The a16z Show - a16z Podcast: Why Every Business is in the Data Business

Episode Date: July 28, 2015

It’s not just the likes of Google, Facebook, and Amazon that lean on a massive and growing corpus of data, today every company is a data-driven company. In this world, access to data -- and how you manage it -- is what matters, says Ash Ashutosh, founder and CEO of Actifio. In this segment of the pod, we get in the weeds with Ashutosh and a16z’s Peter Levine on how this data-driven world is changing the technology infrastructure that is the engine behind it, and the companies that use it. Ashutosh and Levine also discuss ramping sales teams, going international, and what’s driving the timing of IPOs – or really the lack of IPOs. Finally, Ashutosh offers his four-legged response to being referred to as a “unicorn.” Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to the A16Z podcast. I'm Michael Copeland. It's not just the likes of Google, Facebook, and Amazon that lean on a massive and growing corpus of data. Today, every company is a data-driven company. And in this world, access to data and how you manage it is what matters, says Ash Ashatosh, founder and CEO of Actifio. Who among us doesn't say that data is not the lifeblood of their business? And the largest hotel company, Airbnb, owns no hotel rooms. The largest taxi company owns no taxis. Whether you are small, you're large, the smallest of the organization still live on the fact that you have to be competitive in the world. And data becomes a lifeblood of how you run the day-to-day business. In this segment of the pod, we get in the weeds with Ashatosh and A16Z's Peter Levine on how this data-driven work. is changing the technology infrastructure that is the engine behind it and the companies that use it.

The blueprint for computing is coming from these hypercloud environments, and whether it's on-prem or cloud, the fundamental data center design is changing. And if data is at the core of a business, being competitive in the business world requires one thing above all, speed. The classic example, you could have the best hospital in the world. But if the ambulance takes too long to get there, there's really no point. Right. When you're in trouble, it's the speed that matters. That and Ashatosh and Levine discuss ramping sales teams, going international,

and what's driving the timing of IPOs, or really the lack of IPOs. Finally, Ashatosh offers his response to being referred to as a unicorn. Do you like that term unicorn? I really hate it. Tell us how you feel. Peter's in the room and Asher's in the room, and that means we're probably going to talk about enterprise technology and getting the weeds. And that's exactly what we're going to do. Peter, you know, you have this view of the world that is very much, here's the architecture of the old world and here's the architecture that's being built now.

How does Actifio fit into that sort of worldview? Along the lines of hardware commoditization, I've used the phrase that the mobile supply chain eats the data center. And that implies that the hardware, the cost of the hardware, gets very, very inexpensive. And, you know, I can imagine, I think I've said this, that I can imagine a billion cell phones in a data center, and that becomes like the commodity base, and that becomes what we need to go build our next generation compute infrastructure on. And if we now think about Actifio within that framework, Actifio becomes the data access, point for those billions of virtual cell phones that exist in this infrastructure. And without a data management system like Actifio, there's no way to control information, no way to access information

in a pragmatic fashion. And it's a huge Achilles heel because every company in our new world is a data-driven company. And if you don't have effective access to data, it doesn't matter how inexpensive of the hardware is, you need tools to actually manage the data, coordinate the data, make the data fast and accessible to a wide array of users. And that's the investment thesis behind Actifia. So in what you describe, are we talking about still an on-premise world, or at least a portion of that world, still on-premise? I think there's a very thin line.

There's a spectrum where applications are on-premise, applications are off-premise. applications are floating in between, I think that spectrum continues to change, and it really doesn't matter. And for many people, what you really care about is availability and access to applications, where they come from, how they get done, that's truly something that the operations and the IT organizations deal with. And it's not the location that matters as much as the paradigm shift of the cloud. Yeah, I agree.

It doesn't really matter where the data center is. on-prem, off-prem, what does matter is that the architecture for the data centers are changing. So 10 years ago, everyone would look at Fidelity and Morgan Stanley, and those were the prototypes for the data center. And it was, guess what? It was EMC storage and Oracle database, a Sun Microsystem server and a Cisco switch. And the entire world copied that, and that became the blueprint for the data center, all on-prem. Now, fast-forward, 10, 15 years, we now look at the same. We now look at Facebook and Google as the prototype data center. There's commoditize again. The mobile supply chain has eaten their data center. A lot of open source components and a lot of components put together.

