 Hello, welcome to this special CUBE Conversation. I'm John Furrier, host of theCUBE. I'm here in the Boston area studio on the East Coast for a couple of weeks. Going to be in New York in about a week and check out the community there and start setting up some CUBE action in New York. Obviously we've got Boston covered as well as in Palo Alto. I've got a great guest here, Ed Sim, who's the founder and general partner at Bolstart VC. Also, prolific newsletter writer and commentator on Twitter as well. I got to check him out on Twitter as well. What'shotit.vc where he writes a weekly newsletter and what's hot. What's great about Ed is I've interviewed a lot of his portfolio companies. He's a great enterprise and tech investor. So it's not just enterprise, but he's one of the, I would say, original gangsters on the enterprise side. We've, you know, back when it wasn't as cool as it is now, Ed, great to see you. I saw your tweet, you highlighted, I'm Lee, she coined the term unicorn. Enterprise is hot. What's hot in IT is your blog, sub-stack newsletter. Hey, we're cool. Enterprise is cool. Welcome to this podcast cube interview. Oh, hey, John. Thanks for having me, honored. I think you'd mentioned you've been doing this for 13 years. This is year number 28 for me doing early stage enterprise software. So I've seen a few cycles and just a comment on my newsletter, what'shotit.vc. I started that over seven years ago writing a weekly newsletter just to share my notes. But part of it was to shed a light on how I thought enterprise infrastructure software in particular was quite sexy. I'm talking about debt tooling is sexy, same with cloud infra and security. And I guess what, based on Iveen's data, I think it became a little too sexy right now, which is cool and also frightening. It's interesting. It's almost a slingshot. I mean, I'm old enough to remember when I was in college in the 80s and late 80s and broke into the industry in the early 90s with the Eulah Packard IBM. And those days was mainframe to many in the PCs was my generation. And so the internet really kind of came along when I was kind of, you know, getting my professional roots grounded and it's just been great ride since then. And I think now it's probably the most exciting time in the tech industry because it's kind of that convergence of the big iron days meets democratization of PCs and the internet, kind of all kind of happening around the next gen cloud scale, the role of data and AI is certainly highlighting the instant use cases of a generational shift and how things are produced and consumed. So all things enterprise now is kind of the ingredients for essentially founders and innovation and ultimately wealth creation. I mean, I think we're going to see a wealth creation cycle coming never seen before. And again, the role of the clouds are there too. In fact, we just talked about on our podcast how the VC markets even changing with the big boys like Facebook, Metta, Nvidia and Amazon writing checks and more in the aggregate than say some of the old school VC. So, and you got the solo GP trend going on where experts write their own checks. They can move fast. You guys are talking about inception getting with founders early. I mean, this is a really exciting time and I kind of put out a lot out there, but that's the market. It's kind of crazy. It's changing and the power dynamics are shifting. And again, it goes to where the value is, right? It's going to be the founders. So, what's your take on all that as you sit back and you're talking about it weekly, I know, but what's your take on this hot market? What's shifting and what's happening? Yeah, I think about it two ways, right? I think that we just went through an era called the Zerp era, which is zero interest rate policy. And I think we got a little ahead of our skis over there because of fundings and preemptive funding just kept happening over and over again. And a lot of these companies ended up being overvalued. So, I think there's a hangover effect that we're going to work through over the next couple of years where companies that might have been valued five to $10 billion in the private markets during the Zerp era may only be worth $2 billion or $2.5 billion these days. So, I think we went through a lot of pain. I think there's more pain to come. On the flip side, because of all the trends that you mentioned, like AI, for example, and because that we've gone through the Zerp era, founders now have the religion in terms of, let me forget about everything that I learned over the past few years and let me go back to basics. Let me build a startup again back from first principles. And back in the day, you know, back in like 2010 when the cloud was really starting to kick in, you know, there's this mantra about lean startups. It was scale it, it was nail it first and then scale it. What ended up happening was is that the VCs got showered with so much capital that they would just throw money at founders and the founders were scaling it before their nailing product market fit and nailing