okay we're back at SiliconANGLE comms continues coverage of vm world 2010 in the cube with a discussion with venture capitalists who are investing in all the next hot startups software companies infrastructure companies we all know three par two billion dollars is big big wins out there and data domain was a big acquisition and we're here with three venture catalyst to my left is charles beeler from El Dorado ventures and he's done a bunch of storage cloud deals Pete sonsini from NEA and ping li from accel partners so guys welcome welcome to the segment so first question we just go down the line real quick on a scale of 1 to 10 how would you rate the overall investment climate for startups in cloud startups the cloud I'd say pretty close to seven eight nine you know the negative right now is a little bit more around the funding environment than the opportunity for the companies and I think you as venture guys you really have to go to look past that and see the opportunities for the businesses and fortunately got three groups here of capital put to work so you can actually fund these things it's the biggest challenge we're seeing out there right now great Pete yeah i agree i mean it's it's definitely 89 if there's a hot sector or enterprise related it's certainly cloud cloud related you the backdrop is relates to overall venture climate you know casa paypal and affects the investment in this area a little bit but everybody knows this is a big change the ecosystem is creating tons of opportunities for new businesses and so everybody's very focused on it really minute they're missing it yeah i agree i think in terms of areas of excitement enthusiasm with entrepreneurs it's definitely nine or ten i think it it's not just on the infrastructure side as well i think if you look across you know our portfolio i'm sure it's the same with Pete and Charles you know three quarters of the companies are actually built on cloud infrastructure now so there's no more servers or data rooms at any of the startups and we work with so i think there's up and down the stack from the applications down the infrastructure there's a lot of enthusiasm for what the cloud can bring great same same same process right down the line and another question is how do you guys evaluate a company these days because it's so easy to fake out a VC if they're not smart about throwing some clouds stuff up there making it look great at a rails front end doing some voodoo I mean is there a new model of evaluating an entrepreneur or startup the old days it was hey what's Stanford at a PhD look at this unique IP with a patent now it's a really fast Market things going crazy how do you guys look at deals and evaluate entrepreneurs and startups I for me it still comes down to the team and I don't really care where they went to school I care what they know about the market they're going after you know to the extent they're going they're going after something in virtualization and cloud layer storage the pedigree matters a lot at what are they done before that shows they understand the market they're going after I'm hoping that the operators we back know a lot more about the market they're pursuing that I could so if they're really good at it you know i'm not going to keep up on that piece of it i just want to make sure they understand it to understand how they fit the ecosystem you can drive it and the stage we invest it really is all about the team because good teams have good ideas and they know how to pursue them he yeah I mean you can be aware of the trends but you don't know everything about everything there's no way you possibly can so you you try to narrow it down to you know generally speaking it's its people its markets its business traction is technology I think at the end of the day it comes back to those same four things most the time and everybody's got their own personal filter as to what they like to optimize around I think for the deals that that will do in one of those four categories you know and others i think one of them really has to be out off the charts to grab your attention to want to do the deal but i think it still goes back to you know people technology markets and and the passion behind the entre nerd is the ant really have that privileged insight and the opportunity they really know this market and this opportunity and how to exploit it better than everybody else and being the gauge of that is you know at the end of the day that that's probably the most important thing because as I say you're not going to know you're not going to know everything everything about every and you can't expect you anywhere close to that so you try to find those those individuals that really do have that key in so it inside the exploited opportunity so that's how we would look at it today thank you yeah i agree i think the fundamentals of what we look for in a company hasn't really changed i think the sectors and trans as you as you noted have changed a lot and i think there's still the constant tension that we see between kind of features and actual category defining breakdown companies but i think that is a you know a lot of times when you see a new market like cloud computing the first wave of a lot of the ideas are more features or trying to evolving existing platforms and then the next generation of the emerging ideas are are going to be more kind of the category platform type opportunities so trying to kind of parse out which one is which is not an easy task is something we spent a lot of time on I think the other big changes capital efficiency I think a lot of these companies are able to get to market with a lot less capital because the tools and resources whether it's open source products or you know things like ec2 