A Cloud Startup Story (Part 2)

Jolie Hales: Oh, somebody did try to break into my house when I was living by myself before I got married, and I had to yell in a deep man voice, "Get away from me. I've got a gun," and they ran away. Ernest de Leon: Are you sure it wasn't the person who was writing letters to your pet? Jolie Hales: No, I'm not sure. I really have no idea who it was. I hope it wasn't that person. Hi, everyone. I'm Jolie Hales. Ernest de Leon: And I'm Ernest de Leon. Jolie Hales: Welcome to the Big Compute podcast. Here, we celebrate innovation in a world of virtually unlimited compute, and we do it one important story at a time. We talk about the stories behind scientists and engineers who are embracing the power of high performance computing to better the lives of all of us. Ernest de Leon: From the products we use every day to the technology of tomorrow, computational engineering plays a direct role in making it all happen, whether people know it or not. Jolie Hales: Hello, everyone. Hello, Ernest. Ernest de Leon: Hello, Jolie. I know you were feeling a little under the weather last time we recorded. Is it okay for us to take off our masks now for recording this episode? Jolie Hales: I wish I could say yes, but would you believe I caught another illness in this last week? This is illness number four since the new year for me, which I guess is just par for the course for a pregnant woman in her third trimester. I mean, I can't really complain because it could always be worse. I'm still kicking. I just sound not myself all the time now. How about you? I mean, your wife is also pregnant. How's she doing these days? Ernest de Leon: Let me tell you, she's doing great, but she's also struggling. It's one of those when you're this late in the pregnancy, I think you both are pretty much on the same schedule, the later you go, of course, the harder it is and all that. So she's doing fine, but luckily, knock on wood, neither one of us have been sick in over two years, so we've been lucky. Jolie Hales: You really have been lucky. I feel like I'm hoarding the illnesses in my family. Ernest de Leon: Yeah. I think it's related to all the mask wearing around here, because it went from people wearing whatever mask they could get their hands on to now people, myself included, are wearing masks that have certain designs on them or whatever. So it's become like a fashion thing. Jolie Hales: My favorite mask is the one that has two different music time signatures on it, like 13/8ths, and I think it's like 6/5ths and it says, "These are difficult times." Ernest de Leon: That's a great one. I ordered some that were... One of them is the face mask that Bane wears. Jolie Hales: Oh, I've seen that one. Ernest de Leon: In the Batman movie. And then I got, are you familiar with the Guy Fawkes mask? It's the one that you always see Anonymous wearing. Jolie Hales: Oh yeah, of course. Ernest de Leon: Yeah. So I found one that was like the print of that on the mask itself. But those two, the Bane and the Guy Fawkes one, when I'm out in public, like at the store and people see them inevitably, at least one person's like, "Man, I love that mask. Where did you get it?" Jolie Hales: That's awesome. I'm over mask wearing. So I don't wear mask anymore in public. Maybe this is my penance for it, but I guess I'd rather be sick than put that thing on my face anymore. I'm so sick of it. Ernest de Leon: I think we're all over it. But at this point, like I said, it's turned into like a fashion statement. Jolie Hales: So it's like fun. Ernest de Leon: I put it on. It's like putting on, I don't know, a tie or a shoe or something. It's just- Jolie Hales: Do you wear it at the gym? Ernest de Leon: No. Jolie Hales: Okay. Good. I see people at the gym wearing masks and ... I don't know, to each their own, but I wouldn't do that. Ernest de Leon: I used to, but then come new year's, every year, all of a sudden your gym is packed with people. Now, I don't go to an actual gym. Our complex here has, it's pretty much a little gym. And you can fit, I don't know, 20, 30 people in there at a time. So of course after the first of the year, all these people start coming in. So yeah, I wore my mask for a while, but then by the time February 1st comes around? Jolie Hales: Nobody else comes in. Ernest de Leon: Nobody's in there. I'm by myself. Jolie Hales: It's so true. Ernest de Leon: So there might be one other person. Jolie Hales: Well, you don't even need a mask. Ernest de Leon: So I don't even need it. No one's in there. Jolie Hales: I haven't really gone to gyms much either. In fact, I never have, I've always just been a runner outside, but so I actually did finally sign up for a temporary three month gym membership it for my third trimester because running is getting like really hard. So that way I can swim laps, and it's been great. Except on the second day that I went, some thief went into the women's locker room and cut all the locks and stole everyone's belongings, including mine. This is last week. So they got my keys, my wallet, a bunch of my stuff. I had bought like a brand new gym bag and I was hesitant to even use the lockers, but my brother and my brother-in-law are gym people. And I'm like, "What do I do? Do I trust the lockers?" And they have the same type membership. They're like, "Yeah, you get a lock," so I went and bought a lock and literally the second time I go, I get totally robbed. And all my stuff gets taken. And I'm just like, wait a minute. This is super lame. I've literally been robbed 50% of the times that I've been to the gym- Ernest de Leon: That you've gone to the gym. Jolie Hales: In my entire life. Ernest de Leon: Yes. Statistics are hell of a thing. Aren't they? However, one thing I will always advise to people, if they ever have keys stolen or identification is to make sure they change their locks. And if they have a car and it has like a fob program, reprogram it because. Jolie Hales: Well, that's what they did. They took all the keys out of everybody's bags and they went out into the parking lot and they robbed all the cars. But I've been driving the same Toyota Tacoma for 18 years and it does not have any technology built into, and so I didn't have a key fob. So I was spared and I just happened to have my phone with me for that swim because I was attempting to listen to music, find a way to listen to music and podcasts while I was swimming. And it was an epic fail. But the great news is I had my phone with me still. So I was able to cancel my cards. We did change the locks, and I park my car in the garage now. I got another additional identity theft protection program, because we're in the process of trying to buy a house. And this is like the worst possible time to have somebody hurt your credit. But at least they didn't physically mug me and like hit me in the head with like a two by four or something like that. But yep. That was my week, last week. Fun times, I guess I'm going to vent about it on this podcast today. Ernest de Leon: Yeah. And then our apartment complex has actually been burglarized. And I'm talking about like the storage units that belonged to the residents. We had ours burglarized once before the pandemic and then again during the pandemic. Jolie Hales: Wait, really? Did you get your stuff stolen? Ernest de Leon: Yeah. Yeah. We got stuff stolen. And then when that happened, every time I was running into other residents, I would ask them, "Hey, do you happen to have a storage locker?" And I would say about 50% of the ones I talked to said that they'd had storage unit said, "Yeah. And mine was broken into." Jolie Hales: