(upbeat music) >> From theCUBE studios in Palo Alto, in Boston, connecting with thought leaders all around the world. This is a Cube conversation. >> Hi everybody, this is Dave Vellante. And as you know, I've been running a CxO series in this COVID economy. And as we go into the post-isolation world, really want to focus and expand our scope and really look at startups. And of course, we're going to look at startups, let's follow the money. And I want to start with the investor. Mark Roberge is here. He's the managing director at Stage 2 capital. He's a professor at the Harvard Business School, former CRO over at HubSpot. Mark, great to see you. Thanks for coming on. >> Yeah, you bet, Dave. Thanks for having me. >> So I love that, you know... looking at your career a little bit, on your LinkedIn and following some of your videos, I love the fact that you did, and now you teach and you're also applying it with Stage 2 Capital. Tell us a little bit more about both of your career and Stage 2. >> Yeah, I mean, a lot of it's a bit serendipitous, especially last 10 years, but I've always had this learn, do, teach framework in my, in mind as I go through the decades of my career, you know, like you're probably like 80% learning in your twenties, early thirties and you know, 20% doing. Then, you know, I think my thirties was like leading the HubSpot sales team, a lot of doing, a little bit of teaching, you know, kind of hopping into different schools, et cetera, and also doing a lot of, some writing. And now like, I'm teaching it. I think investing kind of falls into that too, you know, where you've got this amazing opportunity to meet, the next generation of, of extraordinary entrepreneurs and engage with them. So yeah, that, that has been my career. You know, Dave, I've been a, passionate entrepreneur since 22 and then, the last one I did was HubSpot and that led to just an opportunity to build out one of the first sales teams in a complete inside environment, which opened up the doors for a data driven mindset and all this innovation that led to a book that led to recruitment on HBS's standpoint, to like come and teach that stuff, which was such a humbling honor to pursue. And that led to me a meeting my co-founder, Jay Po, of Stage 2 Capital, who was a customer to essentially start the first VC fund, running back by sales and marketing leaders, which was his vision. But when he proposed it to me, addressed a pretty sizeable void, that I saw, in the entrepreneur ecosystem that I thought could make a substantial impact to the success rate of startups. >> Great, I want to talk a little bit about how you guys compete and what's different there, but you know, I've read some of your work, looked at some of your videos, and we can bring that into the conversation. But I think you've got some real forward-thinking for example, on the, you know, the best path to the upper right. The upper right, being that, that xy-axis on growth and adoption, you know, do you go for hyper-growth or do you go for adoption? How you align sales and marketing, how you compensate salespeople. I think you've got some, some leading-edge thinking on that, that I'd love for you to bring into the conversation, but let's start with Stage 2. I mean, how do you compete with the big guys? What's different about Stage 2 Capital? >> Yeah, I mean, first and foremost, we're a bunch of sales and marketing and execs. I mean, our backing is, a hundred plus CROs, VPs of marketing, CMOs from, from the public companies. I mean, Dropbox, LinkedIn, Oracle, Salesforce, SurveyMonkey, Lyft, Asana, I mean, just pick a unicorn, we probably have some representation from it. So that's, a big part of how we compete, is most of the time, when a rocket ship startup is about to build a sales team, one of our LPs gets a call. And because of that, we get a call, right. And, and so there's, we're just deep in, in helping... So first off, assess the potential and risks of a startup in their current, go to market design, and then really, you know, stepping in, not just with capital, but a lot of know-how in terms of, you know, how to best develop this go-to-market for their particular context. So that's a big part of our differentiation. I don't think we've ever lost a deal that we tried to get into, you know, for that reason, just because we come in at the right stage, that's right for our value prop. I'd say Dave, the biggest, sort of difference, in our investing theme. And this really comes out of like, post HubSpot. In addition to teaching the HBS, I did parachute into a different startup every quarter, for one day, where you can kind of like assess their go-to-market, looking for, like, what is the underlying consistency of those series A businesses that become unicorns versus those that flatline. And if I, you know, I've now written like 50 pages on it, which I, you know, we can, we can highlight to the crew, but the underlying cliffnotes is really, the avoidance of a premature focus on top line revenue growth, and an acute focus early on, on customer attention. And, I think like, for those of you, who run in that early stage venture community these days, and especially in Silicon Valley, there's this like, triple, triple, double, double notion of, like year one, triple revenue, year two, triple revenue, year three, double revenue, year four, double revenue, it's kind of evolved to be like the holy grail of what your objectives should be. And I do think like there is a fraction of companies that are ready for that and a large amount of them that, should they pursue that path, will lead to failure. And, and so, we take a heavy lens toward world-class customer retention as a prerequisite, to any sort of triple, triple, double, double blitzscaling type model. >> So, let me ask you a couple of questions there. So it sounds like your LPs are heavily, not only heavily and financially invested, but also are very active. I mean, is that a, is that a fears thing? How active are the LPs in reality? I mean, they're busy people. They're they're software operators. >> Yeah. >> Do they really get involved in businesses? >> Absolutely. I mean, half of our deals that we did in fund one came from the LPs. So we get half of our funnel, comes from LPs. Okay. So it's always like source-pick-win-support. That's like, what basically a VC does. And our LPs are involved in every piece of that. Any deal that we do, we'll bring in four or five of our LPs to help us with diligence, where they have particular expertise in. So we did an insuretech company in Q4, one of our LPs runs insurance practice at Workday. And this particular play he's selling it to big insurance companies. He was extremely helpful, to understand that domain. Post investment, we always bring in four or five LPs to go deeper than I can on a particular topic. So one of our plays is about to stand up in account based marketing, you