 Live from San Francisco, California, it's theCUBE at VMworld 2014, brought to you by VMware. Cisco, EMC, HP, and Nutanix. Now here are your hosts, John Furrier and Dave Vellante. Hey, welcome back. When we're live in San Francisco, California, for VMworld 2014, this is theCUBE. I'm John Furrier with my co-host, Dave Vellante, of course, extracting the seeds of the noise. We talk to CEOs, social media directors, CEOs, Pat Gelsinger on, of course, we want to get the VC angle because there's a huge startup opportunity, a lot of entrepreneurship going on around cloud, this convergence. It really is super exciting in the enterprise. Of course, the enterprise is hot, and of course, we're proud to have Frank Artali, managing director at Ignition Partners, managing partner, managing director, general partner, basically the head honcho here from Ignition World. Welcome back to theCUBE, CUBE alumni. Welcome back. Nice to be here. You're a seed investor, a personal investment in Cloudera. You also did the institutional, some institutional around early at early stage. Great success. We've known you from Hadoop World. You're out here kicking the tires, scouring for deals in cloud because there's certainly a big data angle. There's a lot of enterprise action. So give us a quick update on the fund. You're burning that cash, you're still writing checks, and how much is left, and what are you looking at? Yeah, yeah. Okay, that's great, John. I really appreciate it. And also, great to be back. Great to be a CUBE alumni, always fabulous. It's one of the best parts of the EM world for me, one of the meetings I really look forward to. So again, thanks, thanks much. Thank you. And it was like a few years ago, we called the play on big data. And I remember actually sitting here in theCUBE talking about it. At Hadoop World. At Hadoop World, yeah. And people were looking at us a lot back then, saying, wow, what does this mean? It really was the beginning of a resurgence in enterprise IT that we see continuing today. And when I'm walking around the show floor today, it is just amazing how much real innovation that we do see going on. As John, as you said, so we closed our fund about a year and a half ago, and we've been actively investing. One of the most recent investments is in a local company on the Bay Area in San Francisco called Trifacta. Again, so if you recall, we talked about things in big data. You said, what will be next? I said, it'll be applications that only exist because of things like Hadoop. And Trifacta is a prime example of that because people start living in data. Tools like that will become really important. You see Trifacta, by the way, at Tableau Conference in Seattle. Yeah, Tableau Conference, two weeks. We'll be there. We'll be there. We're going to be there. I will be in Seattle that week, so yeah. Okay, so make sure you come by the queue. Not by the queue. That's great. And there's a leadership change. I noticed I have new CM over there and team. And how much did you guys put into Trifacta? So we were, we led the last round. We don't talk about exact dollars that we do put in. Yeah, new CEO, Adam Wilson, just joined Trifacta. He's hit the ground running, been on board about a month. Again, doing some great work there. That's Joe Hellerstein's company, right? Yeah, Joe Hellerstein and Jeffrey here. So Jeffrey, of course, is University of Washington and Joe at Berkeley. Joe, another Cubulum. That's right. Early days he came on and helped us screw through. He was a big data SV. We were down, he was awesome. He's great. He was the only, I think he took it off his profile, but the management team had their GitHub profile, which I was like, that is so follower. That's strong. That's strong. That is strong. Come on, that's badass, as they say. That's really strong. But you know, Joe, one of the things that, we always like to look at trends and you ask me, what are we investing in? And we make long-term bets as early stage investors. We're not investing in things that we expect to see cash from next year. And many of the trends are things that are repeating themselves. And a trend that we see right now and are very encouraged by is that every business is becoming a software company. Businesses of all sizes. And that doesn't mean you're an independent software vendor selling software for a living. But whether you're a financial institution or a pharmaceutical company or retail operation or a forestry company, everyone is hiring software developers. And so what we'll see happening over the course of the next few years is the kind of tools that professional developers use, again, people that sell software for a living, kind of make their way, or at least the techniques that they use will make their way into enterprise. So those are great opportunities. And if you look at a classic business today that's deploying internal applications, they're still very traditional, window-stylized front-end applications. Of course, I worked at Microsoft from 1991 to 2000 where that's sort of that first set of tooling for enterprise developers really came along. And now we see a set of challenges that enterprise developers have that were conquered first by the professional ISPs, in particular