s3 really change how companies can get to market much faster so that's something we do look for if you can build it and get market faster let's see it as opposed to building for three years and then created the markets there I mean capital efficiency is a great entrepreneurs of great at bootstrap so they love clouds okay I can do a data center for 20,000 in three countries yeah so let's talk about that i mean let's a couple efficiencies one thing and you guys provide a lot of funding but now momentum has always been the thing you could be capital efficient and never never make the market so it's about momentum where do you guys see the most momentum in cloud cloud related things we have end-user environments with the beady eye stuff at some desktop mobile obviously in the middle where that model is changing and an infrastructure that network at the plumbing storage what do you guys see the most momentum and most fertile for entrepreneurs to stay a safe harbor if you will do you see that anything out there I mean clearly the place you're going to see the most momentum is the closer you get to the end user of a product that if something's getting adopted quickly and wrapping quickly and if you're hosting that Klaus a lot easier to get deployment continue to deploy and meet that scale I think as you look at more the infrastructure the guts and things that are going on it we're pretty big believers that while virtual desktop is still early in terms of Enterprise usage we think it's at the point now with technology has evolved far enough that it's ready to go we made a bet and recently we just we think that's a market that's starting to gain momentum and when it happens we think will happen quickly I think in a lot of these other areas there are great opportunities but in some ways it's still company-specific if someone really figures out how to take advantage of a technology and leverage something whether it's software infrastructure Network it's more the company getting it and getting it right and you're seeing that today and you mentioned some of these acquisitions it's companies you figure that out understood how to get that wave and catch it and hit it at the right time yeah I mean I think that you know you want to get it you want to get in before the momentum hits I mean that's really where the money's made in venture capitals is getting in ahead of the ways before they all head and you know so so there's certainly exciting there's plenty of excitement around the cloud to spread around and and you know you point out what year as you like the best which ones yes I think that you point out platform as a service and private clouds there's a lot of excitement around there right now I think it's because it's you know it's kind of open field it's is there's huge growth prospects ahead of it there's no real dominant player and the venture investors mines kind of go why you know kind of go crazy thinking about where you know how big this opportunity could be without really that many proof points category not for him you're saying categories not formed yet one two and three I'd approve you know it with private clouds taking private class or as an example there's clearly a lot of interest and talk around IT organizations about private clouds people are talking about it how many deployments are there there's actually you know not you know not commensurate with the hype and so you know you have to discount that back and so you know there's still a lot of interest there's there are always going to be interest from venture investors and things like that but the end of the day you know you're taking a leap of faith that i materialized and something like that it's just not there yet yeah well you had data domain in your confirm a date of domain acquisition that was a big exit three far just went when or going to HP it looks like so you know there's big deals to be had I mean big big meals you know there's you know as it relates to virtualization and cloud is really shaking up the entire that we all know that we all know it's it's a big change in all these areas are presenting huge opportunities for new businesses and really novel technology to come in and capitalize on them and even though traditional areas like storage which is you know storage I mean it's it's boring old storage but no it's crazy yeah there are the rules exactly but it's crazy things happen and there's a lot of innovation be had as it relates to cloud and yeah Charles knows with companies that he has this thing so paying you you're on the board of an investment that you have a cloud era which we were familiar with their friends of ours in Palo Alto they serviced the Hadoop platform and it's an open source project commercializing it but you have big cloud players out there that have a product that they don't sell they just use like Facebook Google Amazon so so there's a whole nother world of big data and data is the big themes in this conference and the world what is your view of that trend of data the tsunami of datas Michaelson would say at Cloudera what is your view on that yeah I think it ties really well into a lot of the conversations I think you got your having around virtualization and cloud computing because if you look at what cloud computing is doing its actually reinventing the entire computing stack from it was there was mainframe whose client server there's web and heathers cloud computing so I think there's opportunities that all the layers of the stack i think what cloud era is focused on is around the data layer and i think what you mentioned that the Big Data trend is one that one could argue start in a web world because they were pushing the envelopes of data when Facebook Yahoo and google were collecting