Wow. Well you're in San Francisco and that's known in the news right now for these kinds of robberies, especially. Ernest de Leon: Yeah. Well where our apartment is in California is actually in north San Jose. And the other day I was ... I mean, it's not funny, but I was laughing about it. I went downstairs to get something and someone had broken into the front office of the apartment complex. They just like busted the glass, went in there and stole. Jolie Hales: What are you going to steal from the front office? A chair? Ernest de Leon: Probably computers. They only had like two, it was laptops. Anyway, long and short of it is petty theft has skyrocketed during the pandemic and it hasn't really come down. I mean, it got to the point you saw, I'm sure you saw where people were like ransacking- Jolie Hales: Yeah. Oh, I saw. Ernest de Leon: Luxury stores. Jolie Hales: Everyone in the country saw. Ernest de Leon: Apparently the trains down there were getting robbed. Jolie Hales: Yes. The trains in LA down here, they're breaking into the box cars and they're going through every package that's been shipped via train to the point where the train companies are saying they don't even want to go to LA anymore. That's not going to do anything great for the supply chain, I can tell you that. Ernest de Leon: No, it's a mess. And conceptually, everyone understands why this happens. But at the same time, it's like, man. Could you imagine just hypothetically if no one stole stuff anymore? Jolie Hales: Oh, it'd be so wonderful. Why can't people all just be honest and work hard and be kind to their neighbor and eat donuts? Ernest de Leon: It's all a mess, but. Jolie Hales: Anyway. Yeah. I guess we can get back to the main subject at hand. Where were we even with the last episode? Ernest de Leon: Joris was at Harvard Business School. Jolie Hales: Business school. He went the business school. Ernest de Leon: That's right. Jolie Hales: Yes. And I should note, this is part two of a two-part episode series about the founding of cloud high performance computing company, Rescale. So we recommend you go back and you listen to part one before continuing here. Or you might be a little bit confused if you're one of our listeners. And for everyone else as a refresher in our last episode, Joris Poort, who is founder and CEO of Rescale, he was telling us his story beginning with being born in the Netherlands And then moving to the US, then to Australia, then back to the US where he dabbled in all kinds of computation, mechanical engineering, math, multidisciplinary optimization, and even playing the trumpet. Eventually leading him to work at Boeing where he found it difficult to get out access to the compute necessary for the computational engineering projects he was working on. So he surprised and terrified his parents by leaving Boeing in pursuit of an MBA at Harvard, where he also worked as a consultant for a semiconductor company, all the while mulling a over what he should do with his career moving forward in order to have an impact on the world. And at this point in the story, Joris has just returned back to Harvard after a summer of consulting in the Netherlands. And he decides to do a field study with a top entrepreneurship professor at Harvard Business School named Shikhar Ghosh, who actually has his own Wikipedia page. So he must be a big deal. Ernest de Leon: That's right. Jolie Hales: In fact, according to that Wikipedia page, not only is Shikhar a top professor at Harvard Business School, but he has been the founder and CEO or chairman of eight technology based entrepreneurial companies and was selected by Business Week as one of the best entrepreneurs in the United States, one of the masters of the internet universe by Forbes, and CEO of one of the most innovative companies in the US by Fortune. So he's gotten the attention of the national media, and spoiler alert, fast forward to today and Shikhar actually sits on the board of directors for Rescale. Ernest de Leon: What a coincidence. Jolie Hales: I know. Joris Poort: And so decided to do this field study together of looking at the technology and the business opportunity, the market opportunity of something in the category of solving these computations better and combining cloud computing with the algorithm side of things and the evolution of the semiconductor ecosystem as well. And so there were many different components coming together that I had experience in and that I was really interested in. And that was the starting point of Rescale. Jolie Hales: Joris was really starting to tie his background together with his new business savvy. And he started to see a market opportunity that not only had a strong chance at success, but could make a big difference. Joris Poort: The idea of Rescale really came from the last 10 years, 15 years of my life at that point of just couldn't let go of the potential of bringing better computing capabilities to engineers and scientists and what that would do for the world. Jolie Hales: So in studying with Shikhar Ghosh, Joris really focused on what the market opportunity would be if better technology was to developed to solve engineering problems. And he looked into a number of different verticals, like aerospace, drug discovery and financial services where algorithms motivate stock trading and money printing. Joris Poort: And turned out that if you look at most of the global 2000, fortune 500, most companies, so most being more than 80%, 90%, use computing as part of their core R&D or research as a core capability to build better products or better solutions. Ernest de Leon: Yeah. I think you'd be hard pressed to find many industries, especially with large multinational corporations that aren't using computing for any of their R&D stuff. As a matter of fact, I could didn't even think of any off the top of my head. Jolie Hales: Yeah. That's interesting. You don't really realize it unless you start thinking about it, but. Ernest de Leon: Yeah, even the shampoo bottle that you have in your bathroom, that bottle had to be designed and they did engineering and computation to figure out exactly what the right thickness of the polymer would need to be for the outside of that, for it to retain its shape, but cut down on weight because of shipping costs. Once you're cranking out millions of those bottles, every extra ounce adds to your shipping costs. So there's a whole lot of stuff that goes into the most mundane items that you and I take for granted. So yeah, I can't even imagine what doesn't go through this stuff, except maybe some handmade stuff on Etsy or something like that. Jolie Hales: You need to do more R&D on paper straws then. Because I had one yesterday and it did not go well. Ernest de Leon: Yeah, those are a bit of a farce. Joris Poort: So what's your addressable market is usually the way you define it as starting a company, but when that's big enough, that means you have the potential to build a good business Jolie Hales: Through his studies, Joris was finding that not only was there an opportunity to make a difference in the world, but that the market share to make that difference was really big. Joris Poort: If you want to make a big impact, which for me is the motivating factor. So making a big impact requires generally a big company, but most large companies require decent amount of funding. And so to get the funding you got to have this big market opportunity because they're making a risky bet on you as a company in venture capital. Jolie Hales: And the Silicon Valley model for venture capitalists was to invest a big chunk of money across multiple companies, knowing