know, capability. So we brought in the CMO, a former CMO at Rapid7 and the CMO at Unisys, both of which have, stood in, stood up like, account based marketing practices, much more deeply, than I could. You know of course, we take the time to get to know our LPs and understand both their skills, and experiences as well as their willingness to help, We have Jay Simons, who's the President of Atlassian. He doesn't have like hours every quarter, he's running a $50 billion company, right? So we have Brian Halligan, the CEO of HubSpot, right? He's running a $10 billion company now. So, we just get deal flow from them and maybe like an event once or twice a year, versus I would say like 10 to 20% of our LPs are like that. I would say 60% of them are active operators who are like, "You know what? I just miss the early days, and if I could be active with one or two companies a quarter, I would love that." And I would say like a quarter of them are like semi-retired and they're like, they're choosing between helping our company and being on the boat or the golf course. >> Is this just kind of a new model? Do you see having a different philosophy where you want to have a higher success rate? I mean, of course everybody wants to have a, you know, bat a thousand. >> Yeah. >> But I wonder if you could address that. >> Yeah. I don't think it, I'm not advocating slower growth, but just healthier growth. And it's just like an extra, it's really not different than sort of the blitzscaling oriented San Francisco VC, okay? So, you know, I would say when we were doing startups in the nineties, early 2000s before The Lean Startup, we would have this idea and build it in a room for a year and then sell it in parallel, basically sell it everywhere and Eric Ries and The Lean Startup changed all that. Like he introduced MVPs and pivots and agile development and we quickly moved to, a model of like, yeah, when you have this idea, it's not like... You're really learning, keep the team small, keep the burn low, pivot, pivot, pivot, stay agile and find product-market fit. And once you do that, scale. I would say even like, West Coast blitzscaling oriented VCs, I agree with that. My only take is... We're not being scientifically rigorous, on that transition point. Go ask like 10 VCs or 10 entrepreneurs, what's product-market fit, and you'll get 10 different answers. And you'll get answers like when you have lots of sales, I just, profoundly disagree with that. I think, revenue in sales has very little to do with product-market fit. That's like, that's like message-market fit. Like selling ice to Eskimos. If I can sell ice to Eskimos, it doesn't mean that product-market fit. The Eskimos didn't need the ice. It just means I was good at like pitching, right? You know, other folks talk about like, having a workable product in a big market. It's just too qualitative. Right? So, that's all I'm advocating is, that, I think almost all entrepreneurs and investors agree, there's this incubation, rapid learning stage. And then there's this thing called product-market fit, where we switch to rapid scale. And all I'm advocating is like more scientist science and rigor, to understanding some sequences that need to be checked off. And a little bit more science and rigor on what is the optimal pace of scale. Because when it comes to scale, like pretty much 50 out of 50 times, when I talk to a series A company, they have like 15 employees, two sales reps, they got to like 2 million in revenue. They raise an 8 million-dollar round in series A, and they hired 12 salespeople the next month. You know, and Dave, you and your brother, who runs a large sales team, can really understand how that's going to failure almost all the time. (Dave mumbles) >> Like it's just... >> Yeah it's a killer. >> To be able to like absorb 10 reps in a month, being a 50, it's just like... Who even does all those interviews? Who onboards them? Who manages them? How do we feed them with demand? Like these are some of the things I just think, warrant more data and science to drive the decisions on when and how fast to scale. >> Mark, what is the key indicator then, of product-market fit? Is it adoption? Is it renewal rates? >> Yeah. It's retention in my opinion. Right? So, so the, the very simple framework that I require is you're ready to scale when you have product-market and go to market-fit. And let's be, extremely precise, and rigorous on the definitions. So, product-market fit for me, the best metric is retention. You know, that essentially means someone not only purchased your offering, but experienced your offering. And, after that experience decided to repurchase. Whether they buy more from you or they renew or whatever it is. Now, the problem with it is, in many, like in the world we live inside's, it's like, the retention rate of the customers we acquire this quarter is not evident for a year. Right, and we don't have a year to learn. We don't have a year to wait and see. So what we have to do is come up with a leading indicator to customer retention. And that's something that I just hope we see more entrepreneurs talking about, in their product market fit journey. And more investors asking about, is what is your lead indicator to customer retention? Cause when that gets checked off, then I believe you have product-market fit, okay? So, there's some documentation on some unicorns that have flirted with this. I think Silicon Valley calls it the aha moment. That's great. Just like what. So like Slack, an example, like, the format I like to use for the lead indicator of customer retention is P percent of customers, do E event, in T time, okay? So, it basically boils it down to those three variables, P E T. So if we bring that to life and humanize it, 70% of the customers, we sign up, this is Slack, 70% of the customers who sign up, send 2000 team messages in 30 days, if that happens, we have product-market fit. I like that a lot more, than getting to a million in revenue or like having a workable product in a big market. Dropbox, 85% of customers, share one file in one hour. HubSpot, I know this was the case, 75% of customers, use five or more of the 25 features in the platform, within 60 days. Okay? P percent, do E event, in T time. So, if we can just format that, and look at that through customer cohorts, we often get visibility into, into true product market-fit within weeks, if not like a month or two. And it's scientifically, data-driven in terms of his foundation. >> Love it. And then of course, you can align sales compensation, you know, with that retention. You've talked a lot about that, in some of your work. I want to get into some of the things that stage two is doing. You invest in SaaS companies. If I understand it correctly, it's not necessarily early stage. You're looking for companies that have sort of achieved some degree of revenue and now need help. It needs some