350. How to Maximize Investor Value for Founders, the Future of Cloud Infrastructure, and the Bull Case for Cybersecurity (Guru Chahal)

How to Maximize Investor Value for Founders, the Future of Cloud Infrastructure, and the Bull Case for Cybersecurity

Guru Chahal of Lightspeed Venture Partners joins Nate to discuss How to Maximize Investor Value for Founders, the Future of Cloud Infrastructure, and the Bull Case for Cybersecurity. In this episode we cover:

  • How Cloud Infrastructure Impacted Innovation
  • Breaking the Constraints of Success
  • Why You Should Execute Quickly as a Founder but Slowly as an Investor
  • And more!

Guest Links:

Lightspeed Venture Partners

Guru’s LinkedIn

Guru’s Twitter

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Transcribed with AI:

Guru Chahal joins us today from San Francisco. He’s a Partner at Lightspeed Venture Partners, focusing on cloud infrastructure, cybersecurity, and DevOps. Guru has had multiple exits as an entrepreneur, most recently with Avi Networks, which was acquired by VMware in 2019. Guru, welcome to the show.
Thanks for having me, Nate. Such a pleasure to be here. And I have heard just amazing things about the show from my partners and from other people in my network is delighted to be here.
We’re delighted to have you. Can you walk us through your background and give us your brief overview to Vc?
Sure. It’s about as straight down the middle, as you can imagine, by Silicon Valley standards, engineering in in the Midwest, I’m a boilermaker, went to Purdue very quickly realized when I graduated, most of the innovation and most of the action in technology was on the coasts, and mostly on the West Coast and moved here to California. And since that time, Dawn, the second realization, which was a much more of a early stage creator mentality than I am a large systems optimization thinker, like that’s just not, it was was a lot less fun. So I spent most of my career actually in two businesses helping build them up. The first one was in the cloud infrastructure space where I was an early employee, and the business was acquired by Cisco. And today’s a four or $5 billion a year business really, really successful business where I got to see scale from slides to running a $400 million business as a kid. And it was it was a lot of fun. And the second business was one week that we started back in 2012, late 2012, early 2013. You mentioned Avi networks, it was actually Lightspeed Venture Partners led my series A and so I got to work with the team over the next six years as we built that business. And then it was acquired by VMware about three years ago. And for the last three, three and a half years, I’ve been really, really enjoying working with multiple founders at the earliest stages in cloud infrastructure businesses in cybersecurity businesses, and having a blast while doing it here at Lightspeed.
Awesome. Well, you had a successful exit at Nuova. And then you were at Lightspeed for I think it was a couple of years. What made you go back and co found Avi?
It’s such a good question. To be very candid to two things happen. One, I wasn’t ready for venture and I think venture is a you have to joint venture, when it really is your calling. You have to get the timing right. I still had that itch. It just still felt like wow, I just built this business. It’s amazing. Now I want to start a business, which is a horrible way of thinking about starting a startup by the way, you don’t go looking for starting a startup, the problem needs to come to you to some extent. You know, I was not I was somewhat unfocused, because every once in a while, while being at lightspeed, while working on some amazing investments with my partners, while learning a lot about venture, I still had this thing in the back of my mind that oh, maybe I should go be a founder. But thank God, I didn’t, I didn’t, I didn’t execute on that desire. Because the problem actually took a while to come back to me. And about a year after I started at lightspeed, I started getting obsessed with this issue of a workloads are moving to cloud, how are enterprises keeping them secure, and performant in the same way that they can, in their in their own data center, it’s a much harder problem to do in the public cloud. And as I got obsessed with that problem, I realized that there’s an opportunity there. And so in 2013, we ended up starting starting Avi networks to go solve that, that that problem. And it was it was a blast, like we just, you know, it had to impact a I got to build another great business. By the time we were acquired it, it was about a, it was about a $40 million top line business doing really, really well growing two and a half to 3x. Year over a year. So that was a great journey. And the second thing it did was it really helped me scratch my itch. Like I really wanted to go with a business and I was able to do that. And that was with it with a great team. And, and so I felt like I was a lot more ready the second time, after selling Avi Networks to come back into venture that was the first time over
Has the itch sufficiently been scratched?
Yes, for sure. It’s one of those who never but boy, I’ll tell you, most of my gray hair is from that second. The first type building, you know, I’ll share with you another thing may you’ve gone through these journeys as well. But even if you’re the very first or second employee at a startup, you know building that business out you get to see the whole journey, but it’s really different when you’re the person who who really sort of was there day one as a founder and is responsible for keeping the lights on and keeping the company funded and you know, making sure you know the things keep humming it takes a lot out of you and so you know it’s when I was done with that I my boss are finding another business was high enough that it’s not clear to me if, if I’ve ever go back and struggling otherwise,
Yeah, it’s often very glorified. But people will see the TechCrunch releases the LinkedIn posts, they don’t see the sleepless nights, the long weeks, everything that goes into building the business, right? They see 1%.
