 Computer Museum in the heart of Silicon Valley, extracting the signal from the noise. It's theCUBE covering OpenStack Silicon Valley 2015. Brought to you by Morantis. Now your host, John Furrier. Okay, welcome back everyone. We're live in Silicon Valley. This is Silicon Angles theCUBE, our flagship program. We go out to the events and they extract the signal from the noise. I'm John Furrier, the founder of Silicon Angles. I'm joined with two great guests. We meet Singh, CEO of App Formix, who he was on the ground with us last week in Seattle for the OpenStack Seattle Meetup, LinuxCon, ContainerCon, all the top action going on in the developer community, and Vic Metra, the general partner at August Capital. The money guy behind, he meets company. Welcome guys, both theCUBE live. Welcome back. Good to see you, great to see you. So, when you're fun of these guys, I mean, I see you guys look for talent. He's been there before, done that. At Microsoft, super technical. What's going on with this segment? Why App Formix? What did you see in these guys? What was the pattern? What was the unique? The big thing for us was, there's fundamental re-architecture enterprise data centers. The existing architectures just don't scale anymore. People are demanding the same level of ease of use that Amazon is able to provide. So, there's a big shift, a tectonic shift that's happening in this area, when Sameeth came almost two years back to us and presented the nuggets of the ideas that he was pursuing. We thought it was going to be very transformational. It allows these data centers to actually realize the whole vision of dynamic in autonomic computing. So, this is something that we were very excited with and we've been working with him and his team for two years now to do that. So, it's now beginning to see the fruits of all the work that they've done. And all, certainly the hype is there. The market textures and all the hype around big data, internet of things that applies to the data center, hybrid cloud, all that hype really kind of boils down to the fact that essentially the operating system of the data center still is core to every single company on premise. And certainly the footprint economics are changing. We talked about that last week. Now with a public cloud, it's really kind of on fire. So, how is that playing out for you guys? How do you see from an investor standpoint and Sameeth, how do you see this hybrid cloud? Does hybrid really exist? I mean, can you buy hybrid cloud or is that an outcome? Hybrid exists and I would say that's going to be the predominant model in the future. But to make it happen, what really needs to improve is the enterprise data center. The public cloud, Amazon, Azure, Google, they are way advanced. They are far more ahead of what exists in the enterprise. The transformation, as Vivek is saying, is needed in the enterprise data. You need to bring in that same ease of use, that same level of flexibility, those same models of self-service. You know, treat the enterprise cloud like a product. That can be consumed by all the users in the automation, just like, you know, you would have consumed Amazon in the public cloud. Okay, so I'm a customer, pretend I'm a customer. Well, Sameeth, I really don't care about this, that, the other thing. I have a lot of cash on the table I spent and I'm going to spend on infrastructure. I got this huge data center. I got issues with that, the facility. I have network issues. I got hackers out there. I got the option for the cloud. I got the promise of economics. But the reality is, all that's going on and I got these new workloads, I got to push to mobile. So what the hell does that mean to me? So that means an underlying transformation. So I agree with that. If you believe that, what happens next in the customer's equation? Fix the data centers first, do I go to the cloud? How do you see that? So what I see is happening is that people are using the cloud first while they are transforming how their application, I mean, the application architecture is evolving as well. And then once you've been through that evolution, your application, so now that they're running in this new framework of what we're calling cloud native, then they're taking a step back and saying, hey, let me now fix my own infrastructure. Let me enable it so that my users can bring those applications back in-house. So eventually what you get is a fluid infrastructure that exists both in the enterprise and the public cloud, I mean, that's the hybrid cloud model. I believe that Amazon, I mean, it has great value for a large market segment, that's going to be the kind of cloud. And they're number one, it's clearly public cloud. But for most large enterprises, it will be an extension of their enterprise data center. It will not be the predominant. If you want to comment? Yeah, so what I would say is the enterprises are looking at it and saying, how do we re-architect it? And then they have choices that are, and I think a lot of it will be application driven. So there are certain applications that are much better delivered through a SaaS-based model. Clearly Salesforce, Workday, a whole bunch of stuff. So the enterprise, a bunch of applications will move pure play SaaS. Then there's a certain set of applications that will move to an enterprise private cloud, public cloud, and then there will be a set of applications that will be run on the enterprise side. So as these architects are thinking, they're figuring out what applications can be migrated and at what level. And so I think all of these things will exist. I think there will be SaaS, that a lot of applications move to the SaaS, a lot will be public cloud, and a lot will be to private cloud. So those are the three predominant. So it's almost tearing up based on the use case of the environmental factors. So if you're Google, Facebook, Salesforce, you're internet company in day one, you're cloud native. You're cloud native. If you're Box or Dropbox in Workday, you're the new startups, you're cloud native because it's the best fabric to develop on. So I don't think it will, it'll be all of those, and it will take a long time to make those decisions. But the enterprise guys who have built on the 1980s, TCP, IP, open standards movement, now have Minis and all that stuff, legacy built in. That's not trivial. That's not