How Nutanix acquired Frame
A few years ago I discovered Frame, which lets you run any application in the cloud, in any browser, without any downloads or plugins.
Being a nerd, I played with it for almost six months without contacting the company. Some of the questions I asked and bugs I reported were pretty esoteric. Finally the CEO of the company, Nikola Bozinovic, emailed me to ask me who I was and what I was doing.
I met Nikola at a restaurant at Palo Alto. It was one of the fancier restaurants, on a weekday, early, right when they opened. We were the only two in there, and the ambiance was romantic, which made us both uncomfortable; so we got out of there and went to Oren’s Hummus.
Although he didn’t tell me, I learned later that Nikola was one of the leaders of the Serbian revolution to overthrow Slobodan Milošević.
Finished with that little chore, he was now working on putting desktop applications in the cloud. Nikola and his team in Serbia had completely reinvented the protocol stack for VDI (virtual desktop infrastructure). The incumbent, Citrix, was getting old. We quickly got the relationship going by making a small seed investment, and a few months later we led a $16M Series A round in Frame.
What allowed Frame to reinvent the protocol stack was that models (data) have become larger, computers (CPUs) have gotten faster, GPUs are becoming ubiquitous, commodity servers with oodles of DRAM are available, network pipes have gotten fatter, faster and cheaper, even over mobile, and low-cost end-user devices have proliferated… but screen sizes have remained the same, making it more and more practical to stream pixels.
Once upon a time, certain simple forms-based applications moved to the cloud. All you needed to use them was a web browser. This was a pretty big deal and it created the category we now call SaaS.
Soon not just apps, but infrastructure software started moving to the cloud. It started with storage, networking and compute. Then databases, developer tools, source code trees, build systems, continuous integration and continuous deployment, application performance management, monitoring and security tools, application back-ends as a service, and even artificial intelligence and machine learning frameworks as a service…
So what hadn’t traveled well to the cloud? Your desktop.
The vision of your entire desktop being in the cloud is an old one: you walk up to a thin screen anywhere in your organization, or a friend’s house, an airport, or the back seat of a cab, and provide your credentials, and your entire desktop (and life) appears just the way you left it the last time. Or it’s accessible from your phablet or a super thin screen you carry with you. This notion of desktops in the cloud has numerous benefits beyond the freedom and mobility: enhanced security, better management and budgeting, and reduced capital expenditures.
The execution of this vision, though, has been uninspiring. Poor user experience has dogged these systems on four levels: first, a bunch of on-premise infrastructure had to be installed; second, the remote application delivery suffered from lag, low resolution, and connectivity drops; third, every user of virtual desktops needed to install client software; and fourth, the administration tools were cumbersome, complex and did not have APIs to automate and integrate with other systems. Turned out, desktop virtualization actually increased your infrastructure costs rather than reducing them. It made data center management more complicated.
This is what had come to be known as VDI and multi-billion dollar public companies such as Citrix (NASDAQ:CTXS) were created despite this clunkiness — such was the demand. Citrix remained the clear incumbent in the space for a long time.
Frame was getting great traction with “heavy” applications (such as AutoCAD and PhotoShop). With literally one click you launch these heavy apps on a cloud computer and they’re up and running in a second or two. When you go to File → Open, you see all your cloud drives: Box, Dropbox, OneDrive, Google Drive, etc. When you’re done, you save your work back to one of the cloud drives. The apps run on beefy servers with GPUs in the cloud, not on the local device, and what you see and interact with is a highly compressed, low latency video stream, which is super responsive to your keyboard and mouse movements. Many resource intensive apps run better in this mode than on your own computer!
Frame also got great traction among government agencies. Virtualizing all desktops and keeping them on the server side was more secure. Who knew?
Working with Nikola was a joy. It was early days, but life was good. But then our worst nightmare materialized: Frame got a reasonable acquisition offer from Nutanix. I say “worst nightmare” because the offer (a couple hundred million dollars worth of Nutanix stock after bells and whistles) was not big enough to get us excited but big enough to put a lot of money in the founders’ pockets. Usually we want to invest early and build companies that end up being valued at $1 billion or more, so that our funds can make $250–350 million in gains.
We tried hard to convince the founders and Nutanix that now was not a good time and this was not a good deal for anyone, and to please let us avoid distractions and build a billion dollar company. But Dheeraj Pandey, Sunil Potti, Duston Williams, and the rest of Nutanix management team, over several meetings, dinners, calls and texts mostly convinced us that owning Nutanix stock for the next few years would be as good or better than owning Frame stock.
Analysts covering the stock noted that Frame fits squarely within Nutanix’s agenda, and that the rate at which Nutanix is aggregating and rolling out new services is simply impressive. With HCI (hyper-converged infrastructure) and VDI (virtual desktop infrastructure) both being super competitive and full of other riff-raff, Nutanix and Frame are better together than separate (BTIG). Nutanix passes the Rule of 40 test with flying colors (Forbes).
Nikola and Dheeraj have built incredible rapport over the last year. Nutanix made a heck of a deal. Nikola is excited to report to Dheeraj and build out the VDI business unit at Nutanix with more firepower. We’re excited for Nikola, very sad to let Frame go, but glad recipients of Nutanix stock.