operational help and scaling. Is that correct? >> Yeah. Yeah. So it's a little bit broader in size, as any sort of like B2B software, any software company that's scaling through a sales team. I mean, look at our backers and look at my background. That's, that's what we have experience in. So not really any consumer plays. And yeah, I mean, we're not, we have a couple product LPs. We have a couple of CFO type LPs. We have a couple like talent HR LPs, but most of us are go-to-market. So we don't, you know, there's awesome seed funds out there that help people set up their product and engineering team and go from zero to one in terms of the MVP and find product-market fit. Right? We like to come in right after that. So it's usually like between the seed and the A, usually the revenue is between half a million and 1.5 million. And of course we put an extraordinary premium on customer retention, okay? Whereas I think most of our peers put an extraordinary premium on top line revenue growth. We put an extraordinary premium on retention. So if I find a $700,000 business that, you know, has whatever 50, 70 customers, you know, depending on their ticket size, it has like North of 90% local retention. That's super exciting. Even if they're only growing like 60%, it's super exciting. >> What's a typical size of investments. Do you typically take board seats or not? >> Yeah. We typically put in like between like seven hundred K, one and a half million, in the first check and then have, larger amounts for follow on. So on the A and the B. We try not to take board's seats to be honest with you, but instead the board observers. It's a little bit selfish in terms of our funds scale. Like the general counsel from other venture capitalists is of course, like, the board seat is there for proper governance in terms of like, having some control over expenditures and acquisition conversations, et cetera, or decisions. But a lot of people who have had experience with boards know that they're very like easy and time efficient when the company is going well. And there are a ton of work when the company is not going well. And it really hurts the scale, especially on a smaller fund like us. So we do like to have board observers seats, and we go to most of the board meetings so that our voice is heard. But as long as there's another fund in there that, has, world-class track record in terms of, holding proper governance at the board level, we prefer to defer to them on that. >> All right, so the COVID lock down, hit really in earnest in March, of course, we all saw the Sequoia memo, The Black Swan memo. You were, I think it HubSpot, when, you remember the Rest In Peace Good Times memo, came out very sort of negative, put up all over the industry, you know, stop spending. But there was some other good advice in there. I don't mean to sort of, go too hard on that, but, it was generally a negative sentiment. What was your advice to your portfolio companies, when COVID hit, what were you telling them? >> Yeah, I summarized this in our lead a blog article. We kicked off our blog, which is partially related to COVID in April, which has kind of summarize these tips. So yes, you are correct, Dave. I was running sales at HubSpot in '08 when we had last sort of major economic, destabilization. And I was freaking out, you know (laughs briefly) at the time we were still young, like 20, 30 reps and numbers to chase. And... I was, actually, after that year, looking back, we are very fortunate that we had a value prop that was very recession-proof. We were selling to the small business community, who at the time was cutting everything except new ways to generate sales. And we happen to have the answer to that and it happened to work, right? So it showed me that, there's different levels of being recession proof. And we accelerated the raise of our second fund for stage two with the anticipation that there would be a recession, which, you know, in the venture world, some of the best things you could do is close a fund and then go into a recession, because, there's more deals out there. The valuations are lower and it's much easier to understand, nice to have versus must have value props. So, the common theme I saw in talking to my peers who looked back in the '01 crisis, as well as the '08 crisis, a year later was not making a bolder decision to reorient their company in the current times. And usually on the go-to-market, that's two factors, the ICP who you're selling to, ideal customer profile and the CVP, what your message is, what's your customer value prop. And that was really, in addition to just stabilizing cash positions and putting some plans in there. That was the biggest thing we pushed our portfolio on was, almost like going through the exercise, like it's so hard as a human, to have put like nine months into a significant investment leading up to COVID and now the outcome of that investment is no longer relevant. And it's so hard to let that go. You know what I mean? >> Yeah. >> But you have to, you have to. And now it's everything from like, you spent two years learning how to sell to this one persona. And now that persona is like, gyms, retail and travel companies. Like you've got to let that go. (chuckle simultaneously) You know what I mean? Like, and, you know, it's just like... So that's really what we had to push folks on was just, you know, talking to founders and basically saying this weekend, get into a great headspace and like, pretend like you were parachuted into your company as a fresh CEO today. And look around and appreciate the world and what it is. What is this world? What are the buyers talking about? Which markets are hot, which markets are not, look at the assets that you have, look at your product, look at your staff, look at your partners, look at your customer base, and come up with a strategy from the ground up based on that. And forget about everything you've done in the last year. Right? And so, that's really what we pushed hard on. And in some cases, people just like jumped right on it. It was awesome. We had a residential real estate company that within two weeks, stood up a virtual open house module that sold like hotcakes. >> Yeah. >> That was fantastic execution. And we had other folks that we had to have like three meetings with to push them deep enough, to go more boldly. But that, was really the underlying pattern that I saw in past, recessions and something I pushed the portfolio on, is just being very bold on your pivots. >> Right? So I wanted to ask you how your portfolio companies are doing. I'm imagining you saw some looked at this opportunity as a tailwind. >> Yeah. >> You mentioned the virtual, open house, a saw that maybe were exposed, had, revenue exposure to hard-hit industries and others kind of in the middle. How are your portfolio companies doing? >> Yes, strong. I'm trying to figure out, like, of course