Yeah, how hard the founding journey is, you can read books on it, and you still can’t really viscerally feel it till you’ve gone through it. And for this reason, I’m a huge proponent and fan of more founders, like yourself, like myself, like some of our peers at other firms come into venture, because I think the one superpower that we have, is we walked in that founders shoes, and we can if at a minimum, empathize with them, but ideally, not just empathize, but also help them look past corners, also help them understand what are some of the, you know, unknowns, that that might come out of the blue and derail the business? So I think, you know, and that has been incredibly awesome to see over the last 10 years, my first iteration ventured my second iteration venture a lot more founders, a lot more operators talk about people who build businesses, with their bare hands are now coming back and saying, Hey, not only do I want to be take on investing as a career, I really, I really want to do, right. A lot of people did, right by me, I want to do right by others, and really sort of give back as well. So it’s, it’s actually amazing to see that.
Yeah, you’re one of the few that I’ve spoken with, has traded sides, from the founding to investing side multiple times. What was different about being a founder the second time around, having had some investing experience, I feel like it’s often talked about how being a founder helps you out as being an investor. But you actually went back from being an investor to being a founder, I’m curious if that experience was helpful at all, founding a company the second time,
I cannot recommend it more, I cannot recommend it more. Like if you get a chance, as a founder, let’s say you never wanted to take on investing as a courier, then between your companies between starting those to try and you know, I highly recommend trying to work at a venture firm, even if pro bono even if it’s just getting a sense for how the business works. I think it just makes discussions with your investors a lot more objective, you understand where they’re coming from? What they’re optimizing for in discussions on rumbly cap table? Why, you know, we should or should not take a certain level of dilution or raise a certain amount of money? Or why are they aiming for these ownership targets? Like, what do I care? Like, my company’s gonna be worth $10 billion? What do you care big difference between 15 or 14%? Like Nate, if you’d like to do 15, you should like it, or 14, these conversations become a lot more objective, when you’ve sat on the other side, and you’re like, I get what you’re trying to do and why this is, this is the direction you want me to go. And so that’s one. The second more tactical reason is it does make fundraising a little bit easier, right? Because you’re much more targeted, it’s less spray and pray you understand how the other side thinks how the other side works, you know, which firms which partners with in those firms are most likely to do your next round. You’re hyper aware of who’s investing who’s not, who’s writing this size checklist has that size check, who’s investing in this particular market DevOps, or cloud infrastructure versus enterprise has right now. So it’s not to say that you can’t get access to that kind of context, if you’ve never been investing. But I’ll tell you, it does help a lot being on the investing side. So fundraising gets easier. And your conversations with the board with your investors are a lot more objective. And it’s just a lot easier in that back and forth, if you know where they’re coming from.
Yeah, totally agree. It’s interesting hearing from entrepreneurs, how opaque the venture landscape is to them, because being adventure, it’s its own little village, and you kind of know everyone, all the firms who’s investing in what, but oftentimes, it’s hard to decouple that experience and put yourself back in the founders shoes to think, oh, wow, they actually don’t know all the firms. They don’t know what everyone’s investing in. So I can see that being a massive advantage. It was what, when you reflect on your entrepreneurial journey, what is one of the biggest lessons that you learned that you pass along to the founders that you partner with today?