And so what we're seeing is the blueprint for computing is coming from these hypercloud environments. And whether it's on-prem or cloud, the fundamental data center design is changing. And so that really gives light to all of the new opportunity is that all these data centers are being reinvented in the eye of scale out large cloud environments, whether on-prem or off. And that's kind of the next-generation data center will absolutely morph to this particular model. Ash, given what Peter just describes, Actifio fits in or what's the opportunity that you saw And the problem that you're helping to folks solve as they move to the world that Peter describes. So take the case of the second largest airline reservation company.

Massive amount of data that's being developed upon by hundreds of developers are constantly innovating, constantly fixing issues. And the old model that Peter was describing where you had infrastructure that basically controlled the data. You move stuff from one stage to another, project-based deployment of infrastructure, and it would take them months, months, for these developers to access data to fix an issue. Right. Now, if you were, you know, the classic example, you could have the best hospital in the world, but if the ambulance takes too long to get there, there's really no point.

Right. Right. I mean, when you're in trouble, it's the speed that matters. It's the ability for organizations to constantly innovate, be agile that matters. And that's where the active use paradigm comes in. It's the ability to virtualize this data, make it accessible instantly, and in the process, dramatically cut out cost. So those are the things.

It's the notion of allowing, and this is completely on-premises, right? This is an organization that are running on-premises, a business that needs to move faster than before. You just convert that paradigm into something that is more cloud architecture, but inside your four walls. An analogy here is that what VMware did for compute, Actifio is doing for storage. And if you think about what VMware unlocked 10 or 15 years ago with their system is the virtualization of compute resources that led to agility and cost savings. Exactly what Ash is talking about.

Storage has been this incredibly slow-moving market. Along comes Actifio to unlock the value of storage as storage prices decline to unlock this massive. massive growth by virtualizing and providing full agility to storage. And that hasn't happened before. You raised an interesting point, Peter, where is the value then in storage? Like if storage, you know, as a commodity is going to free, let's say, is the value then in just that speed and agility? I mean, is that kind of where you guys have your reason for being? Well, we, we, the unlike compute, unlike networking data is a very different beast. Data has a life cycle.

Data has a long tail. It doesn't just appear and then disappear. And independent of the storage, the ability for you to truly manage the life cycle of data through the point where it's being protected, where it's shared, it's analyzed, compliance requirements met. People are doing federal stress tests because you have to meet the requirements of of those people, the hundreds of developers accessing information, that whole long tail that data lives by

is a much more expansive process than what you've seen on the computer and storage. You could give away storage for free. You could literally make the entire world. In fact, the world is already coming to that point. Google has announced. Amazon is basically five bucks a month. You can get unlimited amount of storage.

And this was what we were saying six years ago. That storage is going to be free, but it's the same reason that Peter was talking about. if servers were free, would you stop using VMware? Absolutely not. It's the agility, it's the speed, it's the ability to come back and bring up your server, putting your pocket and walk away wherever you want to go, the mobility that comes with it. Those are they.

The true value proposition comes in speed, agility, and the mobility, not in terms of whether the infrastructure around it is free or expensive or cheap anymore. You said, Ash, that most companies rely heavily on data, if not are completely, completely, you know, beholden to data as, let's say, Airbnb is. You've talked about customers that sound like their large enterprises. Does this sort of apply to everyone now? And are you seeing in your customer base sort of a shift from very large customers to everyone? Yeah, absolutely.

I mean, I think who among us doesn't say that data is not the lifeblood of their business? And the largest, you know, as you pointed out, hotel company, Airbnb, owns no hotel rooms. the largest taxi company owns no taxis, and we expect to be the largest data company that owns no storage. That's active use. Right. And whether you are small, you're large, the smallest of the organization still live on the fact that you have to be competitive in the world,

and data becomes a lifeblood of how you run the day-to-day business, and access to that data, speed of that data becomes even more competitive for you. So unless you are sitting someplace where you are 100% niche market and own the entire monopoly in that business. But even those people have a website presence to come back and try to figure out how to deal with the data that comes through there. Do you have to sell differently to large enterprises versus these smaller and medium businesses?