enterprise mobile. And so we're just really encouraged about to see more and more tool sets for enterprise developers to really enable mobile applications. And we think that's one exciting area. Well, Frank, I'll get a little stroke here for you because you won't say it yourself, but you were really, really instrumental in Windows NT, which is really the beginning of the client server, the PC client server, wind-tell server market, which really exploded the developer community. You kind of gave the headroom, something we're seeing with Node, with JavaScript, you're seeing that same thing in the cloud. So you have been there, so I got to ask you this developer question. You know, I tweeted, I have to quote Ballmer, developer, developer, developers, to apps, apps, apps. The theme here at VMworld categorically is, apps are dictating terms to the infrastructure, programmable infrastructure, infrastructure as code. That rolls up big data, that also rolls up systems, operating systems, if you will, NT-like. So if the thesis is more developers in-house, is what you're saying, that means huge onboarding of developers in the business. Now this is not a core competency for businesses in the past. And you really go back to the mainframe, Dave, when I were commenting that, that's when you saw the last real in-house population of people writing code for differentiation, for the company to differentiate. It was a difference of differentiation. And so what's your take on that? How is that going to happen? What's going to accelerate that trend? What tooling needs to be there? What's your take? Right, so as you said, enterprises typically are not the best organizations that have building software development teams. And so what you'll see is a trend towards adoption of tools that got started with the professional ISV community and also a level of hiring that hasn't occurred before. So most of the really forward-looking enterprises are taking a point of view where they have to start by being present where real software development occurs. And so if you drive up and down Silicon Valley today or in the Gowanus area in New York City or in the Seattle area, you see businesses that aren't software companies putting offices in those areas. So if you go into the valley here, you'll see that Merck and Johnson and Johnson as example of pharmaceutical companies actually have innovation offices in the area to start really engaging the early-stage venture community and early-stage software community. GE has huge innovation. I mean, yeah, GE's been at it. I mean, GE's always been a software company. I mean, they have forever, they've had software R&D, but they're doing more and more. But the challenges are now to bring the kind of things like Node as you brought up. We have an investment in a company called Strongloop that is commercializing that and making it much more accessible for enterprise developers of every kind. And so the thing that I always encourage companies that are enterprise developers, don't look at the entire smorgasbord, really look at things that you know can make work, make a bet on those things that you know can make work and then build your teams around that because you really can't explore everything and do all of the fail-fast, throw things away that a lot of the professionals can. Can you give an example on that? Give a concrete example of that. Let's use some past examples and fast forward that. And so, you know, so like back in the 90s when we first started seeing client server development, something that I was, again, very, very familiar with because I was part of it, there were so many ways to do that development. And so then we just encouraged people to begin with a set of, say, communications protocols at the bottom. And once you do that, then set standards for how you use those communications protocols internally, then set a set of standards on how you do, as an example, your user interface design and your database design. You know, and likewise today, as we move forward, we say, well, there are lots of ways to do things like, lots of ways to do things like enterprise mobile development. Well, so for the enterprise guys, we say, start with what you know. Well, you probably know .NET and Java. So you don't want to go steer all of your people to some set of languages and technologies that they really are unfamiliar with. And then so start from the top there, in this case, and work your way down. So you say, okay, I know how to use .NET and Java for my enterprise development. Now, how do I go mobilize that? So just a very, very concrete example. There's really a roadmap on the development cycle side. So there's a shift in software development life cycle, you're saying? Correct, correct. Absolute shift in development life cycle. But again, the enterprise developer, the enterprises are not places that will just, you can't jettison people and hire completely new ones. You have to take the teams that you have and kind of bring them forward into the future. Okay, so you brought up GE and you brought up some of the software side. Right now, the quote we heard on theCUBE last week when we were in Boston, two weeks ago when we were in Boston was, it's all about the user