Speed of execution. Very few things, especially in software, represent long term advantages and long term moats for a startup. Almost the whole world is out to kill. By the way, you’re like this nursery nursing the small plant trying to build a giant oak tree or a Sequoia out of it. And everyone’s everyone’s coming at you. The only way to dodge there is just speed of execution. And this is a lesson I learned both in my first startup and my second startup, if you can just increase the cycle speed of this Startups slightly just execute faster than everyone else that gives you 612 18, whatever number of sustained advantage over your competition and over the larger incumbents that you’re fighting. And so one thing I emphasize deeply now, when I’m fortunate enough to partner with a founder at the very, very earliest stages as the first check as a precede or seed investor, is there’s an old saying, when I was growing up, why do something tomorrow when you can do it today? Why do we say when you can do it now? Right? And so it gives them a thought experiments like I call it the move the cheese experiment. So a founder will say something, or I’ll say something is like, I’m pretty sure we can get this done by by Friday evening. And it’s Monday, let’s say, right, so I’ll say, okay, great. Well, but how about Friday morning? Is that okay? Let’s say yeah, I think we could do it by Friday morning. Okay, great, great. But how about Thursday evening? Could we do Thursday evening? The next? Yeah, yeah, I think we could do Thursday evening. Well, how about Thursday morning? Could we do? Because you know, when you move the cheese a little bit? If you move it too much, right, then you feel like well, that’s not doable. I can do in one day, what I thought is doable in five days, especially instead of five days, can we can we do it in four and a half? That exercise is doable? And you start thinking about what are the true constraints versus perceived constraints. And most large companies, and sadly, unsuccessful startups are unable to adopt that frame of mind. Perceived constraints versus real constraints. And what I tell founders all the time and sort of was the unspoken rule, even at having was we only think about real constraints, perceived constraints, or context doesn’t matter. Oh, at your stage, you should be going by 3x. Next year. Okay. Could we do 3.1x? Yeah, I think so. Well, okay. Could we do 3.2x? You see what I did that, like, it’s just the same exercise? Like, why stop at 3.2x? Why not? 4x? Why not? 5x? Like, what’s the real constraint, maybe tiring, maybe it’s capital, maybe it’s efficiency, maybe it’s something else. But let’s get to the realistic constraint. And once we’ve identified that, outside of breaking that constraint, let’s execute as fast as we can. So that’s one big thing. I tell them, like, don’t don’t feel constrained by anything. Just execute as fast as you can. And that’s a sustainable advantage.
Have you found that speed of execution is a teachable skill?
Yes, 100% 100%. And it’s that these these frameworks, you know, the move the cheese framework, move it slightly, lightly, without pissing off everyone without challenging you too much, you know, just a tiny little bit. And then that just breaks this mental barrier where you feel like no, no, this thing has to be five days. So we have to grow by 3x. Next year, just challenge you a little bit. And once that happens, you know, once a snipping, it’s like moving a heavy block. Once it moves just a little bit, it gets a lot easier to move it a little bit faster and a little bit faster. And suddenly, you’re like moving it really fast. You’re like, holy shit, it’s happening. And so it is definitely teachable. And there’s a method to that madness. And so these two or three frameworks that I use with founders are extremely ambiguous to use with my team as well, successfully. They’re very, very useful.
It seems that investors on boards have an asymmetric impact on the company, they can maybe influence success marginally, but more drastically hurt the business. First, I’m curious to hear if you agree with that statement.
Is it for you listening in on some of my covnersation? So I take it, that’s a yes. I say this all the time is like, Great Investors can help your business inflect by a few percentage points, you know, just just that slight change in curve, it helps a lot, but maybe 5%, maybe 7%, they can definitely do that. But investors that’s not well suited for your business for one of many, many, many reasons, can have a very asymmetric experience, contributing experience and could could lead to some significant damage to the business if you’re not careful. Yeah.
I’m curious when you think about the role of an investor and being specifically a great investor, aside from frameworks like moving the cheese, how do investors truly add value when they’re on a board?
I’ll caveat this by saying I’m still a student, right? I’m very, very, very fortunate to be at a partnership that has some amazing investors who invested over 2025 years built amazing public companies from the first check it out. So a lot of my learning is through osmosis. And one of my first mentors in venture when I joined Lightspeed the first time over, taught, it said something to me that I’m gonna share with you. Now, that answers your question. And he said that the biggest thing we can do is help CEOs and founders recognize when someone their team, especially in the executive team is not scaling or has hit some sort of a limit And then need to bring in someone who’s better suited for that role, and then help them hire that person. This is the biggest service we can do to the business, we don’t have enough context to impact product strategy. We it’s very difficult to weigh in on the minutiae, or the tactics of the business or the marketing strategy, and so on. But the one thing we can do is help them realize that their marketing leader or sales leader or engineering leader might not be scaling anymore, we need to bring in somebody new. And this was theory at the time, right, I’m listening to him, and I’m absorbing it, I’m also seeing him practice this in real time. And so it had some merit. And then I started a company. And over that six years, all of my board members helped in many, many different ways. But the one thing I can tell you sitting on the other side of the table, the two biggest contributions to me, and now the two things that I try and do for founders is, number one, help bring the best people to the company. Companies are nothing more than a collection of people. That’s it, it’s very simple, right? It’s one collection of people trying to go to war with another collection of people. So if I’m better people than your people, then I’m going to win. And so just making sure that we can attract the best talent to that company is the single biggest thing that an investor can do. And then the second thing, which is also related to that first one is opening up a founders minds to the art of what’s possible, right? Because again, back to our previous topic, there are perceived constraints and real constraints. And often we are, you know, we are beholden to precede constraints. And just helping understand helping founders understand, well, this is how interesting this could be, these are all the things, you know, in the fullness of time that we could go and build. This is how large this company could become. And I again, I’m a very visual thinker. So I tell people about, you know, companies, I’ve been very fortunate to work with examples of look, that huge building with 1000 people or 1500 people inside, you know, I knew that CEO, and we wrote that first check into that company. And today, the company’s name is on top of that building. So when you drive on one on one, and you look at, you don’t even think about it, but that could be us. And so opening up someone’s mind to the art of what’s possible, I think that is a soft skill. And then an actual hard skill, actual help that is quantitative is is helping attract great talent to the company. I think those two, you do those right. Everything else will take care of itself.
