Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
What are the most important technologies that investors need to know? Hhhypergrowth founder Muji and 7investing CEO Simon Erickson dig deeper into what's powering the innovation in today's tech world. In Part 2 of their conversation, they discuss the "must have" cloud tools, cybersecurity, and Snowflake.
July 1, 2021 – By Simon Erickson
Note: This is Part 2 of our two-part 7investing interview with Muji. To see Part 1, please click here.
If there’s one thing you can count on with technology, it’s that it can completely change the way we do things.
Music that used to be played on vinyl records is now being listened to through Bluetooth earbuds as digital mp3. Film reels in movie theaters were replaced by VCRs, which then got replaced by Smart TV streaming. Stick-shift cars eventually became fully-autonomous, while libraries evolved into digital assistants in our living room. There’s no industry that’s immune to technological innovation. Even our coffee is now being made and served by robot baristas!
This pace of innovation continues to accelerate further, as advancements in cloud computing and artificial intelligence are unlocking new opportunities for organizations of all sizes. Forward-thinking businesses are increasing sales by learning more about their customers, while those with complex supply chains are becoming more efficient by taking costs out of their operations.
All of this innovation is excellent news for growth-style investors. By understanding the fundamental technologies that are shaping the future, we can identify the most promising companies who are capitalizing upon them.
So what are those important trends that are brewing today? And what are the specific investment opportunities that are arising?
[su_button url=”https://7investing.com/subscribe/?marketing_id=18024″ target=”blank” style=”flat” background=”#96C832″ color=”#000000″ size=”6″ center=”yes” radius=”0″ icon=”https://7investing.com/wp-content/uploads/2021/04/7Investing-3.png” icon_color=”#000000″]Sign up with 7investing today to get access to our 7 top stock market recommendations every month![/su_button]
To answer those questions, we’ve brought in a technical expert. Matthew Eash — better known by his online moniker “Muji” — is one of the world’s most forward-thinking technologists. After spending decades as a data architect, he’s now founded his hhhypergrowth newsletter to focus on the technologies powering today’s most innovative companies.
In this exclusive conversation, Muji speaks with 7investing CEO Simon Erickson about the important trends taking shape in the tech world. Muji discusses why the recent Confluent (Nasdaq: CFLT) IPO is so interesting to him and why several companies built upon open-source platforms often end up butting heads with the Cloud Titans. The two discuss usage-based pricing and the metrics investors should be evaluating in the new era of cloud-native software companies. They describe why Snowflake (Nasdaq: SNOW) is such a unique opportunity, as well as a variety of other topics that range from Kubernetes to edge networks.
Finally, Muji takes a closer look at several important events that have taken place in the cybersecurity industry during the past year, including the SolarWinds data breach and FireEye (Nasdaq: FEYE) spinning off its products division. He also describes what impact the White House’s recent Executive Order will have on Zero Trust technology.
Muji and Simon share several of their favorite investment ideas throughout the conversation. This is a must-listen for any investors who want to capitalize on the biggest trends taking shape in technology!
Publicly-traded companies mentioned in this interview include Alphabet (Nasdaq: GOOGL), Amazon (Nasdaq: AMZN), Cloudera (NYSE: CLDR), Confluent (Nasdaq: CFLT), CrowdStrike (Nasdaq: CRWD), Elastic (NYSE: ESTC), Fastly (Nasdaq: FSLY), FireEye (Nasdaq: FEYE), Fortinet (Nasdaq: FTNT), Microsoft (Nasdaq: MSFT), MongoDB (Nasdaq: MDB), Okta (Nasdaq: OKTA), Palo Alto Networks (NYSE: PANW), Snowflake (Nasdaq: SNOW), Splunk (Nasdaq: SPLK), Twilio (NYSE: TWLO), and ZScaler (Nasdaq: ZS). 7investing’s advisors or its guests may have positions in the companies mentioned.[su_button url="/subscribe/" style="flat" background="#84c136" color="#ffffff" size="6" center="yes" radius="0" icon="" icon_color="#ffffff" desc="Get full access to our 7 best ideas in the stock market for only $49 a month."]Sign Up Today! [/su_button]
(Part 1) – Introduction: How did you come upon the name “Muji”?