that probably only about 10% of them will actually yield a meaningful return, which means those companies that do find success need to find a lot of success in order to bring in funds to make up for all the VC investments made that didn't pan out. Joris Poort: So it's got to be a big idea, right? Because if you want to provide 100x return to somebody that starts as a small company, but it's got to be able to get really big. And so that's where that market opportunity is really important. Jolie Hales: And seeing the large market opportunity for R&D technology was an eye opener for Joris. Joris Poort: For me, it was like, well, if you're going to go spend, you spend a lot of time in your life working in your career on something, you should probably do it on something that's really meaningful and is going to make a big impact, right? Jolie Hales: He had always wanted to make an impact on the world. And now he realized that he might have the formula to make that impact through a successful business. Joris Poort: For me, it wasn't really about starting the company. It was much more about this technology has a lot of potential. There's a lot of impact. Because I looked at the example of Boeing, how many other engineers are sitting around? Like at Boeing I was willing to lead the fight to get access to that compute capability, and even there was still highly constrained in what we did. We could do so much more. And so if you multiplied that by all the engineers and scientists all around the world, the constrained potential that computing could unlock is just incredible. And I could not let go of that idea. Jolie Hales: Joris kept thinking about it, and the more he mulled it over, the more he felt like this could be what he was meant to do. Maybe he should start a company that accelerated innovation for research and development across the globe. But if he went in that direction, he knew there would be risks. Joris Poort: And back to the minimum graph framework, a lot of these startups don't work out, and it's really, really hard to start and run a company and grow their over time. And so for many people, I think that's a lot of risk. It's very uncomfortable and it's not for everybody, but for me it was pretty straightforward in the sense of, if I had tried and say failed, spent two or three years working on this thing building some cool technology, but turned out not to be a good business or couldn't raise the funding or whatever it might be and fizzled out, I'd happily go back to doing something different knowing that I tried. Jolie Hales: Which I think is one of the things that sets leaders like Joris apart from many people who have big ideas, but then don't actually move forward to execute them. Obviously to start a company, you have to have vision, you have to have a good amount of intelligence. You have to understand marketability and be resilient and all of that. But you also have to be comfortable with taking a chance with a risk level that I don't think a lot of people really prefer to embrace. Ernest de Leon: Right. It's a very personal decision. And it's not just the risk that the company fails. It's also the time involvement. There are a group of us out there who look at this in terms of, do I want to make a 10 year plus commitment to a company that could fail or do I want to find companies that have made it past that like three year threshold? So their viability is essentially proven at that point. The time commitment as a percentage of your life is less so there's risk, but there's also time. And so a founder has to accept both of them, and that's a challenging decision to make. Joris Poort: At that time that's the way I was thinking about it was like, okay, well then maybe I've like delayed my career maybe by two or three years, because I've wasted a bunch of time on some project that didn't work out. But I probably learned the most and I thought that would be really interesting. And it's the first time I really took a shot at something that most people around me thought was totally crazy with my parents and all of the advisors and things like that. But I was like, what better time than now? Jolie Hales: Joris knew that if he was going to take on this risk and start a company he was in the perfect time in his life to do it. He wasn't married with a family yet, and he was just finishing his Harvard MBA, which acted like a nice insurance policy because I mean, honestly it would allow him to always be able to find some consulting job at a company like McKinsey in the future. If he wanted to. Joris Poort: Ironically, maybe the best thing to do when you start a company, is that what I would call burn the boats. In the sense of like, you really shouldn't have any backup. But I do think that having some fallback always is something that allows you to take more risk. Jolie Hales: So while Joris was in his mid twenties, his mind was made up, he was going to start a tech company. Joris Poort: I think our original name was Cambridge Optimization Technologies. There's some incorporation of that sitting around in Massachusetts somewhere. Jolie Hales: And by the time graduation came along, what better place to really launch this new tech company than the center of the world's tech startups, Silicon Valley. News Clip: Like many young Californians, Steven Jobs has a pension for the Western casual and the love of the scenic outdoors, and in the Silicon Valley Jobs is the classic example of the computer industry's philosophy, which says take a chance. You've got nothing to lose. Joris Poort: Didn't know anybody. I hadn't worked or lived in Silicon Valley at the time. Hadn't really been to the Bay Area and just literally moved out there and, hey, this is the best place to start companies. Jolie Hales: He literally just found an apartment, moved in and then started figuring out what to do. And all along the way, Joris found some support from someone who mattered. Joris Poort: My girlfriend at the time, now wife, was willing to go along the ride with me. Jolie Hales: She believed in Joris and as a consultant for McKenzie herself was willing to financially support her now technically unemployed boyfriend who was also loaded up on student debt with this vision that he had of making a true impact in the world. Ernest de Leon: Let's be realistic. How many couples are in this position when it's not an issue of somebody starting a company? I would take the risk. It's a sound risk. Jolie Hales: I think it's awesome. Ernest de Leon: I did a similar thing for my wife. She wanted to go to law school. Jolie Hales: Oh no way. Ernest de Leon: And I was like, "Yeah, knock yourself out." So we moved to New Orleans because that's where they gave her a scholarship spent three years there while she did law school and graduated. So she was not technically unemployed. She was unemployed for three years. Jolie Hales: Well, I mean, in our family, my husband doesn't work. He went back to school for computer science and I'm the one who's the breadwinner in the family. So like, I mean, that's what couples do, but I mean, he's my husband. He's not just my boyfriend. Ernest de Leon: Well, yeah. Jolie Hales: I think it's pretty- Ernest de Leon: Yeah. There's a big difference between a husband and a boyfriend. Yeah. Jolie Hales: Right. Because at this point in Joris' story it was his girlfriend. They weren't even technically married yet. The marriage does eventually come and he does marry this woman, as he should. Ernest de Leon: Yes, absolutely. Jolie Hales: But there wasn't that extra level of commitment and she was still willing to help out because she believed in him, which