 Live from the Sands Convention Center, Las Vegas, Nevada. Extracting the signal from the noise. It's theCUBE, covering AWS re-invent 2015. Now your host, John Furrier. Okay, welcome back everyone. We are here live in theCUBE at AWS re-invent for wall-to-wall coverage of Amazon web services. The cloud game is changing, it's exploding, they're more enterprise focused. This is theCUBE, our flagship program from SiliconANGLE, where we go out to the events and extract the signal from the noise. I'm John Furrier, and my guest this segment is CUBE alum, famous venture capitalist Jerry Chen. One of the other partners, not featured in the New Yorker, Reid Hoffman, I saw the article, your partner, you're one of the other guys. That's the inside joke, but great success. Investor in Docker, a lot of other deals you got going on. Great to have you back. Great to see you. Thanks John. Thanks for having me. It's always great to be back at theCUBE. It wouldn't feel like re-invent if I wasn't spending some time with you guys. So thank you. We really appreciate you spending the time. A lot of deals here. You guys are scouring the landscape. What's going on? I see a lot of VCs here. Again, every year, more VCs showed up. You were early on before you even pulled the trigger on Docker. You were looking at cloud, I see your pedigree at VMware. You know the cloud business. What, where are we, man? Are you like, are you surprised? Are you blown away? Are you like pinching yourself? Like, man, Amazon's tearing it up. The other guys are in the dust. What's the landscape look like? It's a great question. So I would say, first and foremost, what does it feel like? It feels like we're still early innings of the cloud. But a lot of the early opportunity around cloud services, cloud security, around a bunch of mobile services, that's all been played out, I think. And we're looking at vertical application and vertical solutions meet vertical clouds. So I think we're looking at what cloud enables, right? My whole wave versus wavelet theme. The wave is a cloud. What wavelets will occur following Amazon. But Amazon, as a company and the cloud business, in particular, it's amazing, right? 7.3 billion, $8 billion run rate. If this was an independent company, it'd probably be 80 to $120 billion market cap, potentially at least. It was public traded. So you have that feeling of this inevitable march of Amazon building more services, releasing more features, meeting more technology. They have a storage device. Pure storage, one of your portfolio companies, not yours, but Greylock, invested in Scott Deeds and Great Entrepreneur. When IPO, probably today. When IPO today, great news on that front, good liquidity, but still, that's storage. I mean, Pure's not going to put EMC out of business, but Amazon could put EMC out of business. Their storage business has got to be at least $2 billion. It's probably the largest storage company started the past 10 years, right? If you think about that, like a store, AWS, right? S3, EBS, now Elastic Files. It's probably the largest storage company started the past few years. It's the largest server company started the past five, it's 10 years, right? A large app developer company started the last five years. Our database, Fastest Growing Search, we've heard that in the keynote today. Outpacing Redshift, which is tearing it up. What does this all mean? Well, the question becomes, is cloud a winner take all, a winner take most business? And that, I think, if you think about Amazon and it's not just one company or one product, it's hundreds or dozens of really relevant products. So the way I think as a VC is, is cloud a winner take all, winner take most business? Like operating systems, which marks off one in the 90s. Then if you think of data, you think of analytics, you think about storage, you think about security, you think about networking, you think about the mobile services, are each of those winner take most, winner take all markets? If it is, then something like an Amazon that gets a lot of traction and a lot of momentum, then it's going to be hard to compete. But if it isn't, and there's certain areas like databases, I don't, you know, or databases service may or may not be a winner take most, then I think there's plenty of opportunities for startups and incumbents to compete. Yeah, and get those white spaces. This beach head, basically, will there be beach head for new opportunities to grow and figure out where to go? Or seems in between these opportunities, right? It's oftentimes, as a startup, 10, 20, 30 million in revenue is a big deal. And that's, you start early and you grow. Amazon's now the size where if you're not generating maybe $50, $100 million in revenue in your service, you know, why bother? It's so big now. It is the classic innovators dilemma. And it's fascinating to watch that in the short time of the past six, seven, eight years, it's gone from scrappy startup to large incumbent. And then all the potential weaknesses of being a large incumbent in terms of innovators dilemma, you know, not innovating fast enough, leaving white space for startups, that's going to be the next theme about Amazon, I think. You know, one of the things I like about your firm at Greylock, not that I sound like I'm kissing up to you, but the firm has got a lot of ex-entrepreneurs and also have good professional investors. Tier one VC, great investments, cloud era, pure, went public today. Your partner Reed Hoffman was featured in The New Yorker, John