click streams and then trolling the entire web to figure out you know what's what's relevant to two different people i think that amount of data has really pushed the envelope with today's database technologies i think what cloud air and Hadoop is trying to do is change the boundaries of what data can do and what database technology and data management technologies can do so I think one thing we've seen a clatter is everyone's got big data we most of the customer we talked to always start off with a terabyte before the end of the conversation they find it petabytes so the reason why people didn't have all the data back place is because they were throwing them away there's no cheap efficient way to store and derive value from semi-structured or unstructured data so they were kind of going to waste I think now with technologies such as a dupe you can really change that that paradigm around and you can do analytics you can do a lot more data data management capabilities you couldn't do before it's hard to think of a better guy than Michaelson to run something like that yeah he's a good he's a good guy great guy the question about scale and startups dynamic so let's talk about from a starter's perspective they're out there they can deal with in Super Angel has been in the news we've covered that in SiliconANGLE you guys are venture capitalists and you deal with big deals if ficient to get started off the ground what advice you have to an entrepreneur out there they want a good bc they want to have someone's not going to screw them over hey what someone is going to grow with them help them navigate and reduce their risk as well and go to the market be successful so what advice do you have to offer up there about navigating the I need to get financed I have a prototype I'm going to fill this white space of a VMware platform or do this and that what was your back was your eyes by speak I'm sure we agree that you just go to El Dorado start there do your series be with one of these guys a lot of ways it really depends on what your business is we talked about capital efficiency but if you're building a storage solution if you're building complex technology it's going to take 12-18 months to build and get to market you got to be funded to get through that point the hardest van sings today are the series b financing for these companies if you don't appropriately find your company through the series a give yourself time to get to market get the product out have some customers work with it it's going to be really hard to raise a good following financing around as an entrepreneur you suffer the most frankly because you've suffered dilution from that more capital efficient deals you know and really smart super angels say the same thing the best deals they've ever done they may have done it on their own initially but most of those over time taking of capital that to not raise venture money would be a very challenging thing to do it to really build it a profile you're saying if you want to build a real big business go to a serious VC absolutely and if you need to start if you want to start small at few million bucks because your idea only takes that to start great most of the companies that we're seeing the cloud space are not companies or didn't get to profitability on two million dollars and as an entrepreneur if you really think that's going to happen you should look very hard to your business and look at all the comps around your business and see how many of them were able to do it and if none of them were you guys question what's so unique about our model it's different or show to be planning to get more tableau most most most hunters don't know that tend not to do follow on financing so that if it's an intensive deal that needs more cash they may not pony up more right I mean I would just add that you know when you're as an entrepreneur looking at a venture for an angel you need to pick a firm that is going to have some money to me to be there for successive financing I mean people don't knocked out of the park every time after their first financing usually they have successive deals and is it up and down drive so you need to have a firm that obviously has money and as deeper as you know there's obviously constraction value where they was very well there's certainly value at the point I was making is that there's contraction in the venture business right now and so there's a lot of pressure on firms you aren't can be able to raise future fun so you got to feel good there's going to be funding there for you down the road is obviously obviously very important and you need to feel good about who you're working with obviously and yeah I mean that the value add is important i mean the network that the firm brings the experience they have in building companies is actually we feel like it's worth something we've we've done that before and you gotta bail you got a lot of success and we think that that can helps i mean we have a bench of entrepreneurs they can you know speak on behalf and hopefully say the same thing but that's the way we look references are a big thing right you're saying but a big part of that value added speed said is having access to additional capital from your initial funding sources knowing that when push comes to shove if things are going well but you're having a hard time raising money out in the market you can come back to your existing group of investors and continue to scale a business the way it needs to be scaled or should be scaled to be successful and that's that is a component of being value add to those companies being there when they need you to really support them through those time paying you work for a blue chip in Excel there you know earned the reputation over