I think is really cool. Joris Poort: That was for me a very important element of being able to start the business because without her support, I'm not sure it would've been the same decision and the path I took. Jolie Hales: But his academic Dutch parents? They were beside themselves. Joris Poort: They're like, "So let me get this straight. So you didn't listen to us to stay at a place like Boeing or do like a PhD or something like that. You didn't do that. And instead you loaded up on debt that we spent our whole life making sure that you don't have. You went to this questionable place. Let's just say this evil business world, and then you have the opportunity to go work and make more money than you ever thought you would amount to at a place like McKinsey. You're going to turn that thing down and then you're going to go and be unemployed and work in your basement?" Ernest de Leon: I would've been the proudest parent ever if my child had done that. Jolie Hales: And the company started with, as Joris puts it. Joris Poort: Very humble beginnings. Jolie Hales: And with the new location came a new company name. Joris Poort: I don't think it was very popular with other people. And it was a company name for a while. And our official registration in Delaware still has this name. Jolie Hales: The name was spelled V-L-U-D-O, Vludo. Ernest de Leon: Vludo, When I first heard the name, it reminded me of Vudu, that streaming service for movies. So like this is a very Silicon Valley type name, but I just don't know that it like ... Jolie Hales: Communicates what they do? Ernest de Leon: Yeah. What does it do? Then again, what does voodoo do? That makes no sense. Jolie Hales: Or Hulu. Ernest de Leon: Exactly. Hulu's another one. Right? What on earth is a Hulu? Same thing for Amazon. That's random. Right. And I know there's a story there. I don't remember what it is. News Clip: The name was chosen because of the largest river in the world, which can be seen in the company's original logo. Bezos had hoped that Amazon would one day be an endless e-commerce marketplace. Ernest de Leon: This is in contrast to companies like Netflix, which is- Jolie Hales: That makes sense. It's flicks on the net. Ernest de Leon: Yeah. I mean just on the nose. I know exactly what that company does. Jolie Hales: Door Dash. Ernest de Leon: Right? Door Dash. But think about Uber. Jolie Hales: Yeah. I was going to say Uber. Uber doesn't make a lot of sense. Ernest de Leon: I mean, if you take the German word Uber, but that has nothing to do with driving cars around. So Lyft on the other hand- Jolie Hales: Gives you a lift. Ernest de Leon: Gives you a lift, unless you're from like Europe, in which case you're asking, why are you naming a car company after elevators? Jolie Hales: But then like what about Apple? Ernest de Leon: That's a great one too. Jolie Hales: It's obviously not something you eat. Ernest de Leon: Yeah. Well, so keep in mind now I'm not justifying the name. I actually- Jolie Hales: Whatever I know justification is coming. It's fine. Go ahead. Ernest de Leon: In the beginning it was actually Apple Computer incorporated. So it wasn't just Apple. All of it is one phrase. And then when the brand got to what it is today, they just truncated it to Apple. Jolie Hales: It's a little bit more understandable. Ernest de Leon: Now appropriately named companies, Microsoft, on the nose. Microcomputer Software. Like that was like- Jolie Hales: What about Google? Ernest de Leon: That one's interesting because that's actually named after like some mathematical thing. Jolie Hales: Oh, it is? I didn't know that. News Clip: They named their search method after the mathematical term for one followed by 100 zeros, intentionally misspelled. Ernest de Leon: But I think this is the natural evolution, right? Like you start off with, what was it? Cambridge Optimizations or something like that. And in many of these companies that don't nail it on the first try, like there's an evolution that happens, and this is just making their way along to find something that fits overall. And I think Rescale fits incredibly well. Jolie Hales: Yeah. Rescale totally does. But I actually like the name Vludo. Ernest de Leon: Yeah. If I was going to launch my own like video on demand service, I would name it Vludo. That's great. Because at least it's like video something or other, then like D-O is on demand. I don't know. But it was a good name. It just didn't really tie in. Joris Poort: It's pretty hard to, even at that time to get a good .com domain name. And so this was one that I had registered that was still available and I thought it was a cool name, but obviously later got lots of constructive feedback on that name. Jolie Hales: I asked Joris where he got the name. Was it some cool Dutch word or something? But not so much. Joris Poort: Yeah. I just totally made it up. Jolie Hales: And with that, Vludo or Rescale was born. And there's another person we mentioned earlier who we need to bring back into the story now. When Joris was working at Boeing, he reported to a man named Adam McKenzie who was with Joris through all the time scrapping for compute resources and also part of the team that was ultimately responsible for lightening the weight of the wing on the 787 Dreamliner aircraft. And over the years, while Joris went to Harvard, the two of them kept in touch and they bonded over their vision for what computational engineering could be. Adam had also moved on from Boeing to work in, and I'm feeling like there's a trend here, consulting. And he had held onto his excitement about what this technology's potential really was. So at one point, when Joris had the opportunity to present at a Microsoft research conference- Joris Poort: The title of this is cloud based product development- Jolie Hales: Not far from where Adam was located and working at the time, the two of them had some time to catch up. Joris Poort: Over some sushi or something planted the bug of, hey, we should really go and pursue this opportunity. And I would say maybe a year later or so finally could convince after a lot of arm twisting Adam to jump on board. And so then it was two of us. Jolie Hales: Two co-founders of Rescale. Although they started small. Joris Poort: On the weekends, we would hack together some software and stuff. Jolie Hales: And like many software companies in their early days, Joris and Adam began by just writing a lot of code, aiming to build the first version of the product they wished that they had, that would solve the problems they were looking to solve. Joris Poort: Run these large scale aerodynamics problems in the cloud was where we would start because that's where our experience was. Jolie Hales: Cloud computing was just starting to emerge. I mean, AWS had been around for a few years and now Microsoft Azure was just getting into the game. The time was right, it seemed for Joris and Adam to be able to make their dreams a reality. But in order to make them a reality, they would need funding. Lots and lots of funding. Joris Poort: So I went and pitched this idea to many investors. Jolie Hales: Around 70 investors over a nine month period. Joris Poort: Was rejected by every single one of them. Jolie Hales: This was during a time when it was all the rage to apparently invest in social local mobile companies, or SoLoMo as you may have heard it called, and Rescale in its beginning stages was not SoLoMo. Ernest de Leon: Man, I remember the episode of Silicon Valley where they made fun of this. Jolie Hales: Oh really? There's an episode about this? Ernest de Leon: Yeah. And there's this pitch event that happens