 Live from San Francisco, California, it's The Cube at VMworld 2014, brought to you by VMware. Cisco, EMC, HP, and Nutanix. Okay, welcome back, we're live here in San Francisco, VMworld 2014, this is The Cube, I'm John Furrier. Really pleased, 50 year now broadcast in The Cube at VMworld, and it's been an amazing run. VMware is changing, every year it gets bigger and bigger, but it's still a geek show, and it's just a great company. Brand new campus in Silicon Valley at Pat Gelsinger on yesterday, and one of the things that's happening at VMware is the story is there's a lot of alumni that are flying from the NAS that have been there from the roots, and CEOs starting companies, but most importantly, venture capitalists in Silicon Valley starting, helping companies start, companies fund them, and our next two guests are two great VMware alumni, Jerry Chen, who's a general partner at Greylock, and Pete Soncini, general partner at New Enterprise Associates, or NEA. Guys, great to see you guys in The Cube again. Great to see you here. Thanks for having us. You guys are the money bags for all the startups, and Jerry, you and I talked at Amazon re-invent, I think last year, you were looking for your first deal, you know all about VMware, you kind of know what's going on in the market, and Docker was just starting to float around, got a lot of traction, and you reeled that in. I mean, is there a sophomore jinx in your future? I mean, that's a good deal. Tell us about Docker and all the success, and the ride Docker's been. Look, I felt like maybe it was rookie luck or something. It was my first investment, and largely because when you see Docker, you just realize the value he's going to bring, and Pete and I saw that from the early days of VMware, and so I understood kind of the value VMware had in the early days, that combined with some of the knowledge it had around how apps were being built for tomorrow, I'm like, this just makes sense, and I'll be honest, I mean, I knew Docker was a great technology, and the team was phenomenal, but to think open source projects been around for less than two years was like on the keynote at VMworld, it was pretty amazing to think about how far it's come. And of course, Amazon owns public cloud, the DevOps movement isn't full tilt, but the enterprise is really a huge start. I was calling Amazon the tsunami that was going to wash up on shore, and the question is how much of beach will they take, and who will step up and put that sea wall up to stop the onslaught for Amazon? So Docker really becomes a key linchpin in that formula because all the same buzzwords are around interoperability. These are enterprise terms, I mean, it's an enterprise opportunity. Do you see the same thing? Well, I think it crosses through consumer software, enterprise software, public private cloud, and it's the thing, Pete and I see the same thing, there's probably no startup that we see today that's not using Docker, right? Every VP of engineering, every CTO that's coming through our offices, he's using Docker as this Lego building block is a atomic unit of the cloud. So the beauty of Docker is you can make what you want out of it, and if for enterprise use case, you're going to see a whole ecosystem grow up around it, around the enterprise. Pete, I want to ask you a few questions around the enterprise space. Obviously you're, you know, we've all enterprise guys, and it's now sexy to be in the enterprise. The enterprise are the hot deals, consumers, you know, obviously valuations are high, and that's kind of in the bloom is coming off the rose there, still hot, but more importantly, enterprise is smoking hot. You've been doing a lot of enterprise deals, Excal, Grad, a lot of stuff coming out of Berkeley, that's software, so the enterprise really has this kind of OS software play. We talked about software stacks in the last segment. What's your take on the enterprise transformation? You're doing big data deals with Databricks, you've been in the enterprise, what's going on in the enterprise? Why is it so hot? Break that down for us. Well, I think, you know, looking at the infrastructure layer, which I think is the most relevant to this crowd here, it's hot for several reasons. It's, you know, there's just a lot, I think the biggest reason why it's hot right now is because there are these incredible open source disruptions that are going on, and it's, there's just several of them that are just completely shaking everything up. And I mean, you look at, of course, started with Hadoop, and then you look at Spark that came through, we're talking about Docker now, there's OpenStack, there's, you know, Cloud Foundry, I mean, there's these incredible things that are going on caused by these open source disruptions, and it's shaking everything up. I mean, people have jumped on Docker so fast, and what's interesting to me is how quickly, you know, kind of the big incumbents have started to embrace these open source projects, and it's, it kind of used to be that they were kind of lying in wait, and maybe they'd come in and plunge in and make a big acquisition like a Zen source or something like that, but now they're, I mean, from Hadoop to Cloud Foundry to Docker to on and on, these large incumbents, VMware, are embracing them early, which is really creating a very strange kind of dynamic. So to answer your question, it's these are major things that are going on, and they're these open source projects, and the question is