Raghu Raghuram: AI, Robotics, and the Rebirth of Infrastructure

0:00:03 We had an offer from Cisco and it was to like basically put a hole in the backyard and bury
0:00:06 the company. And so like I took the long walk up to Raghu. Do you remember this meeting?
0:00:07 Yeah, yeah, I remember the meeting.
0:00:11 And I’m like, listen, we have this offer from Cisco. We would love to be in the hypervisor.
0:00:14 And you know what Raghu said? No.
0:00:18 You understood leverage at the time.
0:00:21 Yeah, I’m not a super genius, but I’m not that dumb.
0:00:28 If you want to understand how enterprise software really gets built and scaled through multiple
0:00:33 platform shifts, there’s no better person to learn from than Raghu Raghuram, A16Z’s newest
0:00:39 managing director and general partner. In this episode, A16Z co-founder Ben Horwitz and general
0:00:44 partners Martin Cosato and David George sit down with Raghu to talk about what it really takes to
0:00:49 build and reinvent great companies across generations of technology. We go deep on the
0:00:54 lessons from Netscape and VMware, the strategy behind one of the most successful acquisitions in tech
0:01:00 history, and how AI and robotics are transforming infrastructure all over again. Let’s get into it.
0:01:07 Raghu, at Netscape, you met Ben and Mark for the first time?
0:01:07 Indeed.
0:01:13 So what was that like? And what did you think of them at the time? And how are they now compared
0:01:14 to then?
0:01:19 Wow, loaded question. It’s a good thing. Ben, I don’t think you listen to offers, do you?
0:01:24 By the way, Mark’s not on the pod, too.
0:01:25 Yeah, Mark’s not on the pod.
0:01:26 So just keep that in mind.
0:01:28 You’re a lot more mellow now than before.
0:01:31 There are some circumstances.
0:01:34 That is also true of him as a board member.
0:01:35 Yes.
0:01:36 You told me that.
0:01:37 His bedside manner has improved.
0:01:38 Yes, has improved.
0:01:44 In my defense, I would just say that. We were in this very weird situation where we came out
0:01:50 with the browser, and it was like the biggest kind of software hit ever at the time. It put
0:01:57 everybody on the internet. And then Microsoft, who had 97% market share on the desktop, so
0:02:05 basically a complete monopoly. Macs weren’t a thing or anything else. And they decided their
0:02:09 whole mission was to put us out of business. And we were selling the browser for money at
0:02:16 that time. It’s $50 a browser. And they did things that I really haven’t seen since. So
0:02:22 they would put bugs in Windows to break our client, our browser, so it wouldn’t work.
0:02:30 They set their download thing on their downloader that had a bug in it between like 13 megabytes
0:02:37 and 13.3 megabytes. And our download was like 13.1 megabytes. It did stuff like that.
0:02:45 The craziest was when we kind of deal with Compaq, which was the biggest PC vendor to kind of bundle
0:02:52 Netscape with all the Compaq PCs. And we did a big announcement with them. It was front
0:02:55 page of the Wall Street Journal, above the fold, the whole thing, which was a big deal in those
0:03:00 days. And the next day, Compaq called us and said, you have to let us out of the deal. And
0:03:04 we’re like, why do we have to let you out of the deal? It’s like a great deal for everybody.
0:03:11 And they said, Microsoft is withholding Windows 95 from us unless we break the deal. We’ll
0:03:17 go out of business. Like that type of tactic. So we were under a lot of pressure, just long
0:03:26 to say. And so then the strategy at Netscape that I hired Regu into was basically to replace
0:03:30 all the browser revenue with server revenue. But the problem is we really didn’t have any
0:03:41 server products. And the browser was, you know, it peaked at like 250 million a year. And so it was a lot
0:03:45 of revenue to replace in a very, very short order because it went from 250 to zero over a two-year
0:03:53 period. And so anyway, so poor Regu gets hired in by me, who was feeling very urgent at the time,
0:03:54 I would just say.
0:03:57 And you came in right out of grad school, right? You were straight out of grad school.
0:03:58 Yeah.
0:03:58 Okay.
0:04:02 Yeah. But I didn’t have time for a lot of that slow training.
0:04:09 It’s all like very like military style training.
0:04:10 It goes wartime all the time.
0:04:12 Yeah. What are some of the stories of the war that you were in?
0:04:19 No, I mean, I think if I think back, Ben was on top of everything like you wouldn’t believe.
0:04:24 It was like, you couldn’t miss a comma in your data sheet and Ben would catch it, right?