every year. Tech Crunch, I think it's called Disrupt or something like that. And it's where the companies come pitch to a large audience and whatever. And they made fun of that in the show Silicon Valley where like every single pitch is coming up on that stage, it turns into just a montage of the pitcher saying social, local, mobile, mobile, local, social. Silicon Valley - show clip: We are truly local mobile social. And we're completely SoMoLo. And we're MoLoSo. So we're LoMoSo, bro. We were solo Mo, but now we're MoLo. No, MoSoLo. No. Ernest de Leon: That's why I stopped watching that show. It was too close to home. I couldn't deal with it. Joris Poort: At the time, it was like this really complicated piece of enterprise software that's going to run in the cloud, which still a lot of folks were pretty skeptical of, that, that would be something like an aerospace company would be willing to put their IP on a public cloud, on servers that weren't directly managed by them. Jolie Hales: Additionally, the fact that Joris was pitching the aerospace industry as a starting point was a turnoff for a number of investors, because at the time aerospace development cycles were really long, right. They often took seven or eight years to design a single airplane. So implementing new technology into those design cycles would be a slow moving slog. So I mean, needless to say, investors were not really chomping at the bit. Joris Poort: It's pretty demoralizing to be rejected over and over again. You got to have a lot of grit, a lot of resilience to make it out of that to a period of time. But it's pretty common for founders to often persevere through times like that. But it was definitely very tough. Jolie Hales: But Joris persevered, despite the setbacks. Joris Poort: Having no money makes it pretty hard because I was pretty frugal at the time. And so every little expense feels like this money coming out of your pocket. Jolie Hales: And I asked Joris what it's like to pitch in front of investors. If it's more like giving a book report in front of a very important teacher or if it's more along the lines of the TV show Shark Tank. I mean, have you seen that show, Ernest? Ernest de Leon: I've seen it like one time. Jolie Hales: Yeah. I think I've seen like 20 minutes of it. Ernest de Leon: Yeah. It was complete garbage, but I get it. Shark Tank promo: Who are the sharks? Their self-made millionaire and billionaire investors who are entrepreneurs themselves. Joris Poort: Usually not in the TV show setting. But I think that the reality is, somebody doesn't write a check, it's a no. However, for the entrepreneur it's usually ... I mean, this is like your baby. You really care about this thing. So as an investor, you got to be a little bit careful. It's not in the investor's interest to give you really critical feedback, even if that might help your company the most. Because ultimately one of the beautiful things I think about Silicon Valley is this meritocratic system of nobody really knows, especially not when it's one or two people with a PowerPoint deck, who's going to be successful. Jolie Hales: And just because a venture capitalist doesn't want to jump in and invest right at the beginning, it doesn't mean that they might not want to come on board later in the process. And so they want to provide honest feedback to the entrepreneur without crushing their hopes and dreams and shutting the door on them completely. Joris Poort: To me a no just means not now. It might mean tomorrow, you'll say yes. That's really what it means, but usually never get really going to get a no because it's pretty demoralizing to get a hard no. Jolie Hales: And this way of thinking totally makes sense when you're trying to stay motivated and get investors. Though, I will say that the same way of thinking should not always be applied to the dating world as it has created one too many stalkers for me and many others over the years. Like, Ernest, I had a guy who I did actually give multiple hard nos to literally write and mail letters to my dogs, thanking them for being good pets to me, this is a true story. Ernest de Leon: What? Jolie Hales: Yes. Weird. Ernest de Leon: What? Jolie Hales: Weird, weird, weird. And that was just one thing that he did. Oh, it was so bad. Ernest de Leon: I do not understand. But I mean, I guess because that's not ... I mean, I don't, maybe that's normal? Jolie Hales: No, no. It's not normal. Ernest de Leon: I don't think it is. Jolie Hales: Nobody writes ... No, you don't write letters to people's pets if you have a crush on them. That's weird. Ernest de Leon: That is almost like Hannibal Lector level. Jolie Hales: Yeah. I know. You can imagine my reaction opening up those letters. First of all, they were addressed to my dogs and I'm like, "What is this? Maybe something from like Petsmart?" No, it was a stalker. He's moved on, thankfully. Married somebody who seems much more his match. So yay. Happy ending. So yes, no means no in the dating world, usually I will say. But in the business world, okay, I can see how no means not now. And I can see how that would easily apply. And I mean, at this point I know that Rescale has gotten up to the extended series C and I don't know this for sure, but I wouldn't be surprised to learn if some of the later investors were originally people who said maybe not now to earlier investing. I don't know. Ernest de Leon: That's probably true. An investor who's trying to get a return, they're not going to burn bridges so to speak. They will say not right now or it's not the right time or whatever the case is. But if that opportunity comes back around and it is now solid, they're going to take it because they're after money. It's not a personal thing for them. Jolie Hales: Right. 100%. Ernest de Leon: But writing letters to investors about their pets being good to them is not acceptable. In case anybody is wondering about that. Jolie Hales: It's unacceptable. Thank you. Joris Poort: That's the general sales process, I would say in fundraising is essentially a big sales process. Jolie Hales: An investor pitch is often only 15 or 20 minutes, which means that the investors only really have 15 or 20 minutes where they're solely thinking about a business idea and then they take the opportunity to give the entrepreneur a bunch of advice. Joris Poort: Some advice can be good, some advice maybe not so good. And you've probably as a founder been thinking about this problem, in my case for over a decade already, how to solve this well. So I generally encourage other founders when I give them advice on fundraising is to really think from first principles and people can help ... it's great to change their mind and learn and improve, but to usually the founders themselves actually understand the market opportunity and the business themselves the best. So generally you can take investor advice with a grain of salt. Jolie Hales: But after nearly a year of being rejected by investors, there was a glimmer of hope. Joris Poort: What changed the game for us was meeting with folks from Y Combinator. Jolie Hales: And Ernest, are you familiar with Y Combinator? Ernest de Leon: Absolutely. Jolie Hales: Awesome. Yeah. I think people like you, who've been in this business for a while, know much about it. I, coming from the entertainment world, actually hadn't heard much about Y Combinator because it just wasn't part of my atmosphere, I guess you could say. So for those who don't follow Silicon Valley or the startup world, Y Combinator is one of the most successful and well known startup accelerators that exists. And what I mean by that is it's an