from my standpoint, is, you know, how do you make money off them? And so that's what we look to do for our LPs, and we can go on and on about that. But that's why things are not. I love that answer because, you know, a lot of entrepreneurs get on core reading, all this myth about venture capitals and startups. At the end of the day, it's a money making proposition. You guys, they're not philanthropists. You're there to fund innovation, but you brought up the enterprise thing and then all this disruption. The time to value now on startups is much different. Talk about the cycle times and the enterprise deals. Used to be the slow boat to China kind of thing or the airplane that needs to ramp up to 30,000 feet, whatever metaphor you want to use. It used to be in the old days, you can track these deals and now they're happening faster. What cycle times are you seeing in terms of funding, valuations, exits, growth? Is it faster or what's going on? I don't know if it's faster. I'll take two points, I love to hear Pete's opinion. I think with startups versus incumbents, it's a race between technology and distribution. So the large incumbents have channels, sales forces, like install base of customers. The startups typically have better technology or new innovation. So it becomes a race between these startups trying to build distribution and get to the customers versus the incumbents trying to build or buy the technology like Pete just said, like buying in Zen source to compete. And so what we're seeing now is a race between startups growing fast, building the go to market in addition to the technology versus the large incumbents like VMware trying to buy or build the technology to be relevant. And I think what we're seeing now is there's a crossover in kind of the playbooks, right? So when I was a VMware, we made that decision to open source cloud foundry to kind of take a play from the open source market. Now you're seeing startups out there thinking, okay, how do I build a channel? How do I leverage guys like VMware or Google as a smaller company get to my customer? So it's kind of funny to see that the playbooks between the two different species, if you will, are changing. And obviously there's a lot of flow back and forth of individuals and talent. Pete, you're taking on that? So well, I totally agree. And there's the obvious thing that there's this componentization of code so that it's a lot easier to get a company up and going by calling on APIs and pulling in building blocks. So that's very much driving a lot of the startup activity. They can focus on adding value on top of these reusable components. So that's an important trend that is very much alive and is continuing. And like we were saying, you open source a project, it can take off in 18 months. And so you get massive awareness and you can go to market through that route and then the flip side of it is how do you make money on it and so that's, it's a balance you need to strike. So I got to ask you guys both the question from the entrepreneur's perspective out there, watching and watching the video on demand is, they all want to get an appointment so you guys are hard to get so they'll get an intro so feel free to call them. I'll give you their cell phone numbers. But the real question is, guys, what do I'm an entrepreneur? What do I need to do to get your attention? Are there some key performance metrics? Are there growth hacks? What do you guys look for for an enterprise deal in this new modern era of cloud convergence and user computing, software defined data center? I mean, it's a whole new ball game. There are some transformational shifts. What do you guys look for in the team, in the business model? Are there table stakes checkboxes for enterprise deals today from your standpoint? Go ahead. Pete, you've been at this long, I mean, I think- And don't say, oh, I need a good team. That's as soon as you have a good team. The first point I want to make is that it's, there is a lot of very high quality projects going on. So it really is just awesome to be in our business right now because you see so many incredible, great things. So you need something to jump out of you because of that. I mean, this is not a time where, I mean, we're spending our time, I mean, we definitely are open to taking meetings, and you know, but there's only so many hours in the day. So you need to, somebody needs to jump out of you. At the end, that's really, I mean, to net it out. And it can be the team, the market, the technology, I'll give you the same old cliches, but because of the time we're in, it needs to jump out. It can't be an email with a dear sir, you know. Well, let me get more specific. Still on the consumer side, it used to be 10 millions, a new one million users. So you have to see some growth. Obviously you throw an app out there with little dev ops and it grows, it's flying. You can get some validation there. It's been de-risked, if you will. Enterprise, are there different mechanics involved? Because it's different criteria, CIO, it's infrastructure, is it compliance? I mean, these are the things I'm looking for. It's like, I'm an entrepreneur, I did a prototype. That's kind of like what I'm looking for here. I think it depends on the stage of the company and also what you're trying to do. In general, the enterprise, I feel like it's more deterministic what's good or bad. And consumers, non-deterministic, what's going to take off and get a big audience. But in