trivial to move. That's hard, and the facility's overhang is hard to. You just have to wait for the last set of users to die before you can migrate stuff over. Okay, so Vivek, I got to ask you, because I love having the VCs on the queue because they're under the hot seat and the pressure, and you got to be nice to everyone. I got to ask the hard questions. How hard is it to invest in the enterprise? And how hard is it for entrepreneurs to succeed? It sounds so easy. The enterprise is where the action is. So, it's not that easy. Could you share your perspectives on good market, technology, incubation of the companies, and you guys have been in stuff for two years. Share the challenges of enterprise. So, one of the great things that has happened is, it's become a lot easier to start companies because now you don't need to buy hard expensive infrastructure. You don't need to buy expensive computing equipment. So, it's a hell of a lot easier to start companies, and that's given a sense to a lot of the entrepreneurs. It's easy to scale also. But the good part is, given that a lot of companies are starting, there's a lot more innovation that's happening because it's lots of experiments that are happening. So, companies go through that phase, and then there's the development phase. The second phase is the initial customer validation phase. That's when they really have to do hard work of taking the baby and showing it to people and says, it's this interesting for you. Product management kicks in, it's all happening in parallel. So, there's a whole fallout of companies that have brilliant insights, but are unable to really convert those into actually customer demand. So, that's that one phase. Beyond that is, once you get the product market fit, then there's a second challenge, the huge other challenge, which is, how do you scale your business model in a profitable way? And right now, unfortunately, we see a lot of companies, lots of monies, being poured into those companies. And I'm concerned that a lot of the enterprise companies are not scaling in a profitable way. Well, you see a lot of people buying sales. When you see a $2 spend for a dollar in sales, that's obviously a red flap. And a number of firsts that have existed that were around in the 98, 99, we've seen the story. So, my only- The scar tissue, look at that right there. So, my caution is, think about not only the tech, but also to entrepreneurs to be, think about the tech, think about who's going to buy it, and think about the cost that you're going to do, and build it in a holistic fashion. Just practical advice. To me, share your perspective, because we all are old enough to have lived through that day and it was hard, right? I mean, that was a real crash to Earth. He was in kindergarten at that time, by the way. But we were. I mean, he's still getting better grades and probably than I was the good time. But at the time now, those, a lot of folks in the market today weren't around then, don't understand the crash it was. Now, I've been saying that Dave Vellante, my partner and co-host is that the blow is being softened in this bubble burst because the underlying infrastructure change in the enterprise and cloud is radical. The, what didn't exist, the internet was just the internet. The web was out. There was no radical technical changes going on during the web days. So yeah, the economic bubble hit. So that crash was hard. That's my theory. I think we're softening the blow here because there's actually real wealth creation going on. I agree with that. I do agree with that. I do believe that in this time around, there's real wealth creation going on. Last time around, people were just speculating on what the wealth could be. Yeah, web, web van, these companies, pets.com. Absolutely. I think now there's real wealth being created. At least I believe I'm creating real wealth in the long term. Where's the level of innovation? You guys comment on some of the transformative, disruptive enablers. Is it virtualization? Is it cloud? Is it the integrated stack? Is it the DevOps ethos? All of the above, mobile obviously is pretty clear. I think what's happening now is that there's so many different things that are happening all at the same time. It's not one single thing. It's not, hey, put everything on the web. You're mentioning a few. There's cloud. There's virtualization. There's DevOps. There's cloud native. There's enterprise. There's SaaS. There's so many different things that are coming together, right? And really, for me, as opposition app formics, it's really about how does app formics play into the ecosystem, right? How do the SaaS companies benefit from me? How do I play with containers? How do I integrate into OpenStack? How do I play well with Docker, right? So it's very different from last time around, is what I would say. And I think the companies that will succeed are the ones that will figure out how to play with each other. Not the ones that try and do everything on their own. So business model innovation potentially, as well as technical innovation? Absolutely. So there's another innovation that I think is massive and people don't talk about it much. I think it's the ease of use of those deployments. People want turnkey everything now, which wasn't the case earlier. It used to be about speeds and feeds a lot more. It was used to be about, you know, certain ecosystem is important. Technology is important. But if it can't be consumed in a very easy to consume way, that becomes difficult. So I think a hallmark of some of the great companies right now is simplicity, ease of use, quick time to return, all of those things. So I got a question today. I was talking to someone. I got to bring this up because this is the kind of weirdness that you see. How do virtual and converged infrastructures affect your backup and recovery? Architecture. Okay, so now, I don't say that's weird. It's a significantly huge opportunity, but it's got to be the most boring. I mean, okay, you can say it's boring. It's not the sexy driving car, you know, drone delivering satellites and, you know, medical marijuana and people in San Francisco, all the stuff that kind of gets the headlines. But that specific thing is significant hassles, right? I mean, that's a proven industry that's just sitting there waiting to be disrupted. Data domain was the