 Okay, welcome back to VMworld 2012. This is theCUBE, our flagship program. We go out to the events, extract the signal from the noise. I'm John Furrier, the founder of Silicon Island. I'm showing with Dave Vellante, co-host of theCUBE. And we have special guest, Jerry Chen, Enterprise Venture Capitals at Greylock, tier one VC. One of the best in the valley, some say the best in the valley, certainly in the consumer deals, they know about Reed Hoffman at LinkedIn. You got Workday. You have, I mean, a zillion of successful, Facebook, David Z, just a tumbler, huge success, and huge success in the enterprise, Jerry Chen, former VMware employee, so very timely of the 10 year anniversary. Welcome to theCUBE. Thanks for having me. Thanks for having me. So one, you're now a VC at Greylock as a general partner or a partner, managing director or general partner, what do you call it? I think we just go by partner, but it's fine. And you're at VMware. So first I got to ask you, 10 years anniversary of VMworld, what's your take on that? I mean, where does it come from? And what's your, are you blown away by the size? Tell us some of your best stories. I think what blows me away, I've been to every single VMworld, both in the US and Europe. I remember the first one in San Diego, I was literally a new product manager setting up chairs in the back of the road for the keynote. Right, and then even the 10th one, I'm still setting up chairs in the back of the room, they're just more chairs. I think the thing that blows me away is the ecosystem. That first VMworld in San Diego, we had a ballroom hotel with maybe eight booths. And now it's a show within the show, right? It's not just what happens here, but the parties, the events, like the suites that are booked in the hotels for like product launches, it just blows me in my mind, like kind of that shadow economy, that shadow conference that has sprung up around VMworld. Oracles on notice. I mean, they shut the streets down soon. Next year, if they stay in San Francisco, VMworld is going to have to shut the streets down. I mean, 23,000 people is the number around the number there, amazing. So good run for VMware, right? So obviously VMware, there's a little VMware mafia going on. The V-Mafia, yes. The V-Mafia was pointed out by Desonsider. We know Eli Collins at Cloudera when I was in the office there with those guys. He's out there, you're out as a VC. So obviously VMware is that next generation enabler. Starting out as a simple product in the enterprise, growing into a huge infrastructure opportunity, Pivotal now out there. You're out doing enterprise deals. So first, tell the folks out there about Greylock's enterprise strategy. You guys are a good team. Anil Bhushri, yourself, Joseph, Ashim. Talk about Greylock a little bit, and then we'll get into some questions about what's going on. So Greylock's just been a great place to be as an enterprise investor. They've kind of pioneered this move towards a cloud with a category finding comes like Workday, that's really pioneering ERP in the cloud, Cloudera that owns kind of the big data space in Hadoop, and then a bunch of new great companies like AppDynamics in the APM space or SumoLog and Log Analysis. So what these guys have done the past few years is really find these great secular trend or these great technology waves from client server to cloud, from cloud to big data, and really kind of make the right batch of great teams. And so I just feel really lucky to be part of the team. I mean that pedigree is pretty interesting, and one of the themes here in the cube and to come back to that point is the modern era of computing the cloud era, not to be confused with Cloudera. But this is a whole new generation where applications are driving it, where infrastructure has to be assembled and run time assembly of infrastructure based on the demands. But if you look at Facebook, you link them, these are applications that built their own infrastructure initially and redefined the configuration of storage and all the networking stuff. And they see the future of hyperscale, they lived it, they built it. So now you've had all that DNA in Greylock and you also lived it on the VMware side. So what is the thesis for your investments? I mean, what are you looking at? What does Greylock look at for as a signal of a good deal? And what are some of the hot bets? I think there's two ways of looking. One, there's always team, and then secondly is technology trends we're looking at. So first and foremost is finding great entrepreneurs, great engineers. I think walking the halls at VMworld, there are startups, there's entrepreneurs, there are great technologists. So number one is fine, there's great talent, great engineers to work with. Number two is kind of find these large thematic trends and the key is always to ride a wave more powerful than you, right? So if you're fighting in Google or Facebook, you ride the social wave. When you think about technology enterprise investing, you look at what's happened with this cloud generation and you kind of see what wave or what technology trend can I ride that's going to be bigger than the incumbents that kind of carry my startup going forward. And so there are two or three we look at, ones around this trend to mobile. Number two, this trend to what we call this post-server era of computing, not just post-PC but also post-server. And third is kind of this use of data and not actually big data but data science to build next generation applications. So that post-server is interesting, right? Because VMware in many ways obliterated the sort of client-server model. I wonder if I could ask you, you talked about the ecosystem before Jerry, before we get deeper into the opportunities that you see. VMware is walking a fine line up with that ecosystem now. Do you feel like, I know you spent nine years there setting up chairs in the early days. Do you feel like the allure of monopolistic like margins and behavior will not drag VMware