 From around the globe, it's theCUBE, presenting Innovation for Good, brought to you by Onshape. Hello everyone and welcome to Innovation for Good, a program hosted by theCUBE and brought to you by Onshape, which is a PTC company. My name is Dave Vellante and I'm coming to you from our studios outside of Boston. I'll be directing the conversations today. It's a very exciting, all-live program. We're going to look at how product innovation has evolved and where it's going and how engineers, entrepreneurs and educators are applying cutting edge product development techniques and technology to change our world. You know, the pandemic has of course, profoundly impacted society and altered how individuals and organizations are going to be thinking about and approaching the coming decade. Leading technologists, engineers, product developers and educators have responded to the new challenges that we're facing from creating life-saving products to helping students learn from home to how to apply the latest product development techniques and solve the world's hardest problems. And in this program, you'll hear from some of the world's leading experts and practitioners on how product development and continuous innovation has evolved, how it's being applied to positively affect society and importantly where it's going in the coming decade. So let's get started with our first session, fueling tech for good. And with me is John Herschdick, who is the president of the Sufferers of the Service Division of PTC, which acquired Onshape just over a year ago, where John was the CEO and co-founder. And Dana Grayson is here. She's the co-founder and general partner at Construct Capital, a new venture capital firm. Folks, welcome to the program. Thanks so much for coming on. Great to be here, Dave. Thanks for having me. You're very welcome, Dana. John, let's get into it. First, a belated congratulations on the acquisition of Onshape. That was an awesome seven year journey for your company. Tell our audience a little bit about the story of Onshape. But take us back to day zero. Why did you and your co-founders start Onshape? Well, I actually start before Onshape. And like, Dave, I've been in this business for almost 40 years, the business of building software tools for product developers. And I had been part of some previous products in the industry and companies that had been in their era, big changes in this market. And about a little before founding Onshape, we started to see the problems product development teams were having with the traditional tools of that era years ago. And we saw the opportunity presented by Cloud Web and Mobile Technology. And we said, hey, we could use Cloud Web and Mobile to solve the problems of product developers, make their businesses run better, but we'd have to build an entirely new system and entirely new company to do it. And that's what Onshape's about. Well, so notwithstanding the challenges of COVID and the difficulties this year, how's the first year been as a division of PTC for you guys? How's business? Anything you can share with us? Yeah, our first year at PTC has been awesome. It's been, you know, when you get acquired, Dave, you never, you know, you have great optimism, but you never know what life will really be like. It's sort of like getting married or something, you know, until you're really doing it, you don't know. And so I'm happy to say that one year into our acquisition at PTC, Onshape is thriving, it's worked out better than I could have imagined a year ago, along all ways. I mean, sales are up in Q4. Our new sales rate grew 80% versus, excuse me, our fiscal Q4, Q3 in the calendar year, it grew 80% compared to the year before. Our educational use is skyrocketing with around 400% growth, most recently year to year. I have students and teachers in COVID and we've launched a major cloud platform using the core of Onshape technology called Atlas, so just tons of exciting things going on at PTC. That's awesome, but thank you for sharing some of those metrics. And of course, you're a very humble individual, you know, people should know a little bit more about you. You mentioned, you know, we founded SOLIDWORKS, co-founded SOLIDWORKS, actually founded SOLIDWORKS. You had a great exit in the late 90s, but what I really appreciate is, you know, you're an entrepreneur, you've got a passion for the babies that you help birth. You stayed with SOLID systems for a number of years, the company that acquired SOLIDWORKS well over a decade. And of course you and I have talked about how you participated in the MIT Blackjack team, you know, back in the day. As I say, you're very understated for somebody who was so accomplished, so thank you. Well, that's kind of you, but I tend to always keep my eye more on what's ahead, you know, what's next then. And, you know, I look back, sure to enjoy it and learn from it about what I can put to work, making new memories, making new successes. I love it. Okay, let's bring Dana into the conversation. Hello, Dana. You look, you were a fairly early investor in Onshape when you were with NEA. And I think it was a series B, but it was very right close after the A-rays and you were and still are a big believer in industrial transformation. So take this back. What did you see about Onshape back then that excited you? Thanks, thanks for that. Yeah, I was lucky to be an early investor in Onshape. You know, the things that actually attracted me