In this episode of Founded and Funded, Madrona Managing Director Matt McIlwain and Partner Aseem Datar sit down with Qumulo CEO Bill Richter to talk about developing meaningful partnerships. Madrona was an early investor in Qumulo when it launched in 2012, and the company recently partnered with Microsoft to launch Qumulo on Azure as a Service. Startups often partner with large enterprise companies to accelerate growth, but there are benefits to both parties, and in this episode, we take a look at it from both perspectives.
Welcome to Founded and Funded. I’m Coral Garnick Ducken, the new Digital Editor for Madrona Venture Group. And in this week’s episode, Madrona Managing Director Matt McIlwain and partner Aseem Datar sit down with Qumulo CEO Bill Richter.
Bill is no stranger to Madrona bringing 20 years of technology experience to the team when he joined as one of our Venture Partners. Madrona also invested in Isilon back in 2001, and Bill was the CFO when that company went public in 2006 through its $2.5 billion sale to EMC four years later.
Then, of course, Madrona was also an early investor in Qumulo when it launched in 2012. In simple terms — if we can talk about the cloud and data storage simply, Qumulo is a cloud-based data management platform that gives companies more flexibility when it comes to storing, managing, and running massive unstructured data workers.
The company, of course, partners with Microsoft Azure, which is what sparked the idea for the conversation on partnerships today. Yes — we’re talking about partnerships. They are often thought of as an important tool to scale from a startup into a growth phase company and then onto becoming fully mature.
But why partner? What are the actual benefits? And when you do partner, how do you make it work and leverage that partnership to truly bring value to your customers. These are the questions that Bill and Aseem, who was previously an Azure executive, are going to break down for us today.
So, let’s kick it off.
Matt: Thanks everybody for joining us for this Madrona podcast. I am Matt McIlwain and one of the managing directors at Madrona, I am just delighted to have one of my fellow partners Aseem Datar here with me as well as CEO Bill Richter of Qumulo. And what’s fun about this conversation is that we’re going to be able to look at.
How companies partner with large enterprises with large platforms and, look at that journey from a couple of perspectives. let me start with Bill. And I think there’s a more abstract question here to ask, which is, why does a rapidly growing private company want a partner? What are the benefits of that to you? Vis-a-vis going directly to market with customers.
Bill: Hey, Matt, for you and the Madrona gang, and Aseem, I just want to say it’s absolutely great to be here with you. I’ve had the distinct pleasure of being able to work across four or five companies now with the Madrona community and it is just, it’s been an outstanding experience.
Okay. For your question, why do it? That’s a great place to start. Look, I think in any successful startup or growth-stage company, like Qumulo, focus is everything. And we constantly ask ourself this question over and over again, inside the company: what are the one, or very small number of things, that we’re going to do better than anybody else in the world. And I think that’s a very wise strategy. The other side of it though, is if you’re doing one, two or three things extremely well, that implies that there are dozens, if not hundreds of other things that you don’t do. And by being able to partner and complement best-in-class capability with somebody else’s portfolio in service of customers, it’s a very sort of simple and sound strategy.
Bill: And that’s really where the notion of partnering comes in for us.
Matt: So within the context of your strategic focus, are there ways to get leverage out of partnering with others – that’s leverage that is mutually beneficial?
Bill: That’s right. Leverage is a great way of expressing the kind of business element of this. And that’s something that’s obviously important. And um, I say customer leverage like customer value leverage. So, we have customers — nearly a thousand that know and rely on us for a very specific set of capabilities and helping them manage their unstructured data at scale. They know that they can rely on us as incredibly powerful, reliable, and capable, and then they have all sorts of other things. They want to be able to create more and more connections with their applications. They want users to be able to harness that information more readily and rapidly. They want to be able to use the environment of their choice. And that’s, I think we’ll get into Azure a little bit later, but a lot of our customers have made the decision to standardize on Azure.
And so, when you think about those things, the discreet capabilities that those customers want, and then the power of choice, freedom, and flexibility to run their applications, where they want. That’s a very powerful value proposition for customers. And then if you take the power of that value prop for customers and work backward to a partnership, things make a lot more sense to both sides, much more quickly.