into bad behavior and it will still focus. Todd Nielsen when he was on theCUBE would always say for every dollar spent on VMware licenses, I think it was up to 15 or 16 last time we had him on John and spent on the ecosystem. Do you feel as though they've got that balance, I mean just both culturally and from a strategic standpoint. You know I think you got to pick your battles, right? So for sure culturally and strategically, VMware knows that its key success historically has been that neutral technology that kind of bridges multiple vendors on the hypervisor side, multiple vendors on the storage side, multiple vendors on the compute side. So they know that's kind of the key to their success. But secondly, as you look for new areas of growth you have to figure out are there new markets that need to enter or start or categories you need to create or are there existing markets or categories that I'm going to move into that start to tread on my ecosystem's toes. And I think trying to decide new markets versus existing markets is always kind of the dilemma of any management team and you know they kind of go back and forth in different spaces where they say hey we're going to add new categories here, B we're going to start adding value here that may start to overlap with our partners. But hopefully what they try to do is the philosophy is rising tide will float all the boats. If VMware can create a larger footprint in the data center these partners can find other ways to add value of the products to sell, right? And I think that that level of competition forces everyone, VMware included, to be more innovative. And now as a venture capitalist at Greylock I'm looking for opportunities to kind of capitalize on those trends, areas that VMware is adding or areas they're leaving behind and looking for startups to try to invest in this white space. So you talked about the big waves, the big four, cloud, mobile, social, big data and on one hand you have an advantage in the enterprise of being able to see them emerge in the consumer side. At the same time you've got to apply them into the enterprise which is not always easy. John and I were talking about just earlier today and yesterday. A lot of VCs just have struggle with sort of mapping, doing that mapping. Or their herd mentality, right? I mean there's two dynamics, right? Yeah, well the industry in general. So what gives you confidence? How do you squint through all that noise and what are you seeing there in terms of people doing a good job? Sure, Jabari, the phrase you said earlier is separating the signal from the noise, right? And there's a lot of noise loss static and they say consumerization of IIT or consumerizing enterprise. And on one extreme you say, what does that mean? Sticker packs for the enterprise? It's being thoughtful about what technologies matter in what use case. So an enterprise investor, enterprise startups, you do one or two things. Cut costs or add revenue, right? And if you find a product or find technology you can do both of those in spades, you have real value add. And so I look at that lens, are you helping reduce costs or helping to add more value, generate more revenue? Regardless of the technology or the theme, then I think that's grounds for a good investment. I mean, people talk about two themes. Either A, trying to make Amazon look more enterprise-like or B, trying to make the enterprise look more Amazon-like, right? More consumer-like. I think it's always someplace in between, right? There's a whole set of ideas around how to take VMware or legacy enterprise technologies and make it look more consumer-ish or how to take this public cloud, writ large, rack space, Amazon, whoever, and apply private security to it to make it actually more attractable to enterprise company. And like all things, the truth is going to be in between and that's kind of the sweet spot. When I was in college in the 80s, one of the things that we looked at and just observed back then, I didn't even know what venture capital was, but we knew what a PC was. It was a huge Winchester disk drive bubble back in the day. And Dave and I are old enough to remember that. You're too young. Hey, hey. Yeah. It's all you need. 10 meg hard drive was a revolution in the PC business. I got some stories there we can talk about. But now with Flash, everyone's talking storage. So software-defined networking, the serial was sold to VMware. Obviously that opened up the software-defined fill in the blank, storage, networking, compute, that converged infrastructure picture. Is there a bubble going on in your mind relevant to Flash, like a Winchester analogy? And where is the enabler? Where is the disruptive enabler in this massive inflection point that we're living? What is that enabler? In every one, there's always one. It was TCPIP for networking. You pick your trend is always that one and disruptive enabler. Disruptive enabler or our driver, right? That's kind of forcing this inflection point. So I think the enabler in storage has always been the beneficiary of Moore's law or the equivalent of hard drive is that cost of storage going down year after year after year. So you saw what disk did to tape. And now I see what Flash is doing to disk because of Moore's law, Flash is getting cheaper, cheaper, cheaper. They're on software. So Pure Storage is a Greylock portfolio company that takes Flash storage arrays, lays on a level of intelligent software to make the cost even more compelling. So one, that makes the economics interesting, John. But the question is, what's driving that move towards adopting new technology? It's not just because it's cheaper. It's new applications. So specifically, when you use Flash storage, that speed and performance is ridiculous. Remember when you went from flipping out your floppy drives five and a quarter, three and a half. I'm not that young. I just look at it for a hard drive where everything's really fast to optical where you actually had tons of data on a CD