(Part 1) – Confluent’s Initial Public Offering
(Part 1) – Open Sources Platforms Competing with the Cloud Titans
(Part 1) – Usage-Based Pricing and New Investing Metrics to Watch
00:00- “Nice to Have” Versus “Must Have” Companies in Developer Tooling
04:20- Microservices and the Role of Kubernetes
08:19 – Cloud Vendor Ecosystem Lock-in and Switching Costs
11:14 – A Closer Look at Snowflake
18:38 – A Deeper Dive into Cybersecurity
Simon Erickson 0:00
How do you think about that, Muji? This seems like a lot of these are winner take most niches, you know? You don’t need to have 17 identity providers. You might just need Okta, or you know, for Twilio for communications. How do you think about things in terms of nice to have versus absolutely necessary and embedded in the business?
I mean, that’s one of the industries I follow is developer tooling, and it’s precisely for that. You’re trying to find the picks and shovels for other apps to be built on top of, and absolutely, that is the key to that investment theory is that they are in extremely sticky services. They have a high switching costs. And so it was very difficult, like one that came up with Twilio was that Uber was leaving, and obviously was a major customer at the time and had a negative effect on the stock, but they recovered quite nicely. Because guess what? Land and expand. They were landing all these other customers, that platform they built makes it so much easier for any app to have direct communications with customers. Uber had finally reached a state where it was able to dedicate the resources to building it itself. But that is incredibly complex, to build the communications network yourself, and interoperate with all the telcos out there. You had to find some other service in order to handle maybe that last leg of the communications for you. And so it’s it’s about making these tools that reduce the friction of developers. And I think the selling point of all these developer tools like this, whether it’s Okta for consumer identity, or Auth0 now that they acquired, or it’s Twilio for communications, your developers don’t have to spend and waste their time building the framework of your application for the communications part for the login piece. They can sit and focus on what the secret sauce is of that company. They can focus on what the value add is that the company is providing, and not worry and waste time on the structural foundations of the app that they can be rolling immediately with these tools. And so it’s it’s I’ve always been incredibly interested in developer tooling for the for these reasons.
Simon Erickson 2:24
And so on that note of developer tooling, I mean, you now got the picks and shovels that you just mentioned. They’re used for very specific things that people can build things on top of, when we say that, I think of Netflix, kind of as one of the companies that did that really, really well, a decade ago. They were really kind of one of the earliest believers in microservices. You know, you could actually build things in parts rather than this giant IT infrastructure that’s needed to launch an app o and you need to fix it. And then you go back, I mean, you could do this incrementally.
Oh, yeah. And it wasn’t just Netflix, it was all of those kind of tech, behemoths. Facebook, LinkedIn, Netflix. That’s where that was the source for a lot of these open source tools. They had to know how to build tools around these common needs they had around data, for instance. And so like a lot of these data platforms, Apache Kafka, we’re just talking about, spun out of LinkedIn. A lot of analytical tools like Apache Heron spun out of Twitter, Apache Pulsar, the competitor to Kafka, spun out of Yahoo. And so you have this know how in these companies, and that’s what’s kind of spun out into these open source tools. But then the rise of SaaS tooling really provided that as a service. It allows an agility and nimbleness as you’re developing software apps that didn’t exist before. And so that’s why we’re seeing such rapid innovation, I feel like in today’s cloud world, is that developers can move so much faster than they used to be able to
Simon Erickson 3:56
And on that note, can you talk a bit on that note of open source developer tools? Can you talk a little bit about what do you see with Kubernetes? Right now, I know this has been incredibly popular lately. Are there companies that you think are embracing this is kind of the DevOps movement, right, moving things more quickly, more efficiently as you’re building things? Are there certain companies out there that you think are really doing a good job taking advantage of open source Kubernetes?
Well, certainly, almost every company is going to be taking advantage of it for any on prem. But also you can use hosted Kubernetes services. Again, it’s a complex system to run yourself. But it takes so much pain away from the development process.
