EP 146: Bipul Sinha (CEO, Rubrik) on The New Rules of Silicon Valley

28:45I of the rivet was integrity. V of the rivet was velocity. E of the rivet was excellence. And T of the rivet was transparency. And we ran open board meetings in the first seven, eight years of the company till because of the IPO and other activity that we had to start. We had to shut it down. But that was the cultural context. But culture is about how people interact with each other and how people operate when the founders are not in the room. Culture is less about what kind of people you hire per se. You want people to reflect the cultural principles and adhere to the cultural guidance. But you can't have extremely relentless people in all situations.

29:28What does an open board meeting actually mean? Open board meeting was my way to tell the organization that there are no sacred cows. There are no information control. And if we are telling you where the company is going and how much money it has and where we are not doing a good job, then your manager, if you ask a question of your manager or she has to respond, respond to you and give you the total information. And it was a way to build trust in the organization because I thought if somebody like Bipul comes to me and I'm like 30 years old or 35 years old in prime of my time to come join a startup and I have no idea if this startup is working, not working, making money, losing money, how much money in the bank, why would I ever work for a startup like that?

30:16So my principle was why not open everything to everybody in the company so that we all know where we stand, where we are going. There is no communication or misalignment issues. And everybody can demand answers. And when people demand answers, then people also become very responsible. They take it very personally. And I would say that the velocity that we created in our business was a direct result of this alignment. I'll give you some data points. It's not well known. We were selling it on the TCV basis. First, six months of selling rubric, we sold 5 million. First full year of selling rubric, we sold 47 million.

31:01Of TCV? Of TCV. Next year, we sold 168 million of TCV. The following year, we sold 350 million of TCV. Even if you cut the TCV by a third, which is roughly three-year deals we were selling, we could be one of the fastest, if not the fastest, enterprise B2B business. And it is a direct result of this idea of transparency that really created alignment and velocity. Everybody knew where we are going and what needed to be done. At a tactical level, how did you structure it? Like it was the actual board meetings zoomed in? So we put the board meeting in a large conference room and we let people sit on the ground if needed.

31:42And then we had to zoom enabled. And people could ask questions. So it was not a webinar style. It was a true Zoom call. And we have had situations where people actually asked hard questions in the middle of the board meeting. Did you receive pushback from VCs or other executives about doing it this way? It was a little non-intuitive for them initially because when you have like 600, 800 people listening to the discussion, sometimes you don't realize that how many people are on the call. and we would have discussion about an individual sometime so I'll give you an example there was one situation where we had something that we were working on a new product where the quality was very important and the quality leader was on the call and one board member asked is this person going to cut it and he was on the call and I said I don't know we'll see we'll know in six months how the product quality comes out.

32:45And then there was a little bit of, everybody was saying that, what did you say in the meeting? But that person came up to me and said, Bepul, I appreciate the candor because I have to deliver to have your confidence. So again, when you are open and transparent with people and have no hidden agenda, people understand that this is where we stand and this is what we have to deliver. And it is all about confronting the reality. Most of us don't confront the reality because we go back in time and try to find solace in some pattern. Did that person make it? Yes. He's still with us. Good. That's good.

33:24That's good to hear. Well, I'm glad they were able to execute on that. That would be a very different story if otherwise. I'm curious in the journey, maybe in the last five years or so, is there something that That was a strong opinion of yours five years, maybe 10 years ago that you feel like you really changed your mind on? I change my mind all the time. Again, what I tell my team is I have a strong point of view, loosely held. So if you present me with facts that are contradicting, I will back off. And many, many situations I have backed off, many situations. And they all know that I'll back off.

34:05But the whole idea, my idea is, how do we let people confront the situation as situation is, not look at from the rose-tinted glass? So if suppose if a particular situation, if we didn't win a deal, we have to confront like why? Without saying that because of this politics, that politics. If a particular person leaves the company for whatever reason, we need to confront why. Not like apply a nice pen to it saying that we wanted him to go or her to go and that's why this person has left. I said if you wanted her to go, you should have taken her out a while ago. Why do we let her make that decision?