Matt: Yeah, that customer centricity, I think, we’ll keep coming back in, in our conversation, but Aseem, when you had your Microsoft hat on for many years and you were working with third parties outside of Microsoft, why partner from that perspective? What were the goals of a big company around partnering with other software companies?
Aseem: Yeah, it’s a great question. And I think Bill alluded to some of it, which is, it starts with the customer, so I won’t repeat that point in terms of deriving customer value, but I think two things are super critical. One is, in general, Microsoft has always been a platform-centric company — like the companies built platforms. If you go all the way back to the Windows days, and even with Azure, like it’s a horizontal platform. And from a customer standpoint, platforms are great. But you also need solutions on top of the platform. And that’s when the focus that Bill talked about, that Qumulo delivers combined with the power of the platform will complete the solution in that particular scenario.
And while platforms get bigger and richer, the value that somebody like Qumulo provides is completing the solution, getting deeper and deeper into those verticals. And doing, you know, not just based on the value prop, but also last mile, you know, excellence that creates value for customers.
The second part of that is scale. Microsoft operates at a lot of verticals, a lot of customers and while I think somebody like Qumulo starts off with a deep focus, Microsoft, as a company also sees varieties of those applications applied in different industries.
And so, to be able to use the power of the field, the power of the sellers, the power to transcend industries is what gets you massive scale. So, Bill and team can focus on building great product, and Microsoft can work with them hand-in-hand to go achieve that scale once a flywheel is established.
Matt: That’s really helpful. And maybe we can jump into this actually, Bill, before we get to Azure. Let’s talk about one of your other prior partners. One of the very unique and differentiated things around Qumulo is that it’s a software-only solution that scales across any type of hardware.
Whether it’s a box or a cloud, and a lot of your customers even still today prefer to have their implementations in the private cloud. And so that took you down a path of partnering with some hardware companies. Tell us a little about that.
Bill: Yeah, sure. And this was one of those things that just happened. It started with an individual customer. I’ll tell you a story. We had a customer — it was a well-known animation studio in Los Angeles. One that makes many of the movies that we all enjoy, and they became enamored with our technology. They tested. They loved our software and then they told us, “Hey, Qumulo, we actually have a private cloud agreement with HPE. (Hewlett-Packard Enterprise) That’s the standard that we’ve chosen for our private cloud.” And actually, they put it to us. They said, look, you’re a software-defined. That’s why we bought you. Now. We want you to deploy on HPE. Now what a great way to start a conversation off with HPE. Where one of their large global customers is saying, “Hey, I like you and I like them. I want you to work together.” I will tell you that experience cuts through so many barriers that might entail a partner program and a step-by-step process because it gets the attention and the emotion of senior executives on both sides.
And so we started with that customer. It was an easy certification for us. That’s the value and the power of our software. They deployed it. And then we worked backward from there to start asking, hey, this use case is now established. There are so many other customers, like Aseem mentioned the notion of a flywheel, and that’s what everybody’s looking for in these partnerships. And we began to dominate that vertical of media and entertainment. And then very quickly after we started stacking up the adjacent verticals where we really serve customers, places like life sciences and healthcare organizations and oil and gas companies and research centers.
That was about four or five years ago. If you fast forward today, that is an at-scale partnership that’s been enormously successful for Qumulo. It’s enormously successful for HPE and both sides would say, Hey, we’re just getting started. And maybe one last point, and then I’ll pause is just the strategic fit.
Bill: HP is a great brand. It’s legendary in Silicon Valley. In fact, many would attribute it to starting Silicon Valley. But what they didn’t have is a scalable, unstructured data service, like Qumulo, and they recognize that. And what we didn’t have is global scale with tens of thousands of customers in every country around the world.
And so, you put one and one together and it really does make 11 rather than one and a half or two and a half. And I think that’s the secret to our success.
Matt: Let me pick up on two things there. One is this idea that the partner has something complementary to you and in this case, not only a complementary go-to-market organization, but also an international one, I’d love you to speak a little bit to that, that the leverage that gave you in the company and working with HPE from an international perspective Well, I’ll start there.
Bill: Working with any large organization, the power of their geographic presence is enormous. We have Qumulo deployed today in something like 50 countries around the world, all the big ones that you’d expect, all the major economies, but also some of the smaller ones all across South America, all across Asia into Africa.