I'm going to say that, but I'm trying to figure out like how to provide quant, to just demonstrate that. We were fortunate that we had no one, and this was just dumb luck. I mean, we had no one exclusively selling to like travel, or, restaurants or something. That's just bad luck if you were, and we're fortunate that we got a little lucky there, We put a big premium, obviously we had put a big premium on customer retention. And that, we always looked at that through our recession proof lens at all our investments. So I think that helped, but yeah, I mean, we've had, first off, we made one investment post COVID. That was the last investment on our first fund and that particular company, March, April, May, their results were 20% higher than any month in history. Those are the types of deals we're seeing now is like, you literally find some deals that are accelerating since COVID and you really just have to assess if it's permanent or temporary, but that one was exciting. We have a telemedicine company that's just like, really accelerating post COVID, again, luck, you know, in terms of just their alignment with the new world we're living in. And then, jeez! I mean, we've had, I think four term sheets, for markups in our portfolio since March. So I think that's a good sign. You know, we only made 11 investments and four of them, either have verbal or submitted term sheets on markups. So again, I feel like the portfolio is doing quite well, and I'm just trying to provide some quantitative measures. So it doesn't feel like a political answer. (Mark chuckles) >> Well, thank you for that, but now, how have you, or have you changed your sort of your thesis post COVID? Do you feel like your... >> Sure. >> Your approach was sort of geared towards, you know, this... >> Yeah. >> Post COVID environment? But what changes have you made. >> A little bit, like, I think in any bull market, generally speaking, there's just going to be a lot of like triple, triple, double, double blitzscaling, huge focus on top-line revenue growth. And in any down market, there's going to be a lot of focus on customer retention unit economics. Now we've always invested in the latter, so that doesn't change much. There's a couple of things that have changed. Number one, we do look for acceleration post COVID. Now, that obviously we were not, we weren't... That lens didn't exist pre-COVID, So in addition to like great retention, selling through a sales team, around the half million to a million revenue, we want to see acceleration since COVID and we'll do diligence to understand if that's a permanent, or a temporary advantage. I would say like... Markets like San Francisco, I think become more attractive in post COVID. There's just like, San Francisco has some magic happening there's some VC funds that avoid it, cause it's too expensive. There's some VC funds that only invest in San Francisco, because there's magic happening. We've always just been, you know... we have two portfolio companies there that have done well. Like we look at it and if it's too expensive, we have to avoid it. But we do agree that there's magic happening. I did look at a company last week. (chuckles inaudibly) So Dave, there are 300K in revenue, and their last valuation is 300 million. (both chuckle) >> Okay, so why is San Francisco more attractive, Mark? >> Well, I mean and those happened in Boston too. >> We looked at... (Mark speaks inaudibly) >> I thought you were going to tell me the valuations were down. (Dave speaks inaudibly) >> Here's the deal all right, sometimes they do, sometimes they don't and this is one, but in general, I think like they have come down. And honestly, the other thing that's happened is good entrepreneurs that weren't raising are now raising. Okay? So, a market like that I think becomes more attractive. The other thing that I think that happens is your sort of following strategies different. Okay so, there is some statistical evidence that, you know, obviously we're coming out of a bear market, a bullish market in, in both the public and the private equities. And there's been a lot of talk about valuations in the private sector is just outrageous. And so, you know, we're fortunate that we come in at this like post seed, pre-A, where it's not as impacted. It is, but not as or hasn't been, but because there's so many more multibillion-dollar funds that have to deploy 30 to 50 million per investment, there's a lot of heating up that's happened at that stage. Okay? And so pre COVID, we would have taken advantage of that by taking either all or some of our money off the table, in these following growth rounds. You know, as an example, we had a company that we made an investment with around 30 million evaluation and 18 months later, they had a term sheet for 500. So that's a pretty good return in 18 months. And you know, that's an expensive, you know, so that that's like, wow, you know, we probably, even though we're super bullish on the company, we may want to take off a 2X exposition... >> Yeah. >> And take advantage of the secondaries. And the other thing that happens here, as you pointed out, Dave is like, risk is not, it doesn't become de-risk with later rounds. Like these big billion dollar funds come in, they put pressure on very aggressive strategic moves that sometimes kills companies and completely outside of our control. So it's not that we're not bullish on the company, it's just that there's new sets of risks that are outside of the scope of our work. And so, so that that's probably like a less, a lesser opportunity post COVID and we have to think longer term and have more patient capital, as we navigate the next year or so of the economy. >> Yeah, so we've got to wrap, but I want to better understand the relationship between the public markets and you've seen the NASDAQ up, which is just unbelievable when you look at what's happening in main street, and the relationship between the public markets and the private markets, are you saying, they're sort of tracking, but not really identical. I mean, what's the relationship. >> Okay, there's a hundred, there's thousands of people that are better at that than me. Like the kind of like anecdotal thoughts that I, or the anecdotal narrative that I've heard in past recessions and actually saw too, was the private market, when the public market dropped, it took nine months roughly for the private market to correct. Okay, so there was a lag. And so there's, some arguments that, that would happen here, but this is just a weird situation, right? Of like the market, even though we're going through societal crazy uncertainty, turmoil and, and tremendous tragedy, the markets did drop, but they're pretty hot right now, specifically in tech. And so there's a number of schools of thoughts there that like some people claim that tech is like the utilities companies of the eighties, where it's just a necessity