34:43So it's all about confronting the reality. And that's one of my core principles of building business. That you confront the reality of the situation as it is, not apply the lens of the past. You've been exposed to a lot of great founders over the years, either folks that you've worked with alongside Oracle, Rubric, and all the derivative companies you spoke about earlier, as well as a VC. What's the trait that you look for most in entrepreneurs? Self-awareness and high grit. How do you assess those? Because when you chat with them and you ask them about their lives, and I always ask people about how they grew up, who their parents were.

35:24and ask them like in every job situation or transition, what did they learn about themselves that they didn't know before? About themselves, not the subject area, not a particular business, but about themselves. And people who can't answer that question, which means that they have no self-introspection. There is no self-awareness. And lacking self-awareness is a huge problem for founders because if you don't have self-awareness, then you'll not be able to admit your mistake or pivot. You are just driving in one direction. If the direction turns out to be right, it's a great thing. But if it is wrong, then you'll have no recourse.

36:07What about grit? Again, you understand how they grew up, why they do things in a certain way, whether they have a chip on their shoulders, what are they trying to prove. In many cases, they had a difficult childhood financially or they want to prove to their daddy that they are a better person or mom. So different people are motivated by different reasons, but all of these things are their character. And you can't teach somebody character. In Rubik we typically say it's about will and skill. You can't teach well. Will comes from who you are. Is there something you've seen in the news over the course of the last six months, maybe a year that you think is really important that people aren't paying enough attention to?

36:58My fundamental thinking right now is that the VC business, as we know, is dead. And startup business also, as I knew when I started in VC business or when I started Rubric, is gone. Because fundamental change in the market is we are living in an ever-accelerating age of technology change. And now technology acceleration is to a point where product market fit is dead. If you go back 30 years, when you built a new product and found a product market fit, then you could be selling that product for 15, 20 years. Then when we started Rubrik, if you find a product market fit, you could be selling the product for three, four years before the commoditization or competition happens to you.

37:42But right now, it's six months or less. So in a cycle when you have only six months before the product becomes like competition jumps in and things happen, how do you build your business? How do you even run venture capital? In my mind, 500 million ARR is the new 100 million ARR because 100 million ARR has no signal of longevity of the business because every entrepreneurs have to go think zero to one, zero to one, zero to one every six months. And that's why when Paul Graham wrote about founder mode, essentially it is only thinking about the symptom of the problem. The root cause of the problem is product market fit is dead.

38:26So you have to repeat zero to one every six months. And who does zero to one? Founders. So you have to be in the founder mode. Doesn't mean that you have to be founder, but you have to think like founders so that you can continuously find product market fit. It's not a one-time process and a scale. As a result, if you hire an executive who is not thinking about zero to one, by the time they build on the organization and create a system and process of a scale, the product has changed. Market has changed. So that's a big change. And then in respect to VC, the VC business has changed. Now in this accelerating world, anytime you have this level of change and acceleration, the mid collapses.

39:09So my thesis is that when the stock market comes back up and IPOs restart, you will see very few under 10 billion IPO. You will see 20, 30 billion IPO or a lot of M &As under 500 million. Because what would happen is that every market, when market becomes real, you will have a lot of startups jumping in because there's a lot of money to fund these startups. and one of them in a given space will create consolidation, have this scale velocity to go from 500 to 10 billion and the rest of them will get consolidated at 500 million. So you have one huge pool of outcomes at under 500 million and then you have very few larger scale outcomes which is 10, 20, 30, 40, 100 billion.

39:57And so in this market structure, how do you create your venture capital pool to be able to find success? I want to talk about the venture capital point in a second, but curious on the founder mode and the product market fit kind of dissipating or the rate of decay being far faster than it's been in the past. I guess as you internalize that and think about the structures, the organizational design that you have to make sure that you're continuing to iterate, are there things that you've done differently or that you recommend for other founders as they sort of see this rate of decay maybe happening at a faster rate?