And then of course, with a lot of concentration in the economic centers, that’s incredibly difficult for an emerging company to do on its own. And also, not just the logistics of it servicing customers around the world, but the brand recognition. If you’re way out and Chile or South Africa or in Taiwan the brand recognition of a global company, whether it’s Microsoft or HPE or some of the others really matters to those companies, it gives them a sense of trust.
The flip side of it, is you sort of think like, well, what’s in it for the big company or what’s in it for the platform player. I think it’s a real disappointment for customers if they’ve adopted a platform player, even the biggest companies on Earth, and then they get the feeling that they’re in a walled garden and the only services or products that are available to them are branded by that company.
Bill: Because they know that there’s going to be parts of that stack that are either missing or very underdeveloped. And so, it’s the open organizations the ones that open up their platforms and let customers know, hey, when you come here, you’re either going to get the best product that we’ve created that leads the category, or very easily, you’re going to be able to adopt other technologies that are best in their space. And you’ll never have a walled-garden experience. I think that’s very powerful, and we’ve seen that certainly with our partnership with Azure and some of the others as well.
Matt: No, I think that’s really well framed. And the other dimension here is the time and timing. You said, hey, look, we’re four to five years into this HPE partnership. It’s now really at scale. And I think sometimes it’s hard for younger companies to know that something’s going to take, two to three years, let alone two to three months to build out. These partnerships do take time. So, I’d love to hear When are these companies far enough along that they’re ready to actually work with a platform player.
Bill: Look, there’s a, there’s a sine curve of emotions when you’re developing these partnerships. There’s the excitement of getting the attention of a larger company in the early work people strategize together and see the opportunity. There’s a dip somewhere along the way where you realize, hey, there’s some really hard integration work to do or figuring things out there’s commercial agreements and stuff like that, that um, is hard work but necessary.
But then, the real thing that has to happen is you have to find your first customer. One is the hardest one to get. But one makes three and three makes nine and nine make a hundred.
And there is an element of being steadfast about recognizing the strategy, knowing it’s going to take time, knowing it does start with one. And being able to create some repeatability there because especially for a larger company the first thing that their fields will ask is, hey, how many of these have we sold? Or how many customers have we made successful? And so, every incremental win together makes that easier. And then the flip side of that is the early wins are the hardest.
Aseem: My perspective on this is I think it really comes down to two buckets. And I think the first bucket is what gets the technology companies and platform providers interested. And I think it starts with incremental value that you can go create for your customers.
Like the solution that you have as a platform and the solution that in this case Qumulo brings — can that create incremental value for customers that then creates differentiation in market. So, I think, the question that a platform provider would ask is, so why does Qumulo plus Microsoft make it better than any other solution in the market?
And is that something that’s long enduring and can that continue to provide customers the value that they need over time, and can it only grow? So, I think that addresses. The why question? And can we go tackle these white spaces? Which gets everybody interested. And then the how and what of that is really around what I call the Happy Meal Litmus test. Which is, do we have five happy customers using the product day in and day out? And it’s hard to get the first five. And, as much as people think that Microsoft is a very, orchestrated big ship, you know, my boss used to say it the best, which is it’s a bunch of mini canoes all going in the same direction. And to align all those things from the outside in is incredibly hard, but nothing gets the attention more than customer demand and customer usage. And if you’ve gotten a path to get five happy customers on the platform you start to identify all these friction points as companies partner, and then it’s a matter of like, how do you smooth these out over time, one by one. And then the sixth gets easier. The seventh gets easier and then very quickly everybody including engineering, product, go-to-market, sales, like these things start to sing in, in one integrated fashion. And that’s when I think the flywheel gets established.
Matt: Well, That’s I think really helpful, strategically, conceptually. I’ve heard you both talk a lot about, bringing the customers. Bill. Maybe you can talk us through now bringing us forward into the Qumulo, Azure partnership and some of the early days of getting that partnership going and finding that first customer.
Bill: I guess the first thing to talk about is just to spend a little time on the tech. Qumulo has built the world’s most powerful software defined, scalable, unstructured, and file data management service. And what all that translates to for our customers is they have petabyte-scale environments with millions or billions of pieces of unstructured data. It could be a genetic sequence. It could be a radiological record. It could be a PDF document, but they’re at scale. And those customers derive value by being able to consolidate that information into a single place and then be able to reason over it.