It’s actually something I’m planning on writing a little bit about is that kind of the brief history of software development just to kind of understand how things have evolved. But Kubernetes is, you know, kind of where things are at now. I was just speaking just moments ago about how in the olden days you had to purchase hardware. And you know, you’re purchasing hardware to host your database on, and you had to buy it with a certain kind of powerful specs. But the database server I ran that was incredibly heavily used and hosted 50 different, heavily used databases at one time was maybe 5% CPU usage 10% memory usage at any time. And so there’s such idle capacity on the hardware that you purchase, what Kubernetes and underlying it, Docker and container ism solve is that you can maximize the usage of your existing hardware. And so that’s really what the movement is about. It’s that you don’t have to have idle processes around. You can use all your capacity as needed. But also it gives you the scale capabilities of the cloud. But on premise where you can, if a certain workload or application is having heavy usage, it can scale up or down as needed. And so you can kind of start seeing the benefits to a developer. And with that DevOps initiative, it’s really the merging of developers and it in order to, you know, make things easier on both fronts. You know, so again, Kubernetes, kind of complex to run. But from the users perspective, which is the developers perspective, it’s a godsend. It makes things so much easier to deploy in a repeatable way with containers, and then you can really, right size, the usage on the underlying hardware. But also, there’s a transferability with it. So I can develop something and get my application running, and or micro services running either locally on my system or on premise hardware, and then we can deploy it into the cloud for instance, into a managed Kubernetes service. And so you really got a lot of optionality with how you deploy and where you deploy. And that’s really what I think is led to, you know, heavy usage of the cloud infrastructure.
Simon Erickson 7:05
Okay, long live Kubernetes. Long live containers, this is a really big deal that we want to-
I don’t know if there’s a way to invest in that. I’m not going say that there’s, you know, there is a company around Docker, for instance, but it’s, and Kubernetes spun out of Google, as an open source package.
Simon Erickson 7:21
Project goals, I’m sure.
I’m sure there’s services around that. But it’s really the cloud vendors that I think are taking most advantage of that particular capability. But what you do see because of that is the rise of other ways of developing like microservices that you were talking about. That is what leads to the importance of things like Apache Kafka, where you’ve got messaging system between the micro services. And so it gets really complex. For me, I guess, I don’t worry about that level of detail other than knowing how it affects my companies, because it does affect a company like Datadog, like CrowdStrike, that you install on your system for observability or cybersecurity, you might install on your on prem server. But when you move your workload to Kubernetes, and Docker, that, you know, you’re not on the server; you’re on the Kubernetes cluster at that point. And so it changes the paradigm of how those companies work. And luckily, both of them have adapted to, you know, what are called Cloud workloads quite extensively.
Simon Erickson 8:19
Let’s talk about one of those companies that has taken advantage of so many of those resources moving to the cloud, right? You mentioned about you want to have no idle capacity, right? You want to give your processing to the cloud. You want to have your data storage – the cloud, we’ve seen Snowflake, come out and take advantage of those tools moving to the cloud, right? Building upon the layer of the cloud service providers and saying, hey, we can do parallel optimization on this. We can efficiently run this in a way that utilizes all the service providers that have those infrastructure blocks in place for you to focus on the apps and Snowflake can be can be the place that does that. So two questions on this Muji. First is, are the cloud service providers differentiated from each other? Or are these resources that that Azure is the same as Google Cloud? And we’re kind of approaching the point where license agreements are available in any region out there, the building blocks are kind of commoditized? Is it something that the cloud is just the underlying infrastructure, then everyone’s really interested in the top layer building upon that now?
Well, yeah, certainly what you have with that, with the cloud vendors, is that they want to provide all the services for lock in that you’re going to remain within their ecosystem for all your needs, whether it be data movement, analyzing that data, creating apps, creating serverless functions, raw object storage. They want you to remain within their platform, and have it within what’s called core cloud. And so, you know, there’s a lot of new dynamics coming up on that front. Certainly, Snowflake is a pretty interesting one, in that they are again, unlike all the, you know, we’re talking about tooling databases are exactly the same thing. Databases are a tool to let developers move faster. You don’t have to worry, especially the managed services, you don’t have to worry about creating or maintaining the database infrastructure yourself, especially on premise. So these hosted, and managed database services that are cropping up have had a lot of success. And that’s driven the success of MongoDB. The success of elastic Snowflake is is a not an open source tool. It is a fully turnkey managed database service that can be used for data warehousing, it can be used for data lakes, and it absolutely its primary point for me and strength for me, I guess, I should say is that it’s cloud agnostic. It can live across all cloud environments. But not only that, they made some architectural decisions within when they created it that really adopted from that Hadoop architecture we were just discussing. Love how all this circles back.
Simon Erickson 11:11
Right, right. It’s a giant circle, it’s interconnected.