enterprise, either you increase revenue or you decrease costs or both, right? So if you're a startup that has an idea or technology that can help me reduce my capital expenses or operating costs or increase the revenue that I'm driving through my business and then ornamenting to you better than the status quo. And that's the key. So in the enterprise, we're not looking for a 10 or 20% better, a 3% better. You're not going to get a CIO or a CFO's attention for a small improvement. But you can do something where you're 10 times faster, right? So Pure Storage, a flash storage company invested in, there's 10 times faster than disk but at the same cost. Or Docker, right? You get better density, better performance of your application and portability so it reduces costs as well. So I think if you look at one of those axes and if you do exceedingly well in one, you have a good investment. Great, and also now, new dimensions, you're seeing big data, Pete, you recently are, I wouldn't say going off the reservation because it's in your reservation, but it's big data, it's in the mix. Big data is being discussed here in VMworld in the enterprise. So what's the boundary, I guess, that's the question for you on the enterprise? Where is the reservation kind of, where do you go off the reservation on deals? What's not the enterprise from an venture perspective? You mean what is a technology that does not apply to the enterprise? Yeah, what doesn't hit your radar? As Pat Gelsman said, it's what you don't do that people want to know about. What deals don't you do? Well, I mean, I'm focused on the infrastructure layer all the way up to the app layer. So I'm personally looking at all of the above. And that's tons, I mean. So I, there are my partners that focus very much on security, I know a little bit about security but I'm generally going to pawn off security focused deals with my partner, the two or John. I mean, it's, you know, we at NEA will do everything. I think enterprise related, infrastructure related. Me personally, I will look at everything that is and- So I'll put you guys both on the spot. Today's Tuesday, yesterday's Monday, it's Monday partner meetings. Did you guys fund any companies yesterday? Greylock and NEA, partners meeting. Ha ha ha. Trade secret. Do you fund every, do you guys fund startups on every partner meeting? No, I think it's an exception, right? You know, as Greylock, we look at, each partner does, you know, one to two new investments a year. So you play that out, the probability of us funding a company any given Monday is very low. This is like this image on there, sitting there putting money in a table every Monday. That's not like that, it's pretty much mellow. Well, we do a lot of, I mean, we've got a big fund, we've got a $2.5 billion fund. So we're doing, you know, 50 deals. You throw in our seed deals, we're doing probably 60, 70 deals a year. So we're doing a lot of deals. Most of them are series A, series B. The partnerships designed to scale that way. So, yeah, I mean, we're, you know, 52 partner meetings a year, you know, maybe there's not probably 52, but say 45, we're doing a deal, we're doing a deal, a meeting. So yeah, I'm looking at a deal right now. I went to my partnership with it yesterday and, you know, we'll see if it gets there. Share, please, share, no. So I want to bring back more of the VMware conversation because you guys both were VMware. Pete, I think you were an early employee. What employee number were you at VMware? 60, something like that. Sub-100, early days. Jerry, you, when did you? About a couple hundred. Couple hundred. So talk about the culture. I want to ask you guys specifically, there is a lot of VMware alumni now. You and I were talking prior to the VM role. Some other firms have some junior partners coming in. You're seeing startups out there. There is a V-Mafia developing that has that DNA. What is, in your opinion, share the folks out there that early Diane Greene culture from the Stanford, I mean, it's a real geek culture. And how is that transforming? How do you guys see that now on the outside developing? I think you're probably seeing a category of VMware executives both on the product side, the business side, and the engineering side that have been alumni starting companies the past few years because VMware was just like once in a decade or once in a career platform opportunities. We saw the intersection of software, hardware, stores, networking. So anyone that was coming out of VMware in the early days has such a great perspective of the whole infrastructure stack, which is why you see A, a huge success like this, and B, a lot of alumni starting companies. And I think Diane was a great leader in the early days. She instilled two or three things. One, just like relentless quality around the product. The engineering team and the technical team there was like bar nuns and the best engineers ever worked with. And then also just ruthless pragmatism trying to add value to help the customer. So I think you have that cultural intersection plus where we sat in the technology stack that made it a very special place in the early days. Yeah, no doubt. I learned a lot from Diane to help me with the venture business in sizing up entrepreneurs. Was a lot different working for her than it was reflecting on the learnings of her as a hard charge. She was a hard charge. She was such a great entrepreneur. Yeah, so I mean, what can I say? I learned a lot from her as to what it