 From Boston, Massachusetts, it's theCUBE. Covering Activio 2019, Data Driven. Brought to you by Activio. Welcome back to Boston, everybody. You're watching theCUBE, the leader in on-the-ground tech coverage. My name is Dave Vellante, I'm here with my co-host, Stu Miniman, John Furrier, who's also in the house. This is Activio's Data Driven 19 conference, their second year. John Herstek is here. He's the co-founder and CEO of Onshape Inc. John, thanks for coming to theCUBE. Great to have you. Great to be here. So, love the co-founder. I always ask co-founders, why did you start the company? Well, we founded Onshape because we saw an opportunity to improve how every product on earth gets developed. Let the people who develop products do it faster, be more innovative, and do it through a new generation software platform based in the cloud. That's our vision for Onshape, that's why. Okay, so that's great. We start with the why, and the what is just the new generation software capabilities to build the great products, to visualize, to actually create. We took the power of cloud web and mobile and used it to re-implement a lot of the classic tools for product development, 3D CAD, data management, workflow, bill of materials. These may not mean anything to you, but they mean a lot to product developers, and we believe by moving in the cloud, by rethinking them for the cloud, we can give people capabilities they've never had before. John, bring us inside a little bit. So I think I've heard a lot the last few years, it's like, well, I can just do everything in simulation, computer simulation, we can have all these models it can make there, 3D printing's changing the way, I build prototypes, so what's kind of the state of the state in your field? So the state of the art in our field is to model a product in three dimensions in the computer before you build it, for lots of reasons. For simulation, for 3D printing, you have to have a CAD model to do it, to see how it'll look, how the parts fit together, how much it'll cost, really. Every product today is built twice. First it's built in the computer in three dimensions as a digital model, then it's built in the real world. And what we're trying to do is make those 3D modeling and data management and collaboration tools to take them to a whole another level, to turbo charge it, if you will, so that teams can work together, even if they're distributed around the world. They can work faster, they don't have to pay a tax to install and care and feed for these systems, which are very complicated and a whole bunch of other benefits. So when you talk about the cloud model, are you talking about a SaaS model, a subscription model, a different customer experience, all of the above? All of the above, yeah, it's definitely a SaaS model. We do only SaaS. We hosted an Amazon AWS, we're all in with Amazon. It's a subscription model and we provide a much better, much more modern, better, more productive experience for the users. Are you disrupting the traditional sort of CAD business? Is that right? I mean, is that... More than CAD, CAD plus, because there's no such thing as a CAD company anymore. We're essentially disrupting the systems that we built because I've been in this business 38 years now, I've been doing this. I feel like I'm about half done, really. Really, let's talk a little bit about your career. Where did this start out? Well, I grew up in Chicago. I went to MIT and majored in mechanical engineering. I knew how to program computers. And I go to get an internship in 1981 and they say, computers, mechanical engineering, you need to work on CAD. And I haven't stopped since, you know, because we're not done, you know, and still working on it. You were at ME, right? Yeah, mechanical engineering, absolutely. Oh, you're a mechanical engineer. Oh, great. Thermodynamic duo. Great. He mastered it. Okay, but before we get off the bill, John, the MIT thing, you were part of, you know, quite well-known group at MIT. Tell us a little bit about that. You're talking about the American Society of Mechanical Engineers? As me. I was actually an officer in ASME. I know what you're talking about. We had some great events. But the number 21 comes to mind. You're talking about the MIT Blackjack team. Yes, I was a player on the MIT Blackjack team and it's the team featured in movies, TV shows, and all that. Yeah, very exciting thing to be doing. While I was working at the CAD lab as a grad student, you know, pursuing my legitimate career there, was also playing Blackjack. Okay, so you got to add some color to that. Sure. So what was the goal of the MIT Blackjack team and what did you guys do? The goal of the MIT Blackjack team was honestly to make money using legal means of skill to obtain an edge playing Blackjack. And that's what we did, using, guess what, the theme of data, which ties into this data-driven conference and what Actifio is doing. I wish we had some of the data tools of today. I wish we had those 30 years ago. We could have done even more. But it really was to win money through skill. Okay, so you weren't wired? Is that right? I mean, this was all sort of... No, at the time you could not use a computer in the casino legally. It was illegal to use a computer, so we didn't use it. We used a computer to train ourselves to analyze data to give us systems is very common. But in the casino itself, we were just operating with this computer. Okay, and this computer would what? You would count cards? You would try to predict using your... Yeah, count cards and predict. Very good observation there. Card counting is really essentially prediction, in a sense it's knowing when the remaining cards to be dealt are favorable to the player. That's the goal of card counting. And other systems we used. We had some proprietary systems too. They were very not very well known, but it was all about knowing when you had an edge and when you did, betting a lot of money and when you didn't, betting less. Doubling down on high probability situations. So, did that proceed or did that catalyze four decks, eight decks, 12 decks? There were already multiple decks, so I don't think we