When it comes to the talent piece, are you spending time every week recruiting for your CEOs? Or are you building your own talent network? And building out that bench to place and prospective portfolio companies? How do you go about providing the most value, and what have you found that works very well.
So I spend vast majority of my time working with existing investments is on actually interviewing and helping them find and close great candidates, just this week, we’re, you know, four days into the week. And I’ve spent probably cumulatively somewhere between four to six hours on hiring, interviewing and hiring manager discussions. And it’s a non, it’s a significant portion of my time. And in helping these companies, I have the luxury of being able to stand on the shoulders of giants at lightspeed over the last 2025 years, because we believed in the criticality of dysfunction, we’ve built an entire team behind to help you both executive hiring as well as individual contributor hiring, and the executive Talent Team, you know, some amazing individuals like Pete Simon, and others who were managing directors and executive recruiting firms earlier. So very, very senior leaders who have vast networks. And so when one of our companies is looking for the next great marketing leader, we’re able to tap into those talents using our own internal teams. And when we when we run out of those avenues, then we are able to actually help them engage with external recruiters as well, to bring in talent, but I’m involved in all the searches, I do interview every single person, every single executive that’s been hired into our portfolio companies. And that’s not just to interview but also again, to paint that art of what’s possible, because often, you know, these amazing functional leaders want to hear directly from the investors to why did I invest? Why do I believe this company could could be a public company one day, and so you know, that’s, that’s really have a plus I’m looking for fit, right? It doesn’t serve anyone. If the company is great, and the function lead is great, but there’s just a mismatch and impedance and you can just tell from that interview that hey, this is likely not going to work out why don’t you go back and talk some more with the CEO with a company and address these concerns? Because you don’t want to be 60 days into a job being like, Oh my God, what did I do or the opposite with a company’s like, why did we hire this person?
Definitely. You know, switching gears a bit leading up to the show, I spoke with a couple of founders that said they had the opportunity to get to know you through the diligence process and get to know the team at lightspeed and they raved about the experience. I’m curious, how do you become the type of investor or person that a founder wants to work with?
That’s a it’s a good question. I’ll tell you, the driver to want to become that person. So first of all, thank you for sharing. And I’m so I mean, we mess up all the time by that, just to be clear, and but we try and make sure that every founder that we interact with, that I interact with my partners interact with, you know, be respectful and bring our, you know, our full self to that engagement. And hopefully, that, you know, even if you’re not invested, because the I mean, you know, the statistics in the business are really brutal for every 100 200 300 companies we might speak with, we might make one investment. So it’s just knows all day long to these amazing businesses and amazing founders, not an easy job in that sense. But we try and do our best and doing it in a good place, we sometimes fail, but I’m glad to hear that that’s not, that’s not the case, certainly in your research. So that’s great. Now, there’s one driver, I have personally, to try and do things right by every fabric. And that driver, as you might imagine, was a very, very poor experience. I myself went through as a founder during my CSB with a very well known firm on Sand Hill. And so I came off that experience, so annoyed, I just, I was like, Okay, I’m never going to talk to this firm again, ever. And to, I’m going to make sure that, you know, if I was to ever go back to investing, like I’ve never, I never engage in that kind of behavior. And, again, because imagine my reaction, right, I’m walking out of that TSB meeting, it’s obviously a pass, I’ve had a really, really bad experience, if I’m never gonna go back, and I’m gonna keep telling my network. It’s like, Hey, don’t go back to that for that. That’s really bad for business. That’s one in two in terms of actually being prepared. You know, at lightspeed, we do it in a in a in a way. That is, I think, pretty unique to lightspeed. So we are depth first investors, right? So we’re not everything to everyone. We’re not, you know, high velocity, do tons of investments kind of partnership, we’re a high conviction, low velocity, partnership, right? Do the work, get to understand the market, and then go deep in that space, in my case, in my case, cloud infrastructure, and cybersecurity, and then make investments in those space, be very thoughtful do one, two, maybe three investments a year. What that allows me to do then is the next time you and I talk and you’re starting a company in cybersecurity, it’s not an uninformed, it’s not a, what do you think made? Your biggest challenge will be like, it’s not a generic question. It’s very specific questions like, but what do you have you thought about this? And this and this, and I was talking to the CEO, Fannie Mae the other day, or this, or the seaso app, at Home Depot the other day, and they didn’t quite articulate the problem the same way. Have you thought about that? So there’s just a lot more informed discussion on both sides. And when I see no, I have better reasons than a generic reason that it doesn’t feel right. I was like what this is, because I think of the market this way. And you think of the market this way, one of us is wrong. In all probability, I’m wrong, because I don’t have the context that you do. But respectfully, like I’d like to see another 12 or 18 months of execution, before I acknowledge that I was wrong, and then come back and pay four times the price for the same equity. So I’m very open and very transparent. All of us partners are, we generally only take meetings in sectors that we understand really well. And, and we have, you know, deeper engagements with the founders we work with. And that specialization enables us to do that.