0:04:29 It’s crazy. People used to dread going into reviews with this guy. But the second thing,
0:04:35 though, in his defense, because we had no server products, I think you hired, what, six or seven
0:04:41 product managers at the same time. None of us knew any product management. Some people are
0:04:46 like one or two years in the industry. Some people are like me. So remember there was this
0:04:50 paper floating around on the internet for a long time. It still is. There’s a good PM,
0:04:50 bad PM.
0:04:51 Yeah.
0:04:51 Didn’t Ben?
0:04:52 Of course, Ben, that’s yours, right?
0:04:53 Ben wrote that, no?
0:04:56 I wrote it. I wrote it for those six guys.
0:04:56 Yeah.
0:05:02 It wasn’t meant to be published. That was for you.
0:05:03 It was your training document.
0:05:04 It was a training document.
0:05:05 Congratulations. Here’s your training.
0:05:11 So that is actually the second thing to say about Ben is even, I mean, systematizing
0:05:18 organizational behavior. I think all of that is, that’s true of him then and true of him
0:05:20 now. Obviously now he’s written books about it.
0:05:25 All right. So I want to fast forward a bunch here. So obviously we have Martine, Ben, Raghu.
0:05:28 We got to talk about Nicira.
0:05:28 Yeah.
0:05:32 So Martine, obviously you’re the co-founder and the inventor of SDN.
0:05:36 Ben was the investor and board member.
0:05:42 And obviously Raghu was the champion of the acquisition at VMware. So I’d love to hear
0:05:44 the dynamic across the three of you.
0:05:48 I mean, listen, the short version is that Ben saved my company from going out of business
0:05:53 by investing in it and then helped run it. And then because we love Raghu so much, we gave
0:05:55 him a big discount on a great company.
0:06:01 It was a premium like none other.
0:06:05 I love that it’s positioned as a big discount because it was like the highest priced acquisition
0:06:06 of its time.
0:06:07 Yeah, I think we had, I think we had.
0:06:13 Well, it was, but if you look at the revenue numbers that thing did after the fact, Raghu
0:06:13 got it very cheap.
0:06:14 Yeah, that’s right.
0:06:15 Very cheap.
0:06:19 But it was weird because, yeah, we only had, I mean, I don’t know, we didn’t really have,
0:06:23 I don’t even want to say what our revenue was because I don’t know if it was really even
0:06:23 revenue.
0:06:25 So we had some checks.
0:06:26 Yeah, yes.
0:06:27 We wanted some checks.
0:06:29 Yeah.
0:06:36 And by the way, so part of the story is we had an acquisition offer from Cisco and we didn’t
0:06:37 want to sell.
0:06:43 And so I thought if we don’t get into the hypervisor, what we sold is we sold networking
0:06:44 that would go in the hypervisor.
0:06:47 But like the entire hypervisor market was VMware.
0:06:51 And so I’m like, well, if we don’t get into the hypervisor, we kind of don’t have a market.
0:06:54 I’m like, there’s one person that controls the hypervisor, one person, and that was Raghu.
0:06:57 So I took the lonely trip up to see Raghu.
0:06:57 Hold on.
0:06:59 This was when you had an offer from Cisco, though.
0:07:02 We had an offer from Cisco and it was to like basically put a hole in the backyard and bury
0:07:03 the company.
0:07:06 And so, and we knew that because it was threatening hardware.
0:07:08 And so like I took the long walk up to Raghu.
0:07:09 Do you remember this meeting?
0:07:10 Yeah, yeah, I remember the meeting.
0:07:12 And I’m like, listen, we have this offer from Cisco.
0:07:13 We would love to be in the hypervisor.
0:07:15 And you know what Raghu said?
0:07:16 No.
0:07:20 You understood leverage at the time.
0:07:22 Yeah, I’m not a super genius, but I’m not that dumb.
0:07:25 It wasn’t a nuance.
0:07:26 It was no.
0:07:27 That’s it at the time.
0:07:29 I thought we were basically done.
0:07:30 We’d have to sell to Cisco.
0:07:31 So then how did it progress from no to?
0:07:33 Ask, ask Raghu.
0:07:36 By the time I got, by the time I’d gotten home, Shikar had called me.
0:07:38 So there must’ve been some internal conversation.
0:07:42 No, so part of saying no was because we wanted to acquire the company as well.
0:07:44 Yeah, it was no to the BD deal.
0:07:45 Yeah.
0:07:46 You have to understand.
0:07:52 So it was kind of, hey, we can gang up and compete with Cisco.