the years I say the facebooks a big investment and they got slew of other great investments and you've got a good tracker green cloud what do you say to the folks out this a no just go Super Angel there's some dilution not just in capital but reputation don't you think you know I i think the angels are or the super angels are an important part of the ecosystem for startups I think we work with a lot of angels we have angels in cloud era we have angels a lot of our companies so I think they definitely provide an important you know segment of the creation of startups more and more today than ever because the capital just to fund no I think I think they provide value add just like just like a VC well I think for me it's more the entrepreneur's to decide what they want and where they want the company to go and I think and figuring what the business needs should be able to help you figure out if you go with angels you go with VCS you go with both no combination you bring people at different times I don't think there is there's one formula but I do encourage entrepreneurs not to feel there's only one way to do it there's probably more than one way to do and take the time to figure it out i think the most important thing is get to know the people that will be investing in your company spend the time to get to know the VC we're all very accessible we return emails phone calls whatever it takes and that's true for the angels get to know everyone and I think that will help you make the right decision I saw a quote recently that said it's very hard to get an investor to come into your company but it's ten times harder to get them out and in thanks point me you got to get it right because you know they can absolutely kill a company if you get the wrong ones in yeah and you run out of cash too you're at a business I have that too somewhere I've heard it quite never seen a quick get go to business we have money in the bank Pete guys can you guys comment on facebook what is the Phenom of facebook obviously it's a cloud play for themselves it's a huge platform growing at scale I know ping your company has the big data business and trying to figure out clustering google has that but all my facebook and particularly growing very short history is that a cloud play for enterprises to look at is it a unique data point is that cloud any any takers on that question I'm going to look at the expert the last time I sat on a panel if King was three weeks after they did the initial investment in facebook and I still couldn't get in because it was only for college I mean they are operating a scale they use our open source or writing their own code it is a cloud kind of play yeah I mean I think you know we've had a lot of conversations with different Enterprise architects who are curious in terms of how Facebook has built their data center I think whether it's you know Facebook Google or Yahoo or Amazon it's it's very interesting see how these internet data centers are becoming thought leaders in terms of where some of the new groundbreaking technologies are whether it's in the storage layer networking or compute layer you know Facebook's an early adopter of a lot of these technologies just because they were pushing the boundaries of what can be done with you think it's a proof point though of what as a road map for the enterprises to look at or is it just a unique one-off I I think it is I think you have to be careful about just transplanting things that were done for a consumer web property and all the nuances that you need for an enterprise environment but I think absolutely just like a lot of consumer companies like Facebook to use enterprise technologies right so i think it's just an evolution of you know what they're building will be adapted i think a lot of private cloud stuff that we're investing in is very much borrowing from a lot of the clinical public cloud understandings and then bringing that to an enterprise environment so you talk to the enterprise IT guys and the cios are saying to the architects we want one of those amazon things inside driving yeah that's what they're saying right so I think I think there's a I think that's one sure i think the other trend is the episode we don't want them to have it we don't want them happen right and any other things applications are getting rewritten for different ways in other words people are building applications for ec2 and s3 that our web-based cloud type applications as more of these type applications get built they're going to end up in the enterprise and then the infrastructures gonna have to adapt to the application so i think that cycle just keeps going peep peep for you question for you you've been in the evil attic space in the enterprise obviously an IT was a sector that kind of went dark from a venture perspective seems to be coming back with cloud how are the enterprise IT changing as a marketplace when I say market I mean like a market for entrepreneurs what what do you see that's different now from when you were in the enterprise and you were to HB you worked at some startups in the enterprise it's changing what a what do you want him you know when I was I mean before you're in the venture you know six seven years ago the whole social media you know consumers ation of IT was not really happening so that's a huge change that's impacting enterprise IT landscape but it's it's got you know IT executives running around with their hair on fire and how to deal with so that's in the world of IT that's a huge change since I was in the business eight or nine years ago and it's still you know it's a nun saw there's nobody knows exactly how you know what the right answer is with all these these iPads and so forth entering the world so at the same