Oxide is crossing the chasm

Well, let’s start this show where we should start it.

Where should we start it?

Sure. Yeah, where should we start it?

Which season are you in?

Oh, God…! What a great question.

Isn’t it over? I thought it was over.

No. No, no, no. He’s asking in the analog of Silicon Valley that Oxide is living.

Oh, where do you show up…?

What season are we currently portraying?

Oh, Oxide & Friends.

Yeah.

Okay, better question. I thought you meant what are you currently watching. I thought you were saying “What are you watching?”

That is a great question. You know, it always merits a rewatch… You cannot rewatch that show too many times. I mean, it is so prophetic, too. It’s amazing. I feel in particular that the AI episodes are almost chilling. I mean, they seemed a little outlandish… Now they’re just like “Oh my God, the AI did order lunch.”

Season six is coming to fruition.

Season six is coming to fruition, a hundred percent.

If Anthropic just disappears, we know why.

Yeah, exactly. I feel that we are – because I also view it obviously as a cautionary tale. And there’s so many times when I was watching it with my now 18-year-old, where I would kind of pause it and explain to him like “Okay, this is a real concept. They’re presenting this in a very humorous way.” But I still think that season two, episode one, Sandhill Shuffle, is one of the most important single episodes for an entrepreneur to watch…

The nagging.

The nagging is obviously wildly entertaining. But when the guy –

The pursuit of funds, yeah.

He raised too much money. And he didn’t realize that he could have raised – Richard asks, “Could you have raised less money?” And he’s like “Oh, right.” And they do such a masterful job of the guy kind of replays the history of his own startup in his head, of like “Yeah, we would have raised less, and then we would have been at this other milestone. Yeah, it would have been difficult, but we could have pulled it off.” And then he’s just like *bleep*. He realizes that his company was lost because he raised too much money. And we’re very mindful of that. That’s a very real phenomenon. We obviously just raised a hundred million bucks, and we were very mindful about that, and making sure that we – I mean, the flip side, at least for Oxide, is that we have always believed that if this company can cross the chasm, it is a generational company. It’s a huge company waiting to be built. And the number one risk for the company actually is running out of money. It’s actually capital. I mean, VCs hate to hear this. They’re like “Oh, that’s your number one risk…” It’s like “Yeah, that’s why we’re here.”

That’s why you want money.

That’s why we need money. It’s like “Oh, alright. Well, is there any other way we can be helpful?” It’s like “No, you can be helpful by actually writing a check.” It’s like “Wow, God… Okay. That’s kind of boring.” “We’d love to introduce you to – can we introduce you to potential customers?” No. No, that never works. No, you don’t even – no.

We’re good to go.

Yeah, we’re good to go. So I would skirt the question by saying we’re mindful of all seasons of Silicon Valley, and all stages of a company that represents. And how do we be the company we want to be without reliving some of the seasons of Silicon Valley, without instituting Piper Pulse, without – which I still think is one of the… And actually, did you know that the system at Facebook was actually called Pulse? I did not realize this. I’ve got some ex-Meta folks… Like, you realize that that is like actually real.” And also the chairs ad, the tables… That’s based on a chairs ad.

Oh my gosh, tables…

Tables, which is a spoof ad. And you’re like “This is such good satire, and so biting.” It’s like, oh, that’s because actually Facebook paved the way. They have a chairs ad that has to be seen to be believed. It’s just amazing. So it’s like, how do we be the company we want to be, and obviously venture-backed? I mean, we’re very grateful for venture capital. It’s very important for what we – this can only be a VC-based company. I think it’s easy to be very cynical about venture capital, but it does allow you to do something extraordinary. You get this huge amount of cash to go build the thing before you have customers, before you have a business. And that’s a magical thing. And then you’ve got to hit the clutch and the gas just right. So we’re very mindful of it all, and I hope we’re reliving the good bits and not the bad bits… But mindful of it all, for sure.

Sure. So why is a hundred million for a Series B not too much? Why is that the right amount?

[07:56] Why is that the right number? Yeah, we were not necessarily raising – so when we had raised our Series A, and… You know, when you are a venture-backed company, you always have to be willing to take the right meetings with venture capitalists, because you always need that next round. And especially a Series B I think is the most difficult series to raise, because you’re kind of a teenager as a company. You know, teenagers can be tough, because they’ve got adult needs, but they don’t have adult strengths. They’re not actually contributing yet. They’re on the cusp of it. They’re close. I’ve got two kids in college, so I’m definitely feeling this right now. It’s like, “I’ll tell you what - why don’t I give you my bank account and you just give me whatever is left over? Let’s do it that way.”

But you’re kind of a teenager to Series B, and you need to have – so you’re constantly trying to find the right partner for that. We had a bunch of firms that – and there are a bunch of firms that are just like not very good, so you’re kind of… You’re not taking every meeting by a long shot, but this firm that really wanted to get to know us… And the first meeting was fine, but then they came by for a second meeting, and that second meeting was really good, and they’d done a lot of homework. And this is USIT. And it’s courtship that happens over a long period of time, and they got to know us really well, and they felt – “When you’re thinking about your next kind of financing, we think you guys need to go big.” And it was bigger than – we were like “Wow, okay…” But really, the way they structured it was great, from our perspective, to kind of de-risk some of the risks that we saw of taking that much capital…

And it was really important, because again, still to me the greatest risk to Oxide is that we just don’t make it. We run out of capital before we’re able to build – it’s really hard to build a business. It’s especially hard to build a business where it’s like we’re selling big machines. This is not a home labber, even though the home labbers would love us to do something for them. It’s like, I’m so sorry, but –

They’re not your customer.

No, they’re not. And the sales cycles are long. But the flipside of that has been if we get there, if we – and when we were talking to customers… And God bless our early adopters and early customers; love them all, they’ve been terrific. And a couple of them have gone on the record, even better. So grateful for them. Or tweeting it out. That’s also great. It’s like “Are we going to be talking about the fact that they’re a customer?” Oh my God, Toby at Shopify just tweeted it out. It’s like “Oh, my God…! Thank you.”

Yeah, the cat’s out of the bag.

I guess that cat’s out of the bag. I guess the CEO just tweeted it. Which was great. But we are so, so, so grateful for those early customers. But we’ve talked to so many who are just like “Oh man, I love everything about this. I love everything about this. This is absolutely the right thing we should go do.” They were just like “God, I just need another – I need a Fortune 200 retailer to have adopted this.” And like “You’re a Fortune 200 retailer. You’re the one to adopt it.” And they’re like “No, no, I know I am, and I would love to, but I just need someone else to adopt it.” You’re like “Okay… Alright…” It’s like, “But I love this. If you do that, I’m all-in.” And you’re like “Okay.”

Too much risk.

It is. And the risk is – and you get it, the risk is like you guys go away. The risk is you’re acquired. I do love the people who are like “I’m really worried you’re going to be acquired by Dell.” And I’m like “You know, I don’t want to neg myself.”

Do they know about your path with Dell?

Yeah, exactly. Exactly.

Send them to the part of the podcast where you’re like “No… Never again. That’s why I built this!”

[12:13] “I think Dell would not want us. We’re kind of a skunk there, from Dell’s perspective. I don’t think Dell’s interested in us.” [unintelligible 00:12:19.14] we are so disruptive. That has never been the strategy. But people are understandably worried about it because people can rattle off companies that have disappeared. The favorite startups that have disappeared into Dell, or HPE. And I’ve been acquired, and we – I get it. Obviously, that’s not what we aspire for for ourselves, but also, there’s only so much arguing you could do with something, because they’ve got a really good point. Right?

Yeah.

So the only way it’s just like, how do you earn someone’s trust? It’s like, one day at a time. You can’t gas it on earning someone’s trust. And that’s what it really boils down to - people trusting. And not just trusting us. People trust us personally. It’s more that “I need the trust that you’re going to exist. I need to trust that you’re going to be there. I need to trust that this is going to make it.” And I think that this is a big part of – and we’ve already seen that, where people are like “Oh, wait a minute… A hundred million dollars?” People are like “I think you guys are going to make it.” Oh, thanks. We think we’re going to make it, too. But it’s great to hear it out of someone else’s mouth. Like, “Oh my God, you guys are actually going to make it.” Like, actually, okay. And wow, that’s great. You know?

And I think the capitalization is not just the capital that we need to go expand manufacturing and to go – because, I mean, the other really significant aspect of this is that we… And we knew this was going to happen, but it’s been fun to see it happen, where a customer buys one rack, or maybe two, and they’re like “Hey, what would 10 look like? What would 50 look like? What would 100 look like?” And for a long time, that was just kind of like pillow talk. We were kind of dismissing it. It’s great, we always took it seriously, but as time has gotten on, those questions and conversations have been like “No, no, I’m serious. I’ve got budget. I’ve actually used this thing. I know what this thing actually is and isn’t. And I’ve got this new project coming up, this would be perfect for it. And these are the kinds of numbers I need.” And you’re like, those numbers get significant really quickly. And you do actually need a head of capital to be able to secure the financing that you need to be able to – I mean, there is a flywheel that you need for which you need to… Like, on one hand, hardware is not as capital-intensive as people think, because it’s not like we’re building our own plant. We’re not – Benchmark Electronics is our contract manufacturer, and they’ve got their own ITAR facility. We’re not building a manufacturing line… There’s a lot of things we’re not doing that people kind of associate with hardware. But on the other hand, it is also capital-intensive, because yeah, you’ve got to go procure a bunch of DRAM, and a bunch of CPUs, and a bunch of boards. And you can’t invoice someone on that until it’s actually been like shipped. So especially as the numbers get large, the financing angle becomes really important. So yeah.