Do you think specialization can also have a downside? Or can it lead to misses,
it doesn’t need to Mises at lightspeed all the time. And so the way we handle that is a keep an open mind. Like we’re not, we’re never beholden to our own thesis about certain markets, necessarily, obviously, the founders are much more informed about those markets. The other thing is ensuring that we are, you know, constantly thinking about expanding the team to bring in folks who are much more knowledgeable in emerging areas and markets, right, the markets I focus on have been around for a long time. But I’ll give you a real example. So my partner Gore have rejoined Lightspeed about the same time that I rejoined back in 2019. And he’s an expert in open source. I mean, he was he was at Splunk, for five years. And then he helped, really, as one of the early employees build elastic from the early stage, almost all the way into the public markets. And he’s just an amazing individual, an amazing human being, and a total expert when it comes to open source, open source space, you know, enterprises, and certain parts of observability and data markets. And so we realized back in 2019, that, hey, we do need a specialist that has been in those markets for a long time and understands what it takes to build a business there. And can have a much deeper conversation with founders who are looking to build businesses of those type or using that kind of go to market. And so, you know, Garner was kind enough to accept our invitation to join and join the team as you’d be He’s been amazing, since that time. So. So that’s one is keep an open mind to recognize, you know, when founders tell us, hey, this is change happening in the market. And we’re like, wow, that’s interesting. Let’s go read up on that and get to know more about that. And then go hire specialists in those spaces when we once we have some level of conviction that there’s something really interesting going on.
What have been some of your biggest messes or when you reflect on your biggest misses? Do you have big learning or key insight when reflecting on them?
All of my big misses have been due to lack of conviction on market. Almost all if I look back to the investments where I hadn’t listened misses need to you need to be true to yourself, right? These were truly I had an opportunity to invest. It’s not like yeah, the founder and I, you know, cross paths on the same plane ride to do a conference. And you know, that was a miss, like, oh, no, like, actually misses were ones where I either underestimated the size of the developing market, I just could not see a through line to a large market. Or I was too beholden to my ideas around what kind of founder will succeed in this market. I’ll give you a real example of this. So about 12. And over 10 years ago, I still remember I was in Palo Alto, at a Pete’s coffee, sitting outside in this beautiful California weather having a coffee with the then and now CEO, and of course then CEO and founder of data dog. And imagine, imagine how I read about that. And I meet this person who is absolutely incredible, incredible. He is a driven person has incredible clarity of thought outlines how the observability space needs to evolve shares this idea with me that as a product manager, I’m just like, Oh, I get it, like I get this. And he’s also an amazing engineer. He was behind a project called VLC that to this day, but certainly then was the most popular media player on Linux. So if you’re, you know, used to running Linux desktops, and you were going to download something to watch, you know, a video, it was going to be VLC, right, the QuickTime equalent of that world, and that open source project, Olivia was behind that open source project. So there was so much that was impressive. And yet, it was difficult to think about a very core at the time, that was it wasn’t called observability was the monitoring market, right. So it was difficult to think about a old school stayed enterprise monitoring market being disrupted by someone who had not been in that space for an extended period of time. Right? It was easier to see the AppDynamics founding team, having come from that space from that APM space built the last generation of product now seeing a lot has changed in the market, we want to build the next generation of that product, it was not easy to see that was like, Yeah, you’re the expert. If you’re saying this is what needs to happen, I trust you. And so you go. Whereas it was a lot harder to see that with Olivia, at that stage, like this is late 2011, early 2012. So you know, we all make mistakes, I often make them because I can’t see a size to a large market, or I can’t open up my mind to what kind of founder might succeed in that space,
has the way that you approach market sizing shifted over time as an investor, like are there times when the founder speaks with such clarity and has such conviction in the market, that you’re willing to put your own market sizing to the wayside and trust in the conviction of the founder?