and it's always going to be there regardless of the economy. Some people argue that what's happened with COVID and the remote workplace have made, you know, accelerated the adoption of tech, the inevitable adoption, and others could argue that like, you know, the worst is still the come. >> Yeah. And of course, you've got The Fed injecting so much liquidity into the system, low interest rates, Mark, last question. Give me a pro tip for entrepreneurs. (Mark Sighs) >> I would say, like, we've talked a lot about, this methodology with, you know, customer retention, really focusing there, align everything there as opposed to top line revenue growth initially. I think that the extension I do at this point is, do your diligence on your investors, and what their thoughts are on your future growth plans to see if they're aligned. Cause that, that becomes like, I think a lot of entrepreneurs, when they dig into this work, they do want to operate around it. But that becomes that much harder when you have investors that think a different way. So I would just, you know, just always keep in mind that, you know, I know it's so hard to raise money, but you know, do the diligence on your investors to understand, what they'd like to see in the next two years and how it's aligned with your own vision. >> Mark is really great having you on. I'd love to have you back and as this thing progresses, and see how it all shakes out. It really a pleasure. Thanks for coming on. >> No, thanks, Dave. I appreciate you having me on. >> And thank you everybody for watching. This is Dave Vellante for The Cube. We'll see you next time. (music plays)

>> Announcer: Live from Barcelona, Spain, it's theCUBE, covering Cisco Live 2020, brought to you by Cisco and its ecosystem partners. >> Welcome back to Barcelona, everybody, we're here at Cisco Live, and you're watching theCUBE, the leader in live tech coverage. We go to the events and extract the signal from the noise. This is day one, really, we started day zero yesterday. Eric Herzog is here, he's the CMO and Vice President of Storage Channels. Probably been on theCUBE more than anybody, with the possible exception of Pat Gelsinger, but you might surpass him this week, Eric. Great to see you. >> Great to see you guys, love being on theCUBE, and really appreciate the coverage you do of the entire industry. >> This is a big show for you guys. I was coming down the escalator, I saw up next Eric Herzog, so I sat down and caught the beginning of your presentation yesterday. You were talking about multicloud, which we're going to get into, you talked about cybersecurity, well let's sort of recap what you told the audience there and really let's dig in. >> Sure, well, first thing is, IBM is a strong partner of Cisco, I mean they're a strong partner of ours both ways. We do all kinds of joint activities with them on the storage side, but in other divisions as well. The security guys do stuff with Cisco, the services guys do a ton of stuff with Cisco. So Cisco's one of our valued partners, which is why we're here at the show, and obviously, as you guys know, with a lot of the coverage you do to the storage industry, that is considered one of the big storage shows, you know, in the industry, and has been a very strong show for IBM Storage and what we do. >> Yeah, and I feel like, you know, it brings together storage folks, whether it's data protection, or primary storage, and sort of is a collection point, because Cisco is a very partner-friendly organization. So talk a little bit about how you go to market, how you guys see the multicloud world, and what each of you brings to the table. >> Well, so we see it in a couple of different facts. So first of all, the day of public cloud only or on-prem only is long gone. There are a few companies that use public cloud only, but yeah, when you're talking mid-size enterprise, and certainly into let's say the global 2500, that just doesn't work. So certain workloads reside well in the cloud, and certain workloads reside well on-prem, and there's certain that can back and forth, right, developed in a cloud but then move it back on, for example, highly transactional workload, once you get going on that, you're not going to run that on any cloud provider, but that doesn't mean you can't develop the app, test the app, out in the cloud and then bring it back on. So we also see that the days of a cloud provider for big enterprise and again up to the 2500 of the global fortunes, that's not true either, because just as with other infrastructure and other technologies, they often have multiple vendors, and in fact, you know, what I've seen from talking to CIOs is, if they have three cloud providers, that's low. Many of 'em talk about five or six, whether that be for legal reasons, whether that be for security reasons, or of course the easy one, which is, we need to get a good price, and if we just use one vendor, we're not going to get a good price. And cloud is mature, cloud's not new anymore, the cloud is pretty old, it's basically, sort of, version three of the internet, (laughs) and so, you know, I think some of the procurement guys are a little savvy about why would you only use Amazon or only use Azure or only use Google or only use IBM Cloud. Why not use a couple to keep them, you know, which is kind of normal when procurement gets involved, and say, cloud is not new anymore, so that means procurement gets involved. >> Well, and it's kind of, comes down to the workload. You got certain clouds that are better, you have Microsoft if you want collaboration, you have Amazon if you want infrastructure for devs, on-prem if you want, you know, family jewels. So I got a question for you. So if you look at, you know, it's early 2020, entering a new decade, if you look at the last decade, some of the big themes. You had the consumerization of IT, you had, you know, Web 2.0, you obviously had the big data meme, which came and went and now it's got an AI. And of course you had cloud. So those are the things that brought us here over the last 10 years of innovation. How do you see the next 10 years? What are going to be those innovation drivers? >> Well I think one of the big innovations from a cloud perspective is like, truly deploying cloud. Not playing with the cloud, but really deploying the cloud. Obviously when I say cloud, I would include private cloud utilization. Basically, when you think on-prem in my world, on-prem is really a private cloud talking to a public cloud. That's how you get a multicloud, or, if you will, a hybrid cloud. Some people still think when you talk hybrid, like literally, bare metal servers talking to the cloud, and that just isn't true, because when you look at certainly the global 2500, I can't think any of them what isn't essentially running a private cloud inside their own walls, and then, whether they're going out or not, most do, but the few