0:07:55 And Raghu was, no, not gang up like that.
0:07:56 Gang up like I will swallow you.
0:07:57 Yeah.
0:08:01 Gang up like, yeah, I’m buying the cow, not the milk.
0:08:09 Yeah, but I will say, I mean, there was no scenario in the world where it made sense for me to have a market from our team.
0:08:11 Of course, an independent, yeah, of course, yeah.
0:08:20 But more positively, we knew we had to get the next product that was going to sort of rule the enterprise like the hypervisor did.
0:08:21 And this clearly was it.
0:08:26 And Pat Gelsinger, to his credit, he was the CEO at the time, my boss.
0:08:29 He was as equally convinced about it as I was.
0:08:35 And so was Joe Tucci, who’s CEO of EMC, which held 80% of VMware.
0:08:39 And so there was no hesitation from that point of view.
0:08:40 Yeah.
0:08:42 No, I was right, because we got to have done it for a weekend, actually.
0:08:43 Yeah.
0:08:46 Yeah, yeah, it was some of the fastest corp dev work.
0:08:46 Yeah.
0:08:59 Because I think also the VMware team and Raghu realized that if Cisco actually realized what was going on, they would buy it at any price.
0:08:59 Yeah.
0:09:03 Because it was the only actual threat to Cisco.
0:09:11 And speed, I mean, that’s a lesson that carries through, especially against bigger companies, corp dev and acquisition and so on.
0:09:12 Speed matters a lot.
0:09:14 Speed matters a lot.
0:09:17 Yeah, getting a deal done over the course of the weekend at that size, the highest price paid ever.
0:09:18 Yeah.
0:09:19 It’s very fast.
0:09:24 I will say, I mean, Raghu has so many strengths as a leader, which many people know, product, et cetera.
0:09:34 But it’s hard to overstate how complex the integration was, because the reality was is the VMware had an internal team that was doing work just as good.
0:09:37 Like, literally, they were just as talented, just as good.
0:09:38 Some areas, they were stronger.
0:09:39 Some areas, we were stronger.
0:09:43 Now, what we had that they didn’t have is we had all the Linux stuff just because we were doing this open source stuff.
0:09:47 But we were a smaller team, and we were a team that actually got this big acquisition.
0:09:54 And so Raghu was in charge of integrating this smaller team with a large payout with a larger team.
0:09:57 Both teams had done this great work in having that work out.
0:09:59 And listen, we managed to do it.
0:10:00 Yeah, we managed to do it.
0:10:00 Yeah.
0:10:02 So how did you actually do it?
0:10:11 I mean, it took a lot of great leadership from the Nicira team as well, right, and the VMware team that was in there to get to work together.
0:10:12 That’s one.
0:10:13 Yeah.
0:10:22 And then overall, it turned out that the value proposition that mattered to the customer had elements of what VMware had built and what Martine had built.
0:10:26 So once you realized that, then it became easier.
0:10:30 The tricky part was whose base product do you use, right?
0:10:33 And that was the hardest part of it.
0:10:36 But once we solved that, then the rest became possible.
0:10:44 I will say, when we were selling, I put in a call to Diane Green, who was the CEO before, and I said, like, okay, I would love some guidance.
0:10:47 Like, is there anything you can, you know, point me to?
0:10:50 And she said, keep your sales team.
0:10:50 That was it.
0:10:51 That was kind of the guidance.
0:11:00 And I didn’t appreciate that until after we landed, which is, if, and by the way, VMware is phenomenal.
0:11:01 Like, Ragu and Pat were phenomenal.
0:11:07 They kind of allowed us, you know, to do our thing for the first few years pretty much unencumbered, right?
0:11:08 And then over time, you have to integrate kind of more seriously.
0:11:17 So the thing is, when you have your own sales team, you can actually lead your product team much better just because they’re directly doing the enablement.
0:11:18 They directly see the customer pull.
0:11:19 They directly have access to customers.
0:11:24 So it’s much easier to unify a team from the market on end if you actually control that market.
0:11:34 So I honestly think one of the keys, in addition to the leadership, in addition to, you know, the hands-off approach, was just we were able to keep and grow out our independent sales team.
0:11:36 And then over time, of course, we rolled that back in.
0:11:40 And let’s face it, the category was not built out.
0:11:42 The product certainly was not built out.
0:11:45 So without an independent sales team, we would not have been able to build a product.
0:11:46 Yeah, we would have got in the vine.
0:11:47 Yeah.
