 Live from the Sands Convention Center in Las Vegas, Nevada, it's theCUBE at AWS ReInvent 2014. Brought to you by headline sponsors, Amazon and Trend Micro. Okay, welcome back everyone. We're here live in Las Vegas for AWS, Amazon Web Services ReInvent. That's their big conference. I'm John Furrier, the founder of SiliconANGLE. It's theCUBE. We'll go out to the events, extract the signals from the noise, bring you all the action, all the commentary, all the analysis and opinion. Top executives at Amazon are on entrepreneurs, venture capitalists, startups. We bring it all. We want to bring that to share that with you. My next is Ryan Floyd, who's the managing director at Storm Ventures, great VC firm. It may not be the big household name, like some of the big brand VCs, but they do a lot of great investments. Ryan, welcome to theCUBE. John, I'm happy to be here. Great to be here. So always follow the money. I always say follow the money and that's where the action is. I've seen more VCs here that aren't supposed to be here than I've ever seen at an event. I mean, they're all here. They're all huddling, doing deals. Well, the first couple of years in VC, I told my wife I got really good at it, because half of the job is getting really good at losing money. So now I'm getting better at the second app, which is making money. But no, this is the show. This is the show for Cloud. So tell us about Storm. Give everyone folks a quick head up on Storm, deals you've guys done, exits. Yeah, so the quick 30 seconds on Storm. So we started it 15 years ago as one of the founders. What we do is mobile, cloud and SaaS focused on the enterprise. It's all early stage. So we've been an investor in cloud for the last three, four years, really since it started. I remember when Amazon first rolled into the Stanford Faculty Club, and it was a short presentation based on S3 and EC2. Right scale, I think was one of the only exhibitors. So it's come a long way. And they're still exhibiting. Their booth is still the same size. So obviously Amazon is like, some compared to Microsoft. So this just come up in the hallways here. And Andy Jassy would not be admitting this because it's like a Seattle Microsoft. You can make that stretch. People putting that connection together. They're building an operating system. So like if you're not on their camp, you're potentially an enemy. So do you partner with these guys? We had Informatica on. So obviously Amazon's winning. And it's just like secretariat running away with it. Just no doubt, kicking ass at the scale. But at some point, how do we companies figure into this? Do I get bought by Amazon? Is it an open ecosystem? As an investor, you've got pets out there. So what's your thesis? It's actually, it's been incredibly hard. So I don't have a single investment that is just dedicated to the Amazon ecosystem. And the reason for that's been, it's been really hard to figure out a startup that you can place, that can really come in and compete and win. I mean, because Amazon's so fast at delivering services, it's hard to know what to develop again. So actually where I've been more active is on the private cloud side with OpenStack. So we've made several investments on the OpenStack side. And if you were to ask me where I think things are headed, I would bet you in five years, you're going to see a lot of conversions between what's happening on that OpenStack side and what Amazon's doing as people look to hybrid clouds and making them work together. So basically there's a number two in the market that's OpenStack to Amazon because there's a lot of people who don't want to buy into Amazon. There's a lot of enterprise vendors with billions of dollars in revenue that aren't just going to yield. Well, but I'll tell you what, customers don't really care about those big enterprise vendors. They're tired of it. James Hamilton, we were just talking about it in his session about building your own racks of servers, building your own racks of storage. This is what customers want. They don't want to pay for all these service contracts for things that don't work. They just want the service. So I actually think a lot of what's happening at OpenStack is a response to Amazon and big companies like HP, EMC, they don't have a choice. They got to innovate this way. So that's why you see the big guys embracing OpenStack is they see that as a bridge for them. So that's a bridge to say, okay, if we don't serve our customers, we're going to be out of business. That's right. Now those same guys just don't want to capitulate to AWS. That's right. Because AWS will just suck them in, right? Right. Well, I actually think, I mean, there is some meat on the bones of the OpenStack. When you get to scale, when you're spending two, three, 400,000, $500,000 a month in IT costs at Amazon, it starts to make sense to look to running your own private cloud, depending on the application. It's not true in all cases. And I think the mistake a lot of people make is they think it's a winner-take-all market. It's not. There's going to be multiple winners. So that brings up a good point, this private cloud, because we had Theresa Carlson on, she runs the government business. So, I mean, the public sector, which is the CIA, the intelligence community, which, you know, Jesse on, Jesse Proudman