Based on a recent string of billion-dollar exits, cloud monitoring and enterprise software firms in general have been delivering nice payouts. And investors are taking notice.

In the month of August alone, cloud monitoring service SignalFx Inc. was acquired by Splunk Inc.; Dynatrace Inc., another cloud monitoring service, went public and surged nearly 50% on its opening day of trading; and Datadog Inc. filed a prospectus for its initial public offering of stock after nearby doubling revenue the previous year.

“No one thought monitoring would be a big enough market to support multiple billion-dollar-plus companies,” said Jerry Chen (pictured), partner at Greylock Management Corp. “What we’ve learned is making a bet on just cloud-native companies, like Datadog, was a great bet. They’ve grown super fast, and that market turned out to be very big.”

Chen spoke with John Furrier and Stu Miniman, co-hosts of theCUBE, SiliconANGLE Media’s mobile livestreaming studio, during the VMworld event in San Francisco. They discussed the total addressable market for enterprise software firms and how VMware Inc. leveraged its advantage in the virtualization space (see the full interview with transcript here).

Larger market than expected

Chen’s firm is known for its early backing of tech powerhouses, such as LinkedIn, Workday Inc. and Facebook Inc. However, Greylock has also backed a number of companies in the enterprise software space, such as Avi Networks, which was acquired by VMware Inc. in January.

“What we’re learning now is the total addressable market for these enterprise software companies, be it SaaS, log, metrics, security, those TAMs are actually bigger than we thought beforehand,” Chen said. “Every business now is being touched by software.”

VMware itself is an example of a company that started in one particular product space and made its name in the enterprise world providing virtualization products and services. This allowed it to branch into a more diversified strategy that is playing out today.

“VMware is now on their second or third act,” Chen said. “They’ve done a nice job of owning one product category — server virtualization and desktop virtualization — and they’re now expanding to other adjacent categories, buying Carbon Black in terms of security. It doesn’t happen overnight.”

Here’s the complete video interview, part of SiliconANGLE’s and theCUBE’s extensive coverage of VMworld 2019:

Photo: SiliconANGLE