And the at-scale part is really hard. In fact, we just won our 35th patent last month as we’ve built this technology. And when you look through the Microsoft catalog, there’s obviously Azure has an enormously powerful services, but in this section, they were missing something. And so, by working together and being able to help customers build these environments in Azure, it’s really win-win-win. Azure will end up allowing a customer to get more out of their services and deploy more applications, more thoughtfully and more rapidly. Qumulo wins for obvious reasons that for us, it’s a SaaS service sale. And these customers, it’s a real problem for them that we solve together. And before we embarked on this partnership, you can imagine that we spent a lot of time interviewing our customers about what they were trying to achieve, particularly in the public clouds. How they wanted to do it, how they wanted to consume our software and then we got a lot of advice from Microsoft as well. Like, Hey, what have other partners done? How has it been successful? What are the pitfalls? And we took all that aggregated knowledge together, and as Aseem said, you always have to start with one. And um, know our first one was one just within the last six months. And when we explained to the customer Hey, what can we offer you together? They jumped on top of it, and that one lights up the imagination of the Microsoft field in our field.
Bill: And we’re able to go to customers that are like for like, and solve that same problem for them. And then the flywheel has begun. That’s a little bit of the journey. And again, it starts with technology and maybe a better way to put that is the unique value on the problem that you’re solving and who solves what problem and who doesn’t. And then that forms the framework for what I’d say is a healthy partnership.
Aseem: If I might add to that. The other nuance to consider is that the first couple of customers you get are more product-led sales versus go-to-market motions. And I remember the engineering team in Azure, leaning into partner with Bill, as we talked to, I think it was Casepoint if I remember right. Leaning in and saying, look what must be true and what must we do in order to make the product deployment super successful for Cause on Azure. And I think that’s an important nuance to call out because the go-to-market, the sales motions are not established because they’re not there.
And so engineering leading in, making sure that, you’re around 24/7 in a services world to make it successful, to get mission critical applications on the platform. It is really the first, I would say P Zero step to success. Once you’ve got that nailed down, then I think, you know that you’ve got a product that works.
And then I think things follow on the go-to-market and the sales side and the partner programs kick in. But that, that I think mindset of product-led sales is important to begin with.
Matt: Yeah, I agree. I agree with that. Go ahead Bill.
Bill: I was just going to jump in because I don’t want to lose this point here. It’s super important and it is a nuance. Aseem is right. We spent a lot of time with really great product folks and engineers inside the Azure organization. And that’s where it should start. If you haven’t solved it there, then it the solution probably won’t get off the ground.
What I learned along the way is that to know the difference between a product sale and a field-led sale and know where you are, as Aseems’ pointing out in that journey, because, the, I think the failure mode here that ought to be avoided is sort of assuming that since you’ve solved the product part this equation with the products in an engineering organization that, “automagically,” the field will know what to do And so there is a sort of a transitional period where you have to move you maintain and continue to invest in your product relationships with these organizations and then know that there’s more work to be done and really accessing, and frankly, making it’s brain dead simple for the field to be able to bring to their customers if it’s even remotely complex, most fields will stay away from it.
Matt: Aseem, you, you’ve got a wealth of experience in these areas, helping, outside companies navigate Azure. What are your perspectives on these topics?
Aseem: Yeah. Great. Going back to that model of, I think once you’ve gotten your first five, I’d entertain that next step and say, okay, you’ve gotten the crawl now let’s get the walk. And how do you go from five to a hundred? And in that sense, I think it’s important to probably pick a few industries to target. And like Bill mentioned, make it super easy to succeed in that industry and you probably have some proof points for the first five, right? So, let’s pick media and entertainment as an example that Bill, you were on, and say, okay, great. Now let’s make every seller in the field, who is a media seller, equipped with what they need to go sell. And it includes battle cards, compete cards, and really compelling case studies of others in the industry like you use Qumulo and here’s why they found success and here’s how it was successful. So that way you start to nail that industry and it’s almost like you’ve got to establish your birthright in that industry and say, Hey if this is an industry that I’m going after, I won’t fail. And every opportunity will be Qumulo plus Microsoft opportunity. So once you’ve established those set of hundred customers, then I think you can say, okay, what are the adjacent industries that are then easier to go into, so then you’ll go from a hundred to the next hundred and beyond.