from BlueBox was on there saying, hey, you know, that's a private cloud. Technically, he's right. I mean, it's a private cloud. Right. It's a public- I know a little about that architecture, but I know it's AWS, but, yeah. Is it a private cloud? Or is it just a public, you know, it's private with a public name on it? I can tell you, but then someone might shoot me out of the audience. I don't know. I don't know. This is what I can tell you about private cloud at scale, though. Time Warner, BMW, Comcast, AT&T, those companies are running Bloomberg. They're running private clouds at scale on OpenStack. So, you know, OpenStack, Amazon, I mean, it's all good. What I think the companies that are in trouble and why it's so good to be a venture investor in a startup right now, it's the big incumbents. It's so hard right now. You have SaaS happening, you have mobile, you have cloud, all happening is, it's literally a perfect storm. And for these large companies to change course that quickly, it's just, it's a tall order. It's not like they don't have smart engineers, they do. Brilliant guys. But it's just, it's hard. It's all happening so fast. All right, so let's back up. Let's talk about the money. Where's your investment thesis in clouds? You get SaaS as cloud, mobile, certainly mobile infrastructure. And that's going to be key. So what's your key investment thesis going forward for startups? Because you've got two things. You've got buyers. The big guys are buying, filling their product lines with new startups that get, I wouldn't say AccuHire, but a couple hundred million dollars. A tuck under to a full scale growth business, right? EMC does that, IBM might do the tuck under. And there's a bunch of other ones. Then there's the lucky strike, the unicorn that goes public. Or gets close to public and taken out for huge gains. With that in mind, what's your thesis in this market from a quality perspective? Well, listen, at a really high level, what every single enterprise wants is they want AWS-like service. Whether it's running in their private cloud or they're consuming it from AWS. They want what Google has. They want what Facebook has. And so they're trying to figure out ways to consume that. So my job as a venture investor is to figure out startups that enable that to happen, whether that's VisaV AWS or via OpenStack. The whole thesis around OpenStack, frankly, has been for years is just a bag of bolts. And it was very hard for enterprises to stand up private clouds. So the thesis was how do we make it easy to consume? And that's still a large part of the thesis. But really at a high level, it's how do you give a GE the capabilities of Facebook? Because they don't have the IT resources. They don't have the engineering capability. So that's the opportunity. What do you see with Cloud Foundry playing a role in that, with Paul Moritz, what he's doing with Pivotal? Well, Cloud Foundry is just a piece, right, of overall what Pivotal is trying to do. I have never been a huge fan of pass. I think Cloud Foundry probably has the best chance on the private side. Obviously, a lot of what Amazon's doing with Aurora and so forth, I think of that as pass as well. But I think out of all the, compared to, why aren't you a big fan of pass? What's the reason? So much uncertainty, there's a lot of moving parts. The lock-in. I just think getting developers to buy into that, it's just, it's a whole nother step above the infrastructure layer. Getting developers to buy into an API against block store, object store, compute, that's one thing. When you start really layering in these services that you're completely dependent on, you got to code specifically for it, it's a whole nother level. Well, that's why you're seeing developers shy away from beanstalk a little bit. We've seen that, we've done some red as beanstalk stuff, but that's not really, it's nervous. It's more of a kind of like, risk. Yes. Versus Docker, nice, right? Get behind Docker. That's easy to consume. That's right, easy to consume, and it's a totally, totally open source. I mean, if you look at Heroku, you look at Engine Yard. So Engine Yard, I think is a great example. Groupon was on Engine Yard for years. But then as soon as Groupon got to scale, they didn't want to pay the tax at Engine Yard, and they moved off. And I think that's part of the problem with these PAS layers is that it can add in additional tax that, again, once you get to scale, you love it a lot. It's also a human capital factor too, right? You have engineers that might know something and then they move through another job, who's going to run that. Do you see that being a factor? Or is it more of that the lock-in prevents migration? I mean, I'm trying to nail down what about the PAS? Is it to be owned by the stack provider? Yeah, the biggest thing we see in our startups, it's being owned by the stack. It's relatively easy to think about moving an application from OpenStack to AWS to maybe some bare metal environment at Rackspace or something. It's much harder to think about if you're built on elastic beanstalk on Aurora. How do you move that thing, right? You've coded specifically to it. A lot of the stuff they're talking about with the availability zones and the dependencies, it's amazing stuff, but you've got to code specifically to it. It's