0:11:57 Okay, so then brag a little bit, because this is one of the most successful integrations and, you know, financially acquisitions probably in the history of technology.
0:11:59 So what happened in the coming years afterwards?
0:12:04 Yeah, I mean, I think there were two dimensions of value to VMware.
0:12:06 One is the independent revenue from this.
0:12:08 I mean, this cut to about $2 billion in revenue.
0:12:10 And this was, by the way, a license.
0:12:12 And you sold it for a billion three?
0:12:12 Two billion.
0:12:14 This is why it was a discount record.
0:12:20 Yeah, get your mind around a less than one times revenue multiple.
0:12:27 Yeah, so I was just going to say, the second is the multiplier effect on the VMware core franchise.
0:12:27 Yeah, sure.
0:12:31 Because it made the, I mean, Microsoft’s product was slowly getting better.
0:12:32 Open source was getting better.
0:12:32 Yeah.
0:12:40 And now we were able to redefine the core virtualization stack in the enterprise to say, you’ve got to have this and you’ve got to have networking, right?
0:12:45 And so just purely on a multiple of revenue point of view, it paid for it 10 times.
0:12:46 Massively.
0:12:55 I will also say there was a portion of time where we were, like, just the BU that was the, you know, part of the necessary acquisition was a significant portion of VMware growth.
0:12:56 Yeah.
0:12:56 Right.
0:13:00 So not only was it just like the revenue alone, it was actually, if you looked at the overall company growth.
0:13:01 Aggregate revenue added, yeah.
0:13:01 Yeah.
0:13:04 Like, I mean, basically the growth was coming from the VMware.
0:13:06 It was a meaningful contributor to the growth site.
0:13:08 I forgot the numbers, but yeah.
0:13:09 It was 46%.
0:13:09 There you go.
0:13:12 I remember.
0:13:13 I remember.
0:13:15 You remember saying, there’s something around there.
0:13:16 Oh, yeah.
0:13:32 Well, to defend the sales price, though, I remember when we had the meeting with the bankers, the dot for our multiple was, like, literally off the chart.
0:13:41 Like, of all the deals that had been sold, nobody had that, like, it just didn’t even fit on the chart.
0:13:42 How much revenue was it?
0:13:47 There was one other dot that we beat, which was Yammer.
0:13:48 Oh, yeah.
0:13:48 Yammer with Microsoft.
0:13:49 Okay.
0:13:49 Yeah, yeah, yeah.
0:13:50 It was Yammer.
0:13:51 But they had, like, 20 million.
0:13:52 Slightly less successful integration.
0:13:53 Yeah.
0:13:55 Yeah, yeah, yeah.
0:13:55 Yeah.
0:13:58 God bless David Sachs for getting that deal done.
0:13:59 Yeah, yeah.
0:14:00 Okay, huge success story.
0:14:00 Okay.
0:14:04 So, you know, that’s Nysera into VMware.
0:14:08 Obviously, you were at VMware and then became the CEO, ultimately.
0:14:12 So, talk about your experience building the company.
0:14:16 At the time when we bought Nysera, we were on a product expansion path.
0:14:21 So, obviously, I mean, Sarah wrote a great piece on the platform.
0:14:23 Yeah, what it takes to be a platform.
0:14:24 Yeah.
0:14:27 It was as though she was at VMware, right?
0:14:29 Because it literally follows the playbook.
0:14:36 And so, once you get to a certain level of saturation in your core market, you got to build out the adjacent markets, right?
0:14:37 And that’s what we were up to.
0:14:41 We built management, then we got Nysera for networking.
0:14:45 We did our own thing on storage and then security.
0:14:46 So, we were progressively building that out.
0:14:51 So, that was our task for the following seven, eight years.
0:14:57 What that did is it vastly expanded the on-prem franchise.
0:15:01 Because even though cloud was coming, we were continuing to dominate on-prem.
0:15:06 And as you well know in the enterprise, things never go fast.
0:15:07 They always take their time.
0:15:08 They don’t really go away.
0:15:09 New stuff comes on, but yes.
0:15:10 Yeah, exactly.
0:15:16 So, I think that was one big part of the mission.
0:15:21 The second is we initially tried a variant of the cloud.
0:15:24 We had our own cloud thing, which did not work.
0:15:29 And then we recon the industry around what we call the hybrid cloud.
0:15:35 Because most of these enterprises, they had some stuff on AWS and stuff on us.
0:15:37 So, we said, let’s go partner.
0:15:39 And that was another radical move.
0:15:44 Because people thought this was going to be the blood path between the two.