Or does everyone have, you know, understand this problem and have a real incentive, if not a fire under their butts to get it done? Definitely. Dramatically different for many, many reasons. So a smaller, let me start with a simpler one. The smaller organizations have a problem to solve, they have a budget to solve, and there's a person who's responsible for solving it. They go online, they figure it out, they talk to a few references somewhere, and they make the decision. It's about faster, cheaper, better version of whatever the problem they're trying to solve. A large organizations are much more about predictability, much more about organizing the operations of whatever they're trying to do.

And so it goes through a four-step process. It starts with technical validation. Does this thing actually hunt? Right? This thing really meet my requirements. Then you get through a business case validation. Yeah, this is great. It hunts, but does it apply to my business?

Then you want to get to the operation side. Somebody is building a cloud. Do these people know how to operate this cloud, this component of the cloud? And finally, it comes down to somebody actually going through the procurement process. And that's probably the longest pole. in every enterprise sales stand is the procurement purchase and especially organizations like us that are private. That sometimes is twice as much,

three times as much as the front end of the entire process. Is there any difference now between being a private company and a public company in terms of the willingness of customers to jump on board and give it a shot? What's the difference there these days? If people are trying to move so fast, do they have time to sort of wait for you to go public? Yeah.

No, 10 years ago, as I mentioned a while ago, 10 years ago, maybe 15 years ago, much of innovation in the enterprise space was incremental. It was about finding a hole in somebody else's product portfolio, as Peter was pointing out, you had EMC, Cisco, Oracle, and rest of the folks. Your job was to find some opportunity there and fit into that architecture that was already defined. And then there's a massive rapid shift on this architecture that requires organizations to move faster. And therefore, if you are one of those organizations who's used,

to buying from your existing vendor and that existing vendor is basically not helping you move fast which means you're basically dying you have no choice you have no choice but to go to whoever can solve the problem now turns out some of them are private now that's a problem for the back end of the process the procurement legal and rest of the process but for the business people they need a problem to be solved and it is too hard

not to go back and find somebody who is well-established brand and so i think we've seen this more more often now, private companies absolutely getting an opportunity to get a big chunk of data center share, partly because they are 10x, 20x, 100x, more beneficial than the incumbents. Peter, what makes it so hard for incumbents to get there quickly? I mean, they're certainly smart, they're well-funded, a lot of them are sitting on a lot of cash.

I think that the big issue facing incumbents, and this has been since the beginning of time, certainly around technology, here's what takes. tends to happen as a company starts out and they build a product and you end up spending a lot of money supporting and incrementally improving that product line. So while large companies have a lot of cash on their balance sheet, it's not like you can just use that money to go fund a whole bunch of new initiatives. Typically that becomes operating cash and in big companies, there's a lot of fingers that grab for that operating cash that may not be in the best interest of innovation. Because large companies have a lot of factors in terms of, you know, kind of short-term revenue

objectives and profitability, it is very, very difficult for large organizations to create new products or carve out dollars for new products when there's sort of the existing run rate business and profitability metrics. And that really hamstrings a large organization. It's not that they don't know conceptually what to do. What's coming after them. Yeah, it's, it's, you know, these are very smart people who work at large companies, you know, it's just that you kind of get boxed in, and I've been at large companies, so I know exactly how this works. And, you know, when it comes time for budgeting, all the existing operating groups say we need X dollars, you expect us to grow 100% a year, therefore we need 100% of the dollars. And after everyone jumps in,

there were no cookies left in the jar to go do innovation. The natural result from that, of course, is that large companies, you know, to get out of the bottleneck end up acquiring companies, and that's becoming somewhat problematic due to activist investors. So, like, there's all kinds of issues that large companies are faced with right now. But the innovation issue really is one of allocating budget dollars. It may sound really simple. Right. But I'm telling you, when you're in it, it's a whole different thing.

Yeah. I would agree. I think... You've been asked. You've built at HP and large companies, right? And then I think the other part that is lost, it's not just coming up with a new product. Many of these large companies have phenomenal R&D and patent portfolio. They do phenomenal job of innovating.

It's the two-thirds. The stuff under the iceberg under the water, which is marketing it and selling it. Right. They've got to... They became large because they have fun of the phenomenal, most of the best marketing. and sales organizations that are used to taking massive amounts of product. Into that system, you want to inject something that is completely disruptive. That is a problem.