drove them to have more decks, but we did, our team really, some of the systems our team pioneered did drive some changes in the game, which are somewhat subtle, I could get into it, you know, I don't know how much time we have, but there were minor changes that our team drove. But the multiple decks were already well established by the time my team came along. How did you guys do? I mean, what was your track record? I like to say we won millions of dollars during the time I was associated with the team and pretty consistently won. We didn't win every day or every weekend, but we'd run a project for say six months at a time, we called it a bank, kind of like a fund, if you will. And in those six months, periods, we never lost. We always won something sometimes quite a bit. Were it was part of your data model understanding certain casinos, were there certain casinos that were more friendly to your methodology? Yes, certain casinos have either differences in rules or more commonly differences in what I just call conditions, like for instance, obviously there's a lot of people letting a lot of money, it's easier to blend in and that's a good thing for us. It could be their aggressiveness about trying to find card counters would vary from casino to casino, those kinds of factors and occasionally minor rule variations too that help us out. So you're very welcome at casinos, is that? Well, I wouldn't say I'm welcome. I've actually been barred at many casinos. Really? Tell us about that. Well, you get barred, you get usually quite politely asked to leave. By some big guy? Sometimes a big person, but sometimes just honestly people who like you will just come over and say hey John, we'd rather you not play blackjack here and you know, we only played in very upstanding professional kind of facilities but still the message was clear. You know, you're not welcome here in Las Vegas. They're allowed to bar you from the premises with no reason given in Las Vegas. It's just the law there. In Atlantic City that was not the law but in Vegas they could bar you and just say you're not welcome. If you come back, we'll arrest you for trespassing. Yeah, and you really, like you said, everything you did was legal. Yes. You know, we're kind of gaming the system I guess through, you know, Just playing well. Problem probabilities and playing well but it's interesting, Stu, that the casinos can rig the system, right? They can never lose, but the players, no, they don't let us. Never gonna bet against a house date, right? So, how did you, or did you at all apply that experience, your affinity to data to, you know, let's fast forward to where you are now? So I think I learned a lot of lessons playing Blackjack that apply to my career in design software tools. And you had SolidWorks, my old company, and now DASO System who acquired SolidWorks and now at Onshape. I learned about data and rigor could be very powerful tools to win. I learned that even when everyone you know will tell you you can't win, you still can win. You know, that a lot of people told me Blackjack would never work. A lot of people told me SolidWorks would never work. A lot of people told me Onshape would be impossible to build. And you know, you learn that you can win even when other people tell you can't. You learn that the long run is a long time. People usually think of, you know, in Blackjack you have to play thousands of hands to really see the edge come out. So I've learned that in business, sometimes you'll, you know, sometimes you'll see something happen and you just say, just stay the course. Everything's going to work out, right? I've seen that happen. Yeah, well, they say in business, oftentimes if people tell you it's impossible, you're probably looking at a good thing to work on. Yeah, yeah, so what's made it, what was made it ostensibly impossible and how did you overcome that challenge? You mean Onshape or Blackjack? Onshape, well, a lot of people thought that using cloud-based tools to build all the product development tools people need would be impossible. Our software tools and product development, we're modeling 3D objects to the precision of the real world, you know, that a laptop computer, a wristwatch, a chair, it has to be perfect. It's an incredibly hard problem. We work with large amounts of data. We work with really complex mathematics, huge computing loads, huge graphic loads, interactive response times. All these things add up to people feeling, oh, well that would never be possible in the cloud. But we believe the opposite is true. We believe we're going to show the world and in the future people will say, you know, we don't understand how you do it without the cloud because there's so much computing required. Yeah, right, it seems, you know, we're heavy in the cloud space and if you were talking about this 10 years ago, I could understand some skepticism. In 2019, all of those things that you mentioned, if I can spin it up, I can do it faster, I can get the resources I need when I need it at good economics, but that's what the cloud's built for as opposed to having to build out, you know, all of these resources yourself. So what was the big technical challenge? Was it latency? Was it tooling? So performance is one of the big technical challenges as you'd imagine, you know, we deliver with Onshape, we deliver a full set of tools including CAD, formal release management with workflow, if that makes sense to you. Billing materials, configurations, industrial grade used by, you know, professional companies, thousands of companies around the world. We do that all in a web browser on any Mac, Windows, machine Chromebook, Linux computer, iPad, iPhone, look at you. I mean, we run on all these devices and we're the only tools in our industry that will run on all these devices. And we do that, it's kind of magic. There's nothing to install. I could go and run Onshape right here in your browser. You don't need a 40 pound laptop. No, you don't need a 40 pound laptop. You don't need to install anything. It runs like the way we took our inspiration from tools like Workday and Salesforce and Zendesk and NetSuite. It's just we have to do 