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The Container Wars have Started and We Should be Paying Close Attention


On Monday, the guys at CoreOS announced Rocket, a command-line tool for working with App Container, the company's own container image format, runtime and discovery mechanism. It was the first major competitive blow levied against Docker. The news within the news was that Rocket’s format and runtime promises to be completely open, which is in contrast to the approach Docker has taken, having shown consternation around publishing or agreeing on a spec /standard around their container technology.

Docker co-founder and CTO, Solomon Hykes, responded with a Tweetstorm, ending with this tweet:

Docker, Inc. finds itself in the always thorny position of a company balancing its responsibilities as the steward of an open source project and as a profit-making entity. Invariably as Docker guides the community towards its one version of a universal truth and builds out a fully-featured enterprise management stack, some devs will get left behind – that’s simply the cost of doing business for a company behind an open source project as opposed to one that’s commercializing a foundation-led project, say like Cloudera has done with Hadoop or Red Hat with Linux. Clearly, CoreOS saw an opportunity to pounce, and I’m sure we’ll see more vendors come to market with competing container technologies.

If we’re to chart out how this evolves, the closest analog is the virtualization market. VMware was the clear winner as it was first to successfully commercialize its hypervisor technology, taking the ESX – which actually had its roots in open source – and building a full management stack around it which became vSphere. VMware came to dominate the market with Xen (Citrix), KVM and Microsoft picking up relative scraps.

The hypervisor helped commoditize the OS and physical infrastructure, giving way to the cloud-based architectures we have today. Similarly now, we’re in the midst of another platform shift. Docker offers a higher level of abstraction, taking the OS, virtual machine, physical machine and infrastructure provider, and commoditizing it all. The difference this time around is that in concert with a platform shift (VMs to containers), we're also seeing an architectural shift in the way applications are built (evolving from monoliths to systems that are distributed, highly available and modular). Martin Fowler provides a fantastic overview of distributed systems and micro-services architecture here.

The thing is, building, running and scaling distributed applications is HARD and wholly requires a re-thinking of the tools and systems we’ve had in the place for the last decade, with underlying container technology serving as the modular component for others to build on. We are now re-answering questions like how do you manage networking, persistence, storage in these highly distributed environments? And hence why we’re seeing the emergence of new platforms and tools like Mesos, Kubernetes, etcd, Weave, Flocker, etc.

So what’s really at stake isn’t just domination in one portion of the stack – the underlying container technology – but rather a whole a new stack in and of itself: an integrated offering to manage all aspects of running and building containers in a cluster. And that’s why announcements like yesterday’s really really matter.

The Developer-Driven Economy


How the Developer has become the Organization's Most Influential Power Broker

[Last Tuesday RRE made public our investment in Bowery, a company that we believe is doing to developer environments what Dropbox did to file storage and sync. When I joined RRE I promised to blog about some themes, trends and companies I’m most excited about, so I figured given last week’s announcement, now would be as good a time as ever to get the first one out, so here goes…]

In 2003 Nicholas Carr published a piece in the Harvard Business Review which famously promulgated IT doesn’t matter. Carr predicted that as we leave a world defined by scarcity of IT resources and enter one where “the core functions of IT – data storage, data processing, and data transport – have become available and affordable to all,” technology will cease being a source of competitive advantage for businesses altogether. Many at the time believed Carr was forecasting the death of IT in the enterprise.

Sure enough, it took maybe 5-7 years to get to Carr’s dystopian reality as cloud, open source and mobile crushed barriers to innovation, distribution and adoption of IT. However, a funny thing has happened: instead of IT ceasing to matter it has become table stakes. With ubiquitous access to infrastructure, software and software development tools in particular, we’re seeing software eat the world.

As technology has shifted from enabler of business process, to enabler of product or service, to the very product or service itself, we’ve seen IT transform from a cost center that is adjunct to core business to a profit center that is its lifeblood.

It was during this transformation that the power dynamic within the workplace flipped from the c-suite to the basement; from the employees clad in Armani suits with tie clips to those wearing hoodies with sandals. Consequently, we’ve seen the developer become the most prized resource in the modern organization, and it is this trend that lends itself to an enormous investment opportunity.

Devs as the Go-to-Market

Developers are your innovators and early adopters; they are the gatekeepers for new technologies and often decide which new tech succeeds and which fails either directly or indirectly (look no further than iOS and Windows – win the developer, win the platform war). Appropriately they have become the most powerful distribution channel for IT in the enterprise.

Devs often become catalysts for social communities which help spread new products and technologies organically, and their API-driven tools create the potential for powerful two-sided platforms. There are network effects to be taken advantage of here.