to Onshape were largely around John and the team there really setting out to do something as John says humbly, something totally new, but really building off of their background was a large part of it. But, you know, I was really intrigued by the design collaboration side of the product. I would say that's frankly what originally attracted me to what kept me in the room, you know, in terms of the industrial world was seeing just if you start with collaboration around design, what that does to the overall industrial product lifecycle, accelerating manufacturing, just modernizing manufacturing, just starting with design. So I'm really thankful to the Onshape guys because it was one of the first investments I made that turned me on to the whole sector. And wow, just such a great pleasure to work with with John and the whole team there and now see what they're doing inside the PTC. And you just launched Construct Capital this year, right in the middle of a pandemic, and which is awesome, I love it, and you're focused on early stage investing. Maybe tell us a little bit about Construct Capital, what your investment thesis is, and what are the big waves that you're hoping to ride? Sure, at Construct, it is literally lifting out of NEA what I was doing there. After Onshape, I went on to investing companies such as Desktop Metal and Tulip to name a couple of them, Form Labs is another one, in and around the manufacturing space. But our thesis at Construct is broader than just manufacturing and industrial. It really incorporates all of what we'd call foundational industries that have yet to be fully tech-enabled or digitized. Manufacturing is a big piece of it. Supply chain, logistics, transportation, and mobility are other big pieces of it. And together, they really drive half of the GDP in the US and have been very under-invested and frankly haven't attracted really great founders like John in droves. And I think that's going to change. We're seeing entrepreneurs coming out of the tech world orthogonally into these industries and then bringing them back into the tech world, which is something that needs to happen. So John and team were certainly early pioneers. And I think, frankly, obviously voting with my feet at the next set of really strong companies are going to come out of this space over the next decade. I think it was a huge opportunity to digitize these sort of traditionally non-digital organizations. But Dana, you're focused, I think it's accurate to say you're focused on even more early stage investing now. And I want to understand why you feel it's important to be early. I mean, it's obviously riskier and rewardier, but what do you look for in companies and founders like John? You know, I think there are different styles of investing all the way up to public market investing. I've always been an early stage investor, so I like to work with founders and teams when they're just starting out. I happen to also think that we're just really early in the whole digital transformation of this world. John and team have been back from solid works, et cetera, around this space for a long time. But again, the downstream impact of what they're doing really changes the whole industry. And so we're pretty early in digitally transforming that market. So that's another reason why I want to invest early now because I do really firmly believe that the next set of strong companies and strong returns for my own investors will be in these spaces. You know, what I look for in founders are people that really see the world a different way and sometimes some people think of founders or entrepreneurs as being very risk seeking. If you ask John probably and other successful entrepreneurs, they would call themselves sort of risk averse because by the time they start the company, they really have isolated all the risk out of it and think that they have given their expertise or what they're seeing, they're just so compelled to go change something. So I look for that type of attitude, experience. As you can also tell from John, he's fairly humble. So humility and just focus is also really important. That those are, that's a lot of it, frankly. Just the founder. And John, you've got such a rich history in this space. And I wonder if you could sort of connect the dots over time. I mean, when you look back, what were the major forces that you saw in the market in the early days, particularly early days of Onshape? And how has that evolved? And what are you seeing today? Well, I think I touched on it earlier. Actually, could I just reflect on what Dana said about risk taking for just a quick one? And say throughout my life from Blackjack to starting SOLIDWORKS to Onshape, it's about taking calculated risks. Yes, you try to eliminate the risks as much as you can. But I always say, I don't mind taking a risk that I'm aware of and I've calculated through as best I can. I don't like taking risks that I don't know I'm taking. That's really bothersome. You like to bet on sure things as much as you can. Well, sure things are at least where you feel you've done the research and you see them and you know they're there. And you keep that in mind in the room. And I think that's great. And Dana did so much for us. Dana, I want to thank you again for all that you did at every step of the way from where we started to your journey with us ended formally but continues informally. Now, back to you, Dave, I think question about the