Is there a point where you do go build that stuff, or is it just so far away that you’re not even thinking about it?

That’s a great question. Man, I would kind of think never. I mean, on all of that stuff, we always try to keep an open mind… And I think that we’ve got a really great partner in Benchmark, because Benchmark allowed us to do some things that are – I mean, look, we’re an idiosyncratic company, as you guys know… And we are idiosyncratic tip of the tail. And one of the things that was really important to us is that we actually own all of our own manufacturing software. So we wrote all the software that runs on the line. And this is really unusual. Most companies don’t do this. Most companies don’t really consider this aspect of it.

[16:01] What’s funny is the companies that do consider it are the ones that – it’s kind of the Space X’s, and the Apples, and the… I mean, the companies that take manufacturing really seriously do consider it, but companies at our scale generally don’t… In part because maybe they don’t have the luxury of doing it. But it was very important to us to own all of the software involved in the manufacturing line. But because we do that, we have – it is a truly great partnership, where they’re doing the things that they’re good at, that I don’t necessarily know that we want to be good at, and we are able to do the things that are very important to us, like software. Manufacturing companies are not great at software. I don’t feel that this is a newsflash. And we are in our DNA a software company. I mean, obviously we do software and hardware together, and we’ve got software engineers with a strong hardware sympathy, hardware engineers with a strong software sympathy… But we have got great software expertise at this company, and because we control all that, I don’t think so. I think that this is something we would really look to partner more continuously.

Gotcha.

It’s a wild ride. A hundred million dollars.

It is.

I don’t even know - what kind of class do you go to to manage that kind of purse? Like, who says “Bryan, here’s a hundred mil. Spend it wisely”?

[unintelligible 00:17:11.29] does, apparently…

Well, this was something that people don’t realize about, because it’s kind of easy to complain about aspects of VC. And the process can be – any entrepreneur will tell you it’s an arduous process. I mean, it is like coupling. It’s like dating. Although my son plays college baseball, and I will say that playing NCAA varsity sports does look a lot like raising a round. If you’ve got an NCAA varsity athlete, they are definitely – because it’s like…

A lot of options.

A lot of options. And everyone is trying to find the right pairing. You’re trying to really find the right partnership. But with VC, they’re going to give you a bunch of cash, and they actually don’t have a whole lot of control over what happens. I mean, you’ve got some aspects, you’ve got a board seat or what have you, but you’re really trusting the company to build itself in a way that is wise and proper. And that’s part of the reason why they take a long time to do their diligence. Part of the reason why you take meetings with a VC firm when you’re not raising, because they want to get to know you, and they want to get to know you so they trust what you’re going to go do with it. And I think if anything, for us, I think we’re very much children of the dot-com bust, so if anything, the comfort zone we have to get out of is getting a little more aggressive on things that we would do. Because my overwhelming bias is towards a bit of caution, because I think that we – one of our advisors at the company, who I’ve known for a long time, one of the first people I pitched on Oxide, laughed hysterically when I pitched him on Oxide… Like belly laugh, really hard laugh in 2019. And then he kind of came back and saw – came by ’22, ‘23, about what we built. He’s like “Wow, this is amazing. It’d be a real shame to *bleep* this up now.” And I’m like “It would.” And I just remember Steve and I both like –

A lot of pressure.

Yeah. I’m not a serial entrepreneur. I’m not going to take five more trips to the well. This is it.

Yeah. This is your one here.

This is it, and we’ve got to make this one work. So that pressure is a privilege, of course… And in some ways, almost like the comfort zone we need to get out of is knowing when to push harder in. And fortunately, I’m blessed with a terrific co-founder in Steve. He and I both have the same disposition, and the same need and desire to go push ourselves as well.

[20:16] I’m kind of fascinated about the mechanics of this kind of thing. Do you actually take custody of a hundred million dollars, or do you have access to a hundred million dollars?

It wires into your account. Like, you raise around –

It comes into your account.

Yup. You raise a round – well, actually, kind of a funny story in this regard, in our series A… So not only does it – it wires into your account, but it’s actually not yours until the round is closed. But it’s like literally sitting in your account. It doesn’t go to an escrow account. It’s not like buying a house.

It’s not even escrowed. You have it, but you don’t own it.

But people will be like “It’s in escrow”, but you’re like “Okay, you keep saying it’s in escrow, but it’s just kind of like [unintelligible 00:20:59.05]

[unintelligible 00:21:00.03]

Right, escrow’s a real thing, you could do it… But no, no one’s gonna do that. So you’re raising a round, you’re raising a price round, and people are going to invest at… And people are investing conditional on other investors. So you need to wait until you’ve kind of like hit the number that you’ve got on the paper before the round is closed. So you can be waiting on a wire and you’re not closed. And one of the we did in our series A - we’re extremely grateful to our investors for accommodating an early close. So we were going to raise – we ultimately ended up raising $44 million in our series A, and our investors did an early close at 30… Which was great, because we – this was 2022, it was really brutal to… I mean, the environment had turned very, very brutal. So then you know “Okay, once I cross this $30 million threshold, then every–” And not surprisingly, one of the larger investors, institutional investor, is like “Look, we wire last. That’s the way we operate. So we are going to wire last.” And I’m kind of sympathetic to that. They want to make sure that everyone else has already wired before they wire. Well, they go to wire and you’re like “Hey, you guys are $23 short.” And we’re like “Oh my God, we’re $23 short.” And how do you end up $23 – and of course, everybody is like “I’ll pony up $23. Are we short $23?!”

Yeah… Just slap down some cash.

Yeah, it’s like a bunch of like grad students out for dinner, or something. It always comes up short. You’re like “There are only like four of us here. Who didn’t throw in?” And everyone kind of swears that they paid it up. And I’m like – of course, it speaks to how at Oxide everyone’s like “I’m in for $23.” It’s like, no, no, unfortunately it doesn’t work that way. We can’t just put a couple of bills on the table.” The reason we’re short is because of share math. And shares will get rounded down, and you end up… And presumably, you have many rounds that ended up being short by a share, or some very small number of multiples of shares, and most people don’t care. But in this case, that investor’s like “No, I’m not wiring until you have the $23.” And we’re like “Okay.” So now we need to go back to another investor and basically get them to buy an additional share of Oxide, so we can get to the threshold that we need.

And to be fair, that investor is kind of frustrated with their own treasury department on that kind of process… And I get it. I think it’s understandable to be pedantic. Because when that wires – when you talk about like wiring information, you want to have [unintelligible 00:24:01.02] Gone.

[24:05] Yeah. You double or triple-check that one.

We were talking to a corporate venture capitalist, CVC… It was late to a call. I hate it when venture capitalists are late. Hate it, hate it, hate it. Do not be late. Because I’m going to be here on time. I’m going to be here on time as an entrepreneur. You need to be here on time. Like, you as a VC kind of have one job, it’s called show up on time. Hate it when VCs are late. So the VC is like six minutes late, but comes in very apologetic. Like “I’m so sorry I’m late. It’s very out of character for me.” We just had an eight figure wire that went to the wrong account.

Oh, my gosh…

And we’re like “Do you need more time? Like, we can reschedule… I’m so sorry.”

“We need to deal with that right now…!”

“Yeah, you go deal with that.” But when you get to the actual mechanics of the money moving, you’re like “Oh wow, this is just like –” And it’s a super-manual process, and it is people making phone calls… And on the one hand, you’re like “Oh God, this is so manual.” On the other hand, you’re like “Maybe this should be manual. Maybe this is not a bad idea for this to be pretty manual”, because you don’t do it very frequently, and it is super, super, super high consequence.

So when you’re on that kind of – it is really tough. And part of the reason why – you know, this is the reason that like people… You know, opening up to a large number of investors, for example - it makes these issues become more complicated. Now you’ve got more people that need to wire, more people that need to get chased down for paperwork. So there is a big mechanical aspect to it, and it just doesn’t feel like you’re not done until you’re done. But fortunately –

What you need is like a cap table salami attack, someone just sitting there, “Go ahead, and shave those off onto my account, it’s fine.”

Totally. I know.

“Round down onto my account. I’ll take it. I’ll take the 23 bucks’ worth.”

Exactly.

Because it’d be a lot simpler if you could just have that on there.

By the way, so actually, there have been things have been done to make this simpler. So this is why the SAFE is a great construct. So a safe is a Simple Agreement for Future Equity. It pains me to agree with Paul Graham, I think… Although Paul Graham – I’m like super-complicated about Paul Graham right now, because he says things that I really strongly agree with, and then things that I really strongly disagree with, often at the same moment… My brain just kind of buzzes.

Yeah, I agree with that.

