Entrepreneurs are driving an ever-faster pace of innovation in information technology, and the venture capital industry is scrambling to change its investing algorithm in an effort to keep up.

That was a key theme explored in the Dec. 9 episode of SiliconValley Friday Show, which featured guest venture capitalist Ashmeet Sidana (left), founder and managing partner of Engineering Capital, an early-stage seed investor for engineers shaping the future of tech. On the show, we unpacked Amazon Web Services and its dominance, the role of the entrepreneur in the Valley ecosystem and hot areas for 2017.

One important development we explored was how Silicon Valley is where the world championship of entrepreneurship takes place, played every day and all year long, but with the success has come lots of “tourists.” “Most tourists think it is easy to be the next Mark Zuckerberg,” Ashmeet said. “Startups fail all the time. Startups are not easy.”

A key quote: “There are really only three jobs in every startup. If you’re an entrepreneur, if you’re working in the startup ecosystem, you need to know which one of those three jobs you are doing: Are you building it, are you selling it, or are you overhead?”

Silicon Valley Friday Show is a weekly video and audio program broadcast live every Friday at 8 a.m. Pacific from Palo Alto, Calif. The show is hosted by John Furrier, cofounder and co-chief executive of SiliconANGLE Media and cohost of theCUBE.

Here are some soundbites from the show, which also featured Jeff Frick, co-host of the CUBE, edited for clarity. Listen to the show on-demand for the full context. If you like it, share it and subscribe on SoundCloud and iTunes. Follow me on Twitter @furrier, @siliconangle, @theCUBE and @Wikibon.

John: Is Amazon Web Services getting overhyped?

Ashmeet: I think you are underhyping it. I think Amazon is going to change the world quite literally, at a stage in technology and the industry where everyone is being impacted. The impact of AWS and the cloud cannot be overstated.

John: Internal scale is a big issue — it is big enough that they can make their own stuff. The scale is shifting.

Ashmeet: If you walk into the best data centers today, you will not have anything from the some of the best IT companies in the world, they don’t power the data centers anymore. There is a wholesale changeover. The entire stack is changing at the same time. What we’re seeing is a complete change of the stack at the same time, and that is why it is so dramatic.

John: There are two things about AWS. They are changing the game and they are introducing services faster than both competitors and customers themselves. However, Oracle and Google are not going to let them push them around in the enterprise. How does Amazon respond to the growing enterprise ecosystem of its competitors? This will be their defining moment in this phase of the cloud game. You don’t hear about AWS going for Microsoft Azure, it is all about Oracle. I think that this is by design.

Ashmeet: Amazon is a ferocious competitor. What is new about what AWS is doing around IT industry is that they are bringing their mindset of a consumer industry and economies of scale to the IT industry. Amazon is used to seeing margins going down. Having a business model where prices go down every year is what is disruptive. People — their competitors — are not used to this. Prices go down every year. They’re not going up every year.

John: That is the silver bullet to kill any antitrust conversation against Amazon if anyone brings that issue up for discussion. AWS is lowering prices for consumers. Any antitrust conversation is a non-starter on that single point alone.

Ashmeet: It is all based on open source. Scaling it like Amazon is what is really hard.

John: Adrian Cockcroft is now on board at AWS [as vice president of cloud architecture strategy, and so it will be showcasing more open source in my opinion. This begs the question: What is the canary in the coal mine, the signaling from the startups? At AWS the startup entrepreneurs are all positive about AWS. It is an era of who should I bet on with respect to startups.

Ashmeet: You have to give Microsoft credit — specifically [CEO] Satya Nadella for his understanding of the magnitude of the cloud.

John: Satya is a CUBE alumni. We like him. That being said, I worry about Microsoft being a sub-optimized environment for the cloud. Are they just bolting old systems together?

Ashmeet: Microsoft is taking their customer base and serve them by getting to the cloud. Every startup has a concern with cloud. So their product going to be an AWS service next year? This is a huge issue.