opportunity and how it's shaped up. Well, I think I touched on it earlier when I said it's about helping product developers. You know, our customers are the people who build the future of manufactured goods. Anything you think of that would be manufactured in a factory, you know, the chair you're sitting in, machine that made your coffee, you know, the computer you're using, the trucks that drive by on the street, all the COVID product research, the equipment being used to make vaccines, all that stuff is designed by someone. And our job is to give them the tools to do it better. And I could see the problems that those product developers had that were slowing them down with using the computing systems of the time. When we built SolidWorks, that was almost 30 years ago. And people don't realize that it was in the early 90s and you know, we did the best we could for the early 90s but what we didn't anticipate the world of today. And so people were having problems with just installing the systems. Dave, you wouldn't believe how hard it is to install these systems. You need to spec up a special Windows computer, you know, and make sure you've got all the memory and graphics you need. And you can get any of that set up. You need to make sure the device drivers are right. Install a big piece of software, a license key. I'm not making this up. They're still around. You may not even know what those are. You and Dana's laughing because you know, zero cool people do things like this anymore. And it only runs on Windows. You want a second user to use it. They need a copy. They need a code. Are they on the same version? It's a nightmare. The teams change. You know, you just say, well, get everyone on the software. Well, who's everyone? You know, you got a new vendor today, a new customer tomorrow, a new employee. People come on and off the team. The other problem was the data stored in files. Thousands of files. This isn't like a spreadsheet or word processor where there's one file to pass around. These are thousands of files to make one, even a simple product. People were tearing their hair out. John, what do we do? I've got copies everywhere. I don't know where the latest version is. We tried like, you know, locking people out so that only one person can change it at a time that works against speed. It works against innovation. We saw what was happening with cloud web and mobile. So what's happened in the years since is every one of the forces that product developers experience, the need for speed, the need for innovation, the need to be more efficient with their people and their capital resources, every one of those trends have been amplified since we started Onshape by a lot of forces in the world and COVID has amplified all those. The need for agility and remote work, COVID has amplified all that at the same time, the acceptance of cloud. You know, a few years ago, people were like, cloud, you know, how's that going to work? Now they're saying to me, you know, increasingly, how would you ever even have done this without the cloud? How do you make SOLIDWORKS work without the cloud? How would that even happen? Well, you know, once people understand what Onshape's about and we're the only full SaaS solution, software as a service, full SaaS solution in our industry. So what's happened in those years? Same problems we saw earlier, but turn up the gain, they're bigger problems. And with cloud, we've seen skepticism of years ago turn into acceptance and now even embracement in the COVID driven new normal. Yeah, so a lot of friction in the previous environment. So cloud, obviously a huge factor. And I guess Dana, John could see it coming, you know, in the early days of SOLIDWORKS with Salesforce, which is kind of the first major independent SaaS player. Well, I guess that was late 90s. So it was post SOLIDWORKS, but pre Onshape and then Workday was, you know, pre Onshape in the mid 2000s and but, you know, the bet was on the SaaS model was right for Crick-Cad and product development, you know, which maybe at the time wasn't a no brainer or maybe it was, I don't know. But Dana, is there anything that you would invest in today that's not cloud-based? That's a great question. I mean, I think we still see things all the time in the manufacturing world that are not cloud-based. And I think, you know, the closer you get to the shop floor and the production environment, I think John and the PTC folks would agree with this too, but that it's, you know, there's reliability requirements, there's performance requirements, there's still this attitude of, you know, don't touch the printing press. So the cloud is still a little bit scary sometimes. And I think hybrid cloud is a real thing for those or on-premise solutions in some cases is still a real thing. What we're more focused on and despite whether it's on-premise or hybrid or SaaS and cloud is a frictionless go-to-market model in the companies we invest in. So SaaS and cloud really make that easy to adopt for new users, you know, sign up, start using a product. But whether it's hosted in the cloud and whether it's SaaS, you can still distribute buying power. And I would, I'm just encouraging customers in the customer world and the more industrial environment to entrust some of their lower level engineers with more budget discretionary spending so they can try more products and unlock innovation. Right, and the unit economics are so compelling. So let's