EXCLUSIVE INTERVIEW

Startup, Know Thyself: Q&A With Sierra Ventures Managing Director Tim Guleri

In this business climate, the road to striking a venture capital deal is difficult for both funder and fundee. Small startups with big ideas obviously have a harder time finding VC firms willing to take a chance on them, but those VC firms themselves are under added pressure to make the correct decisions regarding where to put their limited resources.

In the case of Sierra Ventures, one of its latest bets is on a firm called “webappVM.” WebappVM is attempting a next-generation approach toapplication management that leverages cloud architecture ratherthan adapting a previous architecture that hinders cloud benefits.

WebappVM’s new approach works as a virtual layer without agents. Otherapproaches use a series of agents and management servers to achieveapplication management functionality. The minds behind webappVM believe the latter approach can disrupt the benefits ofmoving to the cloud: on-demand scaling, portability, low cost,self-service, etc. Instead, webappVM goes in as a virtual layer.

The E-Commerce Times spoke with Tim Guleri, managing director at SierraVentures, about the state of the tech VC marketplace today and ways in which new companies can catch the attention of venturecapitalists.

Guleri has led the firm’s investments and serves on the boards ofApprova, CodeGreen Networks, DotNetNuke, Everest Software (acquired by Trilogy), Greenplum, MakeMyTrip.com (in India), Sourcefire and CarWale (in India), among others. A serial entrepreneur,Guleri built two software infrastructure companiesbefore joining Sierra in 2001.

E-Commerce Times: How much more difficult is it to obtain seed money andsupplemental rounds of investment support in today’s economic climate?

Tim Guleri:

It’s a tough climate for companies to raise capital. Onereason is the macro financial markets have been very choppy. Andobviously the growth over the last couple of years fell off. The lasttime we saw this was after the 9/11 event. The second reason is thecapital which flows into venture capital funds was also at a lowpoint. So there is less capital coming in, and the market is in thedoldrums. This makes it a tough market. The balance is that greatentrepreneurs with well-thought-out business plans are still gettingfunded and are the kind of businesses that we scour the landscape for.

ECT: In light of what you’ve just said, how different is therole of providing funding in today’s market?

Guleri:

We haven’t seen the process change much. We do the sameamount of due diligence and still call customers and prospects and tryto get confidence in the financial model that’s been presented to us.

I think it’s fair to say there is a little more time that’s availablefor us to make these investments from the venture capitalist’sstandpoint, so both sides– the entrepreneur and the venturecapitalists — can do more thorough work. I think the process canstill be very efficient, but at the end of the day, it all comes downto the idea and the team.

ECT: Does that hold true whether the applicant is an opensource company or another type of company? Are there differentqualifications depending on the type of business the applicant comesfrom?

Guleri:

Yes, precisely. Venture capitalists like to invest wherethe market is. There’s going to be correcting in a few years, so wetend to invest ahead of the market, so if you can get to us beforethese ideas become mainstream. We are looking for emerging trends andcompanies that have a sense of how to capitalize on these moderntrends.

So from that standpoint, new things that are affectingexisting architectures — like cloud computing, like a whole newgeneration of storage, like a whole new generation of databasearchitectures, a whole new generation of how you manage applicationsin the cloud — those are the kind of forward-looking trends that welike to pick up on early and then get behind.

ECT: If I were an open source vendor, would I have a leg upin getting considered for a VC money award?

Guleri

You would have a major step up over others if you were anopen source company. Open source used to be a bit of a misunderstoodbusiness model. Now it is something that has picked up good momentumand is something that VCs love to see.

ECT: Are you seeing more requests from open source startups,or is that still a sparse field?