3D graphics and heavy duty release management and all these complexities that they didn't necessarily have to do. The other thing that was hard was not only technical challenge like that, but we had to rethink how workflow would happen, how the tools could be better. We didn't just take the old tools and throw them up in a cloud window. We said, how could we make a better way of doing workflow and release management and collaboration than it ever been done before? So we had to rethink the user experience and the paradigms of the system as well. You know, there's a lot of talk about the edge and I don't know if it's relevant for your business, but there's a lot of concerns about the cloud being able to support the edge. But just listening to you, John, it's like, well, everybody says it's impossible. Maybe it's not impossible. I mean, maybe you can solve the speed of light problem. Any thoughts on that? Well, I think all cloud solutions use edge to some degree. Like if you look at any of the systems that I just mentioned, Salesforce, Workday, Google Maps, they're using these devices. I mean, it's important that you have a good client device. You have a better experience. They don't just do everything in the cloud. They say, they're to me, they're like a carefully orchestrated symphony that says we'll do these things in the core of the cloud, these things near the edge, near the user, and then these things we'll do right on the client device. So when you're moving around your Google map or when you're looking at a big report on Salesforce, you're using the client too. This is what our, we have some amazing people on our team, like our, we have the fellow who was CTO of Blade Logic, Robbie Reddy, and he explains these concepts to me. John Rousseau, he came to us from Verizon. These are people who know about big systems and they help me understand how we would distribute these workloads. So there's no such thing as something that runs completely in the cloud. It has to send something down here. So talk about the company where you're at. You guys have done several raises. You've got thousands of customers. You maybe want to add a couple of zeros to that over time. What's the aspiration? Yeah, correct. We have thousands, the good news is we have thousands of customer companies that are designing everything you could imagine, some things you never would. Everything from drones to we have a company doing nuclear counter-terrorism equipment, amazing stuff. We have people doing special purpose electric vehicles. We have toys. We have furniture, everything you'd imagine. So that's very gratifying to us. But thousands of companies is still a small part of the world. This is a $10 billion a year market with $100 billion in market cap and literally millions of users. So we have great aspirations to grow our number of users and to grow our tool set and capability. So let's talk to him for a second. So $10 billion current TAM, are there adjacencies emerging with all these things like 3D printing and machine intelligence that actually could significantly increase the TAM when you break out your binoculars or even your telescope? Yes, there are adjacencies that are increasing the TAM through, like you say, new areas drive us. So obviously someone is doing more additive manufacturing, more generative design. They're going to have more use for tools like ours. Companies, the other thing that I observe if I can add one that's my own observation is I think design is becoming a greater component of GDP, if you will. Like if you look at how much goods in the world are driven by design value versus a decade or two or when I was a child, you know, I just see this as an incredible amount, like products are distinguished by design more and more. And so I think that we'll see growth also through the growth in design as an element of GDP. John, I love that observation. I actually felt like my traditional engineering education didn't get a lot of design thinking. It wasn't until I was in industry for years that I had a lot of exposure to that and it's something that we've seen huge explosion the last 10 years. And if you talk about automation versus people, it's like the people that design, that creativity is what's going to drive innovation going forward. You know, we just surveyed almost a thousand professionals, product development leaders. Honestly, I think we haven't published the results yet so you're getting it. We're about to publish it online and we found that top of mind is design process improvements over any particular technology, be it machine learning or, you know, machine learning is a tool for the product developer. Additive manufacturing is a tool to develop new products but ultimately they have to have a great process to be competitive in today's very competitive markets. Well, you've seen the impact that Apple has had and sort of awakening people to the value of great design. Absolutely. I even go back to the Sony Walkman. I remember when I first saw one, I thought, oh, that's very interesting design and then, you know, Dark Ages compared to where we're now today. You know, I hate to say it, not a shot at Sony but Sony was the Apple of an era and what happened? Did they drop the ball in manufacturing? Was it a cost issue? No, they lost the design leadership pole position. They lost that ability to create the world leading products. Now it's Apple and it's not just Apple. You've got Tesla who has lit up the world with exciting design. You've got Dyson. You know, you've got a lot of companies that are saying, you know, it's all about design in those companies. It's not that they're cheaper products, certainly. They're rethinking things, pushing ahead. Yeah, the way you feel when you use these products, the senses, that's what the brand experience is becoming, right? No. All right, John, thanks so much for coming on theCUBE and sharing your experiences with our audience. Well, thank you for having me. It's been a pleasure. Really, our pleasure. All right, keep it right there, everybody. Stu Miniman, Dave Vellante, John Furrier. We'll be back, Actifio, Data Driven 19 from Boston. You're watching theCUBE.