that don't, they mimic a public cloud inside because of the value they see in moving workloads around, easy deployment, and scale up and scale down, whether that be storage or servers or whatever the infrastructure is, let alone the app. So I think what you're going to see now is a recognization that it's not just private cloud, it's not just public cloud, things are going to go back and forth, and basically, it's going to be a true hybrid cloud world, and I also think with the cloud maturity, this idea of a multicloud, 'cause some people think multicloud is basically private cloud talking to public cloud, and I see multicloud as not just that, but literally, I'm a big company, I'm going to use eight or nine cloud providers to keep everybody honest, or, as you just said, Dave, and put it out, certain clouds are better for certain workloads, so just as certain storage or certain servers are better when it's on-prem, that doesn't surprise us, certain cloud vendors specialize in the apps. >> Right, so Eric, we know IBM and Cisco have had a very successful partnership with the VersaStack. If you talk about in your data center, in IBM Storage, Cisco networking in servers. When I hear both IBM and Cisco talking about the message for hybrid and multicloud, they talk the software solutions you have, the management in various pieces and integration that Cisco's doing. Help me understand where VersaStack fits into that broader message that you were just talking about. >> So we have VersaStack solutions built around primarily our FlashSystems which use our Spectrum Virtualize software. Spectrum Virtualize not only supports IBM arrays, but over 500 other arrays that are not ours. But we also have a version of Spectrum Virtualize that will work with AWS and IBM Cloud and sits in a virtual machine at the cloud providers. So whether it be test and dev, whether it be migration, whether it business continuity and disaster recovery, or whether it be what I'll call logical cloud error gapping. We can do that for ourselves, when it's not a VersaStack, out to the cloud and back. And then we also have solutions in the VersaStack world that are built around our Spectrum Scale product for big data and AI. So Spectrum Scale goes out and back to the cloud, Spectrum Virtualize, and those are embedded on the arrays that come in a VersaStack solution. >> I want to bring it back to cloud a little bit. We were talking about workloads and sort of what Furrier calls horses for courses. IBM has a public cloud, and I would put forth that your wheelhouse, IBM's wheelhouse for cloud workload is the hybrid mission-critical work that's being done on-prem today in the large IBM customer base, and to the extent that some of that work's going to move into the cloud. The logical place to put that is the IBM Cloud. Here's why. You could argue speeds and feeds and features and function all day long. The migration cost of moving data and workloads from wherever, on-prem into a cloud or from on-prem into another platform are onerous. Any CIO will tell you that. So to the extent that you can minimize those migration costs, the business case for, in IBM's case, for staying within that blue blanket, is going to be overwhelmingly positive relative to having to migrate. That's my premise. So I wonder if you could comment on that, and talk about, you know, what's happening in that hybrid world specifically with your cloud? >> Well, yeah, the key thing from our perspective is we are basically running block data or file data, and we just see ourselves sitting in IBM Cloud. So when you've got a FlashSystem product or you've got our Elastic Storage System 3000, when you're talking to the IBM Cloud, you think you're talking to another one of our boxes sitting on-prem. So what we do is make that transition completely seamless, and moving data back and forth is seamless, and that's because we take a version of our software and stick in a virtual machine running at the cloud provider, in this case IBM Cloud. So the movement of data back and forth, whether it be our FlashSystem product, even we have our DS8000 can do the same thing, is very easy for an IBM customer to move to an IBM Cloud. That said, just to make sure that we're covering, and in the year of multicloud, remember the IBM Cloud division just released the Multicloud Manager, you know, second half of last year, recognizing that while they want people to focus on the IBM Cloud, they're being realistic that they're going to have multiple cloud vendors. So we've followed that mantra too, and made sure that we've followed what they're doing. As they were going to multicloud, we made sure we were supporting other clouds besides them. But from IBM to IBM Cloud it's easy to do, it's easy to traverse, and basically, our software sits on the other side, and it basically is as if we're talking to an array on prem but we're really not, we're out in the cloud. We make it seamless. >> So testing my premise, I mean again, my argument is that the complexity of that migration is going to determine in part what cloud you should go to. If it's a simple migration, and it's better, and the customer decides okay it's better off on AWS, you as a storage supplier don't care. >> That is true. >> It's agnostic to you. IBM, as a supplier of multicloud management doesn't care. I'm sure you'd rather have it run on the IBM Cloud, but if the customer says, "No, we're going to run it "over here on Azure", you say, "Great. "We're going to help you manage that experience across clouds". >> Absolutely. So, as an IBM shareholder, we wanted to go to IBM Cloud. As a realist, with what CIOs say, which is I'm probably going to use multiple clouds, we want to make sure whatever cloud they pick, hopefully IBM first, but they're going to have a secondary cloud, we want to make sure we capture that footprint regardless, and that's what we've done. As I've said for years and years, a partial PO is better than no PO. So if they use our storage and go to a competitor of IBM Cloud, while I don't like that as a shareholder, it's still good for IBM, 'cause we're still getting money from the storage division, even though we're not working with IBM Cloud. So we make it as flexible as possible for the customer, The Multicloud Manager is about customer choice, which is leading with IBM Cloud, but if they want to use a, and again, I think it's a realization at IBM Corporate that no one's going to use just one cloud provider, and so we want to make sure we empower that. Leading with IBM Cloud first, always leading with IBM Cloud first, but we want to get all of their business, and that means, other areas, for example, the Red Hat team. Red Hat works with every cloud, right? And they don't really necessarily lead with IBM Cloud, but they work with IBM Cloud all right, but guess what, IBM gets the revenue no matter what. So I don't see it's like the old traditional component guy with an OEM deal, but it kind of sort of is. 