That is a problem. Yeah. One of the things I observed from you guys at Actifio is you guys have gone global. You've been around for five years, but like literally global. I mean, you guys are everywhere, or not everywhere, but all over the globe. Why? Like, what countries did you pick in terms of geography, and was it a push or a pull? It is not that simple.

I mean, some of it was an absolute pool. We started with selling within 50 miles of our office first in Boston. And then we took over quite a bit of the northeast and east coast. And that led to some of those companies that are based in UK. So we went to UK. They were in Australia. We went to Australia. Some of them were in Singapore or in Japan.

And next thing, you know, we were supporting many of these enterprises that do have either subsidiaries or office. is outside. And that led us before we knew it in 37 countries. And so it was completely by, the relentless focus, Actifio has about just delighting the user and doing whatever it takes, including going out and being in countries that we probably would not have been organically. And that was a single most important reason for us. And is supporting those 37 countries difficult? I mean, for a startup, it certainly adds all sorts of layers of complexity. Enormous, enormous number. I mean, it's not only just from the technology perspective, you know, the internationalization of just the product part.

But there's, I keep coming back to the operation side of the business that becomes even more challenging. Cultural issues, you have to have folks that are native to those areas. You have to have practices that are native. And there are some countries we decided not to be in business with because it is very hard to really go back and build a practice. practice around. We would rather support them from some other places. So it is an educational process. It requires a tremendous amount of overhead. We need a finance and GNA team that actually does the payroll. I mean, it comes down to something as basic as that. Why is it worth it? It's worth it for one simple reason. I've got a user. He or she wants us to go

to every other place that they already have adopted, Actifio, as a global standard. And we have to be a global standard. I cannot be a standard in 333 Wyman Street in an office. I have to be wherever the user is. And it may be the choice of having picked enterprise market as a first market to go after versus a more mid-tier, more localized market. And that probably is the reason why we have to go back and support these users. I want to switch gears. And Ash, Actifio is one of a very small herd of unicorns in New England. Do you like that term unicorn? I really hate it. Tell us how you feel. I think it would rather be a mule that my customers love than a unicorn that some investor does. And I think my investors feel the same way too. Peter, your investor sitting

right here. Mule, unicorn? I love mules. Well, there you go. They're hardworking and the real. They're hardworking, real. You can kick them in the ass and they don't move. It's all good. All right. We'll take that.

Ash, you've talked about going public, but it seems like you're not in a big hurry. Why is that? And Peter, how do you kind of view this stage of company and actifio in particular? Yeah. It's a very interesting time we live in. I know there's a massive shift in transformation, as Peter calls it, the cloud architecture transformation. And it requires a very, very different way of going out and running a business.

And it's an opportunity to continue to go back and build a very viable business, well, independent of being public or private. And you go back and, I would take one more step back and say, why did companies go public before? One was because it was a way to come back and raise some money. that isn't much of an issue these days. And more importantly, it was a way for validation of a company so that the buyers could buy it from those people.

That isn't also an issue today. So if I have my users saying, I really don't care with the private or public, I love what you do as long as you're supporting what my initiatives are. The overhead and the burden of being public company, and we have phenomenal investors who are committed to building a company that is transforming the industry as opposed to cashing out after the lockup period.

I think that helps a lot. Does that sound about right, Peter? It does, absolutely. I mean, look, we want to, for all of our companies, we want to invest in transformational technologies and industries. And these things take time. And we want, you know, for Actifio, we want this to become a platform just like they do. And that just takes, you know, kind of years of heavy lifting.

thing. There's no easy sort of line between here and there. And if it takes time and, you know, the predictability of the business is important and the internationalization is important as we've talked about. Like those things take time. And look, when the company's ready to go public, it'll go public. And when Ash says it's ready, that's when it's ready. When my customers say it's ready, that's when they say it's ready, we're ready. So you mentioned earlier today, what is the average now for companies going public these days? years. The median for tech companies is 11 years.

So it's a long time. It's longer than it's ever been. Yeah. Yeah, I know. We are on this 25-year cycle now. And so it's not surprising. Well, we will check back in before then, I hope. Ash, thank you so much. And Peter, thanks as well. Thank you. Thank you.