the product. So, I think that this will be the best class of startups that comes out. When you look at five, seven years from now, you're going to look back at this and be like, oh my God, there are some amazing founders that built some amazing companies that were really efficient and you know, leveraging this AI thing. Let me just make a quick comment on AI. I mean, look, we've been around the block long enough where, you know, do we have an internet company anymore? Do we have a mobile company anymore? Do we have a Java company anymore? Do you remember there used to be like a Java fund, right? So I think AI is just an enabling technology. And in our opinion, if you're a founder starting a company or if you have a company and if you're not thinking about how to leverage AI in your product, whether it's just a feature or maybe it's a new product offering, then I think you're insane because the technology with the LLMs out there, the intelligence around it, the ability to use an API or even grab an open source model and train it to give you an instant result, I think is off the charts. So that cost compression has come down a lot and most founders I see today are starting with some type of, you know, AI leverage product and I want to hesitate to say that, you know, I don't want to say that we're funding AI companies because it's just inherent in everything we do. AI just in all software. Well, it might help for me if I say let's get funding to a little AY wash, get the LPs put more cash in, but I think you're right. I mean, absolutely. Look, when I talked to Adam Sileski before re-invent, I tried to exclusive sit down with them. I brought that up, that point. I think that's a nuanced point but I think it's worth double clicking on it because, you know, if you look back at the internet and the web in particular, you know, when I was in business school in the 90s at Babson at night, you know, it was called the information super highway at that time. It wasn't even called the internet yet. It was called, or the web wasn't even there. The W3C hasn't even, didn't even move to the US yet. And what's happened in 90, I think 95, Tim Bruce Lee and Tim Reagan, those guys moved over, right? So that didn't happen. There was no internet company. I think AOL and CompuServe called themselves internet, the internet company, but there wasn't even the web yet. So the standards of the worldwide web was interesting, so it was open. And so, you know, you had CompuServe and the online service providers back in the day. So what's interesting is that you got the has and have nots now on the startups. You got the SAS guys pivoting to the AI, which is key. We're seeing that valuation, you know, some down rounds of the ones who didn't get the fit and scale too fast, they're getting crammed down. And they're pivoting into the AI and the AI native startups are getting great funding. And so you have this AI movement. So I agree with you. It's not just AI, it's the environment. Like the internet, it was closed online service providers and then open worldwide web. Do you see the similarity there? I mean, do you see that thing now is open AI? I mean, technically, it's proprietary. I mean, it's closed. I mean, yes, it's closed. We call that an online AI supplier. But meanwhile, open source is booming, right? So you got to ear the ground on the VC side with DABS. Is open gonna go the way of the web or is it gonna be a mixed match proprietary open AI developer? I think it's gonna be more of the latter, right? First of all, I think it's so early and it's hard to predict what the future will look like. But if you look at kind of the data, and we talked to lots of CIOs and buyers at large enterprise software shops. And because of the chat GPT moment where it became very easy and democratized access to AI to show how powerful it could be, many of these large enterprises kicked off pilots. And a lot of the pilots were just leveraging off of open AI. But I think over time, after you saw the governance issues that arose last year, right? When Sam got kicked out and then came back in, I think people understand that, wow, to have one company control access and an API to all my enterprise applications, I think it's a scary place. So I think that really opened up the opportunity for the rise of open source. And I think, you look at models like Lama and other kind of open source models, whether it's Anthropic and others. And I think we're gonna live in a multi-model world and where there's gonna be some open source and some open AI, depending on kind of what cost issues you may have, what privacy issues you may have. And if you think about it, think about like a 10 step enterprise workflow. And perhaps in that workflow, maybe use open AI because it's very easy to look at some, more of a public kind of data analysis. And then maybe you have a human in the middle giving it a thumbs up or a thumbs down. And maybe the next step of the workflow goes to looking at your own proprietary data where you wanna keep it super, super secret. And maybe there's a rag