'Cause we can make money no matter what, and that's good for the IBM Corporation, but we do always lead with IBM Cloud first but we work with everybody. >> Right, so Eric, we'd agree with your point that data is not just going to live one place. One area that there's huge opportunity that I'd love to get your comment here on is edge. So we talked about, you know, the data center, we talked about public cloud. Cisco's talking a lot about their edge strategy, and one of our questions is how will they enable their partners and help grow that ecosystem? So love to hear your thoughts on edge, and any synergies between what Cisco's doing and IBM in that standpoint. >> So the thing from an edge perspective for us, is built around our new Elastic Storage System 3000, which we announced in Q4. And while it's ideal for the typical big data and AI workloads, runs Spectrum Scale, we have many a customers with Scale that are exabytes in production, so we can go big, but we also go small. It's a compact 2U all-flash array, up to 400 terabytes, that can easily be deployed at a remote location, an oil well, right, or I should say, a platform, oil platform, could be deployed obviously if you think about what's going on in the building space or I should say the skyscraper space, they're all computerized now. So you'd have that as an edge processing box, whether that be for the heating systems, the security systems, we can do that at the edge, but because of Spectrum Scale you could also send it back to whatever their core is, whether that be their core data center or whether they're working with a cloud provider. So for us, the ideal solution for us, is built around the Elastic Storage System 3000. Self-contained, two rack U, all-flash, but with Spectrum Scale on it, versus what we normally sell with our all-flash arrays, which tends to be our Spectrum Virtualize for block. This is file-based, can do the analytics at the edge, and then move the data to whatever target they want. So the source would be the ESS 3000 at the edge box, doing processing at the edge, such as an oil platform or in, I don't know what really you call it, but, you know, the guys that own all the buildings, right, who have all this stuff computerized. So that's at the edge, and then wherever their core data center is, or their cloud partner they can go that way. So it's an ideal solution because you can go back and forth to the cloud or back to their core data center, but do it with a super-compact, very high performance analytics engine that can sit at the edge. >> You know, I want to talk a little bit about business. I remember seven years ago, we covered, theCUBE, the z13 announcement, and I was talking to a practitioner at a very large bank, and I said, "You going to buy this thing?", this is the z13, you know, a couple of generations ago. He says, "Yeah, absolutely, I'll buy it sight unseen". I said, "Really, sight unseen?" He goes, "Yeah, no question. "By going to the upgrade, I'm able to drive "more transactions through my system "in a certain amount of time. "That's dropping revenue right to my bottom line. "It's a no-brainer for me." So fast forward to the z15 announcement in September in my breaking analysis, I said, "Look, IBM's going to have a great Q4 in systems", and the thing you did in storage is you synchronized, I don't know if it was by design or what, you synchronized the DS8000, new 8000 announcement with the z15, and I predicted at the time you're going to see an uptick in both the systems business, which we saw, huge, 63%, and the storage business grew I think three points as well. So I wonder if you can talk about that. Was that again by design, was it a little bit of luck involved, and you know, give us an update. >> So that was by design. When the z14 came out, which is right when I first come over from EMC, one of the things I said to my guys is, "Let's see, we have "the number one storage platform on the mainframe "in revenue, according to the analysts that check revenue. "When they launch a box, why are we not launching with them?" So for example, we were in that original press release on the z14, and then they ran a series of roadshows all over the world, probably 60. I said, "Well don't you guys do the roadshows?", and my team said, "No, we didn't do that on z12 and 13". I said, "Well were are now, because we're the number one "mainframe storage company". Why would we not go out there, get 20 minutes to speak, the bulk of it would be on the Zs. So A, we did that of course with this launch, but we also made sure that on day one launch, we were part of the launch and truly integrated. Why IBM hadn't been doing for a while is kind of beyond me, especially with our market position. So it helped us with a great quarter, helped us in the field, now by the way, we did talk about other areas that grew publicly, so there were other areas, particularly all-flash. Now we do have an all-flash 8900 of course, and the high-end tape grew as well, but our overall all-flash, both at the high end, mid range and entry, all grew. So all-flash for us was a home run. Yeah, I would argue that, you know, on the Z side, it was grand slam home run, but it was a home run even for the entry flash, which did very, very well as well. So, you know, we're hitting the right wheelhouse on flash, we led with the DS8900 attached to the Z, but some of that also pulls through, you get the magic fairy dust stuff, well they have an all-flash array on the Z, 'cause last time we didn't have an all, we had all-flash or hybrids, before that was hybrid and hard drive. This time we just said, "Forget that hybrid stuff. "We're going all-flash." So this helps, if you will, the magic fairy dust across the entire portfolio, because of our power with the mainframe, and you know, even in fact the quarter before, our entry products, we announced six nines of availability on an array that could be as low cost as $US16,000 for RAID 5 all-flash array, and most guys don't offer six nines of availability at the system level, let alone we have 100% availability guaranteed. We do charge extra for that, but most people won't even offer that on entry product, we do. So that's helped overall, and then the Z was a great launch for us. >> Now you guys, you obviously can't give guidance, you have to be very careful about that, but I, as I say, predicted in September that you'd have a good quarter in systems and storage both. I'm on the record now I'm going to say that you're going to continue to see growth, particularly in the storage side, I would say systems as well. So I would look for that. The other thing I want to point out is, you guys, you sell a lot of storage, you sell a lot of storage that sometimes the analysts don't track. When you sell into cloud, for example, IBM Storage Cloud, I don't think you get credit for that, or maybe