But they separated storage from compute, unlike a lot of the other competing data warehousing. So they were ahead on two fronts. They beat all the legacy vendors for data warehouses to the cloud, as a managed turnkey service where you didn’t have built knobs to adjust. It’s very simple to use. But they’re also cloud agnostic. So kind of like I was talking about with Confluent, where they can provide the messaging between clouds, Snowflake is the same thing, you can have one set of data, and it can be replicated across the clouds for you and/or across cloud regions. And so if you’ve got one, this was a exactly shown by a customer profile of PepsiCo, they had one part of the company, the west coast of PepsiCo was using AWS, the East Coast was using Azure. And they had one pool of data on Snowflake, yet it existed on both clouds and cross replicated behind the scenes entirely controlled by Snowflake. Nothing had to be done in this inner connection from the customers perspective. And so they have such a highly differentiated product from what the cloud vendors are providing in terms of data warehouse, but then at the same time, head to head comparisons done by Fivetran, a kind of data warehouse pipelining tool where you can ship data from various sources into your data warehouse, found that because of that storage versus compute split, that Snowflake was the fastest and cheapest option out there currently. And so I think Snowflake figured out the right architecture on how to use the same underlying pieces of these cloud vendors. They’re using AWS S3 or Azure Blob as the raw storage, they’re using EC2 or Azure Compute nodes to house their services that sit over it. And so they’re using the same infrastructures, the cloud vendors themselves, but have found a way to do it better than they have. Plus, with the incredibly added bonus that they’re cloud agnostic, and your data can live anywhere in the world. So making huge advancements in kind of that digital transformation you were discussing, getting folks from legacy on premise data warehouse systems into the cloud. But then once they’re the other value prop of Snowflake is the shareability of the data from there. How you can share it in little partnerships, you can subscribe to data feeds or publish these data feeds that are available to the public. That’s a way for companies to even monetize their own data. A company like Foursquare, you know, an app built around check ins, made this map of all the locations that you can check into across the US and sell that is a data set in the Snowflake ecosystem. And so there’s these data sets that you can use to enrich your own, whether it’s S&P 500 data, it’s COVID data sets to see how the spread might affect your retail chain, you can be pulling these into your data sets in queries within Snowflake. And so there’s this exchange of data possibilities in Snowflake that you’re also not going to get in the existing cloud vendors.
Simon Erickson 14:38
In full disclosure, I’m a huge bull on Snowflake, (and) personally a shareholder of the company. It’s really interesting to see their IP and their know how come from Oracle, who built a lot of the early stages the cloud. Also within you know, person who’s really in the executive as they go and get them kind of guy, Frank Slootman. You know, coming from ServiceNow just gets things done, and focuses that company so well. I’m a huge fan as well. I think one criticism of Snowflake, Matthew, is that people are always calling it overvalued. Right? Everyone says oh the price to sales is way too high, the valuation is way too high. I would argue that the denominator of those comparisons is still in its infancy, and that the cloud has got plenty of years, if not decades of growth ahead of it. What inning are, you’re going to somebody who’s seen that transition firsthand, as you said in the olden days, or used to have everything on prem. And now moving into the cloud, what inning are we in the digital transformation? Are we still in the first and second inning are we kind of gotten a lot of the larger companies on board where we’re closer to the middle of this game?
Oh, absolutely. Early innings, I mean, getting on to get started to use cloud services, improving your development processes, adopting other ways of developing rather than monolithic apps. It’s all in its infancy right now. And so you know, moving to the cloud is step one, but then taking full advantage of the cloud, and multi cloud or hybrid environments. Taking advantage of edge networks, for instance, that I talked about frequently, that’s there’s a whole new compute paradigm and networking paradigm of how you can distribute data around. Aall that’s in its infancy. And so core cloud, you know, is maybe in the second inning, and everything else is in the first inning in terms of digital transformation. And so it’s all just beginning. It’s why I’m so excited about in researching, investing and writing about these things is that there’s no there’s no end to it. I mean, we haven’t even talked about analytics and AI yet. I mean, that’s talked about being in its infancy, companies taking advantage of AI. That’s just being born right now, quite frankly. So, lots to come from here.
Simon Erickson 16:57
The first pitch has been thrown, but there’s still plenty of a ballgame ahead for this.