there. People are using that to get a more specific and a smaller model to get a more specific answer. So I think we're gonna live in a hybrid world. And I think it's super, super exciting because right now I feel like it's just the beginning of the gold rush again. But yet we have to have our sanity around valuations, right? Because I think we lost some collective minds as enterprise software investors. It's enterprise software became very cool. Too much money came in and just blew up the sector in terms of valuations. And right now we're sitting at unhealthy numbers across the board with all these unicorns. I think Eileen said there's like 416 unicorns now in the enterprise, which comprises 80% of all unicorns. Once upon a time, there were only 15, that was 10 years ago. So there's a lot of stuff happening right now, but I am super pumped. And I think we're just at the beginning of a massive, massive curve right now. Yeah, I like what you're saying there about the mixing models. And I've talked to Pat Gelsinger one time when he was at VMware running VMware before he went to Intel. And he and I joked about open and closed. He says, hey, an Intel proprietary processor was, a processor was proprietary, but no one cared. No one looked inside the processor, did his job. But everything else was open systems, right? And how you configured those machines. And again, we see the same world happening now. Okay, I can use that tool for that, but I'm going to be open for them a dev standpoint. And I think to me, I'm watching, and this is where I want to ask you what you said earlier and double click on that. It's that velocity of startup formations, okay, and time to value on the product market fit are the key. Now the question that everyone's asking is, what are the entrepreneurs doing? That's the tell sign. Those are the canary in the coal mines for the trends. So like the cloud was accelerated startup formation because you didn't have to buy a data center or gear. You just put your credit card down. AI is going to accelerate the founding and acceleration process of that zero stage to first customer. How are you seeing the startups walking through your door now at the formation stage or even pre formation, as you'd call it, as they start, you know, ideating and getting visibility on an opportunity. And then what's their capture strategy out of the gate? What do you see in that idea, zero stage, jump out there and get value going? Is it shorter cycles, kind of mentioned that? What's happening in that part of the process? Yeah, so these are all great questions. So at both start, I've basically coined the term, we call it inception investing. And that's when you engage with founders well before they incorporate. You help them battle testing at rate on their ideas. And then you kind of verbally work with them to come up with a price so you can lead their round, kind of, you know, so upon company formation, you know, legal formation, they're ready to hit the gates running super fast. Last year we did eight net new enterprise related investments. This year, I think we've already done two. So we're running very fast right now. And we're seeing a lot of founders actually come back and think about new ways to reinvent existing markets. Right, think about it. Every, you know, the beautiful thing about enterprise software it's a gift that keeps on giving. Every 15 years or 20 years, no matter how big a company is, it's open for reinvention, right? I'll give you a good example. We had funded a customer in the customer sports space and they were going after Zendesk. And they had a unique data model where the customer would be the atomic unit versus the ticket or how someone reached out to someone. Well, we ended up exiting that the meta for a reported, you know, it wasn't disclosed but reported over a billion dollars. And then we just bought that back out with our friends at Red Point and Battery. And the whole idea around buying that back out is they're sitting on a pile of data. And guess what? There's this thing called AI. We are just gonna AI the crap out of it, right? So this is an amazing, so this will be one example which is an unusual one. And then I'm looking at startup founders. I have founders coming out of the gate right now. For example, when you're looking at public companies like Haschicorp, Haschicorp is a tremendous open source company, but they had some issues with their licensing. People are complaining about pricing on vaults and things like that. I think there are opportunities for people to come out and create a new vault competitor. Or think about this, let me give you a crazy idea. We backed some founders and I won't say who, but they were looking at kind of the SCM market, you know, GitHub and GitLab. When was the last time we ever did aimed innovation around GitHub and GitLab? Yes, of course, there's some AI related angle to that. Let's just say, and I can't wait to share that with you. But this is the example, right? When you take a new technology as groundbreaking as AI, can you actually build it from