very hard to move away from it. And what's the solution? Well, I think the solution's going to come in, so that's the startups. I think there's going to be startups that are going to help solve the problem. These problems about replication. I love the network analogy that James Hamilton was talking about. I think he's absolutely right, that one of the big problems we're going to say. What was the analogy? Well, basically, with storage, we've got scale. Compute, we've got scale. The problem now is we don't have network scale. We've got all these service providers. There's always bandwidth constraints. It's very, very expensive, and now we want to be moving data back and forth. And it's a big problem for Amazon, especially to think about moving between these and, you know, availability zones are laying their own fiber. So it's a big opportunity, I think, for networking companies to figure out what they can do better, how they can make it more efficient, and it's unlikely to come from Cisco, at least, initially. Well, Google's peer transport, they've gotten, they're getting the peering business. Yes. In the Google Cloud conference. Yes. I mean, that's a beautiful move right there. That's right. I mean, they're laying fiber. I mean, they're doing that. I don't really understand the balloons and the internet, you know, off the balloon, keep surrogate happy. But yeah, I mean, the network is key, right? Because if you don't have the network scale, you've got a major problem for a lot of applications. Yeah, we got Netflix kind of right here behind us. People can't see off camera, but, you know, Netflix uses a lot of bandwidth. So does Amazon. That's right. So they're beholden to a intermediary, unless they own their own backbone. Well, and Netflix is a great example. So Netflix, while it's an, it's obviously a huge Amazon showcase customer, they built their own CDN for exactly this reason, right? It was their biggest pain point in terms of how do they deliver bandwidth to their customers? So they went out and a couple of years ago, and they said, we're going to go build our own CDN. And they did. So I got to ask you about the SaaS thing, because this is something that's come up and I've been chipping about this on Twitter and to startups. Great startups, they come in, they leverage SaaS, a lot of leverage. You can get 10X engineer kind of model that goes on and you get some scale in the cloud and you get some traction. But the sales piece is really critical, right? Sales has to match the land and expand. So the go-to-market in SaaS is pretty obvious folks in the business, but outside of that, that's the secret formula. If you're mismatching your go-to-market sales due diligence with the product. So this brings up the product market fit I wanted to ask you about. What are you seeing for that? And what do you talk to entrepreneurs about in your companies? Okay, if you've got product market fit by yesterday's definition was, you got some people interested in the product, but does it scale the product market fit? So there's like almost two aspects. You got some product market fit today. What does the scale look like in SaaS for the go-to-market? So I think what you're asking is once you've got customers that want to buy, how do you go about selling it? And I think the key question there is really what's the price points? I mean if you can't extract, you know, take an interview, so I just focus on the enterprise. So don't ask me anything about consumer stuff. I love it, but I'm not the right guy. On the enterprise, I know a lot more. That's what my experience is. And you talk about price points, you know, 10, 20K, that's got to all be done over the phone. Even price points up to like 50, 60, 70K, a lot of that stuff's got to be done over the phone. So that means you've got to have a great lead engine that they're driving leads in, or you've got to have an outbound tele-sales effort that's setting up meetings. It's only when you get to the six-figure deals and plus larger deals where actually you can have people start to go into the field. So for SaaS, the key thing I think in terms of understanding that go-to-market, it's really around price point. It has its scale, and one of the key things I think a lot of companies have figured out is time to value. If you can figure out with a customer, take a big customer like GE, give them value very quickly with a relatively small price point, then you grow the account. So instead of coming in and closing like the traditional enterprise sale deal where you're going in and you kill them with a million and a half dollar software deal and it sits on the shelf, now you're going in and you sell 50K deal, but you know what, three months later, they've gotten so much value out of it, they buy another 100K, and that's how you grow those amounts. And that's a shadow IT kind of concept where you land and expand, Tableau, Splunk, all the winners. That's right, that's the proven strategy. And by the way, that Jive kind of enterprise model of Jive, Oracle, that's what you were talking about earlier that people want to move away from. Yeah, that's right. I don't want to buy the bull. Nobody wants to play golf. Yeah, they want to play golf. No, no, no, no. People don't want to play golf, but they don't want to talk, they don't want to be talking