But one of the things that Y Combinator got really right is this idea of a safe. And a Simple Agreement for Future Equity, what that says is “Look, we’ll deal with all this *bleep*.”

“We have no idea how much you’re worth.”

“We’ve got no idea how much you’re worth… And let’s also not wait until everyone’s ready to wire. I’ll tell you what - I’m just going to invest this amount of money. I’m going to invest 500 K, and then at some point, you’re going to have a price round, or you’re going to have an event that happens in acquisition, what have you… We will price it then. And when we price it, because I’m doing this in advance, I get a discount on that.” There are different ways that people kind of structure those things to incentivize them. But a SAFE is – or there’s a cap. I mean, that’s another thing that people do. We’ll say, “Alright, so I’m going to invest, but I’m really worried that I’m going to invest 500 K, and then you’re not going to raise for like years. And then you’re going to raise at this multi-billion dollar valuation, and I’m only going to own a little sliver of this. So to prevent that from happening, I’m going to put a cap in place. So if you raise at above this valuation cap, I get it as if it’s at that valuation cap.”

And it’s also a way for them to kind of be able to model it. But the SAFEs are great for that, because you can just like go right now. They can also be too great. They’re kind of like candy, and entrepreneurs can raise too many SAFEs. They don’t understand how their safes are stacking, and they go to raise a price round, and it’s like “Whoops, you got washed out, because you didn’t keep track of the SAFEs.”

This is actually why we need these Silicon Valley outtakes for it. Because HBO’s Silicon Valley - I don’t think it really hit on… This is one of the rarer things that they [unintelligible 00:28:03.18]

What they need is a new season. I mean, there’s so much new fodder. Shouldn’t they just start it up again?

They definitely need a new season. Aren’t we living a new season right now? Are we convinced that we didn’t just like pass into fiction, and we are just like –

Yeah, we’re there.

[28:16] Maybe we’re living the new season right now.

We’re there, for sure.

I was thinking about some of the money that’s throwing around right now… Because I was reading this Ben Stancil piece all about…

Bonkers.

And to individuals, hundreds of millions to steal an AI researcher from Apple to Meta, or whatever… And they turn them down.

Well, on that stuff you’ve got to know “What did you turn down exactly?” I think this is where you’re just like “Can you show me the paper, actually, that you’ve got?” Because this is not a hundred million dollars cash upfront.

Sure.

On those things, I always kind of wonder what they actually look like… But there’s no doubt there’s a lot of money being thrown around.

Still, the numbers that we talk about now – you know, you just said 500k, and that was because you were trying to think of a number to say.

It’s like nothing.

Yeah. [unintelligible 00:28:58.21] an individual might do, or something.

That’s right.

That’s pretty much free money at this point.

That’s right. Yeah.

It kind of boggles the mind how quickly – it can’t all be inflation, that we’ve ramped up our numbers…

Yeah. It’s going to be interesting to watch what happens, because I think the other problem is we’ve got these companies that aren’t going public. And we might start to see some of that… Certainly, the aspiration for Oxide is to be a public company. That’s what we want to go do.

I assumed that. When you said generational, I assumed “Well, that’s going all the way right there.”

That’s going all the way. Yeah. We want to be a public company.

How close are you? So you’re talking about “We’re actually going to cross the chasm.”

[unintelligible 00:29:42.00]

No, no, no. I don’t mean like in raises, or whatever. I’m just thinking like in your mind somewhere there has to be – maybe not a roadmap, but like you’re talking about crossing the chasm to the generational company… And what is still in your way?

I mean, you always want to knock on wood and everything else, but… Yeah, I think we’re gonna do it.

Are there hard problems unsolved? Are there things where you’re like “We have to figure this out first?”

The problems we need to figure out now are – there are, for sure, plenty of interesting technical problems that remain, no question. But it’s the questions are not around “Can we build that at all?” Which, by the way, was a huge question.

That’s why your friend laughed at you.

Yeah, absolutely. Absolutely. And the other line he had is “You realize that if you pull this off, it’s going to be illegal to buy Dell.”

Uh-oh…

And that’s it. That’s it. But it’s a big if. And so there’s so much we need to go pull [unintelligible 00:30:47.19]

Explain that. Why is it illegal? Unpack that just real quick.

You would never architect what Dell offers. Like, that’s not the way you would build it. If you’re trying to solve rack scale, compute at scale… So if you just say “I don’t want to buy just one rack. I want to buy a hundred racks. I want to have elastic compute in my own data center”, I would not be like “Okay, let me start with a 1U or 2U server, and AC power supplies in each one of these things… Let me go invent UEFI.” Like, you just wouldn’t do any of that stuff. What you would actually do is what the hyperscalers have done, which is “How do I engineer this thing as a whole?” And “How do I think of it holistically?” Nobody likes the pain that they’re in in Dell HP Supermicro. And it is just an enormous amount of pain, because it’s not fit for purpose. It’s just not what it’s designed to do.

[31:42] And people that are trying to build – because we did this. We did this at Joyent. People that are trying to build elastic infrastructure on HP Supermicro Dell are trying to do their own Oxide on the cheap, effectively. And it doesn’t work out well. And this is where you discover – not only do you discover drives that you’ve not qualified… As I discovered at Joyent, I didn’t even know Toshiba made hard drives until I went – I had such a vexing IO latency problem, and I’d finally, over a course of like weeks and weeks, whittled it down to like coming from the absolute lowest layer of the stack, the IO layer… And I’m like “You know, I wonder - do I have a different version of HGST firmware on this drive?” And I pulled the [unintelligible 00:32:25.14] “Toshiba makes hard drives?” I mean, it was literally like this moment of “This is not even a company I–” It’s like having like a Chevrolet hard drive.

Like a Wilson driver.

Yeah, exactly. You’re like “What?! There’s a raccoon in here?” And you just realize that “Oh, I’m just being thrusted this thing because of some sweetheart deal.” It turns out all the cheaper hard drives were basically bought by Dell, and then just thrusted into – you don’t control your [unintelligible 00:32:55.04] with Dell. And that stuff is so deeply frustrating. And that is a deep frustration that people are all feeling. This is not like theoretical. And I think one of the things that’s – it is definitely vindicating. I think it’s like a little bit surprising to even our proponents, where they’re like “You know, I was talking to someone today, and they said that these firmware problems that you’ve solved are really significant and important to them.” I’m like “You know, you don’t have to sound surprised. Obviously, we know it’s important, because we solved that.” But these pain points are really deep and really important, and the people running at scale are the ones who’ve suffered from it. And a lot of why people have moved to the public cloud is because they were sick of dealing with all that s**t. And it’s like, I didn’t have to deal with any of that. I never had to deal with a BIOS upgrade when I’m running on AWS. Thank God. But now I’m dealing with this bill that is just like out of sight, and growing all the time. And it’s like “Oh man, can’t I own this infrastructure and still have all this delightful stuff that I get from the public cloud?” And that’s the market that VCs didn’t believe existed… Believe it or not, they just didn’t think it was there.

Break: [34:01]

They’re starting to believe, though. They’re starting to believe.

They are starting to believe. And it is funny when you will have a VC pass on us or whatever, and they will send us a report, like “Oh, I just read this report about cloud repatriation.” And they send it to me. I’m like “Why are you sending it to me? You should be sending this to your past self.” Like, “If I knew this…” Like, this is not news to me.

Also, I had another investor that passed on us, that was like “Hey, this Rust thing… Do you guys use Rust at all?”

“This Rust thing…”

I’m like, “Yeah, we use Rust a lot.” And he’s like “Oh, wow. [unintelligible 00:37:06.23] I’m like “Yeah, the company’s name is Oxide.” He’s like “Ooooh…” It’s kind of like “Oh, God…” Ah, boy… Anyway.

Well, like you said, they’re always late. A little bit late.

Well, to kind of be sympathetic about it, the concern that VCs always have is product-market fit. The failure mode that they – I mean, there are two failure modes they’re worried about. Failure mode number one is “This is going to be an outsized return and I’m not going to be a part of it.” That’s a real fear. That’s FOMO, that’s the fear of missing out… And that is a very real fear, and they fear that more than a zero, because it happens less frequently.

Totally.

It is very frequent that VCs fund a company that is a zero. That happens all the time. What happens less frequently, and really gets under their fingernails, is when they pass on a company that they could have invested in, that then has returns of fund for somebody else. That’s the stuff that really drives them crazy. So that’s kind of fear number one.

Fear number two, in terms of – I mean, they’re not in the business to have zeros, so they actually don’t want to have zeros… The way you have a zero is that you have a company that built something that no one wants to buy. That’s the concern that they have. And I get it, you’ve got someone who’s like “No, no, no. People have built this all wrong, and I’m going to build this much better thing.” You’re just like “Okay, my antibodies are coming up…” And you can see why people pass on Oxide, because they didn’t see the market was there. And then also, actually strangely, there is no other startup doing what Oxide is doing, which makes them more nervous. And this is what holds them in a quantum superposition between fear and greed.

