 from Bahá'u'lláh, you invested in Nirvon X, some of the companies, you're in this service provider space and you've got companies that are delivering real value. Pete Soncini, you were here last year talking about the enterprise and we're saying it was hot. No one was really here talking about that. Now it's hot as hell. So Charles, real quick, platform as a service, this whole market, what's your take on it? Well you mentioned service providers. I think one of the big themes is the rise of the service provider. The efficiency of the cloud is you can run storage at 95% utilization rates versus 10, 20% using sort of legacy boxes. So if you're running a var today and you're not transitioning to be an MSP, I think you're in trouble. Most of the smart vars we're seeing are going that way. So I'd say Pete will probably talk about enterprise in a second, but the rise of the service provider is a big theme we're investing in as cloud venture investors. Pete, M&A, NEA's had their share of M&A with the data domain, a bunch of other companies and big exits. Do VCs think about the M&A equation when they're looking at the startups and how much goes into that? And Charles, same question for you after Pete answers it. Yeah, yeah, I mean, absolutely you think about it, you got to think about it, but the truth is when you have a large fund, you got to make investments, they're going to become big companies. You got to believe that they're going to go on to be big companies and have that conviction. So while you do look at the M&A market and look at the multiples people are paying, certainly with later stage projects, you look at comparable multiples people are paying that does impact things. You look that Baroku gets acquired for an extraordinary multiple of revenue. You start thinking, well, platforms of service could be an interesting place to invest and strategic investors will pay up. So by all means you look at those things, but as a venture investor, particularly one like NEA, which is very large and really makes our returns off a few very extraordinary outcomes, you got to think about building companies and not making too much of it. Who's the next M&A? Who's the next target? Who's the next target? Yeah, big M&A deal. Well, I think that certainly platforms of service, but if you look at the virtualized ecosystem, there's two big areas that really need to be exploited and products need to be brought to market, which really solve the problem in a way which they're not being solved now and that's in storage and networking. And so, and the truth that we really believe that the really incumbent players in those categories cannot respond to the architectural changes than really the requirements of networking and storage in line with what virtualization is bringing. Therefore, they're going to have to pay huge, huge premiums to get into this market and it's going to be targeting startups. And I think companies in that area will do quite well. Charles, what do you think about that? What startups going to be required? I won't brag about my companies. I think very highly of Nervonix and SolidFire. They have big company potential, but I'd say of the non-vahal portfolio, I think Nimble is one of the hottest companies. They're doing sort of an equilogic plus data domain plus SSD for the mid-market. They have a world-class team from data domain and an M&A company and a net app. I think that's the type of innovation and disruption that the big companies who ultimately own most of the customers are going to need to acquire to get their mid-market business to the next level. So I'd say Nimble's interesting. Newtonix and sort of data center in a box. I think they're going to be on your panel later. Those are some interesting companies. Are we in a bubble? I mean, SSD is booming right now. So Solid State, you're familiar with those companies. You guys are investing in it. I know Charles, you've made some deals. It's hot, but I hear valuations off the charts. So are we in a bubble with SSD? Well, I mean, I think SSD is a huge argument. Yes or no, bubble. Yes or no? I mean, it depends how you define bubble. I mean, valuations are very, very high, but SSD and some of the problems in storage in a virtualized environment are huge problems. And I think of the current crop of six to 12 storage-related companies that are using SSD that are going out to this market, you're going to see one to two to three multi-billion dollar companies coming out of there. You're going to see probably at least one, you know, major cornerstone of the technology. You know, tens of billions of dollar company coming out of this, because it's such a change with cloud and with SSD. So while valuations are very, very high, I think if you look at the current crop, the current crop of established startups. Like who? Like who? Well, I mean, that's a nimble, you know, there's tin tree, there's, you know, there's pure, there's solid fire. I mean, these companies, there's half a dozen, a 10 of them that are solid, established up and running, start-up stays, but still, you know, have getting close to product. Charles. I think there's going to be a great one coming out of that. Overvalued? No. Opportunity? Not a bubble. Every deal that's done at high prices, the 100 to 400 million pre with minimal revenue is being done by smart guys like Pete, who are running the numbers and saying, here's the percentage odds that they're going to be worth two and a half billion like an Isilon, a three par data domain. Here's the odds that they could take out EMC or take out NetApp. So they're good odds, right? What's the odds? I mean, these companies are disruptive. SSD, I mean, it's huge growth. With any individual company, obviously, we're in solid fire with NEA, we're in nirvonics with Mission and Intel. We think those companies have great odds, but the more important thing from a macro perspective is that SSD is going to take massive market share from mechanical disk. Cloud, because of 95% utilization rates, going to take massive market share from legacy refrigerators. And so you've got $40, $50 billion market caps at the EMCs and VMware's and to a lesser extent the NetApps of the world. That's all going to transition. A lot of that market cap will be held by those guys as they acquire the disruptors and bring those disruptive products into their existing channel and customer bases. But the point is that these are $40 to $50 billion outcomes that the startups are playing for. So, yes, it looks crazy to pay hundreds of millions of pre-money for a company with peanuts of revenue, but if they're built in the next NetApp, or even if they have a 10% chance of building the next NetApp, it's not so crazy. I'm Rahwa Dallas said