0:15:45 Yeah, of course.
0:15:47 So, I was doing that, right?
0:15:49 And then we had to get the developer franchise.
0:15:51 So, we went and acquired Pivotal.
0:15:52 Yes.
0:15:55 So, it was basically building out the product portfolio.
0:16:02 First, as a GM for all these data center businesses, and then as a COO.
0:16:08 It’s also crazy about it, it’s like the amount of lessons that you saw in infrastructure software successful.
0:16:14 Like, you know, under Palmer, it’s just trying to go to the application stack, which is very tough to like skip parts of the stack.
0:16:16 Then you went back to doing adjacencies.
0:16:19 You did organic product build out like vSAN, which became billion-dollar product lines.
0:16:23 You did inorganic acquisitions, but it became billion-dollar product lines.
0:16:29 So, I feel like, you know, like the broad scope of business strategy was embodied at VMware at some point.
0:16:30 I think more than any other company.
0:16:36 Like, you can see it in hardware companies like Cisco, but very few other companies had to play that many games.
0:16:40 Well, in reality, if you’re going to be around for more than 15, 20 years, you’ve got to play all those things.
0:16:41 Yeah, that’s true.
0:16:41 Fair enough.
0:16:41 Right?
0:16:42 Yeah, yeah, yeah.
0:16:44 Because the market’s changing you so fast.
0:16:45 Yeah, yeah.
0:16:50 So, but yeah, I think if you have a consistent theme around how to do it, then it’s quite possible.
0:16:56 Yeah, and actually, VMware, interestingly, was born before the cloud.
0:16:57 Yeah.
0:17:04 So, although it was kind of a cloud technology, it was like a very, it was almost like not even first generation.
0:17:07 It was like pre-first generation cloud technology.
0:17:10 So, the cloud immediately put pressure on the business.
0:17:14 It’s this very difficult product cycle circumstance.
0:17:16 Oh, that’s the business model, too.
0:17:16 Sorry?
0:17:23 Yeah, even like, even like, most people’s first experience with VMware that were around at the time was actually as a consumer product.
0:17:24 Yes.
0:17:29 Like, it was literally like, it was like, no, it was really like, like, the first time I used was like the late 90s.
0:17:32 And I was like, I’m running Red Hat on my Windows machine.
0:17:33 That was it.
0:17:38 And so, like, you go from like a consumer product to like this, and then, of course, you know, you did server consolidation.
0:17:40 Then it became like, you know, deep enterprise product.
0:17:43 And then, of course, there’s all the OEM stuff that happened early on.
0:17:44 It was a very, very complex business.
0:17:45 Yeah, it was a complex business.
0:17:48 And by the way, that’s where the founder vision comes to play.
0:17:52 Diane and Mendel, right from day one, knew that they had to get to the server.
0:17:53 Yeah.
0:17:54 And they actually charted their path.
0:18:00 They said, hey, we’re going to get known with a desktop product, which, by the way, is going to work out all the bugs in the system.
0:18:03 And then we’re going to go into the server and then into the data center.
0:18:04 Amazing.
0:18:05 So, you got to give them a lot of credit for that.
0:18:06 Yeah, for sure.
0:18:06 Yeah.
0:18:11 So, at Exit, at Exit, how large was the company?
0:18:13 How many, how much revenue?
0:18:13 How many people?
0:18:16 So, we were $13.5 billion in revenue.
0:18:19 How big was it when you joined?
0:18:20 Roughly?
0:18:25 I think it was $10 to $15,000, $40,000 a quarter, something like that.
0:18:27 $40,000 a year, something like that.
0:18:28 $40,000?
0:18:29 $40,000,000 a year.
0:18:30 Or something like that.
0:18:31 To $13,000,000?
0:18:31 Yeah.
0:18:34 What a ride.
0:18:34 That’s incredible.
0:18:38 Yeah, again, with the cloud in your face, like, that’s the most incredible part of it.
0:18:39 Yeah, yeah.
0:18:39 No, it was.
0:18:40 And Microsoft.
0:18:41 Well, Microsoft.
0:18:42 And Microsoft, yeah, of course.
0:18:45 Like, VMware was sitting on top of Windows, right?
0:18:46 I mean, like, you know, Netscape.
0:18:48 Yeah, what was the name of Microsoft’s crap?
0:18:48 Hyper-V.
0:18:49 Hyper-V.
0:18:50 Hyper-V.
0:18:50 Hyper-V.
0:18:51 Yeah, yeah, yeah.