We have had VCs who are literally overwhelmed with fear and greed with Oxide, and they’re just like “God, there’s no one else. Oh God, there’s no one else.” You know what I mean? There’s like “God, the moat is so deep. Oh my God, there’s no one else because you guys are wrong.” And that has been kind of amusing, as people realize “Oh my God, there actually is – there is a market there.”

There is a market there.

There’s a market there, yeah.

There’s so much – and I don’t know if I’m still just not sure who your product-market fit is specifically; I think it’s on-prem, because it’s kind of clear, “Own the cloud.” That makes sense. But there is so much on-prem out there required that they’re just like “Thank you, Jesus, that Oxide exists”, and they care about the things you cared about, from the Toshiba drive you never knew was there, the mismatch of firmware, how a sound could change IO, and your care for that level of detail… Not just the hardware level, but the software that controls all that. I think that’s the beauty of it.

[40:11] I would – I mean, I don’t know how you phrase it, but I would probably phrase it as if y’all are the only people who could do it. And maybe now that you are doing it, you’ll have someone enter that is also highly capable… And because you’ve done it, they would compete, and maybe because you’ve done a lot of stuff in open source, they can maybe leg up because of open source. Who knows, but…

You know, that was always our assumption. So when we raised in 2019, my assumption was the first myth that we are going to dispel is that you cannot raise for this company. And I had many people tell me “You cannot raise. You will not raise for this company. No venture firm will ever fund it.” And it turns out it’s more complicated than that, because it’s so contrarian that it’s actually – that FOMO does kind of light VCs up, because like “Oh, this is like a big potential.” And the problem we had actually was much more that VCs –

“This is the next Dell, y’all.”

Totally. They would be attracted to it, but then also terrified by it. And they would be kind of locked in that kind of, again, that kind of superposition. And we actually tried to – actually, this is funny; Adam, you’ll appreciate this. I did try, and this is where season two, episode one definitely had some truth to it… You do actually want to disqualify from VCs, to be like “No, you should not be doing this. This is not something you should invest in. You’re a bunch of software investors.” And they’re like “Oh, now we want to invest much more.” You’re like “No, goddammit. I’m not actually trying to neg you. I’m not trying to do what Erlich did to you. I’m actually literally trying to talk –” And actually, there was a VC firm in particular that was so adamant… And I’m like “These guys are just not kind of technically lightweights.” And they just did not appreciate the technical risk. And I’m like “You’re never going to get over the line.” And I’m like “You don’t understand. We are going whaling. You should be fishing from the pier. Actually, you should be shopping in like the fish section in Safeway. That is as close to it.”

Ooh…

And they’re like “No, no, no, we want to go whaling. We want to go whaling.” I’m like “No, goddammit. You don’t actually – no, you don’t actually want to go whaling. We are going like multi-year mission to faraway ocean.” So we assumed “We’re going to dispel this. We’re going to show that you actually can raise. And there’ll be a company that raises behind us.” And so we were kind of geared for that from the beginning, that there’ll be another company that raises behind us.

And one, after we were completely done with our seed, we’re like “Eh, that was actually harder than I thought it was going to be.” And in particular, one of the things we definitely did do with our seed rather, I’m like “I’m definitely going to find the investors that want to invest in this because they believe in it outside of Oxide, and we’re going to get those folks on the cap table. We’re going to conflict them out of investing. So we will definitely have the best investors for this”, which we did.

I see. So that’s like a hedge against competition, or what is that?

A total hedge against competition. It’s a little – yeah, a little sneaky hedge.

Yeah, it’s an interesting play.

The other sneaky hedge that we did is like “I want to make sure that we structure a company such that anybody who is attracted to this, who I want to go do this, looks at Oxide as like “I’ll just go join Oxide.” Like, “I could go to like deal with the whole VCs thing – or actually, “This company is going to give me the freedom and the agency and the autonomy to realize my own personal vision of how this–” And one of the things I’m really proud about is we have attracted those folks, and we’ve got a bunch of people at different – and at any kind of slice of the stack, I can introduce you to the technologist who’s got a chip on their shoulder about that slice. It’s like “No, this slice, whether it’s the security of the system, whether it’s the efficiency of the system, networking of the system, system software… It’s like, no, no, I have got an opinion about this, and I’m coming to Oxide to kind of exert that.”

[44:16] And at this point, we’re going to be six years old here in September. It’s like, yeah, you’re welcome to race behind us, but man, there’s a lot of work to go do. And we’ve got a lot in front of us still technically, but technically this has been now de-risked. I mean, if you’re asking in terms of what are the obstacles, what stands between us? We’ve got a product, it works, and we’ve got – I no longer hold my breath on an install, or an update. Of course, because I’m saying that, the next install is going to go wildly wrong, and we’re going to come back to this about the time that I… And so we’re able to kind of level up and level up and level up, and get to those next customers, the bigger customers, more ambitious customers. So it’s exciting. And the problems in front of us are of that kind of scale variety.

Scaling, scaling, scaling. Yeah. Back on the working for Oxide thing, you guys are famous for having the egalitarian salaries. I don’t know if that’s what you call it, but everybody gets paid the same amount.

Yeah, uniform compensation.

Uniform.

Yeah. Because people are like “Oh, you think everyone’s equal?” I definitely don’t think that.

Well, that’s why I was trying to get at with just thinking about raising money, and people getting a slice of the pie… I’m sure there’s equity involved for these people. It’s not all cash compensation. And so how does that play out?

Yeah. You do get people who are like “Oh, you’re not talking about the total compensation, because you’re not talking about equity.” Well, first of all, everyone at Oxide has got equity. Very important. That’s just like an important principle for me, that everybody has equity in the company. So that’s just like a bedrock principle. The equity also compensates for risk, and risk in the company goes down over time. And there was way more risk for employee number one than there is for employee number a hundred. And those are not going to be – and it is kind of funny that people are like “Oh, everybody in the company should have… If you say they should have equal compensation”, which again, not the word we use, “they should also have equal ownership.” And you’re like “How does that work? Can you just like walk me through how that works?” You can do this. It’s like, you can have an employee-owned cooperative. I think, you know, go down to your local organic grocery store, employee-owned cooperative…

Sure.

I’m reminded of that old Onion headline, “Local Applebee’s, hotbed of Machiavellian maneuvering.” I think there are a lot of challenges. But that’s not our objective. And I also think, by the way, this idea that equity is part of your compensation is misplaced. And this is a problem, and this is something that these large companies with product-market fit, that are public, use the fact that they can kind of print these Confederate dollars in terms of their equity, and they use that as part of your compensation. Because if you view equity as part of your compensation, it means that you are selling your equity all the time. Like, you’re a net seller on your company. You’re not buy and hold on that. And I get where people kind of come from with it, but people don’t understand, startup equity is not liquid. Your Google equity and startup equity shouldn’t use the same word, because they’re not the same thing at all.

You can sell one, you can’t sell the other.

You can sell one with infinite liquidity, and the other one has got zero liquidity. I think people don’t often understand what zero liquidity means.

It’s not real…! Or it’s real, but it’s not real yet.

[47:57] Yeah, and actually, in many cases from a liquidity perspective –

It’s not realized… Yes.

…the worst thing that happens is success. Because the company kind of like stumbles, and exits… And there are plenty of companies that exit for greater than their preference stack, so they pay out to the common… You get your money back. And it was like – you may be disappointed with that. It’s not the venture return that [unintelligible 00:48:17.01] but the angel must be like “Oh, this is great. I gave you 75K and I got back 91K. Great.” But not if a company is successful. Like, I gave you 75K… Where’s my 75K? It’s like “Sorry, we’re six years in, we’re 10 years in, we’re 12 years in.” And that liquidity event doesn’t necessarily happen for a long time.

So it’s like, these are not in the same ballpark. For a startup, your startup equity – it’s very important that everyone has a share in that kind of generational future. It’s also important that that’s not what actually pays for the kids’ summer camp. What pays for the kids’ summer camp is cash compensation. And so that cash compensation is very important to us.

So how do you do it then? Do you just offer opportunity for them to buy it?

I mean, everyone, when they join the company, gets equity as part of their package, and then we re-up people over time, again, to kind of… Because yeah, it’s important that employees have a share in that. And then from a cash perspective, it’s been a little bit tough. We’ve been in an inflationary environment, obviously…

We did just give ourselves a raise…

Nice.

So now I’m making 235k. Which is funny, because this is the fourth or fifth raise we’ve had… And when compensation is completely disconnected from performance review processes and all those other kind of bull****, even I will – like, I know we’ve talked about it, but [unintelligible 00:49:51.04] by the way, everyone got a raise.” Everyone’s like “Oh, that’s great.” And someone literally will have gotten up and go to the bathroom. We did actually have this happen…

[unintelligible 00:50:01.26]

…a couple of raises ago, where people are like “There’s a discrepancy in my paycheck. I got paid too much.” It’s like, “No, we gave ourselves a raise.” Like “When did that happen?” “Oh, it happened like two all-hands ago.” It’s like “Oh, crap. I was out, and I didn’t catch the recording.” It’s like “Well, sorry. You’ve gotta pay close attention to when you get a raise around here.”

That’s wild.