In response to your to your criticism of Snowflake, my only, the only reason I’m mad at Snowflake is that they waited so long to IPO. They are a company that had been on my radar for more than a year prior. And I just wish that they had allowed me to join along on that, instead of waiting and making everyone also aware of what an attractive company they are at the same time. So yeah, very good point. But yeah, I mean, when you’re going 100%, the valuation is kind of moot at that point. It’s gonna make up a lot of ground. And even if the multiples contract, there’s a lot of leeway between 100% growth and multiple contraction, that is still a profitable investment. And so I see a lot of potential there.
Simon Erickson 17:53
160%+ net retention rates.
Exactly. Using the usage based metrics we were talking about before, customer growth is astounding and are astounding. I mean, like you just don’t see those rates. The only other company I can even think of that, that reports something that high is Agora from China, and then the gross margin is inching up, they’re making more, they’re able to leverage their platform more and more. They’re making performance improvements, they’re making storage improvements that just continue to cause gross margin to rise. I love seeing all those metrics.
Simon Erickson 18:38
I wanted to change gears a little bit and talk about a different topic, which I know that you follow quite closely, which is cybersecurity. We’ve seen an increase in activity in this space, for good reason. Like last year, we saw the solar winds hack, you know, very highly public hack that just happened in Colonial Pipeline even more recently, you know, ransomware that was paid in Bitcoin for the operations day shut down to the pipeline in the southeast United States. And then even just recently, we’ve seen a White House executive order to really up the game on corporate cyber security, government and corporate cybersecurity; where do you think we stand in cybersecurity and who benefits from this?
Well, that’s a big topic. And it’s one I’ve written extensively about. I’ve identified zero trust pretty early on, maybe even a little too early. It took companies a lot longer to pay attention. But the the zero trust paradigm of security, which is trust no one at all times. It was a complete paradigm shift from the days of old, which are still in places. Let’s not call them old, but the castle and moat method of security, which is I’m going to build an impenetrable fortress of my network and grant you access through VPN, or some other method to be able to access that network. Then once you’re within the network, you can go do whatever you need to do. That does not work. The VPNs are reachable. And then once inside, you can criss cross across all these systems and find other vulnerabilities to dig in further. And so it’s called lateral movement in the industry. So zero trust prevents lateral movement. It prevents privilege escalation, which is finding a way to grant your self admin rights while you’re logged in. And it basically creates an A, and I wrote a public piece on this recently. So please do go check out my blog about what a zero trust was – a post this past month, but basically, zero trust.
Simon Erickson 20:58
That blog was fantastic.
Well, thank you. Lots of stick men. I like to add lots of stickmen my drawings, and I like to draw to make these things a lot clearer. And so basically, zero trust creates an ephemeral network. It sees who you are, you establish your identity, which is the authorization process, use something like Okta for, but that also determines your rights, which is the authorization piece. So your rights are fixed. That’s what prevents the privilege escalation. But then it creates an ephemeral network connection to whatever it is you’re trying to access. And that’s what prevents the lateral movement within the old castle and moat scenario. And it’s it’s highly complex, you know, there’s different ways of doing that ephemeral network connection. But it’s complex.
What these new cloud native cybersecurity companies allow for is taking all that complexity out of the equation. It’s much more frictionless, and you can use these services to tie in your users to your applications. And so the rise of zero trust is has been critical, I think, for cybersecurity. And it would have prevented many of these breaches, for sure. Not all of them. But another thing that folds into zero trust, besides identity providers, is that it’s kind of pivoted zero trust to also allow what’s called device posture. So you can tie into the cybersecurity services that are managing your fleet of enterprise devices. And that could be laptops, that could be workstations, phones, tablets, servers, all of those are what are considered endpoints. And, and you can have a service like CrowdStrike manage those endpoints for you and provide malware protection. And so they run an agent on those devices. So you can combine what Okta’s giving you managing your users, and you can combine what CrowdStrike is doing managing your devices into a stronger zero trust platform. So all these zero trust providers, and you know, Z Scalar is one, Cloudflare is relatively new to the market. Palo Alto is getting into it heavily. They can provide and tie into that identity provider and device provider and tie the access rights who can access what down so granularly combined with the femoral network connection, that’s what’s given rise to these zero trust platforms. And there, it’s critical. It’s changing the landscape of cybersecurity.