40:38So every founder has to have two parallel organizations. One I call it forward motion and one I call lateral motion. So forward motion is the things that are working. How do you scale those things? And lateral motion is what are the portfolio of risks that you are taking to create something new, zero to one, that will be relevant three to five years from today. And you have to pay attention as a founder CEO on both sides of the equation. that how do you continuously do lateral movement. And in lateral movement, you have to cheer 25K, 50K deals. Whereas in the forward motion, you have to cheer 500 or million dollar or$2 million deals.

41:20And you have to cheer both of them with equal intensity and equal encouragement to have this process in the company. Ultimately, you want to do three things. The things that are working, I call it at scale. You have to make it super scale. So hundreds of millions of dollars business you have, how do you take it to several billion? Then middle one I call sub-scale to scale. So things that are 50 million, 30 million, the early signals of early progress, how do you make it like hundreds of millions of scale? So sub-scale to scale. And finally, zero to sub-scale. How do you create portfolio of activities that create few sub-scale opportunities?

42:00And if you have all three, scale to super scale, sub scale to scale, and zero to sub scale, three motion going in parallel by two teams, forward team and lateral team, then you have a chance of building a generational company that will last longer than your own lifetime. How do you think about how many of those lateral scale projects any company can have going on at one point in time? Depends upon the bandwidth of the team and depends upon the team's maturity. But I would say if you are under 500 million ARR business, you should not have more than two. What's something that people don't fully appreciate about Rubrik, the business?

42:41Again, people are living in the past. In the past, backup and recovery and cyber recovery, things like that were more of like an area that were not critical to day-to-day top line of the business. But the way market has evolved and the way data has come into prominence and backup recovery is a single place where all the business data lives unaltered. It opens up a completely new opportunity for the market. But again, this is a non-consensus idea and it'll take market some time to realize. And we have to make it real. What about the enterprise IT market at large? Is there something that you think people aren't paying enough attention to when you zoom out to a more industry level?

43:26I feel that enterprise IT market, and I'm counting security and everything else, all in it. It is extremely, extremely, extremely large. And AI has opened up a whole new vista in this market. And I actually was talking to somebody and I said, there'll be a trillion dollar cybersecurity company within the next five years. And today, the biggest cybersecurity company is 100 billion thereabouts. Palo Alto. Palo Alto. So I believe that there is a 10x of just the cyber piece in the next five years. And why do you think that's the case? Because if you look at the human productivity and if you look at world GDP and if the world GDP gets impacted positively by AI and if you improve the productivity by 5%, 10%, something like that, just think about the amount of dollars and technology impact that it will create.

44:25And that amount of technology has to be built, has to be integrated and has to be secured. So we are again living in an age of exponential. Because look, as human beings, we grew up, we have evolved the last thousands of years on an everyday basis. And our mind is still in the same state as when Jesus Christ was born. But the technology is accelerating. So as human mind, since we are linear mind, we can't fathom non-linear phenomena. the technology acceleration AI acceleration business is all non-linear phenomena so we always think that how is it possible that we'll have a trillion dollar company but NVIDIA is a close to three trillion dollar company and so so that's what we have to reckon with that how do we suspend the belief of the past and think look at this phenomena as it is because remember in venture capital we didn't fund a company in seed level and suddenly six months later, the valuation is 5x.

45:29And we say, how do I now invest? Because businesses are nonlinear and human beings are linear. As AI plays itself out, do you think that more value will, I guess within, let's combine it to enterprise, be accrued by the existing enterprise players that are adding AI to their functional suite? Or do you think it'll be the first principled businesses that are started to go after these markets from the ground up? It's hard to say, but there is a way to test it. The way to test it is, are you AI native? And the AI native means that if you take AI out of it, your solution becomes irrelevant. If you are AI native, you will have a great future.

46:20I feel like the mood today for large businesses in enterprise IT space doesn't come from technology. It comes from distribution. Because of the years of presence and distribution channels they have built, it is a significant mode. And when elephants shrink, they don't become rats. There is a long process of decline. So my belief is that a lot of AI native companies will become very large very quickly. but that doesn't mean that the existing player will just go away instantly it'll take long time for decline to happen and some of them will figure out how to be a native and they will thrive ai native uh sounds like you're talking about like in terms of the product functionality set but i'm curious how you have encouraged your employees to become ai native quote unquote i I guess recently, Toby Luki published a post about his thoughts on it.