And it’s been funny, because that’s not a point of principle necessarily… Although the transparency is a point of principle. That is something that we have just always done. And then when we were really struggling to hire – struggling to hire bluntly EE’s; struggling to get outside of our kind of immediate network. And one of our engineers is like “I think we should talk about the compensation.” And we talked about it, and this is in March of 2021, and that is in many ways the most important single thing we did in the history of the company, because it brought in so many new folks to the company. And not because they were drawn to the – it wasn’t the fact that it was uniform per se. It was the fact that it represented a different way of conducting ourselves. It’s what it represents that’s important.

And the reason that our engineer was advocating we talk about it, it’s like, when I talk about Oxide values to friends and family, they think it’s bull**** until I talk about the comp. And when I talk about the comp, it’s like a record scratch. People are like –

“You’re serious. Oh, you’re really serious.”

Yeah.

Well, no one else does that. Is anybody else doing that?

No. Not to the best of my knowledge.

No one’s following you even.

Nope. And we’ve been told over and over again, “Won’t scale, won’t scale, won’t scale.” And I’m like, “I don’t know, maybe. Whatever, I don’t know.” I was told that when we were 10, 20, 30, 40, 50, we’re now at 70, or 80, on our way to 90… And I would say that it is playing a more important role, not a less important role. Because there’s been so many interesting side effects. One of the super-interesting side effects is everybody is hiring a peer. And when you tell people that they’re going to hire a subordinate, their standards for that person are going to be a lot lower. And they’re maybe going to overlook a bunch of things that maybe they shouldn’t overlook.

[52:18] You tell someone they’re hiring a peer, and they’re like “Okay, I want to make sure that this is worthy of us.” So it is not easy to get a job at Oxide. We are very oversubscribed, and we’ve got people that take hiring extremely seriously.

And I think the other thing that’s been very important is that it tells us in a very concrete way the importance of every role at Oxide. When we first did this – it’s amazing. We first did this – we obviously announced it March 2021, we don’t have a product, and people were like “Yeah, but are you going to pay support people that?” And it was always like “Support people.” Like this is like a cast in tech.

Right. They’re less than.

They’re less than. And you’ve gotta take it apart. You’re like “Really? I want you to think of the very best support people you’ve ever worked with. Are they worth it?” “Oh, yeah. Of course they’re worth it.” Okay, well, what if we only hired the very best? Like, “Oh yeah, yeah. I guess it would make it work then.” Like, “Alright, asshole. I guess that’s what we’re going to do.” And why is it always support? I’m so sorry, support is so hard and so important. You are –

It’s the front lines.

It’s the front lines with a customer. What is more – and you have got a… It’s highly technical, it is, by the way, under fire…

Always, yeah.

We’re calling you because something is wrong, by the way.

Overwhelmed.

Overwhelmed…

Multitasked…

Multitasked… The ability to have the empathy, the ability to go technically deep… And then to have someone for whom “No, that’s my calling. That’s what I want to do.” I mean, there is an upside to it. The gratification you get is a high-high. When you feel like “Oh, that is really–” And what if you attract people that are drawn to that… And it’s like, we have got the best support people you can find. And I love our – and our support folks have been like “It has been such a relief.” And one of our folks who joined us relatively early was like “You know what? I’ve been told my entire career that I needed to go into ‘software engineering’ to advance my career. My heart was always in support. And I left support, I went into software engineering, but God, I would love to be back in support. Because that’s where my heart is. And I can do it here.” And you look at what they’ve been able to do here… Because when you do that, no one has to feel like “I am doing wrong by my career by supporting a customer.” But conversely, no one also needs to feel like “Well, I need to defend the throne room, and I better not let this support engineer contribute back to the source base, because what would that mean? That we’d have to change their pay grade.”

So as a result, we have our support engineers very much contributing to the thing we’re building. And then you expand that not just to support, but you expand that to these other roles, the operations roles, the QA roles. Roles that people sadly look down upon. In fact, QA is really challenging… We’ve got an open QA role right now that we’re not calling QA, because QA has been so just absolutely looked down upon that we can’t even call it QA. So we call it product assurance. If you’re listening to this and you –

[56:00] PA.

Yeah, PA. If you’re listening to this and that is your calling, you should be looking to Oxide, because we are – that’s what we’re… And it’s watching folks come in with that kind of versatility, and be able to do the kind of extraordinary things. I mean, this is not surprising, and it’s just also not unrelated to the compensation, bluntly. There’s a very strong sense of teamwork. And because we have disconnected compensation from – because the reality is everyone loves the idea of connecting compensation to individual performance, because it feels like “Of course you would.” But the problem is that just leads you down to a primrose path, where whenever anyone does anything, they think to themselves “Does this advance my focal package or not? Is this something that I use my promo package or not?” And great folks will not think about that too much. And they will do the right thing, even when the company is not rewarding the right thing. And we ask people when are they most unhappy and why, and almost invariably it’s when they are doing the right thing and management is discouraging it. And to be in an environment where it’s like “No, we’re going to separate all that”, and now allow people to do the right thing all of the time… So much more of the right thing just happens.

Now, of course, you’ve got to hire carefully, and that’s what we do. We hire people that have that disposition. But man, you build a whole company that way, and it’s extraordinary. So I tell people, “It’s lightning in a bottle. Don’t you dare take this for granted.”

And it’s almost like all politics go away, really. A lot of the politics get removed, that could be there.

They’re just pointless. I had one guy –

It doesn’t get you anywhere. You don’t get anything different, because you can’t politics the scenario, because it’s not a lever you can pull.

It’s not a lever you can pull. And I had one guy come from Google… And I think this is one of the real unfortunate things about companies like Google, Amazon, others like that, that take people who have an intrinsic excitement for the technology, and they break them a little bit, and get them to “No, no, what you should actually care about is that marginal 10%, 15%, 20% of your compensation, and you should distort your life and make yourself unhappy for – you should just like be thinking about that for everything you go do.” And as he said, “I didn’t realize how much of my brain was dedicated to thinking about compensation until I didn’t have to think about it anymore.”

I believe that.

“And I can just think about doing the right thing.” And that’s really, really, really empowering. And it’s been extraordinary. So yeah, I wrote an update on it, about how it’s going, and talking about the support engineering example… Literally, the top Hacker News comment… I could not believe this. So I’m like in the blog entry, I am effectively saying “How could anyone – why do we single out support people this way?” and kind of like shaming people who do that. Top Hacker News comment, it’s like “Interesting blog entry, but I’m sorry, no support person is worth over 200k a year.” And you’re just like “You kidding me?!” And fortunately, one of the respondents to that knew one of our support engineers, and he’s like “Actually, best support engineer I’ve ever worked with works at Oxide… And hey, Will, you’re worth every penny what they’re paying you. So don’t listen to these guys.”

Well, not listening to the Hacker News commenters is an age old tradition that I’ve been following for a long time… I’m believing everything you’re saying, and I’m buying it. I’m super-buying it.

I’m believing and buying.

That being said, I might be the guy that says “Does it scale?” And I’m recognizing that it has continued to for up to 70.

Yeah. A fair question.

[01:00:05.19] You know… How many people work at Dell? How many people work at Dell? Because if you guys cross the chasm, you’re going to be huge.

How many people have to work at Dell?

I don’t know.

This is a different question. Honestly, it’s a different question. I had an investor who turned to me at one point and is like – because they kind of forget that we’ve done this, our investors… It’s not something they really think about. They know that our team is very good, they know we don’t have attrition problems… And also if they look – at one point early on we’re doing this with one of our investors, like “We did the math, and what you’re paying people is like dead on the median salary per employee that we have in our portfolio company. So you guys are not like off the mark one way or the other, so it’s fine. Just doing it differently - fine. Knock yourselves out.” So the VCs kind of don’t care. But one of these investors turned to me, he’s like – because in particular, one of our investors was talking to Steve, and it’s like “Steve, you’ve really done a terrific job. You basically deserve a raise.” And Steve’s like “That’s great news. That means we’re going to give the whole company a raise.” And he’s like “Oh, right. You people… You people on this again. You people…” But we did. We did the give whole company a raise, and it was great.

But this investor turned to me, he’s like “Okay, you realize you won’t be able to do this at 600 people.” And I’m like “I don’t know that we’ll ever be 600 people. I don’t know that.” Really, you can’t build a billion dollar company with less? I mean, nobody has ever done even what we have done. Nobody has even been at this relatively small scale. So I’m just not – the right answer is “We don’t know.” Will things change? Maybe. I don’t know.

How many support people do you have per rack, or per customer, or some sort of metric that you could take and then multiply, to say “Well, at some point…” Because I looked it up, Dell - I’m fully admitting that they’re probably overly bloated, et cetera. They’ve got a hundred thousand people working there. So 600 seems small at scale. Maybe it’s not, but it’s just like, that’s not scaling up Oxide very much from here. That’s a 10X, basically. You’ve got 70…

Yeah. Totally. Fair question. I also think that - how many support people would Dell have if they thoughtfully engineered their products, made sure that every… I mean, the number of people that Dell dedicates to telling customers that “You’re the only one with this problem.” I’ve dealt with Dell support.

Yeah, sure. I have, too.

You don’t need very many people at a company to support a problem. I mean it’s the old Maytag repairman. I’m among friends on this one, right? Are you guys with me on this?