There is an interesting element here on, even within the hundred, as you’re chasing those, given that these are highly involved technical sales, you’ve got to bet a little bit on the sellers who are very tech savvy, who are forward-leaning and who want to take a long-term bet. Which is not just how do I meet my quota in a quarter, it’s almost like, how do I make my year? Which is, you know, the next year and the year after that. So, I think a colleague of mine put it very well when I was at Microsoft — you’ve got to bet on the heroes. And I think you’ve got to curate the global black belts, as we would call it within Microsoft, which is an elite group of sellers who would be incentivized to not just sell, but also make sure that the deployment is done and there’s high amount of customer satisfaction. So, you’re shepherding, not just the sale, but also the customer experience.
Matt: I love the bet on the heroes, and I think you’re right. Finding these champions that not only are aware of this better solution, but they really want to deliver differentiated value to their end-user customer. And they’re technically savvy enough and they listen to their customer enough to want to be the hero on solving a problem better than they can solve it. Otherwise, which gets into an interesting question, and this kind of issue varies from partner to partner, but oftentimes, certainly in the case of the cloud service providers, they also have their own first-party solution that’s similar to your third-party solution. So, Bill, I think that’s probably an area that you’ve had to wrestle with before. I know that we’ve had across a bunch of our portfolio companies, including the likes of the Snowflakes and Amperities but how has that journey been for Qumulo?
What lessons do you have that you’ve learned there?
Bill: If you put yourself in a customer’s shoes and there is a first-party service that meets your needs and it’s great. And it’s owned by the platform player, you should have a working assumption that will continue. And look, we do everything in service of customers and if I were them, I would probably do the same thing. That’s the easy button. So, understanding that to start off with, I think is really helpful. I meet a lot of fellow CEOs that are like, Hey, why isn’t the cloud provider selling my stuff more — they ought to do that for me. And maybe they should, but that’s just not realistic. So, the approach that we’ve always taken is, Hey, I have to be 10 times better from a starting point against whatever sort of neighboring first-party service might exist. And then I have to continue to be better. And that kind of mentality will solve a customer’s problem in a unique way that’s powerful for them — meaningful for them — and it will enable the platform player to want to take you seriously and move forward with you. I’ll sum that up, have to be wide-eyed, you have to start with the customer, and you frankly just have to be fundamentally better.
One of the things that Qumulo offers is cross-environment capabilities. You can run Qumulo on Azure. You can run it on AWS. You can run it on GCP and you can run it in your private cloud. That’s just a capability that any first-party service cannot offer and that’s strategic for customers and it’s powerful.
Matt: Yeah, that’s a really great point. One of the things sometimes the earlier stage. Get a little bit frustrated with and caught up in is you referenced certifications before and becoming a pro in the preferred program and complying with a whole bunch.
Kind of rules and at some level I think we all get this that, the big companies need to know and be able to be competent in the third-party solutions are recommending. But sometimes that feels like a little bit, being lost in the desert a bit for a while before you’re seeing any of the fruits of your labor in terms of customer wins.
Bill, can you speak a little bit.
Bill: Yeah, and this is I think a really good topic. It’s something that we’ve learned a lot about as we’ve done this over the years. Putting myself in the shoes of the platform player. You’re lending your brand to a smaller company, and you want to have some level of credibility that you’ve vetted it and that you’re willing to put your customers on it, so I completely understand the notions of the certification programs. The other thing is for the big platform companies, there’s hundreds or thousands of ecosystem partners and they need some way to scale that organization or scale those interactions. So, it’s all understandable. I think the mistake is to believe that all those enabling steps are results. The results will come from the customers. And so, if you go through the. 15 step process, and then you’re done. And then you wake up one morning and go, okay, now, great. Where’s all the sales.
I think you’ll wake up very unhappy that day. If you deploy some amount of resource to make sure that you’re partnering well and working with these platform players and the way that they like to work with, but at the same time, making sure that your organization knows their job is to add value to customers and win customers, hearts, and minds.
That is really the best practice, so ones necessary, but not sufficient. And you really have to do both.