47:21I'm curious, is that something you guys have operationalized or how have you messaged it to the team? So we definitely have AI adoption in many areas of the company. I mean, some of the obvious areas are your software development, legal, marketing. The idea is, again, the world is of balance. You can't go one extreme or the other extreme immediately. So you have to see where you are and what is the best fit for you. Because if you go on one extreme and hire a bunch of AI, get a lot of AI tools and AI tools creates a whole new risk vector for the business, then the business will be jeopardized.

48:03So you need to figure out what is the right fit. But in my mind, businesses have to move very, very quickly. on the user end of the equation because the market is transitioning. And then operationally, you have to be everyday looking at your operations saying that how do I go do things better and better and better? And that adoption cycle of the technology, it has to be commensurate with the risk reward of the technology. I want to double back to your venture capital evolution point. So you were in VC for seven years, you said? two firms. You're at Bloomberg, then Lightspeed. I guess, can you elaborate on that point in the consideration set that you think about for VCs?

48:52It sounds like you're sort of saying there's going to be a bifurcation of returns, kind of subscale outcomes, and then much, much larger ones. What do you think the derivative implication is for firms? Do they follow the same path that'll be small and big or how do you think about it? So the way the venture firm will bifurcate is that there will be a specialist firm on the very early stage where even at 500 million exit, they will have good returns and superior return to S &P 500. That's they're trying to beat and do much better. But there will be also an asset-based firms that can go span different asset classes and very large investing pool that they could deploy to much larger outcome.

49:41I mean, you look at like OpenAI raised$40 billion or thereabouts, $30 billion or something like that. So that's like an asset class investment. And so there will be investment in those kinds of companies and$30 billion, maybe a little more extreme, call it$5 billion,$3 billion. But still, it's not a regular venture investment. So that would be the kind of like a bimodal distribution in terms of the firms. So there will be a firm that will be asset class all across the board, and then there will be a specialist firm. Because the thing is that lacking 1 to 10 billion IPO, which means that the mid-size outcomes will be much harder to get.

50:22And so if your fund is organized in the mid-size outcome, you'll not have great outcome, and therefore you will disappear. I guess one of the things to bring that back to this point, and I'd be curious how you think about it, is you made the point right when we started that, or we talked about 90 % of venture capitalists don't know what they made. And so pick the partner or the people that are very passionate about what you're doing. One of the things that I've seen is as the assets scale, the employee retention within those large asset managers starts to be more difficult. And I think we can talk about how there's more in private equity and a bunch of different service investment banking.

51:06There's kind of this hollowing out has happened over the course of the last 30 years. The weird thing with InVenture is there's a lot of people that will go start their own firm or go work at other firms that are a little bit more mid-scale. So I'm curious, as you think about that evolution, do you think that that talent retention part is just it's an inevitable thing that's going to happen in our industry just needs to mature into the world that private equity has sort of gotten to where you have the Apollos and Blackstones that are very public? And at the end of the day, you're kind of an employee of those organizations.

51:48Or how do you think about talent retention as it relates to that asset scaling? It depends upon where on the spectrum you are. So if you are on the early stage venture side, early stage will remain the artesian partnership oriented, high outcome, high degree of bet. And it will be classic venture capital where every check you write, you have a churn in your tummy thinking that I'm taking a real bet and you are taking two bets, three bets a year. and your outcome and your compensation will be based on carry that you generate out of those returns. And some of them may become very large, but majority will be 500 million or less.

52:31And then on the asset side, like large asset class based, the compensation structure will change. It will change from being carry-oriented to more of like management fee-oriented. And that will create the intrinsic value to the firms. And you might see some venture firms even go public based on the intrinsic value of the firm brand and fees that the firms make, just like Blackstone or BlackRock and others. And that's only natural because in the age of technology acceleration, you will have hauling out of the middle. You will have very, very large outcome and a big number of smaller outcomes. So in that scenario, for a very, very large outcome, since there is such a huge pool of money involved in terms of taking bet on these businesses.