organization that offers mentorship, capital and connections to all designed to help select startups launch their companies and have the best shot at success. And Y Combinator is actually the big boy in startup accelerators, having launched over 3000 successful startups, including companies like Stripe, Airbnb, DoorDash, Twitch, Reddit, just to name a few. Their program typically lasts a few months and only around 2% of startups that apply these days are actually selected. Joris Poort: Anybody anywhere in the world can apply. A very simple application. Most of the questions that they ask are really helpful as well for a company. Jolie Hales: And although it wasn't typical for Y Combinator to accept the type of startup that was aiming to let's say build enterprise software for aerospace companies, Vludo, as it was known at the time was accepted into the program. Joris Poort: I think Paul Graham and other folks at Y Combinator were willing to make a risky bet and hopefully will pay off for them. Jolie Hales: Paul Graham, a computer scientist turned venture capitalist was one of the original founders of Y Combinator. And he still held a day to day role there at the time that Joris applied for the program. And now Vludo/Rescale was in, and Joris still remembers the moment they were accepted into Y Combinator. I mean he was out to dinner, I think at a Chinese restaurant in San Francisco with his girlfriend, Flora, and co-founder, Adam. And in the middle of dinner, Joris got a call on his cell phone from Paul Graham himself. Joris Poort: I just jumped up in the middle of the restaurant and Flora still makes fun of me about this. And I forgot exactly what he said, but like, we'd like to offer you the opportunity to come to Y Combinator. And I pretty much shouted very loudly. I accept. Jolie Hales: This was the opportunity Joris had been waiting for. Joris Poort: It was a very different time. The entire company was just two people and you're just scrappin', trying to make it happen. Jolie Hales: And now they would be among a select few companies to go through one of the best startup incubator programs in the world. Joris Poort: And what they do is create a really intense program over roughly a three month period of time that all leads up to this one event called Demo Day. Jolie Hales: And leading up to Demo Day, founders listen to invited speakers and participate in Q&As they go to networking dinners, further develop their pitches, have office hours where they can interact with other companies as well as meet with people who may help them move forward. Often Y Combinator alumni who have gone on to run successful businesses. Joris Poort: At the time we did it, folks like Paul Graham, Garry Tan, Sam Altman, were all partners. They come sit down with you and help you solve whatever the biggest part was in front of you. Jolie Hales: Questions like, how can Rescale land their first customer? And after three months of this intense and beneficial mentorship, Demo Day arrives. Joris Poort: Y Combinator was really built, I think to provide the founders a level playing field. When you're fundraising like through this process, I went through before Y Combinator, it's not a level playing field, right? You're coming in, you're desperate for the money. You're trying to make the best pitch you can. You've worked really hard on it, risked months, if not years. And the chance of them investing in you is pretty low, right? So it's a pretty excruciating process. And then the investor usually has a lot of experience investing in companies. And so there's a huge power imbalance between the founder and the investor. Jolie Hales: On Demo Day, which is actually multiple days long for the program now, each Y Combinator startup founder takes a turn to stand on a stage next to a big projected PowerPoint screen in front of hundreds of top startup investors. And then they make their pitch in hopes of generating some funding. Joris Poort: It does provide the founders and the companies the opportunity to have a little bit more of a competitive dynamic in the fundraising process. Jolie Hales: Because instead of a hopeful founder going to the office of a single venture capitalist who holds all the cards, now the investors have to come to the founders and there's a bit of a competition as to who will invest in each founder's vision, which means a different power dynamic. But Joris didn't actually land his first investor check on Demo Day, as is customary. He landed it before demo day in a unconventional way. In fact, Y Combinator rules were different when Joris went through the program in 2011 in allowing for fundraising before the big day, that I don't even think that's allowed these days. But just before Demo Day, while Joris was going through the Y Combinator program, he was getting ready to go out and pitch the company to a venture capitalist. And this particular investor was great and Joris had been getting fantastic coaching on how to pitch from Paul Graham himself. So he was feeling pretty good going into the meeting. And once the pitch was made-- Joris Poort: This venture capitalist said, "Yeah, we're interested in investing." We're super excited. We come back and then they said, "Hey, what are the terms?" And so we're like, "Okay, Paul, what should the terms be?" Jolie Hales: And so Paul helped Joris sort out the numbers and advised what money and terms would be best for this investor. Joris Poort: So we picked a price and we went back with that price. And investor was like, "No way, that's a crazy price." Jolie Hales: No deal. So Joris went back to Paul Graham. Joris Poort: And I was like, "Paul, come on. This is like, you told me this is going to be a good price. And this is the right fair price for the company. And they said, this is crazy. This is way too high." You got to remember, like, this is back in the day when valuations were in the like single digit millions of dollars. Right. And so today those price have changed dramatically. But, and I was like, "Paul, like, look, if this is the right price of the company, would you write a check?" And I think most people probably wouldn't on the spot asked Paul that question, but I did. And he was like, "Sure." And so he wrote the check, and not a small check. And so he just pulled out his checkbook, wrote the check. Jolie Hales: Like a man of his word, Paul was willing to put his money where his mouth was. Joris Poort: I would say he invested, if anything more out of think a combination of wanting us to be successful and feeling really bad for us having such a hard time fundraising. And it clearly wasn't to make a big return on the or something like that. But why that check is so special and like any other founder would certainly remember that first check of investment is because it's really the first time somebody is putting skin in the game and really willing to believe in you. Jolie Hales: With first check in hand, Joris and Adam were stoked. Joris Poort: Yeah. I think we went somewhere to celebrate. Maybe got a double espresso. You got to remember, we were just totally broke. Jolie Hales: But the future was looking bright. Joris Poort: To this day, that was the probably most meaningful investment that Rescale has received, because it helps provide the confidence and the support and the trajectory that then the company is able to go on. But again, if anything, I think Paul invested more out of pity then to try to make a financial return. Jolie Hales: And as time in the program went by Joris and Adam worked to secure their first customers in order to show on Demo Day that they were building something that people wanted. And