I’m getting better. It is an active effort on my part. It’s literally one of the constants that are mentored posted, that I have where every time I find myself in an internal debrief or with a partner saying, You know what, but what about the size that the market has right now? No guru stopped. So I have this mental exercise, I try and put that challenge question to myself. Say, Okay, so before I start, you know, assuming that the market is really smart, let’s play with this a little. What’s the art of the possible here? How could this become a massive market, let’s force ourselves to look for that little speck of light at the end of the tunnel. And when you do that, when you force yourself to take the bull case, then you tend to be a little bit more systematic about it. But I’m still you know, it is still a problem area and blind spot for me personally, was working on it.
You know, ironically, one of the founders that I spoke with, and I asked if we were invested, and he said, No, he didn’t believe in the market size.
Yep, that sounds like me, still working on it.
You know, I did want to talk about some of the areas that you invest in and we’re on the topic, and they’re interesting cloud infrastructure cybersecurity, we’re talking about DevOps a bit and I’m sorry ability, you know, most don’t realize how cobbled together the underlying infrastructure of the internet is and how legacy many of the technologies are. And we can probably spare the history lesson here. But what about the infrastructure layer gets you so excited as an investor?
The biggest, and the most exciting thing that’s happened in infrastructure in the last 10 years is the decoupling of infrastructure evolution from having to deploy metal, right, the decoupling of beds from atoms, you know, when I started my career, any infrastructure evolution or innovation, or a startup investment, had we put in a box, like literally, you would develop all this amazing stuff, download it to a box, and then ship the box off somewhere. And if Twitter existed in the 2000s, and it did, but it wasn’t very common in the startup ecosystem, but if it did, or there was an Instagram equivalent in the 2000s, and all infrastructure companies would post their faceplate of their boxes
like that. That was the big deal. So I didn’t know that was amazing,
right? So we invested in Nutanix, and a whole bunch of super interesting companies. And literally, you know, when the MVP of the product would get shipped, it was literally get shipped. And people would click pictures at the first pair said, Look, Tara, GA, like we’re shipping to our first customer, and you beep see pictures of their warehouse and stuff. And that’s great. That still happens in several industries. But the issue is it arrests the speed of innovation? Because now you’re constrained by physics? How much metal can you buy? How quickly can you bend it to build this box and download your software? And then how quickly can you ship stuff? It’s a brutal, brutal exercise to manage real world bits and so on. And so what happened, I would say this really sort of started happening at an increased pace in the early 2010s. Is enterprises largely sort of deciding what for new stuff, we’re gonna go to public cloud, if we can. And that just fundamentally changed the pace at which you can innovate. And you can see some of the largest companies in enterprise IT today, from the snowflakes of the world on down. These are companies that are built literally on the cloud, never bought a piece of box, never had to bend metal, never had to download ship track a box, never had a pissed off customer saying you said the box was going to read yesterday. It’s not here yesterday, only to discover it’s still sitting on the loading dock somewhere either on ours or there’s none of that none of that it’s beautiful. Proof of concept is as simple as you and I are hopping on a call and saying yeah, just click here, click here, connect to your Amazon account. And we’ll start the POC right away, that has fundamentally changed enterprise infrastructure. I’m so so excited. There was one thing that I could invest in a year in 2005. In 2025, you can invest in 10, or 20. Because not 20 teams can afford to build for 1/10 of the price at 10x. The speed, innovative technologies in networking, security, observability, data infrastructure, DevOps and software development lifecycle infrastructure, just the pace of innovation is mind blowing, I can barely keep up there open source projects that came out two months ago, that have more excitement, and broad endorsement and community interest in two months, then, you know, when I started my career, it will take companies years to get to that level of excitement. And so I’m, I’m excited. I’m excited. I think there’s gonna be just incredible innovation infrastructure of the next decade or more.
If you rewind back to when you first joined Lightspeed and what it was in 2011 2012 2012 2012, when you rewind back to 2012, and I’m sure you had theses on particular areas of interest, if you fast forward to today, how is the market evolved in ways that you didn’t expect? And how does that change the way that you approach thesis building today?
I think going back to my market comment, I underestimated how large both the markets and focus on cloud infrastructure and cybersecurity could get. But not only that, at those sizes, how fast they could grow. Right back then, if I told you a particular market pick up market was a $10 billion market annual spend by customers every year. And you said this market is growing by 5%. Year over year grew. I was like that’s pretty good. That’s faster than it normally which is faster than GDP. Normally, that sounds pretty respectable. And yet cloud infrastructure is today. If you just combine just look at three companies AWS, Google and Microsoft. Depending on the company growing their cloud businesses are growing anywhere between 20 to 50% a year and the scales. The smallest one of these is at 20 or $25 billion a year. So you have companies and businesses that are 20 3050 $70 billion a year, still growing at 20 to 50% a year. If he told me that in 2012. I mean, it wouldn’t even be worth a discussion. I dismissed that offhand which which would be so silly. Today. Cybersecurity is 130 100 $40 billion a year in spent, okay, you know, what’s the CAGR on this thing. It’s still growing at 15 to 20% a year, it is growing at 4% a year GDP is contracting.
put things in perspective.