[laughs] I know Maytag, but I’m not sure…

Okay, so the Maytag repairman was an ad from the eighties, and the Maytag repairman had nothing to do. And he had nothing to do because Maytags worked. This is when washing machines used to work. Those of you who have a modern appliance know that this is not true. But it used to be this way.

I was gonna say, they don’t work anymore.

They don’t work anymore, because it’s a terrible economic model. Or that’s what companies convince themselves of. We want to build something that works. And the way you build something that works is when it doesn’t work, you jump on it and you understand it in totality, and you fix it, so the next customer doesn’t have that problem. If every problem is only seen once, because you’ve got such an aces support team and aces engineering team that they jump on it and they root-cause every single thing from the very first failure and they don’t need to see a thousand failures, ten thousand failures… How many support people do they need? A lot less than Dell has… So that’s the experiment we’re doing.

Right. So how many do you have now?

Four, or something like that.

Four?

Or five, something like that. Yeah.

Dang, that is a small amount.

Yeah. And we will continue to hire, but we’re going to continue to hire extraordinary folks, you know?

[01:04:21.20] Sure. And that’s the part that I say “How far does that go?” You have to be incredibly vigilant in your hiring, which right now you are… And at a certain point you might have the demand for hiring, and you might actually be like “We compromised a few times, and we’re getting now to the mediocre people”, you know?

Nope. Nope, nope, nope. Not going to do it.

Not going to do it? Alright… Okay…

Not going to do it. And again, not to praise Paul Graham a second time, but this is where –

Oh, two times, PR?

Two times, I know… A hundred percent founder mode.

A hundred percent.

And this is where founder mode is actually extremely helpful. Because if you look at those companies, why does that SA exist? Because Brian Chesky woke up and suddenly there were a bunch of people at his company he didn’t recognize and he didn’t hire. And the failure mode is always the same. The failure mode is that they lose control of their hiring, because they don’t have good processes to begin with… The processes suck, because they don’t take it seriously… It’s like “Oh, we want to have a great team”, but no one actually understands what that hiring process looks like, they don’t actually, admittedly… I’ve had some advantages of making some grievous mistakes in my past, that forced us to have a very good hiring process. Not at Oxide. But they lose control of hiring. They hire – I mean, I don’t want to say middle management is the root of all evil, but… It’s maybe a little too reductive, but… The problem is that middle management grades their career on the number of reports in an organization. It’s like, if you hire software engineers based on the number of lines of code that they write, if that’s how they value themselves, you’re going to get a lot of bad code, and you’re going to get a lot of it. If you hire management that grades their career based on the number of reports that organization, guess who needs more recs? That manager you just hired. “Really? We can’t do it with fewer people?” “No, we can’t. I need more people.” “Okay, you’re just trying to advance your own career. I get it.”

And this metastasizes, and you wake up and you have too many people, and they all do it. And so I turned to this investor, I’m like “You know what? I don’t know if we’re ever going to get to 600 people. And you know what? We are also the only company in your portfolio that has not overhired.” And he’s like “That is true, actually.” I’m like “You don’t have to say ‘actually’ when you agree with me, by the way. You don’t need to say actually.” But we’ve not overhired, and we are not going to overhire. Yes, that’s going to mean that it is painful and requires vigilance. But we’ve got a very writing-intensive hiring process, we believe it can scale, and we are not going to delegate. Every hire, ultimately, that decision is ultimately made by Steve. And yes, it’s informed by everyone else, but he bears responsibility for it, and that’s not going to change. And that’s just called founder mode *bleep*.

[laughs] That’s what that’s called, huh?

That’s what it’s called. I’m always reminded of the scene from Pulp Fiction. I want a wallet that says “Founder mode” on it.

Oh yeah, man. That’s a good one. That’s a much better reference than Silicon Valley. So –

Bite your tongue.

…imagine your IPO-ing…

Okay, we need a new season of Silicon Valley directed by Quentin Tarantino. That’s what we actually need.

Okay, I’m in.

Now you’re on board. How great would that be?

Oh, my goodness…

Like, Kill Bill as a startup. You know what I mean?

I do know what you mean.

Uma Thurman entrepreneur. I just feel like –

Where can I put my money to make it happen?

Absolutely. Absolutely.

I’ll bankroll that thing. I don’t have very much, but I can borrow some, right, Brian?

Exactly. Yeah, I’ve got tons of money. I’ve got tons of money. Yeah, who needs money?

[01:08:06.10] That actually makes me think about money management. With a hundred million in your bank account, it’s certainly –

It’s real.

It’s real. Like, that’s real money. You could just buy government bills and make millions of dollars a year. Do you have money managers, or how do you –

Is that on my LinkedIn now? Are you reading my LinkedIn?

[laughs]

The number of LinkedIn connections I have had has just gone nonlinear, because of course, you advertise that you’ve done this raise, and many, many people are offering –

They would love to manage that money for you.

They would love to manage that money for me. Absolutely. Absolutely. So I just gave it to the first person that came along.

But you’re not gonna use it all at once, so how do you manage it?

I mean, there’s an issue - how do you manage it? Where do you bank? We’ve got a –

Silicon Valley bank, is that the one?

We were at SVB, we were at SVB when – and I think Steve will still say the most stressful moment of the company for him was when SVB… We were concerned that weekend, and we had payroll to make on Tuesday… We had a 453 or whatever it was, thousand dollar payroll check that we needed to go out… And this is where you really, really, really know who your investors are, because the ones were just like “I’ll write a personal check.”

Wow.

You have investors like “I’ll write a personal check.” You’re like “Great. I’m going to need that.” And you’re like “Don’t you have anyone else [unintelligible 01:09:23.06] “I’ll write a personal check, I’ll write it now. Don’t cash it if you don’t need it.” And we did have investors who did that.

That’s pretty cool.

So where you bank is a huge issue. And then that becomes a cash issue, because you want a real banking relationship, because you want all this – you want to have PO-based financing, and AR-based financing… So some of that you offer up as kind of a carrot to who is going to really own this banking relationship… Like “Okay, we’re going to bank with you. You’re going to get this large amount of money. But then in return, we are going to get some services from you, whether it’s venture debt, whether it’s PO-based financing, what have you.” So there’s a whole science to all that.

Yeah.

Even credit lines, too. I mean, you don’t need cash. But you have to have some credit lines, because you can’t spend your cash, you’ve got to spend it differently…

That’s right.

It’s all about how you spend your cash… Well, perceived cash, the bill that you’re creating for yourself; it gets –

Right. Do you have a CFO, or you just manage that yourself, or how do you do it?

We hired someone to help on that. He’s been doing a great job. And did the same thing - did a process for someone in finance. Same thing, same compensation, same process, same materials process, same… Did it all. And got someone terrific there.

It’s in good hands.

Yeah, exactly. Coming from Lenovo, having had done a lot of this stuff, and has been… I think it definitely has – we’ve given Todd plenty to do at Oxide.

So speaking of big money, there’s been lots of big money going into data centers proposed and otherwise. I think Apple just said another a hundred billion in the States… I’m not sure what that’s going to actually be, but they’re going to build something, somewhere. Kentucky, I think. I think their glass is going to come from Kentucky. Obviously, that’s not a data center, but… Manufacturing stateside, you have projects - is it Stargate? What’s the Open AI one? Star-something…

Stargate.

You have xAI saying they’re going to put out 50 million GPUs in the next five years… That could just be talk, but they’re certainly going to be deploying lots of things… Does Oxide have opportunity in this new GPU-based, heavy model training and inference world that’s like blowing up right now? Do you guys have a role in that at all?

[01:11:49.12] Yeah. For sure. Something to know about that world is it’s really easy to focus on GPUs. And they’re important. There are a bunch of GPUs. We obviously don’t have an accelerator-based sled. We will at some point, for sure. Something we’ve definitely got our eye on. When we do that, it almost certainly will not be focused on those training workloads. We’ll focus on inference. And we can kind of talk about that. There’s a lot to talk about in terms of inference. But I would say that one thing that people should be aware of is that there is a lot of general-purpose compute involved in what people view as an AI workload.

I’ve been - and I’m sure you’ve been - mesmerized by watching these things show their steps. And the number of times – like, if you give ChatGPT or Claude an image to do something like “I want to recognize some things in this image”, it will write a Python program. I mean, you can watch it write Python programs, run those Python programs, get the results of that… It will obviously search the web, it will do all sorts of things… Like, yeah, that didn’t happen on GPUs. That’s happening on CPUs.

Right. So just standard servers and APIs, et cetera, et cetera, blowing up.

Yeah. And also, they need to be containerized. Especially if you’re going to have something where like I’m running general purpose compute at the behest of a user of this thing, at the behest of the internet, and we had Simon Willison on the podcast, on our Predictions podcast, which is great… And he was talking about Claude Compute. The first thing he had Claude Compute do is download a UEFI vulnerability rootkit. And it’s like “Okay, I’ll go execute this thing.” And you’re just like [unintelligible 01:13:31.19] So there’s a lot of general purpose compute out there. And I think with the rise of test time compute, and the way these kinds of models are going, there is more general purpose compute, not less.