53:25And then it's relatively consensus investing. You are thinking about whether this thing will become$50 billion or$100 billion versus zero or nothing, zero or something. So it's a very different risk-reward equation. And in that risk-reward equation on the larger side, you would have different mindset of investment and different kinds of investment committees and analysis and all the rest of it. And the reward will be different. As you kind of map out the AI landscape, are there areas that if you were still a venture capitalist that you would be pursuing from an investment standpoint? Or maybe if you weren't doing rubric, you would think about starting a company to go after?

54:05The way I see AI is all about productivity. And then you have to map the productivity back into the scarce skill set and professionals. So if you think about, in our country, we lack doctors. There are not a lot of doctors in America. In many rural situations, there are no specialists. If you think about, like, accountants, again, it's a high reward profession. But, again, as the businesses grow, the need for them grows constantly. If you look at lawyers, so skillset, software engineers, like there's always need for more software engineers, but not enough software engineers exist. So the professions which are knowledge-based professions and there is a scarcity of professionals, that creates the natural AI opportunity.

54:57And I don't believe that is going to be augmentation of human beings. Over time, the AI has to gap from the, you have to fill the gap from information to knowledge, which human beings are doing today. So we will have both AI employees and regular employees. And regular employees, human employees, will be more about further judgment on the AI's judgment. But we are not going to do it together with AI, every activity. I guess I hadn't thought of that point specifically. It's an interesting one that the areas where we've had the strongest product market fit inherently with AI are the ones that have had some supply constraint to people doing the job.

55:45I guess causation correlation. In some ways, it does seem like the LLMs are best suited for jobs like doctor information retrieval, accountants doing that workflow on it, computer science actually doing the programming. In some ways, I guess I thought of it as that's things that the LLMs are uniquely well-suited to go do. I hadn't thought about the demand need for people to solve those problems so that we actually just didn't have a supply of the functionality. If you look at the cost for software engineers keep going up. And so ultimately, technology is about economics. and the other interesting part is that lawyers are not inventing new laws.

56:35They're looking at all the past laws and saying, how do I read these laws and correlate them with each other to have an applicability to this situation? They're not predicting the future. So all the jobs that requires connecting the dots of the past for this current situation can be done by LLM because the expertise is dead. There's been a lot of people that have spoken about, um i guess dario from from anthropic maybe most notably about how uh we're gonna end up i think by the end of this year is what he said uh with software producing the totality of code written or something close to it do you think that's um true that we're on that path and at the end of the day what what has traditionally been software programming will move to a higher abstraction of kind of managing the the prompts themselves or do you think there's a human element that will always be in the fingers to keyboard side of programming?

57:27I mean, look, a machine will generate more code. And the codes have all flavors of it. Codes could be testing code. Codes could be integration testing code. There are many different kinds of code being generated. But I agree with him that the machine-generated code will be bigger than human-generated code. The question is, which creates more value for the business? and where the human software engineers will be more applicable versus AI software engineers. If you were giving advice to someone about what field to pursue or a job that might be far more important in five years' time than it is today, is there a field of work or a skill set that you think will be more valued by society as we look forward than it has in the past?

58:18I think the biggest thing with AI is that, I'll repeat, expertise is dead. So if you are a hedgehog, then the AI will do the job of a hedgehog. So you have to be a fox. And this is not a new concept. It has been talked about in the past. But this is even more urgent and relevant today. Because since everything that can be known by existing knowledge is known to LLM. So you as a human being, if you think about the purpose and the value that you are creating, you're creating value in the space of intuition where you're connecting dots which are not connected in the past. Then only you create value.

59:01And how do you connect dots that have not been connected in the past that LLM can't connect and you can only do as human beings? And that's where the value is. So you have to be more diverse in your knowledge, more diverse in your perspective. You can't be like doing one thing for 30 years and be an expert because that expertise will be relevant. So if I'm a college-going kid today, I will try to study from humanities to history to arts to maths and physics and science. Like broaden my horizon. Don't go too far deep in one space. And more importantly, focus on communication. because if the expertise is dead and connecting the dot is going to be important, but connecting the dot inherently is uncertain.