It’s been interesting to watch the rise of Bitcoin I feel like is enabled this kind of brazenness with ransomware. You know, this wasn’t possible. Certainly, you know, ransoms can occur, but they had to go through the financial system, and could be tracked and stopped, potentially. And now, you know, that’s what’s caused the rise of ransomware. And these platforms that are combining ransomware authors with people who are hackers and know how to hack into systems. They’re combining and sharing the loot in ransomware attempts, and we’re seeing how heavy a toll that takes. I live in the southeast United States and saw a direct effect when Colonial Pipeline billing system, it wasn’t even their pipeline itself, it was their billing system got hacked, encrypted and held as ransom and they paid it and we saw the effects as they didn’t know how to bill their customers, so it shut everything down. It you know, extreme response, and caused a major panic in a quarter of the nation. So, you know, we’re starting now that so much infrastructure is driven by systems. You’ve got IoT devices out there that have been so security lacks. In general, where you know, you have a model of camera that’s being used for traffic cameras, always has the same administrative password hard coded into it, you know, or doesn’t have a firewall over it, so that you can always directly access the IP. So you know, IoT devices are being hacked into and used as bots to attack others and distributed denial of service attacks. But also operational technology, it’s called OT, which is think of smart factories, smart tractors. And now you have smart devices in your home, your Ring camera, your Amazon Alexa device. All of these are Kevin Kelley, a technologist that used to work for Wired or started wired, had a great tweet one time, anytime you read the word smart device, substitute hackable device. And so we’re in the age of hacking, and any enterprise customer has to now take it seriously. And I think the benefit of these incredibly widespread attacks with solar winds, the Sunburst attack, and now the Colonial Pipeline and countless other ransomware attacks that have occurred, finally drove the federal government in the US to address this.
And because it’s being done by nation states, it’s not just, you know, a bunch of teenagers in Finland, you know, hacking into these systems, it’s it’s nation states that are supporting this, and in order to, you know, further their Intel, and so I’m really excited that the federal government finally has a fire under it to take this more seriously. And what they explicitly said in their EEO that I have written about a little bit in my premium sub, is that they’re going to adopt in a very rapid fashion for the federal government. But there is a command for all of the oversight agencies within the government to adopt rules and regulations around zero trust, and moving civilian, federal civilian agencies and contractors to them to a zero trust model of network access. And then to adopt Endpoint Protection solutions as well so that the managed fleet of devices can be protected. And so I think all of those companies have mentioned with cybersecurity, it’s going to rise all boats here. There’s going to be a lot of movement, not only within federal agencies, and then you know, major enterprises that all contract to the federal agencies, but I think it’s gonna make slower moving, more myopic enterprises finally realize that they have to take this seriously. Cybersecurity is a vital part of spend at this point. So I think it’s, you know, massive tailwinds for companies like CrowdStrike, and Okta that are kind of the picks and shovels of zero trust. But also, you know, for all those zero trust providers, company like Z Scalar already has FedRAMP approval High. So can basically go into any civilian agency at this point, and they’re striving for more, you know, they want to get into the DoD levels and be able to to work with some of the agencies that are dealing more with classified information. But for now, they basically have federal authorization to work with any civilian agency. And so that I think that’s a company that has a lot of tailwinds too.
Simon Erickson 29:04
Such great insight there, Muji. But just double click on one of the things you said about how this is changing the cybersecurity landscape out there – I can certainly see how this is gonna benefit companies like Okta for user and identity and companies like CrowdStrike for Endpoint Protection. How does this change the existing landscape for the really, really large cybersecurity vendors, the things like the Palo Alto Networks that were going after network protection right before nets, the ones that were protecting things before they were important, but now the game is changing, and hackers are finding new ways into those networks. Are they going out and acquiring these small pieces that incrementally improve their offering? Or do they get replaced? I mean, I’ve heard that large corporations now on average have more than 50 cybersecurity vendors that they’re working with, do they need to keep those in place or it’s just the the overall game changer, you start working with different vendors than you had before?