Lilly was the CEO of Mozilla. Those guys are doing some pretty cool things. It would stand for this blitz scaling class that they're teaching, which I commented on Facebook by saying I think that's a huge deal. It's open source, they're documenting it. They're really giving back and trying to shape this next generation kind of entrepreneur on execution. So you have a good execution staff, mindset, entrepreneurial, so I got to ask you the question. This is not necessarily a dig against Reed and John Lilly, because I love the class of following it closely. It's great for consumer companies, but what is the blitz scaling model for enterprise? So it's different, you can't say blitz scaling that they're teaching at Stanford actually doesn't apply, I would argue, doesn't apply to the enterprise fully. There might be some pieces here and there, go to market, frictionless, blah, blah, blah, but what is blitz scaling? It's a little bit harder game, different roadmap. What's your take on that? So I think, so what Reed and John are teaching in class, Stanford's online, it's free for them to watch and consume. The whole thesis, starting up is easy. Everyone can start a company, credit card on Amazon. Scaling's the hard part. I would agree with that. And as an entrepreneur yourself, successful entrepreneur yourself, you know scaling's the hard part. It's the hardest hell. And so what does scaling mean? Scaling changes from zero to 10, employees 10 to 100, 100 to 10,000. Every part of that curve, the problems change. And that's from HR, sales processes, R&D processes, marketing, et cetera. And so some of the things are teaching are very, very consumer oriented. Some are very common, like how do you recruit world-class talent at speed? But some areas like go to market, sales, distribution, channels, pricing, those areas are very different when it comes to enterprise. And I always say the battle between startups and incumbents is distribution versus technology. And the hard part for a startup is getting that distribution. So you look at a pure storage, going to war against EMC is how can they grow with better technology and get their products in the hands of customers faster before EMC can buy and try to catch up? And so. Be faster basically. And that's the blitz scaling for the enterprise is, hey, how do you grow the product? How do you add more features and more technologies and more product lines? And then it's clearly how do you recruit great talent? But how do you get distribution and go to market? And at Greylock, we think a lot about, as entrepreneurs, not only how the technologies that are fundamentally better, there's a deep IP or there's operational IP, but also how to get this in the hands of your customers. And if you are a mobile app or a consumer app, there's social networks to tap into. But if you're an enterprise product, we think about, okay, how is the go to market for this product going to happen? So I got to take it to the next level then, which is I'm a buyer at an enterprise. The consumption of product and technology is also changing. So you have now kind of a blitz scaling vibe going on that we say, okay, what Amazon's basically showing is, you can actually have a 10th of the cost in these areas for developer with some distribution in marketplace. IBM's promoting the same thing with BlueMix Oracle has their thing in that sort of marketplace, but you're seeing that kind of vibe. So what does that mean for the buyer? How are they consuming the products and services? With a cloud, public cloud, and hybrid in play? It's changed before the CIO or the VP of technology was the only buyer. And the CFO wrote the check, right? So all buying was centralized and you kind of had this procurement office. And now with cloud and SaaS and distribution channels that last mile has changed. So you have app stores, so I can get things on my phone or my iPad. You have cloud, so developers can go and just hit Amazon or Google or Azure and start developing. And they have SaaS consumption where basically from a website or from app store, I can get HR apps and get finance apps. And so what's happening now is that buying has been decentralized. So the good news as a startup, exact, you now have multiple buyers to choose from. So it's not only do I have to like knock on the door of the CIO of large investment bank or the CIO of a large retail company. There's only one gatekeeper. Now as a startup, I can actually sell to the developer to the VP of sales, the CFO, to the business analyst, right? To the sales rep in the field because there's multiple channels to my end user. And so the beauty is as a startup is great. There's no better time to try to build something because you don't have to deal with this kind of a gatekeeper to get to your ultimate user if you're selling CRM software. So they're going to add you to the Blitz scaling roster for a Blitz scaling enterprise? I read, I and John have talked about you know, content going forward. Maybe the next class would do an enterprise version of that. They seem pretty happy with that. Chris Yeh is also involved, all these Stanford alum guys. So they seem to be happy about that. So okay, bottom line, what's going on here? What's your takeaway? What are you looking at? Have you bumped into anything? Are you doing any deals? What's going on in Amazon? What's on the floor in your mind? What's on your observation space right now? You know, the thing of what I come to these events for two or three reasons. One, to talk on