scratch in a better way than bolting on AI on top of an existing infrastructure that may not have been built for that era? You know, that's such a great example on a call out. One, you just mentioned earlier, disruptive enabler AI, that's a great examples of those. Of one, going after an incumbent and taking down a big market fast. So one little feature, you do it. The other thing that you brought up is interesting and I noticed this in the social media wave on that last big wave of innovation is that you had companies had to build their own stuff from scratch. There was no general purpose enterprise software around for their business. They could take Facebook, for instance. They build their own stack from day one. And so do you see similar kind of things happening now where there's the accidental startup? I mean, hell, we're a media company. We're sitting on a ton of video AI. Maybe we're a video company. Maybe we're a data company. Or we're certainly a data company. But you see these accidental discoveries that just happened because they built their own stuff for themselves. And I see a lot of that in these early markets like AI where, look at RAG taking off. You mentioned that earlier. So there's a lot of founders out there. I had to build my own stuff. Hey, that's a company. There's a pony in there somewhere. It's actually a good venture opportunity. What's your take on that? Yeah, once upon a time, like 15 plus years ago, a lot of the coolest infrastructure companies came out of existing Silicon Valley web scale companies. You think about like Confluent came out of LinkedIn. Think about some of the infrastructure companies that came out of Airbnb or Uber. And so, yeah, I think the hard part right now when you're looking at AI and the enterprise is kind of that last mile piece, right? It's easy to get up and running. It's easy to call an API and get an answer. But the question is, can you get that answer repeatable? Can you make it happen every single time? And how do you kind of build around that? How about AI security? I have been banging on the drums for a long time about there's no AI and the enterprise without AI security. And that is definitely a big risk when you talk to some of the largest organizations, you know, fortunately, we backed a founder who is starting his third company that we've known for a long time named Ian Swanson and we funded Protect AI in January of 2022 or February of 2022 before AI was really hot and sexy, right? So these are the things as an investor, like being an inception investor, you have to find founders who can see around corners. And guess what? He was working at AWS, you know, leading go-to-market for SageMaker and a lot of the AI products. And he heard a lot of the fortune, kind of 500 customers saying, hey, you know what? I need more visibility on my models from a security perspective. We have it from a operational data perspective. And, you know, by the way, our thesis was, let's give them three years of runway to see if he can kind of see if there's a big hack that happens or a seminal moment, but we didn't predict GPT. And guess what? After our initial round, they raised like $40 million last year because the market was hot, but we had a product in the market ready to go. So those are the things that are kind of the things you need to think about. I almost think three years ahead of events to see if, you know, makes some bets about the future with founders who can see around corners. I love chatting with you, Juan. You've been on theCUBE, alumni before, and your companies are all enterprise. We've had interview, most of them. But I got, I was joking on Twitter as before you came on. It's getting more enterprise-y. We were kind of riffing back and forth on Twitter there. It's going to get more enterprise-y before it gets even more consumer, even more, I see. Because if you look at the cloud market, enabling all this distributed computing paradigm emerging fast, the whole multi-cloud problem, what we call super cloud, there's still a problem. There's still proprietary stacks, if you will, if I'm not, they're going to hate that I use that word, but there's a, say, different code bases running essentially similar services across the cloud. So to me, that would look like the old mainframe days, okay? So you're going to see more standardization around environment, traversing environments at the infrastructure level. And then ultimately, the software side which it will sit on top has to run in a distributed fashion. So there's going to be more distributed computing stuff going on architecturally, as well as the tsunami of applications sitting on top of it. So as you look at your experience, how do you see that playing out? What would you, how would you connect those dots as an investor? Is it lower in the stack? I would say Silicon Advancements is all the rage right now. NVIDIA is taking all the press on that. But you're seeing a lot of infrastructure from super chips to super apps going on and everything in between. But it's still hardware, middleware and software, right? It's