0:18:57 No, I mean, I think after the Netscape stint, the thing that gave me most satisfaction was
0:18:58 beating back Hyper-V.
0:18:58 Yeah, of course.
0:18:59 I was going to say that.
0:19:01 You faced the same.
0:19:02 I’m like, you’re not going to give me a second time.
0:19:03 Yeah.
0:19:05 Give me a second time.
0:19:05 I love that.
0:19:11 Yeah, so, yeah, so $30.5 billion, about 37,000 people.
0:19:12 Incredible.
0:19:15 And $69 billion in enterprise value.
0:19:15 $69 billion.
0:19:16 Wow.
0:19:16 Yeah.
0:19:17 What a run.
0:19:20 Okay, so I now want to shift topics.
0:19:23 You have this incredible set of experiences.
0:19:28 You know compute, network storage, maybe better than anyone, experience-wise.
0:19:32 What are you going to do with us here?
0:19:39 Yeah, I mean, I think I would say fundamentally two or three areas where I’m super excited by.
0:19:42 One is like we were talking about the other week.
0:19:47 Everything from the foundation model down all the way to the power station is going to get
0:19:47 reinvented.
0:19:48 Yeah, of course.
0:19:48 Yeah.
0:19:48 Right?
0:19:54 There is just no other way you can supply all the compute that AI is going to need.
0:19:55 Right?
0:19:58 And that opens up all the opportunity in the world.
0:20:04 For the last 15 years, you really did not have opportunity as a hardware vendor because
0:20:07 everything was being done in-house by the hyperscalers.
0:20:13 Now there is neoclouds and the world is moving so fast, even too fast for the hyperscalers.
0:20:20 OpenAI is going to build a lot of things on their own, Oracle, et cetera, et cetera.
0:20:25 So now there’s a legitimate infrastructure market that’s opened up for innovators.
0:20:25 Yeah.
0:20:27 So I think I’m super excited by that.
0:20:33 I think that’s going to be a significant area for both early-stage companies as well as
0:20:34 late-stage companies.
0:20:34 Yeah.
0:20:37 And helping late-stage companies navigate that market as well.
0:20:38 Yeah.
0:20:40 And there’s going to be new types of service providers, et cetera.
0:20:40 Yeah.
0:20:41 I think that’s one.
0:20:47 The second one, and this is more in partnership with you on the growth side, these enterprise,
0:20:50 the enterprise transformation will happen, right?
0:20:51 Yeah.
0:20:51 Through AI.
0:20:54 I think that’s going to open up a lot of opportunities.
0:21:00 And then the third is adjacent areas to the data center, like robotics applied to the data
0:21:02 center, generally robotics as a whole.
0:21:08 Those are all areas that are going to be physical AI, in other words, significant areas that I think
0:21:13 are going to be a lot of exciting things, a lot of fun to go study and work on.
0:21:18 So, you know, one thing that really occurred to me, you know, as Ragu was, you know, talking
0:21:22 to us about joining is where there’s this very unique point in history where even very small
0:21:27 companies have the problems that would draw on the breadth of someone like Ragu.
0:21:32 Like, think about someone like Cursor, you know, like the ecosystem includes like kind
0:21:38 of incumbents at scale, you know, the company is at scale.
0:21:41 How do you manage platforms?
0:21:42 How do you manage the clouds?
0:21:46 All of these things are at the sophistication that you would actually see a VMware, right?
0:21:50 And it’s just because AI is growing so fast.
0:21:54 And so one thing that I’m, I mean, I’ve said this, you know, many times is Ragu is the best
0:21:55 techno strategist in the industry.
0:21:59 And I strongly believe that, but also he has this wealth of experience when it comes
0:22:06 to partnerships, you know, OEM deals, dealing with incumbents, you know, dealing with competitors,
0:22:08 dealing with talent, dealing with stuff, like the whole thing.
0:22:11 So it’s like, if you can distill all that down, it’s actually-
0:22:12 International expansion.
0:22:14 International expansion, yeah, exactly.
0:22:17 But like literally it applies to the companies in the portfolio that aren’t that, yeah.
0:22:20 So like you would think like, oh, this is some, you know, this is only going to be growth
0:22:21 stage stuff.
0:22:23 And it’s absolutely not the case.
0:22:23 No, no, no, no, no.
0:22:23 Well, it’s not.
0:22:24 It’s so relevant.
0:22:25 That’s the dynamic.
0:22:29 They are early stage companies that reach the problems of big companies so fast because
0:22:30 they grow so fast.
0:22:30 Totally.