Moreover, the trend towards DevOps (and now BizDevOps) – characterized by the convergence of software development cycles and IT operations (and all business activities) – has effectively blurred the line between developer and sysadmin (and pretty much every other employee). Those tools which shrink developer time-to-value (aka time-to-code written) and offer frictionless onboarding, often multiply through the organization. From Splunk and Logentries, to Puppet and Chef, to New Relic, to Mongo, to Datadog, we’re seeing the emergence of companies at every layer of the stack who succeed by winning the heart and mind of the developer.

Devs as the End-Market

There’s been a lot of talk about a renaissance in the dev tool market and it makes perfect sense: as dev teams become an organizational profit center the tools that make them more productive become that much more valuable.

The dev tool market is constantly evolving, but ultimately can be broken down into three categories which delineate the development lifecycle: writing code, testing code and running code. Within each of these segments we’re seeing companies who are fundamentally changing the way applications are built and shipped.

Tools from vendors like GitHub, Slack and upstarts like Bowery are helping devs write, manage and collaborate around code. Trends around continuous delivery and integration have compressed release cycles and made companies more agile and responsive to customers thanks to companies like CircleCI, Rainforest, and CodeClimate. Finally, the toolkit to ship and run code at scale is being reconstructed with the developer in mind. Infrastructure is becoming more open, more programmable and thus more developer-friendly. Products and platforms such as Docker and Digital Ocean are rethinking operations and infrastructure altogether with the developer at the center. Companies like Flynn are even further on the bleeding edge, trying to wholly productize the role of ops teams.  All of this implies that devs don’t have to mess with config files or worry about provisioning servers and databases and can just focus on their code, knowing their app will run and scale in any environment.

- - - - - - - - - - 

We’ve heard incessantly for the last several years about how the enterprise is being consumerized; how business apps are all about beautiful UX/UI, how BYOD and BYOA have broken down the corporate perimeter and how the procurer of IT is the end-user. What we haven’t heard much about is how the developer has become the biggest power broker in this new paradigm.

The Markets You Can't See

Will Porteous

As venture capitalists, we have the privilege of partnering with exceptional entrepreneurs solving exceptional problems. Innovations come in all shapes and sizes and it’s our responsibility to be open to opportunities in whatever form they present themselves. RRE Ventures has invested in over 200 companies over the last 20 years across a broad range of sectors. We typically get excited when we see a combination of a brilliant team, a fast growing market, and novel technology that addresses established trends.

But sometimes you only get two out of three of those ingredients to start with. And while we can help recruit a strong team, and a strong team can create truly innovative products, neither of those matter if the market does not develop. This is probably the most common reason that venture investors pass on opportunities - a lack of confidence in the addressable market. But sometimes, you have to look past the market that exists today - and imagine the market that could be… 

At RRE, sometimes we do what others say is crazy. And sometimes a great new company emerges. We would like to tell a few such stories about startups that ultimately became successful RRE companies because they were a little weird. Each of these entrepreneurs looked at things differently, believed things that most others didn’t believe, produced a better product, presented it in a creative way, and opened up new demand in a previously uninteresting market.

In 2010 our team began to hear about the innovative things happening at NYC Resistor, a hacker collective. Bre Pettis and his co-founders were reimagining the essential components for 3D printing in ways that would make it vastly more accessible to consumers. And the community was rooting for them, as evidenced by the vast library of open source 3D designs on Thingiverse. In a period when we were hearing a lot about incremental advertising technology and the latest derivative social networking application, Bre and his team stood out. They were fearless entrepreneurs with a big idea. They wanted to change human behavior, and bring rapid prototyping to the desktop and our homes the same way personal computing and the Internet had revolutionized the economy two decades before. Many people thought the idea was a fad, just an expensive toy no one would buy (especially because you had to put it together yourself). After all, the 3D printing market in 2010 was dominated by machines costing $20,000 or more and tools accessible only to CAD designers. But we saw the extraordinary organic demand for those first MakerBot printers and we realized that this product was enabling the creation of a new, fast growing market in the shadow of this old one. 

MakerBot was acquired for $604 million less than two years after our initial investment.

In 2004 we made an initial investment in a company called Index Development Partners. The company was publicly traded, though it had no discernible business, and was on the verge of being delisted. The principal founder, Jono Steinberg, was well known to RRE though, and he thought deeply about how mutual fund management was starting to change. Jono and his team had assembled substantial intellectual property (IP) to define fundamentally weighted indices that would allow an investor to make very focused fund selections. They planned to launch a family of funds based on this IP. They faced the challenge of getting these novel products through SEC registration and building distribution for them in a market dominated by well established brands. Index Development Partners was an unusual venture deal: an investment in a failed public company building a new financial services business. Certainly the mutual fund market was unremarkable in 2004 from a venture capital standpoint. But the founders of the company that became Wisdom Tree had a clear vision of the future - one in which consumers might forego active fund management and the associated fees in favor of simple, index based products. The Wisdom Tree team worked tenaciously to create the reality in which they would be successful and uncovered massive latent demand. And a new high-growth market emerged such that Wisdom Tree’s 2010 fund launch was the largest in the history of the New York Stock Exchange. 