the same game. It's all the same stuff right at the end of the day. I feel like the pendulum swings kind of over time. We had mainframe computing back in the day. Then you had a client server. Then you had the internet which was almost mainframe. And then now you then you had microservices and containers which is almost like distributed again, right? So where is the pendulum going? Is cloud actually a centralized kind of computing environment now? Now you're seeing edge stuff, right, John? You're seeing, you're seeing stuff around the edge. And by the way, think about this. I think an opportunity over time is that as the models get smaller and get more specific, as the chips get more powerful on the edge. I mean, look at the Apple laptop right now. We're looking at the iPhone. Think about the privacy and data implications kind of being able to process and the cost implications being able to process and give you answers on the edge, right, you know, on these devices without reporting back to the cloud. Then think about all the opportunities like sensors sitting out, you know, collecting data on windmills. Think about cars, automobiles. Automobiles are moving data centers right now. I think there's just gonna be an explosion of opportunities kind of looking at edge-related stuff over time. And not all of it has to be round-tripped back to the cloud, back and forth when it comes to latency and privacy. So I would say that's one thing that's gonna be interesting kind of moving forward. I think the other, by the way, is that I'm also excited about this environment right now because only the craziest founders are starting companies right now. They're reading the news, you know, on the one hand, the public markets are on fire but it's really driven by the big seven because there's been no tech IPOs, you know, over the last like 18 months, right? So, but you gotta be crazy founder to really believe in the opportunity that you're building right now. And I liken it to Noah's Ark. When the big flood comes, no matter how many animals there are, only two of each make it on the boat on the Ark, right? So in the last three years, we had 30 of everything in every single category getting funded and just created stupid competition. And people did stupid things. And now I think there's gonna be less competition coming around the planks. So you add all that together and there's a massive opportunity ahead of us. Well, here, here on that one, I totally agree, in my experience over the past three cycles I've lived through best startups come out of the trough and when it's really the most painful because by the time their crazy idea gets going, it's almost like they survived. And also they were early and they're built out when it hits positive, right? So the good founders will aren't afraid to go in there and handle some of the waves that are hitting the boat. So I totally agree. I say, if you got an idea at this capital and you've seen valuations strong on the AI side. So it's not like there's not a lot of capital left. It's just the appetite to fund unknown is there. But so I think it's a great time to start up. And I think that I encourage everyone if they got a durable idea, it's great. Now the key to success in my opinion which is why I love theCUBE is connecting with community and providing content to help founders. I think what you do and hopefully this interview will help folks but you're also on the same religion we are which is it takes a village and it takes a community to help founders and with your inception strategy, getting early, trusting a capital partner as a partner is super important for founders now because they've seen the bludgeon and the battle that can go through if they don't pick a good partner early and they get experience. So the smart money, smart founders are going early to you or trusted parties, not just ID, it's not like they need help ID and they just want a wingman or a person to help them, right? So, and it's not just you, it's also your network and as we have these networks and explain your concept here, I think this is a, it also highlights why the solo GP is working in some cases. If you have community presence and you have value and you're trustworthy, it's a perfect opportunity. So explain as we close out here your vision on this because I think it's a state of the art in my opinion. Oh, thank you. Thank you. Well, I guess a couple of things. First of all, people talk about AI trying to automate venture capital but at the end of the day, I still think relationships matter. So in the past few years during the Zerp era it was a transaction driven world where people just got multiple term sheets and didn't spend enough time kind of with their VC partner or with the founder. And I think because of these board issues like an open AI issue and other board issues you've seen, founders and investors both understand that these are 10 year relationships that we're entering into. Let's make sure we know each other. Let's make sure we can operate with each other through the good and the