59:52So if you cannot express your ideas about how you connected the dot, even if you are able to connect the dot, it'll be irrelevant. The irony in that, I guess, is that for a while, people have been talking about liberal arts schools being dead. And I guess, does the implication of that, then that people might end up having multiple careers or job functions over the course of their work life. And so you need to be amenable to, hey, this industry could be super important today and it might not exist in five years, 10 years, 15 years. And so we just need to be able to juke and jive as new things come to be.

1:00:27It has already happened. Our parents' generation, they used to do one job for 30 years. Our generation did every five, six years, they have a new job. The next generation will look at work as a completely different thing. See, technology evolution is the story of simplification. And what is, when we use talk to computer, we had to give punch card to computer 30, 40 years ago. Then from punch card, then we had black screen with typing, then we had windows and mouse and clicks. So we were trying to adopt to technology and human behavior was trying to adopt to the technology that was available. And that's why for the masses, it was very, very hard to deal with computer.

1:01:11But over time, it gets simplified and simplified, and iPhone was the easiest thing that had the biggest adoption. Now with AI, we are in the world where you can actually interact with AI or computer with natural language. You can program computer with natural language. You can get output from the computer in natural language. Now for the first time, we have now enabled not just the usage of computer, but the programming of computer and the usage that you can get out of computer and change that usage that you get out of the computer in natural language. And that has serious implication, which means that, again, a kid sitting in rural China will have the same amount of knowledge than somebody growing up in Palo Alto.

1:01:56So how do you live in this new world? The only way that you can live in this new world is to use this simplification, this accessibility of technology to create new worlds. And that new world creation, again, will happen really, really quickly. So you would see somebody become a$100 billion person in two years because of this acceleration of the technology. Something that becomes a... Somebody's become a$100 billion person in two years, which means that the technology decays equally fast. so the time compression that is on technology will get reflected on the careers and the technology cycles.

1:02:40So the opportunity for everybody is that to not fall in love with anything in particular, but to live in the moment and create the future. Are there ways that you foster the considerations of this within the company culture? Like, do you do things around cross-team collaboration or retraining, reskilling people? Or are there things that you think you can do as you think through the derivative considerations of this for a business like yours? Transparency is where things start. We are not creating channels. We are bringing the information out in the open. We have, when we do our meetings, we encourage people from different spaces.

1:03:30So if there is a sales thing we are discussing, we encourage people from like a product piece or legal person to kind of express their opinion because of the interconnectedness of these things. See, the issue with this is these things are happening so fast that if you tell people that things is going to change too frequently, then it also has distraction factor. so what you could do is you could create an environment a cultural environment where everybody has uniform access to information and understanding of what is happening around them and then as i said in the beginning bring all the brains in the game because that's how you'll connect the dot one person will not know everything but the way you communicate of not rely on the past like leave the baggage of the past everything that we knew in the past is irrelevant in fact But the day after Rubrik went public, I wrote a note to everybody in Rubrik saying that the old Rubrik as we knew is dead.

1:04:30Because somebody who put in money into our IPO, they don't care we went zero to IPO and what returns we created. They care about where we go from here. And that's what you need to kind of encourage people to let the baggage of the past go. Their own expertise is less relevant. Don't tell people that I know this and you don't know that. always collaborate, bring all the brain in the game. As you're looking forward for the future of Rubrik and what it might look like in five years, 10 years time, are there things that you're particularly excited about that maybe we haven't touched on? I'm very excited about our culture.

1:05:12And that's the only invariant that we have as a company. Has Rivet stood today? Absolutely. And we believe that it will withstand the test of time. And our culture is what will bring great people into the company will encourage the people who are already in the company to do great things. And we don't know in 10, 15, 20 years what Rubik would do. But one thing we know for sure that will be a huge company. Well, Bipal, thanks for doing this. This is great. I appreciate you answering all the questions. Thank you so much. Thank you.