takes to win, how to be a chess player, how to grind it out, and you know. I think we're getting the hook here. We're not going to stand for a little bit longer. I want to get one final question and sorry to interrupt you, but they're trying to get in the next segment. But my last question is really more of a market one. You know, the IPO window is open and I want to get your both take on this. A lot of companies are raising a ton of dough. Pure, obviously your portfolio company raised a ton of dough, big valuations. And there's a pre-IPO market developing with liquidity. What's the impact of companies raising a boatload of money before they go public? Is that a Sarbanes-Oxley issue? And Jason brought this up on some crowds storming he did on Twitter around this comment. But it used to be, you get public, everyone gets exit, everyone's happy. Now there is this little pre-public kind of thing going on. Is that good or bad for the industry in your perspective? I mean, it depends on the company's strategy. You raise a lot of capital at high valuation then in the public market may not, you know, be able to stomach that valuation. And so it means you delay going public, which could be a good thing or a bad thing depending on what your objective is from going public. If it's to get liquidity, then you can get liquidity by doing some of these rounds of course. I tend to, you know, I like seeking the public markets at the right time if your company's ready and avoiding these late stage rounds and having the overhang, because it does complicate things. So I can't comment on the Starbucks stuff, but I think strategically it's nice to get a windfall at a high valuation, but it doesn't come without its exposures that you need to factor in as a shareholder, as an investor's employee. I think overall it's probably a good thing because now you have different options at a stage. If the company makes sense to go public, then you should go public. If the company for one reason or another needs to raise that $100, $200 million pre IPO round to fund development or, you know, international expansion, I think it's a nice option that they can raise that capital knowing they're still in a heavy growth phase that they don't need to screw in the public markets. So I'm the CEO. Actually, I think it's better. Also as a board member, it's better for us too, because now we have different options to raise that last chunk of capital that could play better with the strategy. I think, and sometimes- So you're saying the revenues aren't there yet, they're still in build out mode. Why go public and have that tax? Sometimes they could do, they have the revenue to go public, but there's two or three chess moves left to play. You know, either one, there's another product offering I want to invest in under the business, something I would acquire, or I want to get international as a big, expensive one, which is like, hey, I want to go to China and Europe. That requires a lot of cash. Doing that as a public company is okay, but you have to deal with screwing the public investors. But if that's the right strategy for the company to do it while private, there's capital to do that. So it's not right for every company to do that, but it's also not wrong. And I think if you're starting a company now, it's kind of nice to say, look, I'd go public if that's the right story for me, but if I need to raise the money to do a strategic acquisition or growth, I can do that as well. And so I think that option benefits everybody. I mean, the old days, IPO was about fundraising. You raise money on an IPO. So if you can raise $200 million in a private realm with the complications, it might be worth it. So guys, you guys are pros. I love talking with you here on theCUBE. Great to see you guys. VMware, alumni, tier one VC firms, NEA and Greylock, really pros. Congratulations. I'll give you guys the final word. I want you to share with the folks out there the hottest thing you're looking at right now from a technology perspective, not company, an area where you're digging in and you're peeling back and you're getting in without revealing all your secret sauce. But what you're looking at, what's your focus? Well, obviously, with the Docker investment, I've been spending a lot of time around that whole ecosystem from storage, networking, security, to management. So that's a whole thesis that I've been spending time on. I'm still bullish on it for obvious reasons. You know, spending certainly a lot of time on that. And also, I think there's this strategic question about Amazon, if they're going to take over the world or not, and the implications on that with infrastructure investing, and if they take over the world, then we should just be focused on the app layer. But a lot of people, that's not going to happen, but a question is who and when and how you play it. So I think trying to really figure out how that's going to play itself out has the biggest implication on that lower level investing. Certainly great time for entrepreneurs. I mean, I love the opportunities right now, I think, with confusion as opportunity and right now the market is shifting. And Docker is a great example, and you guys are doing some great investments with open source and this action. It's going to be fun. So good luck guys. Thanks for coming on theCUBE. This is theCUBE with two awesome VCs, Jerry Chen and Pete Sancini here at VMworld 2014. We'll be right back with our next guest after this short break.