interface, right? Because if it's an app specific, the user interface is everything. Even GE is bolting us some really cool DevOps, but tailoring the UI for machines, hospitals. So the apps are dictating essentially, again, back to the workloads, right? So what's your take on this? And what's your advice to entrepreneurs when they're saying, you know, how do I design my app? And is it driven by the interface and the functional description? And what's your take on that? Right, so design is coming front and center. Again, it's not enough just to be able to provide access to the data that the end user needs, but it has to be done in such a way where the end user likes your application. And I know that's kind of an ephemeral term. Well, what does it mean to have an end user like my application? But it does need to provide utility and it has to be engaging. In these days now, especially with mobile, the form factor is so constrained that you really need to be careful in terms of what you do. In the old days when you had, or even currently, when you have a big screen, the tendency is to just put everything in front of the user all at once. And so what we see are applications that are really well designed in terms of bringing the user to what they need exactly at that point in time and not having them waste time. Those are the things that they really like. But for the first time, I think you'll actually see within enterprises of all sizes, you'll see people who are really focused on product design. And back in the 90s, when we were building our first tooling for enterprise developers with Client Server, I don't think I met anybody that worked at an enterprise IT development shop who had the title of product designer. And we're starting to see more of that now. And that's a great thing. So Frank, we asked Jerry Chen and Pete Zancini. I would like to get your thoughts on this earlier this week. What should we make of the trend toward companies doing larger raises, maybe not going public? Is that a good thing? Is that a bad thing? What are the pros and cons? What's your take on that? Yeah, well so in terms of raising large rounds, not going public and building more value before you do that, it's really a matter of taste and what the company needs to do in order to continue to operate independently. So whether you raise a large private round or you go public, it's all about continuing to operate as an independent entity and not becoming part of another company. And there's a subtext to this, especially for enterprise software. So when you go talk to, let's say a modern CIO or a modern VP of infrastructure or VP of software at an enterprise customer, one of the first questions they'll ask be the startup or the small company is, how will you stay independent? And how will you not just become a feature of something that I already own and something that's not innovating? And so whatever you do in terms of raising large rounds and valuations are just a side effect of that or going public, it is about maintaining independence and being able to innovate for your customers. And also the comment that Chen made was going public is also a lot of pressure. So if you're not ready and we weave in the extra dimension of global aspect with cloud consumption being global phenomenon, even cloud era is getting there, they're moving as fast as they can to be global but that may be a problem to go public too early if your build-out's not done. So do you agree with that? Yeah, so in terms of when is the right time to go public? I'm not sure there's really a great, let's say unified answer for that, but let's talk about what going public means. It really means operating as a public entity. And so a lot of people think, well, going public means just you go cashing your stock and you have an ATM that's flowing but there's an awful lot of things that you require it to do. Most days ago. Most days ago. To operate. That's not the private round before you go public. To operate publicly. What we try to do is we encourage our companies that are really planning to operate publicly is to think about that at least two years in advance and so yes, going global is part of it but there's also elements of governance and controls inside and also around predictability of revenue that are super important again to be an operating public entity and you can see how companies that do have predictable performance are rewarded and companies that don't are punished and so we'll say, well, it's all about growth. Well, it's not all about growth but the global aspect of course is important. If you look at the overall market again where I specialize in enterprise IT, you know, I just know this from my Windows days things haven't changed that much in that you're looking at anywhere from 28 to 35% of system software is US. So you really have to think outside the US if you're going to start. But your premise was that the enterprise buyer wants the company to stay independent so it makes themselves acquisition proof essentially, right? So help me understand it. I mean, why wouldn't, for example, a Microsoft customer want to say, okay, hey, why don't you just consume Hortonworks make my life easier? So there's a couple of schools of thought around