0:22:34 And so this is the magic of organic demand and like the market pool that they’re all seeing.
0:22:39 In fact, you know, as, you know, Ragu was coming on board, I mean, probably every night
0:22:43 I would call him asking for some help with like, you know, a 10 person company.
0:22:44 I’m like, Ragu, can you help with this intro?
0:22:46 Can you talk to us, you know, about whatever?
0:22:48 And so, and this is the reality of what we’re living in.
0:22:50 Everything’s being changed all at once.
0:22:54 The problems are the problems that you would face as a very serious senior CEO.
0:22:59 And so it’s great to actually have that kind of experience and talent around the table.
0:22:59 Yeah.
0:23:06 Early stage companies are having large company questions being posed to them.
0:23:10 Well, it used to be like year 10 or 15 when you’re facing things like how do I be multi-channel,
0:23:12 multi-product, international.
0:23:12 Yeah.
0:23:14 And now it’s like year one and a half.
0:23:15 No, you see the companies.
0:23:15 Like it’s immediate.
0:23:17 See, all you see, you see M&A, like.
0:23:17 Yeah, of course.
0:23:20 They’re working very well, these very large cloud partners.
0:23:26 I mean, we have companies that will like raise money and then broker a hundred million dollar
0:23:26 GPU deal, right?
0:23:28 I mean, this happens all the time.
0:23:30 With tiny companies, like very small companies, small people.
0:23:33 And then you’re relying on these, I mean, all of these things that you have to manage, you
0:23:34 know, so.
0:23:34 Yeah.
0:23:43 Well, and the thing that’s still true is none of the founders, you know, a year into running
0:23:45 the company or two years in have any of those skills.
0:23:46 Right, of course.
0:23:51 Yeah, and so it’s just such a boost to have somebody to talk to.
0:23:57 I mean, it’s just, it’s transformational because the number of mistakes that you will make right
0:24:00 there and blow yourself to bits is just insane.
0:24:02 Well, and we have to change too, right?
0:24:04 Like we, the way you build a company is different.
0:24:07 The technology stack is different.
0:24:09 The type of people you hire are different.
0:24:12 And so we also have to be different.
0:24:19 And so one of the things that for me is great about having Ragu here is there’s a lot to
0:24:25 do on that front, you know, to kind of improve on every dimension there.
0:24:26 So I need help too.
0:24:27 Yeah, exactly.
0:24:32 It’s both the combination of the companies growing really big, really fast and facing big
0:24:34 company problems really fast.
0:24:34 Yeah.
0:24:37 At the same time, the companies stay private so much longer now.
0:24:42 So like we have to evolve to that, you know, dynamic as well.
0:24:49 And so, so one of the areas, Ragu, that you mentioned that you are intrigued by and you
0:24:51 have obviously great experience in is robotics.
0:24:56 I’d love to hear your state of the world of robotics right now and what gets you excited over the
0:24:56 next few years.
0:24:57 Yeah.
0:25:03 I mean, I started looking into the data center construction and all that, right?
0:25:04 And server construction.
0:25:12 And you find that number one, all those industries are highly manual today, believe it or not, right?
0:25:19 So these AI servers that people are building is like 70% of labor and or 80% of labor, right?
0:25:19 Wow.
0:25:26 And if you look at the bazillions of GPUs that have to get turned into usable infrastructure
0:25:30 and all the power that’s getting converted, the only way that’s going to happen is there’s
0:25:31 going to be a lot of robotics, right?
0:25:36 And then you look at that and you say, turn out, say, what are the generalizable elements
0:25:39 from a robotic build out of data centers?
0:25:43 I think that applies to pretty much the robotic build out of a lot of manufacturing things.
0:25:50 I mean, humanoid is obviously the most exciting concept, but the pathways to getting humanoid
0:25:56 to work itself is very valuable because of all the ways you can use everything that comes
0:25:56 along the way.
0:25:59 I mean, that’s the really interesting thing.
0:26:01 And there’s horizontal infrastructure that’s needed, right?
0:26:03 The data infrastructure that’s needed.
0:26:10 And if you want to get the right training, you got the sensors from various different places
0:26:11 that has to get synchronized.
0:26:13 So there’s a lot of new infrastructure that needs to get built.
0:26:20 So I think robotics is so verticalized that, you know, it’s more defined by the market it
0:26:29 goes after than something pure horizontal, which is why I’m very happy Reku was focused on it
0:26:35 because when it comes to things like, you know, infrastructure creation and servers and data
0:26:37 centers, like we can become real experts in that.