they found those first customers in private space companies that I'm told are well known today, but were not as famous back in 2011. Joris Poort: They were looking for new ways to build rockets 10 times faster than the traditional aerospace industrial complex was building rockets or satellites. And that enabled us to come in and say, "Hey, you guys are a startup, we're a startup, let's work together. Let's figure this thing out for you. And ultimately try to help solve the engineering problem of how do you design a rocket 10 times faster, effectively." Jolie Hales: The names of those companies are still on the down low. So they must not be named, I don't know, we can call them Voldemort space companies, but I guess that makes them sound evil. So maybe that's not the best name for them. Ernest de Leon: Yeah. We could also use the Kerbal Space Program. Jolie Hales: What is that? Ernest de Leon: You don't know what that's from? Jolie Hales: No. Ernest de Leon: It's a video game. Jolie Hales: I've never even seen these images. What? Ernest de Leon: They've been around a while. Jolie Hales: Is it like a roller coaster tycoon for a space program? Ernest de Leon: It's exactly that. It's a simulator. Jolie Hales: Interesting. Okay. Yes, we can call it Kerbal then. Ernest de Leon: The Kerbal Space Program. Joris Poort: A lot of great advice. I think Paul was actually somebody who told us is like, "Fly out there, go sit down with them and just don't leave until you come home with a contract. I don't want to see you guys back here at the Y Combinator dinners until you come back with that contract." And we thought it was crazy. And it sounds crazy, but he was so right, because what we did is we went out there, we sat down with them and we did everything we possibly could to get them as, I would say, partners in the development and paying something for what we were building. And that was really material because that's what got us to being able to show, hey, this idea more than just an idea, here are some pretty serious companies building rockets that would use this technology. Jolie Hales: And when demo day came Joris could confidently show how his technology was helping engineers to build some incredible space technology. And as a result, Rescale picked up more than 20 seed investors for a few million dollars. And that led to more investment opportunities. Joris Poort: We have folks like Jeff Bezos, Richard Branson, and Peter Thiel, many others that were quite involved in building this private space industry at the time Jolie Hales: They jump on board investing in Rescale. And I should point out that by this time, enough people had communicated to Joris that the name Vludo probably wasn't going to work. And it was another founder going through Y Combinator who happened to own the domain name, Rescale.com. Joris Poort: So this founder was nice enough to essentially sell it to us at a very fair price, because that domain name really fit the company so well in what we were doing. So we were nice enough to say, "Hey, like as much as I would like to take it, I'll give it to you guys." So that allowed us to really launch the company as Rescale. Jolie Hales: Rescale graduated from Y Combinator at the beginning of 2012, and with their first investors, their new name and their first customers already locked in, they were off to the races. They hired their first couple employees who after more than a decade are still with the company today. Joris Poort: And so with the four of us, we started building the product. Jolie Hales: Over the years, they listened closely to their customers. They picked up more customers from many different verticals. They hired more people, added more features, picked up more investors, raised more money and the company just grew. With Joris all along the way, seeing his technology break down the engineering barriers he had originally been so frustrated by during his own days as an engineer. Now rocket ships and airplanes and drug discovery was being done much faster, thanks to his own vision. Joris Poort: They ultimately really cared about the speed, right? The speed and the performance, and accelerate this overall design cycle. And so we kept writing software to do that. Jolie Hales: But it wasn't all gum drops and roses on the journey at first. Joris Poort: So at that time, public cloud was nowhere near as performant as it is today. So it was known for being really buggy. The performance of a server would be pretty random. You would call up a server and sometimes it would just, the clock speed of the server, the perform of a CPU be like 30% of what it should be. And it might be because it wasn't being properly cooled in some data center somewhere. Jolie Hales: And so even though the concept of spinning up as many servers as you needed via the cloud to get a job done in a faster timeframe was great, the actual server performance just wasn't as compelling against a traditional on-premises system, at least at the beginning. Technology just wasn't there yet, but at the same time, they were able to spin up thousands of servers simultaneously, which was something that wasn't typically done at all. Joris Poort: Which was mind blowing for engineers. Because even if it runs a little slower, now I can run 1,000 at the same time. Jolie Hales: And since that part was resonating well with customers, Joris and his team decided to concentrate on making the software especially awesome while the hardware caught up. Joris Poort: We really hired the team that could go build the software, because it's pretty difficult to build. And so big kudos to all those early engineers and especially Adam, Ryan, Mulyanto, we were all writing software to just make this thing happen. Jolie Hales: Their first 20 or so hires were all technical people focused on building out the software. And then when they wanted to introduce the product to companies outside the space industry, they had to go through a bit of a transitionary period because suddenly the whole "sit down next to a potential customer and don't leave until you've solved their problem" approach didn't really work with fortune 500 companies. Joris Poort: To just put it into the harsh reality, you can't even walk into Boeing. There's a gate. And if somebody didn't invite you, you'll get arrested if you try to jump the gate. Jolie Hales: So they had to hire marketing and sales people. Joris Poort: And that's something I had absolutely zero experience with. And so it was a pretty interesting time. A lot of things learned along the way, but fast forward to today, big chunk of our company, maybe about a third is focused on sales and marketing. It's a huge piece of any important enterprise software company. It's being able to make sure that these products make it in front of the right companies as potential customers and make sure that the customers understand the value that they can get from adopting the technology and the product. Jolie Hales: Because a technical founder's dream is just to build the best product. And because it's the best product, people will just buy it. And that's true to a certain extent, but in an day where there are so many competing voices, there really needs to be someone to help break through the noise and get the product in front of the right people. Retro Commercial: And it's simple with Kraft Macaroni and Cheese dinner. Only a nickel is serving too. Jolie Hales: So Rescale continue to grow. And as far as cloud servers went, before Joris was even accepted into Y Combinator-- Joris Poort: I used a combination of a bunch of mappers and a dupe run in a distributed form at large