Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Eric Benhamou was recorded in November 2014.
Eric Benhamou, Managing Partner of Benhamou Global Ventures, was the CEO of 3Com, a pioneer in the networking space, and the key competitor to Cisco. He also ran Palm, the first Smartphone maker, that 3Com acquired, then spun out, and took it public. He provides an insightful window into the opportunities in the enterprise cloud infrastructure space, and in Cyber Security, and also explains why he is not necessarily looking for Unicorn companies to invest in. This, I might point out, is a highly unusual perspective in today’s VC universe, so you may want to pay attention to his analysis of the market.
Sramana Mitra: Let’s start with some general comments on where your head is right now.
Eric Benhamou: I spend the bulk of my time running the second fund. That fund has a very strong focus on cloud opportunities. The reason why we built fund two is because we saw the opportunities even beyond what we had originally assessed. We think this is a very unusual time in enterprise IT. It’s a once-a-generation type of opportunity where a new generation of companies has a space to expand and have an impact on the industry.
The last time we saw opportunities of that magnitude was probably in the early 90’s when enterprises were moving away from mainframes and transitioning to PCs and Internet. When that happened, incumbents got toppled. A new generation of companies came on the scene. You mentioned 3Com and Cisco. Companies like Sun and Oracle had a wide space to expand into and we see the same thing happening today with cloud-oriented companies. This is theme number one for us.
We’re looking for companies who exploit the new model both at the infrastructure level and the application level. The second theme is tied with security which is, by far, the fastest growing item on all IT budgets around the world. The third is ultra-mobility. I’m referring to the fact that applications have to be written for the mobile platform first. Mobile refers to more than just smartphones and tablets. There are all kinds of mobile devices yet to be invented and rolled out.
Just recently, we saw the preview of the Apple Watch to be introduced within a few weeks. I’m sure there will be many other devices with yet different interfaces but with one common characteristic; they’re all mobile. This creates another set of opportunities. Existing applications have to be repurposed and new applications have to be created. These are the three basic growth vectors that our fund is attempting to exploit through startups.
Sramana Mitra: Let’s double-click down on the infrastructure side of cloud IT. What is your next-level thesis on that particular segment? What are you seeing? What is your analysis?
Eric Benhamou: The environment in which you develop applications for the cloud is very different from the environment in which you built out business applications a generation ago. The new environment is totally virtualized. Applications today use a modern set of tools and draw services from all kinds of other places around the world.
Applications today is not a self-contained single thread of code but rather it has dependencies on myriads of other services which get offered from other services elsewhere. Configuration complexity that exists today is totally unprecedented. This calls for a new set of tools to keep track of this co mplexity and be able to improve the agility of IT organizations. For example, this whole concept of DevOps did not exist a generation ago.
It was introduced when people realized that there was this big gap between developers and operations people. This was an impediment to the quick rollouts of changes and new features. DevOps was an organizational creation to smooth out the transition from development and creation to operational deployment, but that’s not sufficient. Just having a DevOps organization without tools is not going to do much for IT agility.
A big theme for us is companies that can empower DevOps organizations to deliver on this notion of an agile software factory which continuously rolls out changes. Few companies around the world have mastered the formula mostly based on homegrown tools. I’m referring to companies like Amazon which will allow changes to their websites every few minutes. For most other companies, changes take weeks, if not months, to get rolled out.
We think this problem, which is not yet solved, is an opportunity for young companies to innovate in. That’s one of our themes at the infrastructure level.