0:26:39 And he’s got a lot of background in that.
0:26:42 And I just think, you know, it’s kind of funny because, you know, we wrote this piece on like
0:26:46 where China is, you know, ahead of the United States.
0:26:49 And then a lot of people are like, okay, well, that means you’re investing in humanoids.
0:26:51 And I’m like, listen, humanoids are very interesting.
0:26:53 Maybe somebody at Andreessen Horowitz is investing in humanoids.
0:26:54 I know nothing about this.
0:26:57 But I do know a lot about like the manufacturing of chips, for example, right?
0:27:02 And so I think, you know, listen, we need to take a systemic approach to understanding this market.
0:27:03 There’s a tremendous amount of opportunity.
0:27:08 We’re going to do a broad set of research, but, you know, we will definitely focus on the areas that we understand.
0:27:09 Yeah, absolutely.
0:27:14 Yeah, and I think the important point that you’re making is there’s going to be a ton of productive use cases that happen
0:27:19 that lead up to that point where you have humanoids walking around and doing personalized tasks.
0:27:19 Yeah, yeah.
0:27:24 And the history of infrastructure is infrastructure is actually a second order thing to the solution.
0:27:25 Yeah, yeah.
0:27:30 First, you come up with some solution, and then the infrastructure falls out of it, almost.
0:27:32 And I think that’s what has to happen in robotics, too.
0:27:33 Yeah, absolutely.
0:27:36 So you have a vertical solution, and then you get the infrastructure.
0:27:36 That’s right.
0:27:40 I mean, I remember, like, you know, we actually invested a lot in the drone wave.
0:27:43 If you actually looked at those businesses at the time, and we had experience with a lot of them,
0:27:46 like, you’d kind of evaluate, you know, at first we’d evaluate it as tech companies.
0:27:48 Like, oh, this is a drone company.
0:27:49 You look at the tech, and you look at the team.
0:27:52 But then you find, like, if you’re selling into insurance, you kind of have to become an insurance company.
0:27:55 And, like, they’re actually buying, you know, like, whatever.
0:27:57 It’s either you’re buying it from a human, or you’re buying it from a drone.
0:27:59 And if you’re in construction, you’re a construction company.
0:28:00 If you’re ag, you’re an ag company.
0:28:05 And so I think from that, we’ve learned that you have to really be a specialist in the space that you’re going to do.
0:28:08 It’s like, you can’t just be kind of a garden variety infrastructure investor.
0:28:16 That said, sometimes you get these aggregation points where to build the robotics, you need, you know,
0:28:18 there are horizontal tools you can use.
0:28:23 So, for example, in the AV industry, it turns out you needed high-definition mappings, and you need a simulation.
0:28:23 Yep.
0:28:24 Right?
0:28:28 And so, like, you could create a company like Applied Intuition, which allows you to kind of do software.
0:28:31 So there are opportunities to do these kind of horizontal investments.
0:28:31 Sometimes they’re software.
0:28:32 Sometimes they’re hardware.
0:28:38 But I think the closer you get to the actual robot, the more you have to verticalize into the industry you’re focused on.
0:28:38 Yeah, absolutely.
0:28:41 Once you solve the vertical problem, the horizontal pieces come out naturally.
0:28:42 Yeah, absolutely.
0:28:44 And there’s commonalities that you identify.
0:28:44 Absolutely.
0:28:45 That’s exactly right.
0:28:45 That’s right.
0:28:46 Cool.
0:28:48 We’re so lucky to have Regu with us.
0:28:48 No, no, no.
0:28:49 I’m so lucky to be here.
0:28:50 Come on.
0:28:51 Yeah, this is awesome.
0:28:54 And the other great thing about him is he fits right in.
0:28:55 Yeah, of course.
0:28:58 I can’t say how valuable that is.
0:28:59 Oh, yeah.
0:28:59 Perfect customer fit.
0:29:04 Friday night, slacking at nine o’clock with thoughts on markets and stuff.
0:29:05 And it helps if you’re empty nice stuff.
0:29:07 Yeah, exactly.
0:29:09 Well, we love it.
0:29:09 Awesome.
0:29:10 Thanks.
0:29:10 Great, man.
0:29:10 Welcome.
0:29:11 Okay.
0:29:11 Thanks.
0:29:12 All right, guys.
0:29:12 Cheers.
0:29:13 Thanks for doing this.
0:29:13 Thanks.
0:29:13 Yeah.
0:29:19 Thanks for listening to this episode of the A16Z podcast.
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