DMR: Many startups in the web business are pushing their often Cloud-based services. From your experience, does this actually scale, or is the Cloud in the end a limiting factor?

Brian: The advantage of having a Cloud infrastructure means they can get their start-ups off the ground fairly quickly. Actually, I think the biggest limiting factor is cost. So if you really do the math on EC2 it gets pretty expensive pretty quick the minute you get out of play land. More than the technology scaling there's a cost point where it makes more sense to actually bring it back in house. Actually, there’s a cost point where it makes more sense to actually bring it back in house.

DMR: Very interesting. Wouldn’t that be the ideal situation for a telecom to say: “I provide my own internal departments a Cloud facility that they can play around.” And as soon as they have an application where they see it’s going to work, they say, “okay, now I push that service to something bigger, better.”

Brian: Yeah, you’re asking a question of whether an operator can fill that void. Basically, become the next kind of step function in the economic value chain. I think that’s probably true. Certainly, I think that’s probably the place to attack the marketing. I’d go after the super low end.

Operators don’t do anything without scale. That’s the advantage that they have I think they should play on. When I go back to the days when I was running services or products inside telecom operations, I would take the approach of starting with some very basic services. It doesn’t have to be sophisticated. Backup services: people have file servers, a bunch of branch offices, why don’t you just back that stuff up? And it’s not complex. And will H&R Block pay an operator $100 a month? I don’t know. Probably. And over time that becomes a pretty large business. But to me it’s just tackling basic services that an operator ought to offer.

DMR: Interesting. So what kind of companies are you investing in right now?

Brian: I’m investing in two general areas. One is infrastructure technologies. That’s largely in communications, enterprise infrastructure, carrier kinds of things, and then energy technologies – not so much clean tech but really the intersection of IT and energy. Those two things. If you do an analysis of returns, it’s still by and large mostly infrastructure technology companies that are having the big outcomes. So even if you look at the last quarter, you have LifeSize for $400M. You have Starent for $3B. All of the large exits are still actually infrastructure companies. 
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