bring it, you know, to today's, you know, situation, John, you decided to exit about a year ago, you know, what did you see in PTC other than the obvious money? What was the strategic fit? Yeah, well, Dave, I want to be clear. I didn't exit anything really, you know. I love it. I don't like that term exit. I mean, Dana had to exit as a shareholder. And so it's not an exit for me. It's just a step in the journey. What we saw in PTC was a partner, first of all, that shared our vision from the top down at PTC, Jim Heppelman, the CEO. He had a great vision for the impact that SaaS can make based on cloud technology. And really, as Dana highlighted so much, it's not just the technology, it's how you go to market and the whole business being run and how you support and make the customer successful. So Jim shared a vision for the potential and really said, hey, come join us and we can do this bigger, better, faster. We expanded the vision really to include this Atlas platform for hosting other SaaS applications at PTC. I mean, David, the day I arrived at PTC, I met the head of the academic program. He came over to me and I said, and how many people are on your team? I thought he'd say five, 40 people on the PTC academic team. It was amazing to me. Because we were just near about 100 people when we were acquired in our total company. We didn't even have a dedicated academic team and we had a lot of students signing up, thousands and thousands. Well, now we have hundreds of thousands of students. We're approaching a million users and that shows you the power of this team that PTC had combined with our product and technology, whom get a big success for us and for the teachers and students of the world. We're doing them great tools. So many good things. We're also putting some PTC technology from other parts of PTC back into Onshape one area, a little spoiler, a little sneak peek, working on taking generative design. Dana knows all about generative design. We couldn't acquire that technology when we were a startup, just too much to do but PTC owns one of the best in the business. This frustrum technology, we're working on putting that into Onshape and our customers will be happy to see it, hopefully in the coming years sometime. Nice, great to see that two way exchange. Now you both know very well when you start a company. It's of course a very exciting time. You don't have a lot of baggage. Our customers pulling you in a lot of different directions and asking you for specials. You have this kind of clean slate, so to speak. I would think in many ways, John, despite your install base, you have a bit of that dynamic occurring today, especially driven by the forced march to digital transformation that COVID caused. So when you sit down with the team at PTC and talk strategy, you now have more global resources, you got cohort selling opportunities. What's the conversation like in terms of where you wanna take the division? Well, Dave, you actually, it sounds like we should have you coming in and talking to us about strategy because you've got the strategy down. I mean, we're doing everything he said, global expansion, we're able to reach cross-selling, we've got some excellent PTC customers that we can reach now and they're finding uses for on shape. I think the plan is to just go, go, go and grow, grow, grow. Where we're looking for this year, priorities are expand the product. I mentioned the breadth of the product with new things. PTC did recently another technology that they acquired for on shape. We did an acquisition. It was small, wasn't widely announced in an area related to interfacing with electrical CAD systems. So we're doing, we're expanding the breadth of on shape. We're going more depth in the areas we're already in. We have enormous opportunity to add more features and functions. That's in the product, go to market. You mentioned it global presence. That's something we were a little light on a year ago. Now we have a team, Dana may not even know it. We have an on shape dedicated team in Barcelona based in Barcelona, but throughout Europe we're doing multiple languages. The academic program just introduced a new product into that space that's even fueling more success and growth there. And of course, continuing to invest in customer success and this Atlas platform story I keep mentioning, we're going to soon have four other major PTC brands shipping products on our Atlas SaaS platform. And so we're really excited about that. That's good for the other PTC products. It's also good for on shape because now there's other interesting products that our on shape customers can use, take advantage of very easily using say a common login conventions about user experience they're used to invest of all their SaaS based. So that makes it easier to begin with. So that's some of the exciting things going on. I think you'll see PTC expanding our lead in SaaS based applications for this sector, for our target sectors, not just in CAD and data management, but another area of PTC is big in is augmented reality with the Vuforia product line, leader and industrial uses of AR. That's a whole nother story. We should do a whole nother show on augmented reality, but these products are amazing. You can help factory workers, people who are left out of the digital transformation sometimes who are standing in front of a machine all day. They can't be sitting like we are doing Zoom. They can wear an AR headset and