theCUBE. Two, to catch up with alums of Amazon, Microsoft, VMware, all these other tech companies out there. So just reconnecting with individuals because you know, we are in a internet, Twitter, it's a crowd chat world, but we're definitely also living a world where, you know, face-to-face communication matters. The third thing is studying the rate of change, right? It's companies that three years ago, four years ago, the first Amazon weren't here, or were here in a small way, and how big are they now? In terms of booth size, traffic, products, and it's such a great way to absorb so many data points and understand the rate of change that things are growing and they're slow and they're going declining. Like I always say, when it comes to investing, or even decision making, I collect the dots before I connect the dots. So I come here to Amazon to all the shows that I meet at to collect the dots, right? And then I collect the dots and I connect the dots and the foreign investment thesis of where things are going. Yeah, and that's also key, you're in the middle of it. So you've been riding this whitewater rapids for almost eight years now, maybe 10, right? I mean, you go back and look at that and say, okay, what's the biggest change that's happened in your mind? Like if you look back and say, okay, between in the past 10 years, from Jerry Chen doing cloud early days to now, what is the biggest thing that's changed? And the biggest thing that's also surprised you? Sure. I think the biggest wave clearly is mobile, cloud mobile. People say mobile is something different trend or it's one trend, but the past 10 years of my career working in cloud infrastructure is what mobile as a sensor, as a device, as an input has changed. And we talk about this change from moving systems of record, systems of engagement, systems of intelligence, right? And one of our companies, TriFact, that talks a lot about this. It used to be systems of record, who owned the data? Who owned the database? Then it became systems of engagement. How do you interact with your user? Be a web browser, there was a browser wars, right? To the app wars of who owns the app on your phone. So that's the systems of interaction battle. And now we're kind of seeing the systems of intelligence. How can you make better decisions? How can you make faster decisions? Machine learning, machines. Absolutely, so I think that because mobile definitely plays in the whole system record, collecting more data, better data. It definitely plays in the whole systems of interaction. How you engage with your users. And that's been probably super transformative. And who knows what it comes next in terms of systems of intelligence, machine learning, early days there and have a whole thesis of what's going on in machine learning and data, but more on how it shapes applications. So A, that has been kind of one of the most dramatic changes because all the things that follow that trend percolates, permeates through this room and the way you build applications for this world of mobile apps, smart data apps, very different. I mean, 10 years ago, it was still mostly Windows Server, Windows, Microsoft SQL servers database, Windows Server 2000, Windows Server 95. That was the canonical stack, right? People spent a lot of time talking about that. Now, do people really talk about operating systems? Not in the data center, they talk about iOS versus Android when you say the OS... They talk Linux open source is what they talk about. But did he talk about Red Hat versus something else? No, it's going to be Linux, right? It'll be Linux. And so the OS battles have moved from Linux versus Windows to like Android versus iOS. And so the way you build your application to enable these new apps has changed. So macro trend to answer your final question was this wave towards mobile and what it means in terms of building applications, the biggest trend in the past 10 years. And that springs to the internet of things. Internet of things. It's mobile. It's the edge of the network. It's the edge of the network. Well the internet had things long for a long time. Yeah, I mean it's called the edge of the network, the connected device. It's this last mile. Because that wave has shafted and pulled so many changes in operating systems, virtualization versus containers. Databases from relational database, the big data to Hadoop, to Key Valley stores. That has kind of percolated and permeated and passed through every stack, every level of the infrastructure stack. Jerry Chen, great to have you. You're like a guest analyst. We have you on. Also a VC doing great stuff. Congratulations. Obviously we didn't even mention Docker much, but not a lot too much to talk about here. But quick update on Docker. They're making money. You don't care. They're doing great. What's going on? Definitely care about that making money. And they're definitely doing great. Everyone here should drop by the booth and learn about the enterprise products that they're working on. Good recruiting opportunity. Also great management, Tina Doc, our big fan. Jerry Chen, obviously enlightening us with this great insight. Thanks for sharing your knowledge and data with us here on theCUBE where we're collecting the dots and hopefully you can connect them. We can do that every time we go to an event. Thanks for watching. It's theCUBE here live, wall-to-wall coverage. Day two of three days of coverage. I'm John Furrier. You're watching theCUBE. We'll be right back after this short break.