Matt: I think we’re getting a little bit more now into some of the, the nuts and. I’m curious in order to build beyond the necessary pieces, the programs and stuff. What’s the cadence and the resources that you would recommend, it doesn’t strike me it’s enough just to have a quarterly business review between the CEO of the company and some key partner leader at the other company, there’s got to be more resources and weekly daily activity going on in the field.
Bill: Hey, Aseem. I’d love to hear jump on this one.
Aseem: I can’t answer the resourcing question, Bill, that’s you, but to the stage of engagement, especially when you’re trying to get your first couple of customers or your first five, I think quarterly is not enough because what typically happens is both teams get together, they decide on some activity, people go and work on their own and they come back in, in quarter and realize, Oh we’ve barely made any progress, even though they’ve been at it. I think, to the extent of setting mini-milestones in saying, Hey, what needs to happen in six weeks, and treating it as a sprint is something that’s really been worthwhile. And what I’ve seen work in really successful cases where you’ve got a customer, you’ve got a three-way essentially between the customer, the company like Qumulo and Microsoft. Because then all three parties are equally involved in all three parties want to make it successful. That’s the recipe for success. And I think faster turns to get to outcome. Is where I would put my bed on versus a quarter cadence. I think once you graduate from first customer to fifth, yeah, you can go to the quarter, but I think the first two or three, like it’s gotta be like a 6-week type of sprint.
Bill: Yeah. I agree with that. I, I would just say in general more is better. You have big company and small company. And one of the expectations of a big company, they know that they might be slow because it’s, there’s a lot of people and organizations to manage. And so on. The expectation is the small company would be fast. That’s one of the reasons why I think some of these larger companies like partnering they learn from startups about how fast things can get done. But that also implies, as the emerging growth company, you have to live up to that you have to be fast. And by the way, our cadence is more like weekly with our partners, if not more frequently. And the idea is to be incredibly responsive as Aseem said, have a lot of turns really quickly because that’s what generates momentum. The thing I wouldn’t do is defer to the larger partner, just simply run at their cadence because they have a lot going on. And um, you know, you might find that in the conversations with them, they’re like, geez, you’re slow. And you’re like, no, I’m working at your cadence. And they go, that’s what I mean.
Matt: well, hey, let me, just really briefly touch on. To two topics that kind of come from the same thing, but from different angles, which is the, how do you approach getting to the contract and the economic alignments in these partnerships, which sometimes feels like it drags on forever. But then conversely, how do you build genuine people-based trust relationships, which I think is the more enduring thing cause inevitably, both sides of these partnering relationships are going to have moments where they surprise and exceed expectations, and there’s going to be disappointments and falling short of expectations.
Bill: Oh boy. Yeah. At least in the first point we, that’s probably another podcast, but look, it’s hard. The large organization has really long contracts that are very often, to Aseem’s point, not Built in is bespoke way. In other words, you look at the contract, you’re like this isn’t even written for me. And so that takes a fair bit of work. At some point, there is some element of holding your nose and, making sure that you’ve protected your organization, but moving on, which is I’d say some science and a lot of art and maybe even some legal fees.
I did model my daughter’s cell phone contract — my personal contract with my daughter about how much he cell phone, using one of these.
It was very one-sided, and I modeled it off of one of these contracts, not actually from Azure, but somebody else. But maybe more importantly on the other point around. Building trust in these relationships because you’re right, Matt. You hope for there to be nothing but a lot of success, but you also have to figure in day-to-day life something, at some point it goes wrong. and I would just say the single most important thing is transparency. It will be okay if you communicate well and you’re transparent, you do the right things. I, my sense is that any organization has seen plenty of challenges and know that you can work through them as long as you’re both sides are being transparent. Where it really breaks down is if somebody is worried about scaring somebody and, tries to sweep something under the rug that almost never ends well. So, if I had one word, it would be transparency.
Aseem: Yeah, I echo that, and we used to call it, embrace the red internally, which means that look, if you’re embracing it, you can own it. The only way to go is up. And, we have this notion around let’s not have watermelon metrics, where they look green on the outside, everything is great, but you ask two questions and it’s remaining red
Matt: Great. Well, hey, this has been fantastic. I really want to thank Bill and Aseem a lot of great nuggets of insights there. And I hope that this is helpful for other folks as they’re looking to partner with the big cloud service providers and other partners in the innovation ecosystem.
Matt: Thanks again, guys.