Guleri:

It’s still a sparse field, and that’s a good thingbecause every discipline, be it software or hardware or data center, hasan open source project that knocks them to death. So consequently, whathappens is that the customers are not getting a value from a closedsource like a McAfee or Microsoft. They would rather look for an opensource company. And when that open source company gets to scale, thenthat open source company will come looking for money. So that fieldhasn’t become over-crowded. There are only a handful of companies thathave reached commercial status following open source

ECT: What advice would you give to a startup entrepreneur whois reaching out for VC support? Are there certain things that need tobe done, or are you just looking for something that is out of theordinary?

Guleri:

The first thing to do is get conviction around thecustomer ROI. The way to do that is to know the market and getconfidence in the market. So number one is product market. Number twois getting confidence in your financial model. This is where I tend todo a lot of work. I like to invest in companies that are efficient inservicing customers. I like a company to know how to develop thecompany and how to leverage that. So entrepreneurs need to be veryfocused on this early because the decision we make today about fundinga small company will be based on how do you go to market, how do youmarket and how much money do you need to raise.

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Cloud Providers Push Products, Tactics, To Win Customers in Competitive Market

In the current cross-industry scamper among enterprises migrating to clouds, no clear winners have yet to emerge in the race for market share among the hyperscale public cloud providers.

Automated cloud migration company Next Pathway on April 20 unveiled a new report with key data on the overall state of cloud migration, including the current status of the cloud wars.

The study draws insights from over 1,200 IT decision-makers that highlights which cloud providers have the edge and why enterprises might want to avoid multi-cloud and hybrid approaches. Businesses are under great pressure to enable digital transformation from the cloud to generate new revenue streams.

While businesses believe a multi-cloud strategy has advantages, they are selecting only single cloud platforms for their enterprise legacy workloads. This puts cloud providers in a battle to bring enterprise workloads to their cloud platform, creating a highly competitive marketplace.

First-Mover Advantages

Providers are luring potential customers to their platforms with industry solutions, faster migration paths, and enhanced capabilities, according to the State of Enterprise Cloud Migrations report.

Further, cloud providers are leveraging the benefits of first-mover advantage with a range of tactics to gain market share, including employing their hefty balance sheets to buy businesses’ favor.

Until the dust settles in the cloud wars, service providers face both opportunities and challenges for victory. Once migrated, customers will be reluctant to switch to other providers. So, moving new customers to a particular cloud platform and turning on consumption is paramount for winning the cloud wars.

“Our research reveals that companies that want to move to the cloud, need help. They want more services, industry solutions, and enhanced products,” said Chetan Mathur, Next Pathway CEO. “In this highly competitive market, the cloud wars are on and likely to continue for some time.”

Results at a Glance

Looking at market share, Microsoft Azure (37 percent) has a slight advantage. But Amazon AWS (32. percent) and Google Cloud Platform (30 percent) also hold a prominent stake of the public cloud market.

A hefty majority of IT leaders (87 percent) report an increase in demand for moving workloads to the cloud. Just one-third of respondents have completed a workload migration, which is only slightly more than the finding from Next Pathway’s July 2021 survey showed completed the process.

“We are still in the early stages of the emerging cloud market, and as this market matures and we realize that the race to the cloud rewards those that move quickly, more is being demanded from the vendors to accelerate cloud migrations,” said Clara Angotti, Next Pathway president.

With companies eager to move to the cloud fast, cloud providers that move workloads to their platform will reap big financial benefits and long-term competitive advantage. However, companies need help, she observed.

“Moving to the cloud is not easy. Companies are asking for more services that will automate their migration and mitigate their risk to enable transformation,” she said.

Cloud migration services topped the list of requests from businesses looking to select providers, according to the report. Nearly half (49 percent) of respondents named migrating existing applications.

Additional services requested include multi-cloud strategies (45 percent), a robust partner ecosystem (42 percent), increased storage capacity (40 percent), and industry-specific solutions (39 percent).

Cloud Migration Stumbling Blocks

The lack of automation is proving to be a major concern of firms moving to the cloud. Speed to market is critical to ensuring they can sustain a competitive advantage. Forty-seven percent of companies acknowledge that they lack the automated tooling to expedite the translation and migration of code from on-premises to the cloud.

