The Xconversation: Software CEO Meets University Innovation Leader, Part II
(Page 3 of 3)
about Chef, where we’re going, our roadmap, the market dynamics, the TAM [total addressable market] that we see out there. And it doesn’t mean it’s going to be easy. As I said, we’re in a period of ongoing disruption, so we have to continue to drive, continue to innovate, and continue to push for better results with our customers than anyone else in the industry. I’ve said this, and I continue to believe it. Chef has an amazing customer base. It’s not just the quality of names of the customers, but it’s the strategic nature of those projects.
Chef has a real shot to be one of the next big important software companies in this industry, and I would be very disappointed to see us have to sell to another company. So as a venture-funded company, you have two options. One is the M&A path, the other is to pursue public markets. It is my intention and expectation that at the appropriate time we’d pursue the public markets. The algorithm behind that is complex, of course, as you know. Right now, the good news is we’re well-funded. We have a nice amount of capital coming from our customers. So we’re under no real pressure to try to do any unnatural acts to get to public markets. We’ll let that develop over the fullness of time.
X: Barry, you spent some time at Ignition Partners before joining Chef, so you’ve seen it from the venture investor’s point of view. A continuing topic of conversation in Seattle is the relative lack, in terms of number, of venture firms that are based here. How big of a hindrance may that be for the innovation economy?
BC: I’ll speak on both sides. I will say as an entrepreneur, I do not think that being in the Seattle area you’re hindered from lack of capital. There is a lot of capital in this town. Ignition, Madrona, DFJ has a group up here. There’s actually a lot of money. We’ve seen, investors from the Bay Area—Scale—that have come up here, or a Battery from Boston invests here in the Seattle area, so I think we are in a truly global venture-funded [market]. I don’t think that holds Seattle back.
What I’d love to see us continue, and I see the trend heading this way, is where we’re getting more students coming out of places like UW that want to go straight into starting their own thing or working at a small company. There’s been a little bit of bias towards safety in the Seattle area compared to the Bay Area, and I see that starting to break and starting to change, but it’s something that I want to really continue to push. The young people that I work with and mentor and talk to, I’m always pushing them to jump right out. It is really not as risky as you think, jumping on something like that straight out of college.
VJ: I hear complaints about [the relatively few locally based VC firms]. I would never tell the folks that complain, but I think if your idea has a certain level of maturity and quality, I think you can raise funding. It’s really not an issue. And we’re getting investors from China and everywhere coming, and they’re looking for ideas.
The two things which I think we could do better: One is exactly what he said, the mindset of the folks who pick safety first. And I can understand it in many cases. That’s their safety net. The other is we need more company builders in Seattle.
BC: Tied to company builders, people who have that operational knowledge that can go all the way. The more glimmer-in-the-eye of saying, I don’t want a $50 million exit to sell to Google or somebody or Amazon, I want to go all the way. I want to create that next big disruptive thing. I want to see us have more billion-dollar outcomes here in the Seattle market.
X: Seattle is increasingly synonymous with cloud computing, and one of your 2016 predictions, Barry, was large enterprises adopting public clouds en masse and for data centers instead of projects. That’s obviously going to be a big deal here. What’s going on this year inside the organizations you’re working with, and in the public clouds themselves, that underpins that prediction?
BC: We’re starting to see a real shift around cloud. If I look back at the last couple years, the enterprise has been dabbling with the cloud. They had projects going on, or they had greenfield applications that they were doing, running on Web architecture, cloud architecture. One of the things that underpins this is the very fundamental role of IT is shifting. It’s shifting from being an infrastructure provider to being that innovation engine inside the company, so it’s very germane to this discussion. As part of that, the economics, if you can go to one of the cloud providers, whether it’s AWS or Azure, they can provide more functionality, faster, cheaper, probably better security than most companies do. You can free up resources to go work on other things, which is the shift from infrastructure to applications, where the innovation is occurring. And we’re seeing that happen in a very mainstream, accelerated way, not just for these new applications or at the project level, but for core IT strategy and big Global 2000 companies. I stand by that prognostication.
X: Vikram, the UW is moving forward with the Global Innovation Exchange [a partnership with China’s Tsinghua University]. What is that going to mean for a company like Chef, and as an asset to the region?
VJ: We’d love to have Chef as a partner in GIX, just putting that out there.
BC: Let’s do it. What’s the pitch?
VJ: The idea again is we get global business students—they’ll all come in from business, social science, law, and then engineering, hardware as well—and they get to spend 15 months together. The first phase, they just learn to get their skill sets up to a level so they really are T-shaped [having both breadth and deep expertise in a given area]. The next phase is practicing teamwork. And then the third phase is really like a startup incubator, where they have an idea, either they come up with it, or an industry partner comes up with it, and they get to spend time, and they have some mentors, building on that idea.
At the end of it, we don’t expect all these ideas will become startups or even products, but imagine the experience they’re going through. They’re really going through that crucible of creating a product, doing everything possible. And at the end of it, this team could be a great acquisition as a team for a company.
This has sort of been happening. I don’t know if you remember Uber funding Carnegie Mellon. They were funding autonomous vehicles, and then they took the whole lab, 40 people. We were like, that’s nice, but can we do this in a way which is not disruptive in that way.
The fact that China’s involved, one, it gives us access to two cultures, and it’s a top Chinese school, Tsinghua University, rated No. 1 in engineering right now. MIT doesn’t like that. They’re rated No. 1. These guys are amazing coders. They’ll be here. They will learn how to work with American teams, and, in terms of the startup phase, they’re going to be able to look at two markets simultaneously. The American market and the Chinese market. The understanding they’re going to get is going to be pretty phenomenal.