But it just it completely shifts your perspective. And the size of price is just so much larger because of that. That is the single biggest difference in certainly for me from 2012 to 2022.
You mentioned Amazon, Microsoft, Google, the large cloud providers do you think they can be competed with? Or what do you think about the future of the large cloud providers?
So the future of large cloud providers, they’ll definitely continue to grow? Because their offering is just so compelling, is like, Would you like to buy hundreds of things? And then real estate and then build a data center yourself? And the answer is no. So they have one prop is very compelling. And I think their core business of offering, you know, compute as a service storage service is very compelling. So I think they’ll continue to grow, and they will dominate. And there’ll be a class of workloads that is much, much better for an enterprise to run on premises. So that’s, that will also stay but it’d be a minority of the market. Your first question, though, is much more interesting. And something I’m pretty passionate about. Nothing pisses me off more than someone dismissing a startups approach or product by saying, Oh, well, what AWS could do it? Or what if Google does it, too? Yeah, sure. That question has existed in technology ever since technology existed, you could have in the 1950s, or 60s or 70s, or 80s, argued again, against the PC, I think, well, whatever would have created it, yeah, what if? Sure, but it just doesn’t make sense for these cloud providers to provide the depth of product that a single startup that is focused on one area can my own startup, I mean, Netflix, we were building an elastic load balancer, we started building that product in 2013, Amazon has had one, since I don’t know 2008, or nine, they had a five year lead on us. And yet, we started the business. And we successfully competed and won some of the most sophisticated enterprise accounts in the world. So you can do it. And now we’ll think that it’s a little bit easier to have that conversation because you just say, can you go look at snowflakes market cap, then come back, and we’ll chat. Because it’s not that redshift is not a great product. It’s not that big query is not a great product. And yet snowflake, I think, yesterday or day before, again, blew away the number, again, increase their guidance. That’s because when you put your mind to it, you can beat these cloud providers. And the reason for that is quite simple. If you look at any large cloud provider, and the internal team that is focused on a single service, look at the size of that team, maybe 10, maybe 20, maybe 30 people working on that. You can hire 30 people as a startup, and you can hire 30, people have a much higher caliber than the talent that these large companies can attract. And so you can build a better product, you don’t have the incumbency advantage, you don’t have the other sort of bundled in advantages that these cloud providers do. So bar for your success is higher, but you can absolutely beat the cloud providers with a superior service.
Are there any opportunities around services that you’re especially excited about?
I think in security, observability, and data infrastructure, massive, massive value yet to be created by startups, all three of those areas.
Cyber is interesting, because you hear on one hand, that it’s very saturated, and that there’s a lot of providers, and then on the other end of the spectrum, it’s very large. And as you said, it’s growing 15% 20% year over year. I mean, it sounds like a market that you’re clearly still excited about. I’m curious how you handled some of the objections that there are too many players in the space or that the opportunities just aren’t the same as they were used to be in a lot of this growth is actually going to the companies that are already in these markets.
Cyberdust is one of the only markets in enterprise IT that is what I call an active market, where you’re not just competing against other vendors against your competition, but you’re competing against an adversary that is also evolving, right? In infrastructure. That doesn’t happen in your data pipeline. It doesn’t happen in AI and ML that AI doesn’t suddenly suddenly get sentient and start fighting you. But it does happen, right. But in cybersecurity, not only do you have to build a great product, it’s a treadmill, you have to continue to make it better because your adversary is constantly poking and prodding and trying to find ways of building your product. And I think for that reason, that reason alone, cybersecurity will forever be a super interesting space for startups to build. And because incumbents by the very nature get large, they’re slower to evolve, which makes it easier for hackers and bad actors to work around their products. And so there’s always going to be appetite for best of breed startups to build a great product and for enterprises to source from the start. So that’s one. The second reason why cybersecurity continues to be exciting is because more our daily lives are becoming digitized, like more of what we do more of commerce, and increasing with better web three and crypto, more intermingling of finance and technology happens, which means you’re more prone to security related challenges in the digital world than ever before. And the damage is much, much bigger and much worse. And so the investments are much larger in protecting against those threats. So at that at the, at the 30,000 foot level, why cybersecurity will forever be interesting to me, at the tactical level, you ask a great question, which is, well, isn’t the market going to get to a point where it’s just too fragmented, and CISOs are like, That’s it, I’m done, I’m just going to buy everything with all the networks. It’s possible, it’s definitely possible. And I think that’s where you have to invest as an early stage investor, not only in the use case, and the market that teams building against, but also in equal parts in that team itself. Because if the market sort of starts pivoting into consolidation, then that team is going to have to pivot very quickly, and add more swimlanes to their product line, so that they’ve got a broader set of portfolio and a broader set of things that they can take to the market. And if the team doesn’t have that desire, aspiration or imagination, to be able to do that, if they’re very sort of fixated on one use case, then if the market pivots away from you into a consolidation play, then you can have trouble. But you know, I’ve heard this thing about cybersecurity for 20 years man, like, and yet hasn’t happened yet. So I just don’t believe in hyper consolidation in the cybersecurity market. It just, that’s, it’s just not that kind of market.