our tools let them create great content. This is an area Dana's invested in in other companies. But what I wanted to note is the new releases of our authoring software for this AR content getting released this month, used through the Atlas platform, the SaaS components of Onshape for things like revision management and collaboration and workflow activity. All that, those are tools that we're able to share, leverage, we get a lot of synergy. It's just really good. It's really fun too, we're having a good time doing it. It's awesome. And then we're going to be talking to John McElaney later about Atlas and do a little deeper dive on that. Dana, what is your involvement today with Onshape? Are you looking for, which of their customers are actually adopting and they're going to disrupt their industries? Are you going to get good pipeline from that or how do you collaborate today? That sounds like a great idea. As John will tell you, I'm constantly just asking him for advice and impressions of other entrepreneurs and picking his brain on ideas. No formal relationship clearly, but continue to count John and John and other people at Onshape in the circle of experts that I rely on for their opinions. All right, so we have some questions from the crowd here. One of the questions is for the dream team, John and Dana, what's your next collective venture? I don't think we're there yet, are we? No, I just say, as Dana said, we love talking to her about, Dana, you just returned a compliment. We would try and give you advice on the deals you're looking at. And I'm sort of casually mentoring at least one of your portfolio entrepreneurs and that's been a lot of fun for me and hopefully a value to them. But also, Dana, you're an important pipeline to us in the world of some new things that are happening that we wouldn't see if you've shown us some things that you've said, what do you think of this business? And for us, it's like, wow, it's cool to see that's going on and that's what's supposed to work in an ecosystem like this. So we deeply value the ongoing relationship and no, we're not starting something new. I got a lot of work left to do with what I'm doing and really happy, but we can collaborate in this way on other ventures. I like this question too, somebody's asking, with cloud options like Onshape, will more students have STEM opportunities? So that's a great question. Are you, because of SAS and cloud, are you able to reach more students, much more cost effectively? Yeah, Dave, I'm so glad that I was asked about this because yes, and it's extremely gratifying to us. Yes, we are because of cloud, because Onshape is the only full cloud, full SAS system or industry, we're able to reach STEM education. We're able to be part of bringing STEM education to students who couldn't get it otherwise. And one of the most gratifying things to me is the emails we're getting from teachers that really, and the phone calls, where they really pour their heart out and say we're able to get to students in areas that have very limited compute resources that don't have an IT staff where they don't know what computer that the students can have at home and they probably don't even have a computer. We're talking about being able to teach STEM on a phone to have an Android phone, a low-end Android phone. You can do 3D modeling on there with Onshape. Now you can't do it in any other system but with Onshape you can do it. And so the teacher can say to the students they have to have internet access. I know there's a huge community that doesn't even have internet access and we're not able unfortunately to help that. But if you have internet and you have even an Android phone we can enable the educator to teach STEM. And so we have case after case of saving a STEM program or expanding it into the students that need it most is the ones we're helping here. So really excited about that. And we're also able to let in addition to the run on whatever computing devices they have we also offer them the tools they need for remote teaching with a much richer experience. Could you teach solid works remotely? Well, maybe if the student ran it and had a Windows workstation, big high-end workstation, maybe you could but it would be like the difference between collaborating with Onshape and collaborating with SOLIDWORKS like the difference between a Zoom video call and talking on a landline phone. It's a much richer experience and that's what you need in STEM. Teaching STEM is hard. So yeah, we're super, super excited about bringing STEM to more students because of Cloud and SAS. And we're talking about innovation for good and then the discussion John, you just had, it really, there could be a whole another vector here we could discuss on diversity. And I want to end with just pointing out so Dana, your new firm, it's a woman led firm, two women leaders, you know, going for it. So that's awesome to see. So really, yeah, thumbs up on that. Yeah, congratulations on getting that off the ground. Thank you, thank you. Okay, so thanks you guys really appreciate it. It was great discussion. I learned a lot and I'm sure the audience did as well. In a moment, we're going to talk with on-shape customers to see how they're applying tech for good and some of the products that they're building. So keep it right there. I'm Dave Vellante. You're watching innovation for good on theCUBE, the global leader in digital tech event coverage. Stay right there.