We kind of assume that “Oh, if we don’t have a GPU, there’s not a place for us that’s interesting.” And it’s always nice when customers tell you you’re wrong. And our first customer, God bless them, Idaho National Labs… Idaho National Labs had to kick our door down, because we’re like “You’re a supercomputing facility. We’re not making accelerated compute. We’re not taking your call.” And they’re like “Can we please explain to you why we’re interested in Oxide?” And finally, it seems like “I’m just gonna take this call. These guys won’t leave us alone. It’s a waste of time, but fine.” And he’s like “Okay, can we talk for a second? Because yes, we have a supercomputer. We also have a bunch of Dell/VMware that does a bunch of stuff that we need that’s not the supercomputer. Don’t you guys replace the Dell and VMware?” “I’m so sorry. I’m so sorry we didn’t take your call.”

“That’s what we do.”

“That’s what we do. I’m so sorry. I’m so sorry.” So I am learning that I need to not judge companies by what my perception of what they need is, because I have been disabused of that notion more than once.

Well, when you’re running like you were at the time you need to be focused. And so every customer interaction that was not your core audience, or even close to it was a waste of your time…

A hundred percent.

…because you were worried about not being able to even be generational to be able to succeed.

That’s right.

So you had to have that position. And now that you don’t, then you don’t, probably. I’m curious how all this flavors into sales. Are you in sales mode? What mode are you in now?

Oh yeah, for sure.

Yeah. All on sales. Sales as much as possible.

Yup. Yeah. And these are always customers – you know, everyone has a rack, or a small number of racks, but with the idea of like “If this thing works, I’m going to go big with this.” And this has all been true for a couple of years now, so we’re now kind of at that go big moment for a couple of these different customers, which is exciting. We are in sales mode, but we’re really focused on customers that really need what we offer, which is not even like… A customer that’s only going to buy a rack or two - yes, we’ll get to you in a while, when we truly have crossed the chasm. But it’s the customers that are like “No, no, I want to talk to you about 5, 10, 20, 30, 40, 50.” Those are the ones that are customers – and we’re blessed to have. So it’s exciting.

[01:16:28.00] How big is your sales team now?

We have something like four or five people.

Four or five…

Yeah, exactly. Small –

My gosh…

Yeah. Small.

Yeah, that’s tiny.

And we’ve got this very writing-intensive process, and… Is this the right hiring process for sales? Kind of a question I had. Steve felt adamant. Like, “No, this is absolutely the right hiring process for sales.” And it’s been really interesting, because you hire – again, it’s the way people feel with support. Like, you can’t possibly do the support. People are like “You can’t possibly expect sales people to write a sentence. They’re animals, and beasts.”

“Write a sentence? What do you mean?”

“Write a sentence? Nah. This is an animal. It rips apart customers.” It’s like, is it really an animal though? Really? And what we have actually found is that for sure, it’s different, and it’s not… But the people that are attracted to that are really attracted to that.

So we’ve got sales folks that are terrific. The ones that can model themselves on Steve. Steve’s disposition has always been about “How do we not just find new customers, but make customers delighted? Delight customers. Find that next use case for – look out for customers, be that trusted advisor for customers.” And we want a sales team that, that go-to-market team that represents that. And we’re really blessed with that.

How do you have salespeople make a salary? I assume no commission…

No, actually there is an asterisk. So on sales - and we do talk about this publicly, but on sales, there is a commission component. And it was funny, because it was a change to roll out, because – I mean, sales is commission-based.

Yeah. It should be.

And so people were like “Oh, well, I want that, too. Why shouldn’t the engineers get that?” Like, okay, well, their base salary is less. So yeah, you also can make less. Like “Oh no, nevermind. I don’t want that.” Okay. You don’t want that. In other words, you’re taking a risk. You’re going to make potentially less, and potentially more. I can tell you, everyone at Oxide wants our sales folks to make a ton of money, because they know that if they make a bunch of money, it’s because we’re selling racks.

Sure. So what happens if today one of your sales team just goes out and books like a 50-rack order? A, can you fulfill that? B, how long would it take? And C, how would you go about it? 50 racks. They want it right now. They’ve got the money.

50 would be smaller than some of the numbers of our customers are talking about.

Okay. Well, give me a number that would scare you then. I meant it to be scary.

Well, I mean, that number does scare me, but –

Okay… [laughs]

…we’ve already had to do this exercise for large numbers.

You have.

Yeah.

Alright, so you crossed that chasm. I mean, that’s scale, right?

I mean, let’s ease up; we’ve not across that chasm yet, but –

Okay. You’re out over it. You’re over your skis.

Out over it. Out over it and it’s exciting. And it requires – I mean, this is where it is… Like, it actually is hardware you’re shipping. So actually, this is where you need to go into the supply chain. You need to go find those long lead time parts. You need to go leverage partnerships that you’ve got. And when you talk about big numbers like that, there’s also a challenge of like – the numbers get big, so now you’re like “Okay, well, we’ve got a lot of approvals that we need to go through internally.” And there’s a bunch of – and understandably. This is a big number. And like “Okay, well, when can we get it?” It’s like “Well, we need to get the PO before we can–” How do we kind of kick stuff off without having a PO in hand? Because you don’t – and we’re very mindful of history in everything we do, but the history of the Osborne computer company…

[01:20:28.01] Famously, Osborne went belly up when it actually had product-market fit. And there’s a great book – ‘great’ is maybe in air quotes, but a book called “Hypergrowth out of print”, where Adam Osborne gave his version of events, but operationally… They lost it on operations is kind of the – the TL;DR is they had a product that people wanted, and they died because they screwed up the operations of it, and they ended up with too much inventory of the wrong stuff, at the wrong time, and they just went insolvent. So that can definitely happen.

So when you have a – a customer’s talking like “Hey, I want 50 racks, and I’m serious. I want 50 racks, and this is not just like pillow talk. What does this look like? Give me a quote. I’m going to go through my approval process.” Then you need to be “Okay, we’ve got to go light up busbars, racks, rectifiers, compute sleds. We need to go figure out exactly what this thing is going to look like. We need to figure out where the long lead time parts are. We need to go – inventory, that’s cheap. You just procure that. That’s easy. And then you’ve got some decisions to make. People buying at that scale will need some skew control. Maybe I want different DIMMs, or I want – and you’ve got to afford them that. That’s a back and forth.

So there’s a whole galactic amount of detail. There’s an entire galaxy of detail that is not the building of the thing, which already has enough detail, but it is the actual – the operations piece of this is extraordinarily complicated. And it’s why when you’ve – it’s why our operations team is… You know, our operations team is terrific… Talk about being just as important as anyone else in the company. And boy, when you go do one of these exercises where it’s like “It’s serious, and we’re going. This is not a drill”, and you really appreciate it. Like, wow, this is just extraordinary resourcefulness and agility, and being able to… Probably unsurprisingly, a couple of our operations folks have got operations experience from the service. I’ve got some ex air force folks that are used to just like “How do we go deal with very large scale operational issues, and having to make up a bunch of stuff on the fly”, in terms of like “Your facility in Toronto can’t do this, but there’s another facility that you’ve got in Malaysia. What does that look like?”

Oh, by the way, then you have like the Joker in the White House spinning the tariff wheel. This is hard enough, by the way, without being like – okay, there’s a tariff. There’s not a tariff. No, no, there is a tariff. No, no, no. We’re going to have a tariff later. We’re going to do this, we’re going to do that. This is actually hard enough when everything’s staying still… And it’s all challenging. And it’s a lot of detail. And you’ve got to embrace that detail, and you’ve got to go headlong into it.

And then I think the other thing that’s been important for us is then be transparent with folks about where we are and where we’re not. If and when we hit a snag, we’re going to be transparent about what it is, and we’re not going to present this to you as like “Hey, this is the problem. We don’t know what to do.” It’s like “Here’s the problem. We’ve hit an issue here. This is what we’re doing to resolve it. Just, we’re letting you know.” And that is the way we’ve operated as a company, with that deal of transparency. But if you are a Dell/HP/Supermicro customer, you get these same delays, but you don’t have any transparency of what’s going on. It’s like, “Where’s this thing I paid for?” “Oh, I don’t know. No one will tell me.” It’s like, no, no, we want to be sure that we are giving people that kind of transparency. But it’s difficult, and it’s detail-oriented, is the answer.

[01:24:16.25] It’s got to be hard to plan that far ahead. I mean, do you just spend a lot of cash like holding stuff? How do you reserve the DIMMs, you know…

No, you can’t do that.

You just made the order?

Just in time.

Yeah, you kind of want to be like [unintelligible 01:24:30.07]

You’re making pizza over there?