media. Once you move to Flash, the speed of your application, speed of your database, it's incredible. And so our users now, they expect no latency. Instantaneous photos, instantaneous data retrieval. That kind of experience is driving this move towards Flash. So I think the next gen is speed matters, speeds of better experience. Now, what kind of technologies or what kind of applications need that kind of speed? That means do I need to rewrite my database server? Do I need to rewrite my application? Do I need to rewrite how I think about scaling my application out and as the world works all Flash? And so that I think is the next time. And that is a cut cost and increased revenue play. And it's a huge market, but it does feel a little bit overfunded and it feels like the music's going to stop and there aren't enough seats. But maybe not. I mean, Violin did its file yesterday and there's still a lot of growth potential left there. So we were talking about that. So I wonder if you get Jerry's take on it. Maybe we're out over our skis a little bit on that one, John, I don't know. And you got a portfolio company, so you're a little biased on that. I know, we've met Scott on theCUBE before. He's a great spokesperson. Sure, Scott's great. He wants Pure to be a winner. Scott's got a good product. Yeah. But there's probably room for a couple more IPOs. Okay, so let me rephrase the question in a different way. Get the answer we're looking for. Is it, are all the bets made? I mean, all the best ventures in my experience in observing what happens is the ones that no one sees coming, right? If it's a category, oh, I want to invest in Flash, okay, it's maybe a little bubbly, we'll see. But are the bets all made right now? I mean, enterprise, we were seeing here, it's cloud. We know what that means. You mentioned private public, look at that, like a dog or a cat, no matter how you look at it. But are all the bets made? You're seeing acceleration, a lot of stuff under the hood and then you got the app market. Is there a missing area that you see that no one's talking about? So I don't, if all the bets are made, then I've taken the wrong job, you know? And I think we're at the wrong place. So clearly, if you look at the startups down on the Expo floor or all the companies in this space, the bets are far from being made, right? So I think we're actually seeing the beginning of a new wave of franchise companies, right? This whole post-server generation of cloud companies won't create the next VMware, the next Microsoft, the next Oracles. So I'm actually bullish. Which is why I'm at Greylock because I want to participate by being an investor in this generation. So to your point, John, is okay, not all the bets are made. So where are the white spaces? So I look up and down the stack, specifically on storage, I think we're still early. So I think we're just seeing what flash and solid state is going to do to storage and application architectures. If you just, if you talk to any of the folks that are close to the hardware design around PCIe, NVM Express, kind of these new standards around, you know, computer interfaces, that's going to change what you think about the storage architecture. Then I think when you go one level up from the storage architecture, I'm really bullish about this next generation of applications, right? So it's not just mobile or scale out, it's all of a sudden you have data that's massive in size with, that's at your fingertips as an application or as a user. So you think about applying new algorithms or new technologies to bring this data to bear. You can build next-gen apps that are better customer-facing experiences, better e-commerce experiences, better personal experiences like, you know, things from like, you know, personal search around my own technology, my own data, my own photos or enterprise. So that potential to change the whole application, you know, delivery model, development model, that's a big, big revenue head, huge value proposition. So let me ask John's question a different way. This, you know, the bubble around, you know, one tier 1.5 storage, the three parts, the e-projects, the compelence, that you feel like this flash wave will be, you know, substantially larger than that. You know, it's always hard to say where we're sitting now, but I do believe this flash wave is going to be bigger and more disrupt in that generation. I mean, based on what you just said, I would have thought you'd say, of course, because you've got a combination of both the costs of the technology combined with this next generation applications and data. We're getting a huge market. We're getting a lot of questions in on Twitter. You're getting a good crowd on Twitter. So the one question is, how commoditize this storage? Come on, Jerry, answer. That's Jim Lundy. Next gardener analyst, Jim. Good question. Shout out to Jim. So, storage, as you know, Jim, is what, $40 billion, $50 billion market. So there's a chunk of the storage market. It's not going to get shrinking. It's growing, right? So I think you've got to tear out the storage, right? So I think there's, just like tape became commodity, I think a lot of the disk array vendors and the disk technologies would become less interesting. And that the innovation around performance, flash and solid state is where the action is now. I think it's where we're going to be for the next few years. So it comes like pure storage that have kind of valiant around that layer is definitely far from commodity, right? If you look at pure stone of flash, there's nothing close, right? In our minds, and you can say I'm biased, but then you look at the layer below and some of the older disk technologies, yeah, they're getting long in the tooth for obvious reasons. This technology has been around for a while, not quite as long as your Seagate hard drive or Winchester hard drive, but long enough. My impression is that there's going to be a massive, the ball's going to be moving down the field very fast