1Mby1M Virtual Accelerator Investor Forum: With Ashmeet Sidana, Chief Engineer at Engineering Capital (Part 4)

Sramana Mitra: The motivation for the infrastructure layer, whether it’s storage, security, or networking, is not very different. Timeline-wise, it’s behind. Let’s play out the argument with me for a second.

For an application layer SaaS company that has achieved $200 million ARR by selling one product, there are a lot of companies in the $100 ARR range with one product. They do not have to move out of that one product and broaden the portfolio to be a successful public company that goes to $1 billion in revenue.

In that quest, I think a lot of them are realizing that a SaaS strategy may be reasonable because integrating an acquisition on a different stack is difficult.

If you study Atlassian’s strategy, they are acquiring from their own SaaS ecosystem because everybody is building on their stack. They have the Atlassian marketplace so that the customers are the same. They have a relationship with their customers.

The stack is the same and the products are built on the same stack, so it’s easy to integrate and scale. You can build a diverse product portfolio on top of that strategy.

If you translate that same strategy to the infrastructure, it’s the same story and motivation. The stack issue is entirely the same. From the entrepreneur’s perspective, being able to build on somebody else’s platform and being able to access that company’s marketplace is very attractive.

From a security industry, in particular, you don’t see them having to deal with so many vendors. The security industry is full of innovations and has so many startups. It’s difficult to get an audience these days.

If you are part of the portfolio of an existing player who is already established, gets into somebody’s marketplace, and is a part of their pack and team, it’s an easier sale. We are not seeing this yet.

Ashmeet Sidana: I completely agree with you on the old rule of venture capital where it’s not possible to build a large independent company on somebody’s platform. That was not a viable strategy. It’s no longer true.

I think it’s instructive to look at two recent examples of Dropbox and Apple and see what they have done with their infrastructure. Let’s look at Dropbox. It’s a simple application. They are a successful company that leveraged the public cloud hyperspace infrastructure. They started building their own data centers because they wanted to reduce costs.

Apple started using the public cloud infrastructure, because they didn’t have the economies of scale to build their own data centers. Even with the size and scale of Apple, they could not find enough value in doing it themselves. Not that they don’t run their own data centers, but they are also leveraging the hyperscalers and the Infrastructure-as-a-Service platform in a very significant way.

The rule that you can’t build a large company is disproved. That rule is not something that I apply. I believe in innovation in all layers. If you have your way of capturing your innovation, building a moat around it, then you can build a large business.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Ashmeet Sidana, Chief Engineer at Engineering Capital
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