that storage is the hottest area right now and to invest in and integrating it in into the systems, kind of system software. So you got HP, EMC, these are big storage vendors. Are they running the risk of just being one big backup farm and these new players taking down their share? I don't see them being just a backup farm. I think they're going to continue to innovate and I think they'll continue to serve their customers well, but I don't think that they can respond and change their products and their go-to-market as much as is needed to really meet the needs that are emerging today in the storage market. I mean, they're at risk, right? I mean, they're definitely at risk. I mean, Charles, you just said that. HP and IBM are at risk, but at the same time, the big banks, the JP Morgan's, the Goldman Sachs's, prefer to buy from IBM, HP, EMC, rather than from the startups that we invest in or Ping, who was just here, invest in. So if you're, you know, JP Morgan's IT group and you've got tens of thousands of employees, you're used to having IBM global services manage your product lines for you. So those guys have an important role. They're not driving innovation, but they own the customer. I think I like your point about disruption. Next question about service providers. Service provider cloud market, is it over-hyped or under-hyped? Under-hyped. You know, again, back to the utilization rate thing. If you're running a world-class cloud operation, a Dropbox, a Box.net, Nervonic, SolidFire, you're running a 95% utilization rate. Amazon, one of the pioneers in cloud storage, 95% utilization rate in cloud and compute, that's a very powerful value prop versus the big banks that had over-provisioned legacy storage in the past that were running at 10 to 20% utilization, whether it's primary storage or archive. So I'd say that the role of bringing sort of Facebook IT, Google IT to the enterprise is we're halfway through inning number one, if that for it. It's a major trend and customers really want help from service providers. They don't want just the vendors, they want help from service providers to get there. Tara, Mark. What did you guys talk about at dinner last night? When you guys get together for dinner with other VCs, what do you guys talk about? Buying companies, what's the dinner conversation happening? There's too much talking about how great each of our portfolio companies are to one another. And so that probably consumes half of the discussion. But I'd say that, you know, it's a lot of talk about evaluations are in fact very high with this area, there's no doubt. There's challenges in the venture business. There's, you know, there's, you really need an IPO market to really, you know, make the venture in business sustainable really long-term at the levels that's been historically. And so there's a lot of talk about when that's going to come. But you know, it's a competitive business and we're friends, but you know, we're competing as well. So you talk about other VCs, of course. VCs always talk about other VCs. So, I don't know. Yeah, Charles, what can you share with the folks out there what goes on in these conversations? There's a war for talent. So we've talked mainly about storage today, SSD and cloud, but mobile, you know, Android has taken massive market share very quickly. So every one of our mobile companies, NEA's mobile companies is in a war for talent. Android developers, iPhone developers, people who have back to storage proven exits. The guys who came out of the three parts in data domains. Part of the reason these valuations are so high is they're being built by veterans of the companies who had the last big exit. So Solid Fire, which we talked about, is heavily staffed with veterans of left hand. Nimble, which I think neither of us have ran as heavily staffed by veterans of data domain. So there's an intense war for talent from the young guys and the old guys from the existing big wins. So that's something that I think when we get together for dinner, we talk about a lot. So how do we get the best guys in our companies? Because we're bragging about the good companies, but not every company works out so well. And usually it's a combo of market meets team that makes that happen. Talk about Nervonix for a minute because Nervonix is a company that's just offered Hurricane Irene people to get free backup, great marketing over there. They did it in Japan too. They did. Disaster there. It's just like they just pull the trigger on that. Is that effectively the model of just saying, I can provision storage instantly? Is that kind of where you see that company going? Sure, so when we invested in left hand, I'd say the power of the grid architecture where if San Fran goes down to the hurricane, you click a mouse and the storage in New York is safe was one of the things that appealed to us. And at left hand, it was really more of a dream. You know, I'd say most of their growth was mid-market, cheap easy to use. And Nervonix, it's real. Now Nervonix is focused on sort of Fortune 100 class archive, but if you're a big bank, a big media company, you can move your storage around. If Asia goes down, if East Coast goes down, you can literally with a click of a mouse, move dozens of petabytes from New York to LA and your data is actually safer in the cloud than in legacy storage. Yes, it's an emerging technology paradigm, but your data is actually safer, cheaper, easier to manage. Final question guys, for you guys, what's changed in the startup community at the entrepreneurial level and at the VC level over the past year, two years? What's changed? Well, I'd say that cloud is hyped, it's pretty much in the hype category now. So a lot of these ideas have been banged around a lot. A lot of these general major categories have been funded. So I think we're kind of waiting for that next layer of innovation as it pertains to cloud. And that's a good thing. And that's been interesting. And I think that we're getting close to that next big wave of change and technology is going to shake things up. I'll just add one point. I'd say the size of the exits and the intensity competition. So Groupon's unfile to go public, so Pete's not going to brag about it, but he'll brag about it for him. People think that's worth about 20 billion. Facebook is trading in the private market for 80 billion. So we're not shooting for 300 million tech flip outcomes to net up anymore. Startups that are two, three years old are worth 20 to 80 billion dollars. That gets people excited to build companies to invest in innovation and that's what's really driving what we do for a living. Pete Sunstein from NEA, Charles Curran from Bahá'a Paz. Thanks so much guys for that conferencing.