Also lacking within enterprises planning a move to the cloud is an efficient and effective migration process. Most respondents agreed they would have spent more time planning their migration and used more automation to migrate workloads faster. The planning process took longer than expected. So did the actual implementation phase, noted 40 percent of the respondents.

The research showed many potential cloud migrators over the past year looked before they leaped. They ran proofs-of-concept with multiple public cloud warehouse platforms before finalizing plans. This suggests they exercised caution instead of rushing their cloud entry platform selection.

Still, IT leaders uncovered unexpected limitations in the selected cloud platform. Slightly more than one-quarter (27 percent) felt that data migration presented the highest risk element of cloud migration.

Cloud providers able to enhance their migration services will differentiate themselves from their competitors and turn on consumption revenue faster, according to the report.

Hybrid Cloud Remains Untapped

Nearly all companies (97 percent) acknowledged benefits come with a hybrid cloud strategy. More than half (55 percent) said it allows organizations to benefit from the automation of public clouds and the security and privacy of private clouds.

The hybrid strategy delivers more flexibility to select the right applications for the two cloud structures, noted 41 percent of the IT respondents. However, only 30 percent have a hybrid cloud in production, despite the hybrid cloud’s attraction and considerable market opportunity.

“While the urgency to move to the cloud becomes greater each passing day, challenges and fears surrounding the migration process continue to hold companies back from beginning the journey,” said Mathur. “It is a complex process.”

Key Considerations

A few viable solutions exist for the inherent problems the survey reveals, according to Mathur. The major stumbling blocks to cloud migration, whether public or private, are quite similar.

“Spend sufficient time planning the migration. Clients tend to rush into execution without proper planning,” he told The E-Commerce Times.

This includes a detailed analysis of your legacy applications to understand data lineage, dependencies, and data flow. This information is critical to determining what to migrate and in what order, he explained.

Once this is completed, prepare a wave plan that outlines the schedule by which workloads are to be migrated.

Mathur offered these additional suggestions to overcome migration stumbling blocks:

  • Automate as many steps as possible. Many tools automate the crawling of your legacy applications, automate the translation of legacy code and ETL pipelines, and automate test script creation and execution. Automation will save valuable time.
  • Create a proof of concept that will test your data migration strategy. Clients will be moving massive amounts of data to the cloud. It is important to run tests to ensure you are picking the right data migration strategy.
  • Leave a buffer in your schedule and budget for exceptions. Every cloud target will have some gaps and exceptions. Make sure you plan for these types of unknowns. We call this “the last mile” as these gaps tend to appear during the implementation phase of cloud migration.

“The major difference between private and public cloud is the security considerations and cloud management. However, all of the above solutions apply to both public and private cloud migrations,” he said.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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New EU Law Will Force Google, Meta, Others To Expose Algorithms

The content of large tech companies, like Google and Meta, will be more tightly regulated under a new European Union law that received provisional approval Saturday.

Among the provisions of the Digital Services Act approved in an agreement between the European Council and European Parliament are transparency measures on the algorithms used by online platforms and services to recommend content and products to users.

“Platforms should be transparent about their content moderation decisions, prevent dangerous disinformation from going viral and avoid unsafe products being offered on market places,” Executive Vice-President for a Europe Fit for the Digital Age Margrethe Vestager said in a statement.

“With today’s agreement we ensure that platforms are held accountable for the risks their services can pose to society and citizens,” she added.

However, Daniel Castro, vice president of the Information Technology & Innovation Foundation, a research and public policy organization in Washington, D.C. noted that it remains to be seen exactly how the EU will implement some of the new law’s requirements.

“It’s possible that companies like Google and Meta are already meeting the DSA’s transparency requirements for ‘recommender systems’ under their existing disclosures to users,” he told TechNewsWorld.

