Jerry Chen | Castles in the Cloud | Summary and Q&A

TL;DR

Greylock's interactive project, "Castles in the Cloud," explores the cloud computing ecosystem, identifying opportunities for startup success.

Key Insights

• 🇨🇷 Cloud computing has revolutionized industries by reducing costs and promoting innovation.
• 💪 AWS, Microsoft Azure, and Google Cloud have established strong moats, making it challenging for others to directly compete.
• 🥶 However, successful startups have demonstrated that it is possible to co-exist and offer specialized services.
• 😶‍🌫️ Greylock's "Castles in the Cloud" project aims to identify strategies allowing challengers to succeed and understand the next wave of innovation in the cloud computing space.
• 😃 The project will be updated annually and incorporates data on private software companies and early-stage startups competing against the big three cloud vendors.
• 😒 The project uses pitchbook queries and manual categorization to analyze the markets and sub-markets in which these companies compete.
• 😃 Greylock will continue to publish essays and host podcasts featuring cloud company founders and executives to provide insights into competing with the big three.

Transcript

Read and summarize the transcript of this video on Glasp Reader (beta).

Questions & Answers

Q: What is the significance of cloud computing in modern industries?

Cloud computing has had a profound impact on industries by reducing costs, enabling experimentation, leveraging machine learning, and transforming various aspects of our lives.

Q: Who are the three dominant cloud vendors, and what advantages do they have?

The three dominant cloud vendors are AWS, Microsoft Azure, and Google Cloud. They have established strong moats with economies of scale, network effects, easy distribution, and direct relationships with developers.

Q: Can other companies successfully co-exist alongside the big three?

Yes, the IPOs of several cloud companies have shown that they can co-exist successfully by offering specialized services that compete directly with offerings from AWS, Microsoft Azure, or Google Cloud.

Q: What is the focus of Greylock's "Castles in the Cloud" project?

The project aims to map the cloud ecosystem by categorizing the services offered by the big three cloud vendors and identifying companies and startups that compete against these individual services.

Summary

This podcast episode features an audio version of Jerry Chen's essay called "Castles in the Cloud," which explores the opportunities and challenges presented by cloud computing. It highlights the dominance of the three major cloud vendors (AWS, Azure, and Google Cloud) and discusses the potential for other companies to successfully compete in the cloud computing space. Greylock, the host of the podcast, has also launched a comprehensive interactive project to map the cloud ecosystem and understand the strategies employed by challengers to the big three.

Questions & Answers

Q: How has cloud computing revolutionized industries?

Cloud computing has had a significant impact on industries by reducing the cost of starting a new company, enabling experimentation with different ideas, leveraging machine learning, and transforming various aspects of our lives. The cloud has created numerous opportunities for new businesses and business models.

Q: Who are the dominant cloud vendors?

The three dominant cloud vendors in the US are Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. These companies have established modes of defensibility through their massive economies of scale, strong network effects, and easy distribution of new services. They have near infinite resources and unparalleled control of distribution, making it challenging for competitors to disrupt their dominance.

Q: How has cloud adoption accelerated in recent years?

In 2020 alone, AWS, Azure, and Google Cloud experienced significant revenue growth, indicating the accelerated adoption of cloud services. AWS saw a 30% increase in revenue, Azure increased by 50%, and Google Cloud grew by 80%. This growth is fueled by the induced acceleration of cloud adoption.

Q: Is there still room for competition against the big three cloud vendors?

While the competition between AWS, Microsoft, and Google is intense, there are still opportunities for other companies to successfully coexist alongside the big three. The success of cloud companies like Snowflake, Confluent, HashiCorp, and Databricks, as demonstrated by their IPOs, shows that the sector is dynamic enough for others to thrive. The growing demand for tools from companies like Chronosphere, Rockset, and Cato Networks further signifies the ongoing shift into the cloud-only era.

Q: How is Greylock mapping the cloud ecosystem?

Greylock has embarked on a comprehensive interactive project to map the cloud ecosystem. They are categorizing the various independent cloud services offered by AWS, Azure, and Google Cloud to gain insights into their investments and differences. This mapping aims to answer questions such as which cloud vendor offers more machine learning services or platforms for IoT. Greylock is also compiling a database of startups that compete against individual cloud services, with the goal of creating a tactical guide to understanding where startups succeed and how they overcome challenges posed by the big three.

Q: How frequently will the cloud ecosystem database be updated?

The cloud ecosystem database will be updated annually, at the close of each year. In Q1 2022, the database will include updates from 2021. This ensures that the project reflects the evolving cloud ecosystem and provides up-to-date insights into where investment and innovation are heading.

Q: How did Greylock categorize companies in the cloud ecosystem?

To categorize companies in the cloud ecosystem, Greylock ran Pitchbook queries on private software companies that reached a valuation of over $500 million in 2019 or 2020. They then categorized these companies based on the markets and sub-markets in which their products compete against cloud providers' services. Additionally, they supplemented this data with information on select early-stage startups that compete in these markets.

Q: What content can be found on the Castles in the Cloud website?

The Castles in the Cloud website offers essays, podcasts, and other resources related to the project. Visitors can find essays exploring the methodology behind the project, top trends from the funding data, and analysis of how and why it's possible to compete with the big three cloud vendors. The website also hosts the Grey Matter podcast, featuring founders and top executives from various cloud companies.

Takeaways

Cloud computing has revolutionized industries by reducing barriers to entry and enabling innovative business models. While AWS, Azure, and Google Cloud dominate the cloud computing market, there are still opportunities for other companies to successfully compete. Greylock's interactive project, Castles in the Cloud, aims to map the cloud ecosystem and understand the strategies employed by challengers. This ongoing project provides valuable insights into the cloud landscape, offering a guide for startups and investors looking to navigate the competitive cloud industry.

Summary & Key Takeaways

• Cloud computing has revolutionized industries, providing opportunities for new businesses and business models with reduced costs and innovation potential.

• The three dominant cloud vendors in the U.S. are Amazon Web Services (AWS), Microsoft Azure, and Google Cloud, which have established strong moats and near-infinite resources.

• However, there are still opportunities for challengers to effectively compete with the big three by creating businesses that offer alternative or specialized services.