M&A. So if your product actually would, if you have a product that your customers believe would benefit from being integrated into another product then there'll be that pull on the M&A side because largely the customers will tell the big buyers, hey, you should buy these guys and put them in this thing that I already own because these two things always have to work together. And so in fact, when I was at Microsoft, customers used to come tell us things like that all the time. And we weren't a big, we weren't a buyer of large enterprise technology at the time but it was a message that we did here. Now in terms of, again, being independent, the reason is to prove that you can be independent customers are smart. They'll say, whoa, how much money do you guys have in the bank? And they know if you don't have a lot of money enough money in the bank to at least take yourself for a year and bring on people to put in front of them to help understand the product, help do deployment then they don't feel like you'd have skin in the game. So again, it's two schools there. Some of the customers believe that you need to be independent in order to continue to innovate but then at other times the integration outweighs that sort of innovation factor. In your experience where customers good indicators of good acquisitions or were they mixed? Yeah, I would say like, so I would say your customers are good indicators of almost anything, right? So, yeah, they really are customers. You don't want to say the customer's always right. So people ask me, when I was, yeah, when I was worked in customer facing roles, how did you hire new sales people as an example? That's why I'll ask my customer who their best sales person is that's at a competitor and I'll go hire that person. So in a sense, your customer is a great sounding board and a great filter. Now what you just want to be careful about is not having a sample size of one, right? So you need some calibration. I think that's the thing that's coming out of the cloud market is this customer centric. If you look at all these incubators and all the brogrammer kind of trend that's going on now one of the things that people are saying is be customer centric. That's the ethos in the enterprise. Certainly a best practice. But I got to ask you the real question on the table that everyone else answered, Herod, Sincini, and Chen. Everyone, everyone loves algorithms, right? So what's your algorithm for deals? What's your investment thesis for the VMware community and cloud? Herod has a specific thesis that he believes is the preferred future. What's your thesis for investing right now? Right, so I think more of a macro view on investment thesis, first of all, and perhaps the most important thing when you're investing in software for businesses, you have to be able to answer the question to yourself is this a thing, is this a class of thing that every business will need one of? And then you say, is this team that I'm speaking to about this thing? Is this the team to create that category, define it, and be the first mover, and build it into a, and build a category, build a business? And so for me, those really are the core of my investment thesis. Which is essentially big market and great team. Is there any technical thing you're looking at? So yeah, so right now, I love changes in computing trend. I do, anytime there's a change, there's opportunity around that. So I love the addition from big data to relational. I love when virtualization, I was at Zensource. I love when virtualization happened that created opportunity. I think the movement around containers in terms of what it brings, in terms of a style of computing, will create continued opportunity. But I think we're also still early days on the big data side. I mean, the early days here are still on the developer side. Central IT needs to come in, manage it, control it, make it better, optimize it, secure it. I'm more applications around that. And so I love changes in compute, and I love data. So to be specific, I'll ask you, what is, in your opinion, the biggest technology enabler for this next transformation inflection point? So right now, really, what we're seeing is, there are changes in, I believe it and I, I think silicon technology is still the enabler, and we just see such increase in transistors, lowering price of memory, increase in speed of IO, that really allow us to do things in software that just couldn't be done. And so I always go back to the hardware and places that I'll place bets there. Yeah, and Dave and I were talking about the Linux kernel and Flash opens up a lot of doors, so, so basically what he's saying is a ton of work still to be done. It never ends. There are a lot of deals to do. Never, never ends. Frank Artali, managing partner at Ignition Partners, great firm. Certainly they know their stuff. They've been through many ways of innovation. Thanks for coming on theCUBE. Great to chat with you. Thanks for taking your time out of your busy schedule, and then we'll let you go hunt some more deals out there. This is theCUBE, live from San Francisco, VMworld 2012. I'm John Furrier, Dave Vellante. We'll be right back with the next guest after this short break. All right, great guys.