the services, the global services division. So there's a big chunk of revenue that you don't get credited for, that I just want to highlight. Is that accurate? >> Yeah, so think about it, IBM is a very diverse company, all kinds of acquisitions, tons of different divisions, which we document publicly, and, you know, we do it differently than if it was Zoggan Store. So if I were Zoggan Store, a standalone storage company, I'd get all credit for supporting services, there's all kinds of things I'd get credit for, but because of IBM's history of how the company grew and how company acquired, stuff that is storage that Ed Walsh, or GM, does own, it's somewhat dispersed, and so we don't always get credit on it publicly, but the number we do in storage is substantially larger than what we report, 'cause all we really report is our storage systems business. Even our storage software, which one of the analysts that does numbers has us as the number two storage software company, when we do our public stuff, we don't take credit for that. Now, luckily that analyst publishes a report on the numbers side, and we are shown to be the number two storage software company in the world, but when we do our financial reporting, that, because just the history of IBM, is spread out over other parts of the company, even though our guys do the work on the sales side, the marketing side, the development side, all under Ed Walsh, but you know, part of that's just the history of the company, and all the acquisitions over years and years, remember it's a 100-year-old company. So, you know, just we don't always get all the credit, but we do own it internally, and our teams take and manage most of what is storage in the minds of storage analysts like you guys, you know what storage is, most of that is us. >> I wanted to point that out because a lot of times, practitioners will look at the data, and they'll say, oh wow, the sales person of the competitor will come in and say, "Look at this, we're number one!" But you really got to dig in, ask the questions, and obviously make the decisions for yourself. Eric, great to see you. We're going to see you later on this week as well we're going to dig into cyber. Thanks so much for coming back. >> Great, well thank you, you guys do a great job and theCUBE is literally the best at getting IT information out, particularly all the shows you do all over the world, you guys are top notch. >> Thank you. All right, and thank you for watching everybody, we'll be back with our next guest right after this break. We're here at Cisco Live in Barcelona, Dave Vellante, Stu Miniman, John Furrier. We'll be right back.

>> from Santa Clara, California It's the Cube covering techno ovation. World Pitch Summit 2019 Brought to You by Silicon Angle Media. Now here's Sonia to Gari >> Hi and welcome to the Cube. I'm your host, Sonia to Gari, and we're here at Oracle's Agnew's campus covering techno vacations. World Pitch Summit 2019 a pitch competition in which girls from around the world developed mobile labs in order to create positive change in the world with us. Today we have teen LPs n from Spain. Welcome, and the team members are Paulo Fernandez Rosa's Sandra Cho Manual Gomez, Nouria, Peoria, the CIA, Fernandez and with the beyond Tovar. Welcome to the Cube. Thank you. So your app is called one and where tell us more about that. >> They will, when I'm were easy enough that detects anomalies when you go out to work or run am. It's to ensure woman's safety on it, obtains your location in real time. And if something happens, for example, if you stop or if you're in getting near to your destination, it calls the emergency contact or the emergency service's >> Wow, and so can you tell us how a user would would go through it. Step by step. >> Yes, A first of all you need to establish our contact am. So then you have two different Moz A the start mold, which is a for when you, for example, go running. And when do you stop the up? He takes that anomaly so it sends you a message in case off emergency it goes a the emergency contact on the other mode, it's they take me to a remote. So that's when you, for example, want to go home. And so you you don't follow your route. I am the only they up since you and alert. And in case of emergency, it's Cindy. Um, message to your contact. >> Wow. I feel like that could be really useful. Yes. Is that a big problem in Spain? >> Yes, it's He's actually well into feel better. Okay, Yeah, >> we saw this problem in our community on when they gave us the opportunity to try to help in some way. We thought while we can try to create this application on forgives on on it in our country, there have been a lot of women murdered on kidnapped ennui. A thought that it was something very >> very important. I'm That's amazing. So how did you all come up with this idea? >> A. Well, it'll be gone when we hear about their martyr off Laurel. Wilma It that made us a became aware with the magnitude of the problem, so am I. We wanted to do something that they will will be a helpful for us. So we did this >> application. Wow. And, um what problems or struggles as you go through creating this app? I >> am. Well, I think that the the worst think was the time because we had, like, a really short time to do this application to develop and to develop it because we started in February on, we had to We have a deadline in April. So for us, the time was the most difficult part. Also, the programming, the coding. But that that was because we had to learn coding. So yet the time was our our difficult >> part. If you get funding, where do you see this app in five years? >> Well, a We want to continue developing this up on improving it because we really need this up. We want to add new new languages and also introduce it in a iose to a iPhone users to use it also on in 50 years. We would like a this up to continue working about. Hopefully, maybe a this problem with disappear. >> That's great. Um, so tell us more about your experience at Tech Novation. How did you all meet? And why did you decide to join techno vacation? Tell >> me. So we discovered generation in the high school. Our technology teacher air showed as the contest, and we decided to join. And we're old friends. So it was a, like, easy to work because we already know each other. So am that's the best part. And we won't really wanted to do something that could be useful for us. So we decided to to start the Italians with that idea. >> That's awesome. What? What's been like the best experience a part of the experience so far? >> A this trip, actually, Yeah, it is being amazing. I am. It's actually one of the best rips off my life, and we're all having a great time here. >> That's also, um So, uh, thanks so much for coming on. We really appreciate it. And good luck for tonight. Thank you. This is team LPs n from Spain. Thanks so much for watching Stay tuned for more