Do you expect it to keep growing 15 20% For the next three years, five years? How long do you think it can sustain that, that sort of growth rate,
minimum five years,
minimum of five years,
wow, it will continue to grow at that pace, minimum of five years. You know, it’s, it’s amazing, like local business, it just, you can walk in the physical world, and look at a commercial business. And there’s more and more and more technology in those businesses. I’m just constantly surprised by how much technology there is in your local hardware store now, in your local doctor’s office, small primary care practice, in the local retail store, in any kind of business. So that rise of digitization is going to continue to lead to a rise in the need for cybersecurity. So I think we’ve got at least another five years of robust 15 20% A year growth in cybersecurity.
Interesting. If we could feature anyone on the show, who should we interview? And what topic would you like to hear them speak about?
You should talk to Gourav, my partner and you should talk about open source because that man has taught me more about open source and, and related go to emerging go to market models than then I could have learned in a lifetime, like he’s got more in his head than I could have imagined was possible.
What resources have you found particularly valuable that you would recommend to listeners, whether it’s books, blogs, videos, or an article,
you know, I’m not going to do Nate the usual thing of pointing to another technology blog or something like that. I would strongly encourage your readers to go read fiction. Just do something that takes your mind away from your regular day to day, please, for crying out loud, don’t don’t take the advice that my mentors gave me, which I took and it was very beneficial. My mentor told me when I asked him that question, he said, Go read company s ones, as many as one says you can. It will teach you a ton about the business. And he was right. I learned a lot about these businesses that were about to go public. And I do recommend your listeners do the same. But if there’s one advice for me personally, you can take go read fiction. I read a ton of science fiction, it is super helpful helped me just unwind. But also you know, it’s it’s nice to be able to at least for me, just imagine what where we could go in the future. Just awesome. Interesting, actually, parts of the metaverse chatter began because of the Sci Fi we all dread like 10 years ago it’s it’s interesting. What’s your favorite fiction book? Oh, there’s no one but the one that I read for the second time recently that you know will always be one of my favorite is seven Eve’s by Neil Stevenson it’s just a what an epic and then of course there’s you know, dune and a whole bunch of others that are also equally but they’re already famous right? It’s just among the books that I do find a gap between how amazing that Epic is and how little in mind networks had spoken about is probably 70s.
In grew What do you know that you need to get better at? Aside from marketizing
time management, for sure. Time management, you know, I have another gruesome in addition to the move the cheese and a budget that we all the time and that grew is, is there’s only one zero sum game in life. And that’s time And unfortunately in my 20s, and my 30s, I do not internalize it in the same way. But when you do when you do realize that the only thing you cannot create more of his time, then you become hyper aware of every minute that you allocate, to work and how you allocate that across work. And every minute you allocate to family and how you allocate that across family, I need to get better at time management. It’s an ongoing struggle, but I’m hoping I’ll get better.
What’s one piece of advice you would have given to your 25 year old self?
Oh, good question. Surround yourself with really amazing mentors, and listen to them. I think on both of those, I was weaker. I had some awesome mentors, but I didn’t add more to the roster. And I certainly did not listen to much of the advice that they gave me. I think it’s a young person disease as well. But what I wish I’d listened more, there was some amazing nuggets and amazing advice in there.
In group, what’s the best way for listeners to connect with you?
Every place I’ve ever worked at my email ID has been grew at. Send me an email MSbP you know, send me a note on Twitter, send me a note on LinkedIn, I do my best to stay on top of any and every way that someone might reach out to me.
There you go. Well, I really enjoyed this. It’s been a blast having you on.
Thanks for having me. It’s such a pleasure, especially talking to folks who have gone through the same journey that I’m going through and studying and learning from. It’s just always good to have those conversations.
Absolutely. Thanks again for coming on the show.

Transcribed by https://otter.ai