Retriever Consulting Blog

“Venture Capital Investing in the Cloud Economy” Panel Discussion at AWS re:Invent

Christian Carlson - Monday, December 10, 2012

I was fortunate enough to attend Amazon Web Services first ever re:Invent developers conference, held November 28th and 29th, 2012. The buzz was exciting; as I attended sessions and spoke with attendees it was clear many were fearful of what they might miss by not being there! 

That buzz was borne-out in the informative panel “Venture Capital Investing in the Cloud Economy.” The venture capital community was represented by members of the venture capital firms, press, and analysts who deal with either the VCs or their capitalized firms. Many saw the conference as almost a coming-out party for their investments and were anxious to see how their companies handled the event. On the whole they were not disappointed, and that was a recurring comment from the panelists. 

I found it reassuring to hear the panelists agree that cloud computing makes it possible for companies to reinvent and execute faster, to be able to do more with less, roll out a use case quickly and adapt on the cloud. They can monetize their solution much more quickly as a result. One of the challenges we cloud advocates face is many feel cloud only has value for start-ups and greenfield opportunities. Experience bears out that many organizations who fully implement their cloud strategy find they have not only achieved operational efficiencies and cost savings; they have unleashed a significant amount of creative talent within. 

The panelists felt cloud was an enabler but they still had to look for the right combination of ideas and leadership in the company before investing. To be on the safe side, they are always looking for investments with recurring revenues as opportunities. Michael Skok, North Bridge Venture Partners, stated the five cloud formations they invest in are media and entertainment, social and collaboration, ecommerce and payment, big data, and mobile and location. To them this is a fantastic era for new investments in software and development and the idea of cloud native applications. Big Data was highlighted repeatedly as a crux of cloud native capabilities, especially in realizing untapped opportunity for revenue out of existing data. 

There were many recommendations for entrepreneur and all panelists felt opportunities still abound, from the bottom to the top of the technology stack. Matt McIlwan, Madrona Venture Partners, described how Madrona likes to dive-bomb the intersection of digital and physical worlds, that mobile devices are a strategic intersection point for innovation. Many business workflows and processes can be completely reimagined as a result of this disruption. Ann Windblad, Hummer Windblad Venture Partners, encouraged everyone to think about what companies exist in a world without pcs and servers? And Matthew Miller, Sequoia Capital, suggested that VCs are looking for more enterprise-focused companies and offered mobile first enterprise applications as an example, noting that more enterprise-focused companies reach $1B valuations than consumer-focused companies. 

One lively discussion centered on “how do you value a company?” What do you think this capital is going to allow you to do...and be worth? Investors focus on value and often find there is a disconnect between the asking price and actual value. For entrepreneurs, investors are looking for intellectual curiosity and humility. They ask how big is the market, how good is the team leading the company? When competing against established giants the key is the disruptive nature of the start-up—how disruptive are they?

In assessing the re:Invent sponsor Amazon Web Services, the panelists felt AWS is "bleeding edge" with a competitive advantage and they are pushing the bleeding edge of scale. They also highlighted the rapid pace of innovation and continued commitment to lower prices as advantages.

You can watch the panel video on YouTube here: 

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