bad. What both started was purpose built to do was partner with founders with ideas. And we like to tell the founders, hey, you know what? Our job, we can paint this picture and say, look, we love infrastructure, we love DevTools, we love cyber but we don't see the future. I need to trust you to see the future. So it's the idea of how do you have someone with the idea of building a flying car? But when you're going in to sell it to an enterprise how do you make them feel like I'm getting a faster car instead of the flying car right now even though you have the flying car vision, right? So I think the one thing we do really well there's common things that we see over and over again and mistakes that founders may make early. And we wanna help founders accelerate their path to product market fit and avoid the mistakes that we've seen for 28 years, myself personally in 14 years of the firm. And fortunately, we actually have a number of companies that have been on theCUBE, like Sneakwitz, which was worth over $7 billion, I guess as the last evaluation last year, Big ID, which is a unicorn itself. You've had Nimrod, I think, and Dimitri kind of on theCUBE. So when you see these patterns over and over again you have the confidence you can give the founders the confidence and we have a whole network of people that can come in that understand that zero to one phase because you know what happens? It's like a rocket launch. Every inch that you change is kind of a mile in the atmosphere. So the culture you set from day one, who you hire, how you think about hiring, how you build, how you think about go to market as you're building your product, all tie in together. And these are the things that we can, coach founders around, but ultimately they're responsible for building that magical product, which we're relying on them for. Yeah, mutual respect, honesty. Also, it's hard, I tell startups all the time, hey, you can't get a real, I mean, you can get degrees in entrepreneurship now, I guess you get, I mean, Babson was an entrepreneurial school, I went to, but I mean, doing a startup is hard. I mean, enterprise is hard too. So it's not easy, so you can't just throw money at the problem these days. One of my partners like, you know, like say, startups are, am I allowed to curse on this at all? Yeah, of course, absolutely. Startups are fucking hard, period. I mean, it's gonna, you know, you're gonna get knocked down three times and you have to get up every single time and keep moving, right? And by the way, to your point, John, I have this kind of funny saying that I've kind of learned over the years is that a great partner and investor and board member needs to know the three CHs. You need to know when to chill, because sometimes you work with the founder and just leave them alone and they're coding away that they don't wanna be bothered, right? You don't wanna interact with them because they're in their flow. Sometimes you need to know when to challenge founders. And you know when you challenge founders is not when they get their ass kicked. You need to challenge them when things are going so great that they feel like they're invincible. Cause you need to ask them like, how do you add another zero? What happens if this happens, right? So help them see what could actually happen. And then you cheer for them. That's the third CH is when they get their ass kicked three times in a row. You peel them off the ground and say, dude, you can do this, keep going, right? So that psychology is so important about startups, frankly. You got a lot of great example. I loved your example of the Green Plum on a podcast you did a while back. And that's another example. Perseverance, having a good partner, you know, is a great, great thing. Ed, thanks for coming on and sharing with me. And great to have you on theCUBE solo. You're on with your company. And by the way, we'll do more. I'm going to be in New York. We're going to do a lot more enterprise. The world's getting more enterprise-y, which means it's opportunities. And I think, you know, whether it's a white space or a big market, the disruptions here. And I think this disruptive enabler, that is the data AI machine learning trend is going to continue to power change and opportunity. So if you're on the right side of the street and you're in this one, you're going to look good. I'm pumped. Well, John, thank you. Thank you for all you do for the community. Our founders love kind of Silicon Angle. We love theCUBE. So thank you for all you do for helping make enterprise-sexy because you've been part of this too. It takes a village. I appreciate that. We love what we do. Thanks for coming on. Okay, you're watching theCUBE. Of course, I'm here in Boston. We're in Palo Alto, Boston, soon to have other studios and get experts like Ed and in the community sharing their knowledge. And also, more importantly, money. And he writes checks. So check out Ed and he's at boldstartvc. Of course, what'shotit.vc is a great newsletter. Again, great network effect going on there. Thanks for watching theCUBE.