scale, many computations on Rackspace for software, because they gave me some free credits as a startup. Jolie Hales: Which is technical speak that means he did smart person things to connect to what he could afford. But eventually Rescale partnered with a well recognized cloud service provider. Joris Poort: At that time, I don't think it was even a serious choice in the sense of the only cloud provider that was really catering towards startups and early stage developers was Amazon Web Services. And so they since then have been an amazing partner for us. And we started building upon that API. Jolie Hales: In addition to Amazon, Rescale started partnering with supercomputing centers. Joris Poort: Who has the latest and greatest computing technology? It's all these like universities and national labs. Jolie Hales: And Rescale still partners with supecomputing centers. Joris Poort: Just a few months ago, we announced partnership with Fugaku, which is a super computing center in Japan. Jolie Hales: Not just a supercomputing center, but the world's fastest supercomputer. But long before Fugaku, the Rescale platform ran on AWS, various supercomputing centers or on a customer's own distributed private data center. And soon after, as cloud really started to take off, Rescale added all the other major cloud providers like Microsoft Azure, Google, and Oracle. And today it's safe to say that cloud hardware technology has in fact caught up, and the thought is, I mean, let engineers do what they're hired to do, create awesome products and innovations. Don't make them have to sit there and figure out how a data center works or have to wait around in long queues or lines to get a job going. Instead, be able to run a simulation during a coffee break or something using software and hardware optimized for that specific workload in an easy to use collaborative environment. Joris Poort: As a company, that was certainly our thesis that if you're an aerospace company or an automotive company or a life sciences company, you probably shouldn't be building up this expertise around running data centers. That probably should be somebody who's really good at running data centers. And they're probably going to be able to do it better, faster, cheaper than you would be able to do yourself inside of the company whose focus is on building certain product. Jolie Hales: And today, Rescale is used by countless companies around the world. Joris Poort: Most of the largest companies in the fortune 500 in these verticals are our customers. And so, yeah, that's a huge accomplishment. And I want to thank the entire Rescale team over the years for many years and long nights of hard work that has gotten us here. Jolie Hales: And it's funny to think back on the beginnings, the little Dutch boy without a TV who learned to program in his childhood, plopped down in an English school and eventually developed a multidisciplinary process to optimize the wing of an airplane many of us have probably flown on ultimately using his passion and his experience to create technology that is now being used to build rockets, more airplanes, cars, consumer products, as well as design microchips, sustainable energy practices, drug discoveries. And I mean, just about any innovation out there that involves engineering. And I don't know. That's pretty cool to think of about. Ernest de Leon: Yeah, I agree. As a matter of fact, I've flown on a 787 several times. Keep in mind, the 787 is a massive airplane. It is huge, right. Amazing aircraft, like just- Jolie Hales: Is it cool to think about now what you know about how its wing was designed? Ernest de Leon: Yeah. Because obviously back then, I didn't know Joris and Adam, but it's interesting to know now that they had worked on that wing. It is one of my favorite aircraft to fly on. But yeah, that was an amazing feat to get that airplane designed in. It's cool to think that companies like Boeing, Airbus could have the ability to do so much more, much cheaper and much more effectively on Rescale than what they had traditionally done. It's almost uncanny to think of the amount they can gain and then just the reduction and the time to market for a new aircraft, if they use Rescale as opposed to using their on-prem system. So yeah, it's pretty cool. Joris Poort: Success is always in the eyes of beholder. I think the measure of success and how you define success is always very important. So certainly relative to when we started the company, it's an enormous success and there's actually one of our investors, Sam Altman, he has a quote saying something around, "You generally overestimate what you can do in one year, but you probably underestimate what you can do in 10 years." And I think that's very much true and it's a testament to the team of all the grit and resilience and effort put in over the years to get us to this point. But I would say if you look back at the vision we laid out when we founded the company, a lot of it has come true. In many areas it has far exceeded our expectations, and so that's always really exciting, but we have a long ways to go. So if I look at the overall market opportunity or just cloud in general and high performance computing, it's today only maybe about 15% of the market. So we're still in that early stage of adoption. It's certainly going mainstream. If you look at how customers are investing and you talk to analysts, everyone's obviously looking at cloud. Majority of customers are for any net new investments, selecting cloud for that. And our mission and our goal is to empower these engineers and scientists in every single one of these companies to be able to do their work faster, better, and accelerate innovation across all these areas. And so we're just scratching the surface of what's really possible with Rescale. And so I'm really excited about the future ahead. Jolie Hales: And in case you were wondering, I asked Joris what his parents thought of his decisions now, given where he's been as well as where he's arrived. And he says with a smile that he doesn't really ask anymore, he knows that they just want him to live a happy and balanced life. And I don't know, my guess is they're probably not complaining. And as for Flora, Joris' kind girlfriend who helped financially support Joris when he first dove in and took the risk of building a startup, the two of them tied the knot a couple years after Rescale was first founded after the first few people had been hired. They have two young children today, the multilingual and probably genius children we mentioned at the beginning of this story. He also noted that while having a few employees in an official business set up wasn't a requirement for marriage, he was sure it helped that Flora could tell her parents that her husband was more than just unemployed. Yay. Well, that's going to do it for us in this two part series about the Rescale startup story. To learn more about Rescale, you can visit Rescale.com/BCpodcast, where you can also sign up to demo the platform. You can also go to BigCompute.org, where we'll put up some pictures and links of Joris and his journey. Ernest de Leon: And if you'd like to support the Big Compute podcast, you can leave us a review on Apple podcasts or Spotify. You can also visit BigCompute.org for videos, articles, and other podcast episodes all about amazing innovation in a world of virtually unlimited compute. Jolie Hales: Yes, and special thanks to Joris for talking to us today and to all of you for joining us. Ernest de Leon: Don't forget to use multifactor authentication everywhere and practice 3, 2, 1 back up. Jolie Hales: Stay safe out there.