Ten years later, Wisdom Tree has $35 billion in assets under management.

In 2010 the media industry was well into its current period of turmoil. Legacy media companies had begun to see subscription revenues collapse and online display advertising was already a weak business, getting weaker. There were lots of new media companies producing engaging content, but with very little revenue to show for it. This was not just an uninteresting legacy market, this was an industry collapsing. BuzzFeed started with a simple idea: understand and make things that people like to share. BuzzFeed’s founder, Jonah Peretti, had a remarkable history of identifying and creating content that people were willing to share – and he was building the tools to track and understand that sharing. When RRE invested in BuzzFeed, it wasn’t clear what sort of a business would emerge from this - there was no revenue and only the vague idea that advertisers would pay to have their ads ride along with content as it was shared. But Jonah recognized that a fundamental shift was happening – people were increasingly interested in discovering the news stories and content that their friends were reading and excited about. That’s when BuzzFeed started experimenting with content sponsored by brands that was funny and engaging. With the company’s deep analytic capabilities, brands could now understand how their advertising was being watched and shared. This was a far cry from “impressions.” Thus the sponsored content business was born, a new form of brand advertising and a rapidly growing market where none had existed before.

Today BuzzFeed reaches 150 million monthly visitors around the world.

RRE recently made a similarly audacious investment. Peter Platzer is a former CERN research scientist and hedge fund manager turned space enthusiast. Peter went from drawing concepts on a napkin to having his first satellite in space in under 12-months and, in the process, launched a company called Spire. Spire is a big data company powered by small satellites focused, not on satellite imagery, but on other remote sensing capabilities. By placing cheap, nano-satellites into Low Earth Orbit, Spire aims to provide high-frequency Automatic Identification System (AIS) data to track vessels and assets on the open ocean, as well as to monitor piracy, illegal fishing, maritime security, and even geopolitical conflicts in places like the South China Sea. Spire also fills an upcoming gap in the US national weather data set caused by the end-of-life of certain government weather satellites. And Spire solves this problem at a significant cost savings for the American taxpayer.

Now, tracking vessels and cloud formations is not exactly new stuff. These markets exist today and they are, frankly, relatively unremarkable. That is partly because there has been relatively little innovation in support of these applications until now.

As the Spire team builds its constellation of Nanosatellites, they are creating a future in which weather data remains cheap and accessible, in which highly precise asset tracking becomes possible on the open ocean, in which higher frequency AIS improves maritime security, and in which manufacturers always know where their products are, even when they’re inside containers on the open ocean. We believe great products in these areas can unlock substantial latent demand and spawn a new, high-growth market that rapidly eclipses the old one.

Whether it’s MakerBot, Wisdom Tree, BuzzFeed or Spire, the commonality in each of these companies is a tenacious founding team with a relatively unique point of view, and the capabilities to bring real innovation to the task of creating a new market. Markets don’t coalesce around ideas; great entrepreneurs create the conditions in which their vision can become reality.

Introducing RRE Flatiron, Our New Downtown Space Designed for Co-working, Events & Community

Will Porteous

Today we are excited to announce RRE Flatiron, our new downtown space designed for co-working, events and community. For a few years we've been discussing opening a second office space in Manhattan. We find ourselves in the Flatiron neighborhood multiple times a week to visit our portfolio companies and to meet with entrepreneurs. This new space gives our team the flexibility to work Uptown or Downtown, depending on our individual schedules.


We also wanted a space where our team could share desks alongside our portfolio founders and members of the technology community. RRE Flatiron is designed for working in a different environment for a day, or as a place to recharge in-between meetings. 

Finally, we wanted a workspace that transforms into a venue to host, co-host and sponsor special events. You can expect a mix of industry-specific roundtables and demo nights, as well as community facing meetups, classes, panels and pop-up shops. 

RRE Flatiron is located at 54 West 21st Street - a building that has been home to many of our portfolio companies over the years. If you’d like to host your next meetup or event at RRE Flatiron, email to schedule a tour.

A lot of people on the RRE team contributed to making this happen, particularly Steve, Amrit and Rachel. We are excited about our new space and hope that we'll be seeing more of you there soon!