“And these companies have also made progress in the past few years in terms of better explaining to users how they use their information and how their platforms work, such as ad transparency and ad library,” he added.

Focus on Big Tech

European Commission President Ursula von der Leyen explained in a statement that the DSA will upgrade the ground rules for all online services in the EU.

“It will ensure that the online environment remains a safe space, safeguarding freedom of expression and opportunities for digital businesses,” she said. “It gives practical effect to the principle that what is illegal offline, should be illegal online. The greater the size, the greater the responsibilities of online platforms.”

According to the European Council, the obligations introduced in the new law are proportionate to the nature of the services concerned and tailored to the number of users. Very large online platforms and very large online search engines — defined as services with more than 45 million active monthly users — will be subject to more stringent requirements.

To safeguard the development of start-ups and smaller enterprises in the internal market, the council continued, micro and small enterprises with under 45 million monthly active users in the EU will be exempted from certain new obligations.

“With the DSA, the time of big online platforms behaving like they are ‘too big to care’ is coming to an end,” Commissioner for the Internal Market Thierry Breton said in a statement.

Castro, though, maintained that the EU is making a mistake by focusing so much on the largest tech companies. “Smaller firms have a significant impact on consumers as well, and the largest companies are often the ones with the most resources and commitment to addressing harms,” he said.

Drag on Innovation?

Google did not immediately respond to a request for comment for this story, but in a blog written by Karan Bhatia, vice president for global public affairs and government relations, posted in October, the company warned, “While we support the ambition of the DSA to create clear rules for the next 20 years that support economic growth, we worry that the new rules may instead slow economic recovery.”

“They would prevent global technology companies like Google from building innovative digital tools like the ones that people have used through lockdown — and that will help European businesses rebuild their operations,” Bhatia wrote. “That would be a missed opportunity for Europe as it looks to the post-Covid future.”

In addition to algorithm transparency, other provisions empowering users and society include:

  • The possibility to challenge platforms’ content moderation decisions and seek redress, either via an out-of-court dispute mechanism or judicial redress; and
  • Access to vetted researchers to the key data of the largest platforms and provision of access to NGOs to public data to provide more insight into how online risks evolve.

Explosion of Public Scrutiny

“Even more impactful than making more information transparent about their algorithms is going to be the researcher data access provision,” observed Alex Engler, a fellow at the Brookings Institution, a nonprofit public policy organization in
Washington, D.C.

“There’s only so much you can learn by telling people something broad about a complicated issue as the interaction between an algorithm and millions of people who use it on a daily basis, but when you let professional researchers study all of that , they can come away with much more nuanced, specific understanding of what’s going on,” he told TechNewsWorld.

“Did a policy change lead to more disinformation? What are the mental health impacts of using social media?” he asked. “In those areas, we’ll see the most public scrutiny into large online platforms that the world has ever seen. Without any doubt, this will fundamentally change the level of public knowledge about these platforms.”

He explained that the DSA requires independent groups to validate what the companies are saying. “That gives them a lot less room to completely manipulate and hide the harms on their platforms,” he said.

He discounted concerns about the harm that opening algorithms to the public could have on the companies’ competitive edge.

“The competitive advantage of these companies comes more from their user base than the algorithms themselves,” he contended. “Facebook could tell me exactly how their algorithm works, and I wouldn’t be able to replicate the site because I don’t have billions of people coming to my website every day.”

Not Leaving EU

“The DSA is a significant piece of legislation, but it is unlikely to dramatically change the internet,” Castro noted.

“It imposes a number of new obligations on large online platforms, however, none of the rules are so onerous that large tech companies will leave the European market,” he added.

“A 450 million person market among the wealthiest countries in the world?” Engler asked. “I think the tech companies will comply with the new law.”

“These requirements are not so invasive that these companies won’t be able to make money anymore,” he said, “so I would be very surprised to see them leave.”

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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