That’s a big question. I feel like the legacy players for firewalls, Fortinet and Palo Alto were a little slow to adopt the cloud model. And then subsequently there were a little slow to adopt the zero trust model. They’re all in now. There’s there’s no question. Zero trust is the buzzword in cybersecurity, and has been for the past year. In fact, you can see it if you follow Palo Alto, massive restructuring of their company into two segments, that is basically trying to combine CrowdStrike Endpoint Protection with Z Scalar, zero trust in two segments. And so they’re absolutely paying attention. But I think right now, they’re the major vendors that you’re discussing. And so their focus, first and foremost is in retaining their existing customers, right? And so they’re moving quickly into these areas, but it’s to transition their own customers. And so they kind of have muted growth because of that top line growth, because they’re transitioning from, you know, kind of next gen firewalls into zero trust for these solutions. But they’ve done well, but they’ve given an opening, I feel like to companies like Z Scalar and CrowdStrike. And they’ve had huge success. And that, I see it in the customer growth, you just see this massive onboarding of new customers, incredibly high NRR with these companies, and hyper growth at the top line just shows you that they’re amassing customers, because they’re a preferred solution right now. And so, you know, that’s it’s not investing in growth for growth’s sake, it’s that it, you know, you can see that there’s a humongous appeal for these new approaches. And people are going with the cloud native solutions for that, rather than the existing vendors that are, you know, playing catch up.
Simon Erickson 31:50
Muji, this has been incredibly insightful, you know, we’ve been chatting almost for an hour and a half here about a lot of things. So much fun. It’s incredible. If it is too long, didn’t read for people that aren’t able to make it through 90 minutes of a podcast here. I mean, you said those different approache, we’ve chatted about quite a bit here. But is there anything that we haven’t covered that you’re also really, really excited about? That you’re tuned in on? Obviously, hypergrowth is is your blog that you follow a lot of these things in the details. Just in the bigger picture? Is there one or two things we didn’t cover on this podcast that we should be paying more attention to?
Oh, for sure. I mean, we’ve talked about developer tooling, open source, usage based models, Snowflake, and cybersecurity. But edge networks I briefly mentioned in there, but it’s really changing the paradigm of how networking happens. Everyone focuses on the compute aspect of it, which is, you know, allowing apps to have logic and be running much closer to end users instead of in centralized core cloud. So you know, things that are really latency sensitive can completely benefit from that. But edge networks, what they forget is that it’s a programmable network that can be controlled by that compute. And so it can be making logic decisions as the data traverses the globe. And, you know, you look at the trends from Gartner that, you know, IoT is going to drive a lot of new data coming in from all of these smart cars, and from all of these smart buildings and smart cities and smart factories. And so we’ve got sensors everywhere and cameras. But you know, you also have your distributed point of sale systems and and now remote users are dispersing around the globe. They’re not so much in centralized headquarters anymore. And so I think you will see it emerge as an all new paradigm, kind of against core cloud, and, you know, a company I follow heavily there is CloudFlare, that crosses a lot of boundaries. They are also a zero trust company. And networking company, like Z Scalar, but also with edge compute. And much less, you know, it’s a CDN, like Fastly, and so it’s definitely one to watch as well. And that industry in general.
Simon Erickson 34:26
Once again, our guest today has been Matthew Eash, aka Muji. Runs one of the most insightful and forward thinking websites that I’ve come across. It’s hhhypergrowth.com, hyper growth with three h’s. I just think that Muji, you’re one of the most thorough analysts that I’ve chatted with. It’s been a real pleasure having you on the 7investing podcast today.
Thank you, Simon. Yeah, I’ve always enjoyed talking to you because I feel like you’re the same. You’re so forward looking with with some of this. Certainly with the cloud and data so it’s, there’s so much more to come. That’s that’s the exciting part here. You know, like I said, AI like, haven’t even – another industry to watch but who knows what’s possible there? Well, we’ll find out when the future hits us.
Simon Erickson 35:11
And that’s that’s a future podcast. Right?
Exactly. Let’s see where we are in another year. That’s where I’m sure a lot will occur.
Simon Erickson 35:20
So well, thanks very much. You know, it’s been a real pleasure chatting with you again, and looking forward to keeping in touch with you and chatting in here soon.
Thanks, Simon. Good to see you.
Simon Erickson 35:29
And thanks, everyone for tuning into this edition of our 7investing podcast. We are here to empower you to invest in your future. We are 7investing.
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
Anirban and Matthew were joined by Alex Morris, creator of the TSOH Investment Research Service, to look at seven former market darlings that have taken severe dives from...
On episode 5 of No Limit, Krzysztof won’t let politics stand in the way of a good discussion - among many other topics!