in an area that no one's going to see yet. So this is again my speculation, my opinion, but when talking to David Flynn, who prior to him leaving Fusion IO, he talks about flash as a memory resource, not a disk resource. If you take that mindset, that opens up basically a completely new market, that's apps, right? Whole other apps here. But yes, what you were saying before, I mean that whole NVMe, right? Yeah, I think- With DCIE and NVMe, exactly. When you use solid state, treat it like memory or you think of a memory, what happens to my application, my data, my app architecture. So you're absolutely right. Yeah, so I think this is exciting. And what I'm impressed about Greylock is just a little plug for Greylock. I mean, you have no agenda there. I'm not funded by you guys at all. Or looking for funding, although I know my neighbor, Michael Callahan's great guy, EIR over there. But your reputation is good, but your deals on the consumer side are all self-built hyperscales. A lot of the big successes are, have lived through what a lot of enterprises are trying to do. So you guys have a unique perspective of this. So I think that's going to be very positive. But I got to ask you about your investment thesis around the entrepreneurs these days. So I always get in trouble on Twitter when I say, the kids don't want to install Linux patches anymore. They want automation, which is true. The new generation, if you will. But there's a lot of new entrepreneurs under the age of 30, getting into the enterprise space because it's sexy now. Now you're seeing all the mainstream blogs cover the enterprise. So the question is, does experience matter in the enterprise? And are there enterprise plays that don't require that legacy experience of channels, sales, with SaaS? You know, you're seeing guys going to Y Combinator, they're doing these discovery deals at Greylock. There are young guys out there, the new blood, if you will. So I think as a combination, for sure there'll be a bunch of enterprise companies coming out from what you said, the young blood that has less enterprise experience. But I think as those things grow up, like Cladera came out from four co-founders, three of which were like Facebook or Google. And Mike Olson, which was kind of a more of a seasoned enterprise hand, that was a great meshing of old and new to kind of build this great enterprise software company. So I think a lot of the great ideas technologies are going to come from this generation because they're solving problems in a more creative way. But ultimately, I think as they grow up, you got to solve what problems am I trying to solve? And the closer you are to the problem, right? If you understand the enterprise buyer's pain point, that's going to help you sell the product. Either identify a message, a value proposition, or even figure out how much is this worth, how much you charge for it. And it's not really a freemium ad model really in the enterprise. So understanding how much of a pain point is this and how much value can I create and charge for? A lot of that comes from a combination of new technology and enterprise experience. And so a lot of our enterprise entrepreneurs are folks that have come from industry like a VMware or EMC or PeopleSoft or a BA that can take that knowledge of an enterprise pain point and combine that with a new technology trend. And so that merging of new technology with a known enterprise pain point is where you get this kind of hyperscale adoption. We're here at Jerry Chen. I'm getting short on time. I want to thank you for coming in. Obviously great to have you on with your experience at VMware. You've been to all 10 VM worlds. Obviously it was a VMware veteran, now general partner at one of the best VC firms in Silicon Valley and in Boston. So I got to ask you the final question, kind of tying both those two worlds together is, you're looking at deals, you guys don't afraid to invest big money, pay up valuation for the winners and look at new startups. What is, and what level of disruption is the software defined data center going to do for IT and the enterprise? Obviously without businesses, no consumers don't have jobs, without jobs they can't buy stuff on the web. So you got to, there is a business market that's viable. So that's obvious. But how much change is coming on the enterprise side? If software defined data center tracks the way people think it's going to track or maybe with some upward trajectory or flatter trajectory still change. How much more is it going to change and what do you think the impact's going to be? So I've been talking to entrepreneurs about this post-server world, this post-server thesis which in my mind means $150 billion of IT spend in the enterprises of the grabs. Which means like every incumbent from the database vendors, the hardware vendors, the storage vendors, they're all at risk of being disrupted by this post-server trend. So I think, John and David, that all those technology players are up for disruption. I think it's a huge opportunity for entrepreneurs. I'm excited, you know, I'm still bullish on a bunch of the companies here, VMware included, but I'm really bullish, really excited about seeing, you know, the next VMware's out there. And that's where we're off to the race to find out. And Joe Tucci's looking for the next VMware too. Or everyone else, the next Joe Tucci. We totally agree. The core IT market is just the tip of the iceberg. More business people are building apps. IT is going to just continue to grow, but change. So Jerry Chen, Enterprise, general partner at Greylock Venture Capital in Boston in Silicon Valley, known within the great circles of entrepreneurs. You look at all the most successful deals there in them and I've got a great pipeline. Thanks for coming on theCUBE. Always great to get your perspective with the guy with the checkbook. So thanks for coming in and sharing your knowledge inside theCUBE. We'll be right back with our next guest after this short break.