Yeah, exactly. We’re making pizza. How many do you want? [laughter] No, and it’s like, you want to like hit that balance. You don’t want to be made to order, and you don’t want to hold inventory. And so the answer kind of depends on the part. So you’ve got parts that are with thin supply chains, that aren’t that expensive - like, yes, stock inventory. Doesn’t matter. Fortunately, the parts that you would not want to stock as much are parts that are more commodity. So it’s like, DIMMs and CPUs - you don’t have to stock those. That’s just a lot of money to stock a bunch of those. And then this is where you also need partners that are going to really – and it’s been fun, because we’ve had a lot of people that have believed in us from the beginning… But we’ve always been like – obviously, we’re weird. We’re idiosyncratic. And all of a sudden we have these demands show up and they’re like “Oh my God, this is actually like – you nut jobs actually might pull this thing off.” And you actually do need like big numbers of DIMMs, or disks, or of boards, or of chassis, or what have you. So it’s actually fun to go reward folks who have really believed in us for a long time. It’s like “Okay, now we’ve got a big order. Let’s go.”

How many are building right now? Can you reveal versions of numbers, and not the exact number?

You know, I’m not going to review our exact run rate, but let’s just say that we’re on this knife edge the entire time of like trying to figure out how to expand our capacity as quickly as we possibly can, have people not – we want to make sure that we’re hitting the expectations for when these things are going to arrive. We don’t want to have long lead times. And especially in the supply chain crunch we saw some very long lead times… So yeah, I would say it’s something we are spending a lot of energy on. If you go to the jobs we’re hiring for, you will notice that there are several in the operations area. So this is an area where we are very aggressively expanding, because we’ve got a terrific operations team.

What is the lead time? How do you quantify that? If I said “Hey, I want to buy. I’m super-interested. I wanna buy 50.” The general response to that. “Give us a year…”?

Yeah, so “I’m super-interested, I want to buy 50” is like not exactly the conversation, because that number is so big that like that’s not a – there’s the casual conversation.

How about “I need four”?

Yeah, “I’ll buy four.” Right. So we need to get to a PO, and then you’d be working with our operations team to be like estimating a time. If you were to buy those right now - I mean, our goal is to be at like 8 to 12-week lead times.

Not bad.

Yeah, exactly. In general, we have been able to move faster than our customers, mostly. That is no longer becoming the case. As the numbers get bigger and the urgency gets higher, that is not going to be the case. But it has been the case that – “No, we’re ready to ship it. We need an address from you.” They’re like “Oh, we still don’t know which DC it’s going to”, or what have you. But yeah, we want to be at that kind of 8 to 12-week kind of lead time. We don’t want to be longer than that.

I know you kind of educated us on like general compute and data centers. Jerod mentioned like Starlink – not Starlink; it was Star-something, Jerod. What was it called? The one in Abilene, Texas.

I think it’s called Stargate. It’s just huge data centers. Mostly GPU-based, but…

Yeah, I mean, is it, though? Do we know what that is?

That’s what they’re telling us. But I don’t know.

Yeah, exactly.

I’m just reading the headlines. I’m just reading the headlines.

Did ChatGPT make that up? Is that a hallucination?

[unintelligible 01:28:12.12] constant deliveries to Abilene, Texas…

[01:28:18.14] So when you get to a certain size, that’s what it looks like. If you start talking about –

“10 more Oxides, just right there. Look at those beautiful 10 Oxides, just sitting there…”

Exactly.

“There’s 50… Oh, my gosh…”

50 right there, waiting to get installed…

Yeah. And it begins to look more like, okay – these things are just like streaming in effectively, because you are buying them as fast as we can make them. And we’ve got a couple of folks who are on the cusp of doing exactly that.

We’ve been super-deep in, I suppose, money, and fulfillment, and operations, and support… Very little on the tech, though. And I’m really curious, what are the major technical feats that you’ve just accomplished that’s enabled this world for you? I know the integrated stack, but what are some major – like, the things you’re truly, truly like “I can die tomorrow because we did this. And I’m happy. Yes, we accomplished the goal.” What is that?

Yeah. Just for the record, I don’t want to die tomorrow.

Okay. I don’t want you either, but –

I want to get that out of there.

But you could…

Yeah, that’s right.

You understand my euphemism.

Yeah, a hundred percent. And there are a bunch of things. I mean, what we’ve been able to do - it’s just sad… It’s a sad state of the industry that the bias, a construct that dates back to when I was a child - and I’m 51 years old - being able to boot an x86 without a BIOS is like a man on the Moon. and that was extraordinarily difficult. And that was one of those things that’s like “If you don’t pull it off, you’ve got nothing. You don’t have a product at all.” The approach we took to holistic boot is something that the hyperscalers haven’t even done. The approach that we took to the switch, the programmable switch, and being able to integrate that in with the rack is extraordinary. And I can’t believe we – we got it to work, and then Intel killed the part. We were using Intel Tofino… Intel killed the part, and so we have had to go find another part. And we were really excited about the part we found, [unintelligible 01:30:30.01] which we’re really excited to go build on. And then the stuff we’ve been able to build on that X2 is very exciting. That’s not what we’re shipping today. It’s really extraordinary.

The things we’ve been able to do with the control plane, with this distributed system, that was – we had done several control planes in the past, and really wanted to improve on them. And actually seeing that come to fruition, being able to do an update, and being able to dynamically update this thing… Because we take a distributed system that we update across an air gap. And when we shipped our first product, it was important that we could update this thing at all. We had something that we called the update, the minimum update; that minimum update required the rack to be parked. You would stop VMs, update the software, and start the VMs again… Which is great that you could update it at all. Obviously, that’s not the cloud experience, right? And the ability to build a true distributed system to allow that thing to be updated truly dynamically, and to watch that unfold. I mean, that was a long, long, long software project, and required just extraordinary work from a bunch of people. So watching that come to fruition is amazing.

[01:31:54.23] What we’ve been able to go do on the service processor, and getting rid of the traditional BMC. We’ve been able to go do – with the root of trust, having a true root of trust. Being able to attest all the way up the stack. Having the root of trust truly attest the SP. Having the SP attest what runs on the host CPU. Pooling that together into a trust quorum, where you have – I mean, what we’re pulling off is really extraordinary, where you get this group of sleds together, and they themselves decide there are enough of us to share a secret. So in other words, if you just walk off with a sled, you don’t have anything. The ability to do this with distributed storage. The ability to stitch all this together, and then get the power observability.

There’s so many things that I had always wanted, and I didn’t understand why I didn’t have them. And now I understand why I didn’t have them, because it’s really hard. It turns out a lot of this stuff is really hard. But the vision for Oxide dates back so long. It dates back – for aspects of it, over 20 years. And it’s a vision a lot of people have had. And watching that come to fruition in so many different dimensions is extraordinarily satisfying.

In terms of like the thing that truly fills me with pride - this is going to sound corny, but it’s hand on heart true… It’s not the technical artifacts. I’m proud of the technical artifacts, for sure. The thing that I am like tears in the eyes proud of is the team that built it. And when you walk into Oxide, there is a panel from one of the first Oxide machines signed by everybody at Oxide. And that’s the first thing that you see when you walk in. And that to me is the most important thing that we’ve built together, is this extraordinary group of fearless, fearless technologists, who are wanting to actually go kick the dent that we want to kick in the universe together. That is what is – and as I told people, this is lightning in a bottle. If Oxide were to stop tomorrow, we would all look back on this period of our careers as the apex, as this unique time period in our careers. And that is the thing that is unequivocal, that we’ve achieved, that can’t be taken away. Now, we’ve got a lot further we want to go, but that is the thing that I am most proud.

When you convince someone – and this is why I mean, hiring is such a… It’s amazing to me how frequently this gets outsourced to people. Because when you’re coming to Oxide, you are giving to all of us the most precious thing; you are giving your finite time on this Earth. And you’re going to give that to us, and we are going to give ours to you. And that is sacred. In the words of – James Carville has got this, in the War Room, the documentary that follows James Carville and George Stephanopoulos. He’s got this phenomenal speech at the end of the election, where he talks about how sacred this is. And it is so important. And the most important kind of sale that I make/we make is convincing someone to cast their lot with us. And God, that is so amazing. And I am proud, of course, of all the things that come from that. And of all of these technical artifacts and these breakthroughs that we’ve had. And the breakthroughs that we will have; we’ve got a bunch of exciting stuff in our future. But it is the crew that did it, that I am hand on heart most proud of.

That’s awesome. It’s good to be a part of that kind of crew too, because… I mean, just being able to be that kind of fearless person with a small cadre of people; you didn’t have to hire thousands thus far to get there. You had to be in the sub-one hundreds to get to that point, which is just wild.

I would say that also the fearlessness is very complimentary. There’s so many things that I’m terrified about, but then someone else at Oxide will be fearless about it. I’m like “Oh, thank God. Hold me. Hold me right now. Let me weep on your shoulder. Tell me it’s going to be okay.”

Stronger together.

Stronger together. I think I wet my pants.

[laughs] Well, if you’re looking for a secretary, I can answer phones for 235. I mean…

There you go. Exactly.

I’d love to be part of the crew. I probably can just say “Hello. Uh, Brian’s unavailable right now, but leave me your name and I’ll make sure he calls you back.”

There you go. Yeah.

Well, should we close –let’s close down the friends and let’s do a… Do you want to do a Plus Plus bonus? I’ve got some current events I’d love to get your guys’ take on.

Oh God, yeah. Let’s do it.

I’ve got two things on my mind. Alright.

I hope it’s one of… One of my things.

Bye, friends.

Alright, bye, friends.