enterprise software, they don't want to play golf anymore. The customer will take you golfing when they get promoted for having the value. That's right, that's right. All right, so what exits you guys got going on, what cool things are going on Storm? What's going on in the VC community? Well, so in the cloud space, we just had this company MetaCloud, we wrote the first check form, that it opened Stack as a service, and helped customers like Disney, Tapjoy, SurveyMonkey, Time Warner, and we just sold that company to Cisco, and it's part of the Cisco's offering for how they're going to deliver private cloud. So we've been very active on that side, on the SaaS side, you've got a bunch of companies, Didespark, Talk, that's going to name a bunch, there's a bunch that have gone public, Marketo, Marketing Automation software coming, we had it coming earlier this year. Did you invest in Marketo? We did, we're an early investor in Marketo, we're an early, we actually incubated a company called Mobile Iron, it's on the SaaS side of the security, so we've been very active. Again, just focused on early stage enterprise, but we've been very good in that sector. That's awesome, and you know what, now everyone wants to do the enterprise, enterprise hot, you know, it's like the trend goes from consumer to enterprise, I've noticed in the past year, enterprise is hot. Yeah, well, yeah. But it's hard, it's not easy. Yeah, it made everything kind of ebbs and flows, what I found as an investor over the years is, you just, everybody's different strategies can work, you just have to be good at executing your own strategy, and we're very good at executing this early stage enterprise strategy. What do you think about the capital markets right now, is the bubble, are people pulling back right now, do you see a little, I see a little back drift going on in terms of people are a little nervous, that's just my opinion. I don't, I actually know, I mean, I think what I'm actually really happy with the public markets are, because they're sane, they're not doing crazy things. Now, the late stage private market, there's some craziness happening there, arguably, but the public markets are actually very sane. I mean, you know, they force box to delay there, the IPO, yet at the same time, Hortonworks filed to go public. So, I mean, it's- Their revenues were much lower than expected. 30 million. Hortonworks. Hortonworks, yeah, yeah. So, I mean, I think the public markets are actually very sane, which is good because that means we're not in a time of just absolute craziness. And it should be sustained. Well, Fusion A always scores a sell to a sand disk, you saw that. I mean, they're going to take you down if you're not performing. That's right. So, it's really rational. That's right, that's right. The private market, pure storage in Cloudera, worth billions. Right, that's right. And, you know, we saw a bright roll, just got taken out, right, was announced today with Yahoo, and they could have gone public, but they decided, you know, Tremer and Yumi, the other video solutions hadn't done as well. And so, it's a good decision, I think the bright roll. The balance is coming back into the VC force then. I think so. I mean, I think certainly relative to the public markets, there's a lot of late-stage money that's paying relatively high prices. You know, the Cloudera valuation, you know, Dropbox, Uber, I mean, these are great companies. Are they worth, you know, is Uber worth 25 billion? I don't know. You know, what time will tell. But again, that's on the consumer. I would definitely have sold my shares on that round of funding. It's a great company. What's interesting on the enterprise side, companies don't grow valuations that quickly. So, you know, I'm not equipped to answer it, but it's a good time. So, talking about Storm, tell the folks out there, what should they know about you guys? What's your culture like? What do you invest in? What do you look for, for entrepreneurs? Is there a secret algorithm fit that you look for? Secret Dakota Ring? Yeah, a secret handshake. Look, we're looking for passionate entrepreneurs that are in the enterprise sector that want to do something in mobile cloud and SaaS. We're willing to take a risk before companies break out. So, we're not looking for companies that have got, you know, a million dollars a month. A lot of people will invest in those companies. But we're looking for people that really understand their domain and we're looking for companies that have some product market fit. And then what we do really well is help those companies scale. We helped them cross, you know, that we were talking about earlier about how to figure out what the right sales model is. You know, how do you grow that base? How do you go from a hundred thousand a month to a million dollars a month? That's where we're really good. Well, you guys do some good deals. We're familiar with you in OpenStack. Certainly got a great reputation in the industry as a firm. So you're one of the good guys out there. Thanks for coming on theCUBE. Ryan here with Storm Ventures, founder of the firm. Again, VC's doing their part building the next generation companies all in this crazy awesome world of cloud, mobile, social. This is theCUBE. We'll be right back after this short break. Thanks, Sean.