last one that I could think of. That was radical. That didn't change. It wasn't a back, who thought backups would be sexy and then behold, there's a multi-billion dollar company to be built there. So what do we learn from that weird question? Converged infrastructure affecting your back, virtualization of backup and recovery, which is a significant challenge. And, but that's again, speaks to the opportunity out there. I mean, this is the data center issue, right? So what does that mean to all these, there's a zillion of questions like that happening all over the industry. What's the big picture in here? You need to back up no matter what kind of infrastructure you're using, right? That's really what the point is. And it's harder now, right? It really doesn't matter, right? Even converged infrastructure is virtualized, so I don't see the distinction there to begin with. Right? The notion here is, look, there used to be a set of disks attached at the back of a server. It was easy to back that up. Now you don't even know where the disks exist. You don't even know where your storage is. But you still have to be back it up, right? So systems have to be built, that take care of dynamic storage and be able to back it up. I would agree, and I'll also add to that. What I take out of that is that this integrated stack is a teaser to me where the market's going, which is a holistic architectural view. Most people think of backup and recovery like a side, oh, we'll get to that later when we're done fixing our core architecture. But in reality, I think what I'm hearing is the engineering mindset is a holistic architecture. So to me, if you believe that, you may or may not believe that, but if you did, what does that mean to your opportunity? Because you're essentially tackling that whole holistic view with app formats. I mean, just as you're pointing out, you're bringing out one segment backup, right? At App Formix, we are focusing on one segment, which is performance, reliability, right? I mean, it's like, hey, you're going to have your applications, you're going to have your workloads, you want to run them on your infrastructure, hard you reliably, and consistently run them on your infrastructure, whether they're in fries and the public cloud or whether it's running on-prem. We're just focusing on that one problem, just like you could have backup or you could have security. All right, so what's next? Give us some performance. How much do you guys put in? How many employees, they doing a B round on your C round? Who are the other investors? Give us some by the numbers for App Formix. So Vivek is actually the only investor. He stepped up. He's going lone wolf on this one. He actually gave, Vivek actually gave me a term sheet and he said, if you want, you can bring another investor on. And I said, no Vivek, if you're giving me that term sheet, I don't want anybody, let's just get going. And I also wanted to make sure that he had enough capital to make enough progress. Okay, how much do you guys put in? We put in $7 million. That's a good seat. A round. A round, yeah. Awesome. And how many employees? So now we are at 20. 20, so you have plenty of cash. Yeah, we have plenty of cash. We've been very conservative with how we've been spending our money as well. The thing to keep in mind is that anytime you're seeing newer ecosystems emerging or as Vivek is saying, hey, things are being re-architected, it takes time. It takes time to build. It takes time for customers to catch on. It's still much longer. And you've been in shelf for two years, so you guys been on board meetings. You come up, still in stealth, still in stealth. Now you got to hit, the rubber hits the road. What's next? What's the big thing? Is it get the customer traction scaled up? You actually have a few probably in your back pocket. What's the next step? So we already have some deployments. And really the goal now is to scale up. The deployments that we do have, we targeted certain market segments to get the right proof points. And now the goal is to use those lessons and go back to those markets to more customers and start to gain more market share. Awesome. Vivek, you guys at August capital have a great relationship with entrepreneurs. That's your kind of mojo and firm. Stay behind your entrepreneurs. I've noticed that throughout the year. So congratulations. What are you investing in now? What gets you excited? What are you seeing? What are the crazy ideas that are coming through the doors there? And what are you passing on? What are you looking for? You know, we invest broadly in IT. Everything from consumer internet oriented companies to some other. Splunk was a big one. Splunk was a big success. Splunk was a huge success for us. So Splunk on one end and Zoolily on the commerce side of things were big. So we're not thematic. So one of the things that's very different for us is we tend to be much more opportunistic. Our view is the guys that are best at predicting the future are the entrepreneurs. It's not us. So we don't have a thematic way of investing. I can truly, I can tell you what my next investment is going to be because it may be based on the person that I mean has some brilliant idea. So you get to network a lot. So we have to network a lot. We have, you know, most of us at August have been in this business 25, 30 years. So we built relationship with entrepreneurs. And that's how we get interesting ideas. Is that why you picked the office space where you're at with a beautiful deck? Wow. A great networking event. That certainly does help. That certainly does help. You know, and then working with entrepreneurs that have been successful always helps. It's almost like, you know, when you're starting a startup, you need to start it in a place where it's easy to hold beatups. Yeah. Well, we love the fact that we've been always in love with the enterprise technology and now it's hot. So congratulations on all the work you've already done. You've been there. You're very not a momentum investor. So again, you guys have been an enterprise for a long time. Thanks for coming on theCUBE. Thanks so much to me. Thanks to my F4mex, CEO of F4mex and the general partner of August Capital here in Silicon Valley live at the OpenStack Silicon Valley event. We'll be right back with more CUBE after this short break. Thank you. Thank you.