Jeff: The hardest thing for incumbent competitors of AWS to copy is the culture that AWS built. AWS’s innovation pace is its strategic advantage.

John: The scale is unprecedented. AWS is a service ,not a product. This is a new dynamic for customers because the evaluation scenario is different. Look at Salesforce: Service wins over shipping a product. Customers evaluate speeds and feed of product if they take it on premise, but they rarely look at a service internals if its works as a service.  This is key distinction between product sales and as-a-service technology solutions.

Ashmeet: Look Salesforce is just one function just CRM, that is why it gets me so excited. Imagine the opportunity for startups if you can take a feature and make it a entire business. I call this time of disruption rational exuberance, not irrational exuberance.

John: How is venture investing changing and what’s the impact on entrepreneurs?

Ashmeet: Creating technical insights is very valuable as an investor. It always wins in the end. It’s the difference between a product and a company. If you scale and execute well, you can succeed off a narrow idea.

I teach a class about scale and markets from a VC perspective. How should VCs think about market size? VCs tend to get it wrong. They do it top-down. Entrepreneurs do not do it that way.

Software and money are the only two things in the world that have zero friction and infinite scale and infinite leverage. With software and money, there is no limit or scale. Software is only limited by your imagination. With a small amount of capital, you can create a great company in AI and machine learning, for example.

John: What have you learned?

Ashmeet: The magic of the entrepreneur doesn’t change. It is not necessarily the person with the loudest voice, but if you have that great idea, you can change the world. That is happening every day here in Silicon Valley. Making a profit never goes out of fashion. One of the biggest ideas impacting innovation is the lean startup notion created by Steve Blank – quickly iterating with customers. Spending time with people.

John: As Mark Cuban says, “Sales cure all.”

Ashmeet: If you are an entrepreneur, you need to know which role you and your team members are undertaking. There are only three jobs in every startup every entrepreneur need to evaluate the people: Are you building, are you selling or are you overhead? Venture is crossing the chasm. We are going mainstream and deal flow is the mother’s milk of venture capital.

John: It’s easy to get to 3 million but it’s hard to get to 30 million and beyond.

John: Stepping back, what were the highlights of 2016?

Ashmeet: 2016 is the year the incumbents threw in the towel on the cloud. Clear to me the old guard has realized the game is changed and they need to reboot. Amazon has realized data is a form of competitive advantage. Data is a prerequisite to AI and machine learning.

John: Getting a competitive advantage. IBM is still in the cloud game. I wouldn’t count them out.

Ashmeet: I don’t think IBM has thrown in the towel. The key is to combine technology with secret sauce and you need something special, not just only the data.

John: Surprises for 2016?

Ashmeet: There was no crash in terms of the bubble. This is a herd mentality when it comes to investors. The rational part of the market has come through.

John: I predicted the consumer crash would be subtle, but not the enterprise market — no crash there. I have publicly said in the face of the Bill Gurleys of the world that the enterprise will save the consumer crash. We were right on that. We see the consumerization of business happening now in ways no one saw coming. The distinctions between the two are artificial. Is Google and enterprise company or consumer company? Everyone is becoming a technology company. Enterprise has changed and it looks more like consumer tech.

Ashmeet: Expectations are now very high. Thank you, Steve Jobs.

John: The impact of business is much more structural. Enterprise business are changing in every way from technology – a new reconfiguration of business driven by a new software industrial revolution – this is not consumer verses enterprise sector –it is all one sector – software and cloud. This is why the bubble never crashed the wealth creation is outpacing the bubble created by venture capitalists.

Ashmeet: You can measure everything and collect data, but if you aren’t doing it, you are going to lose because someone else is going to do it. People take it for granted that every seat should be priced differently, but that is the reality of the world.

John: What are you looking for in 2017?

Ashmeet: A continuation of innovation for 2017. Emergence of strategy becomes important.  I’m paranoid and nervous because these changes are hard to predict and they are dramatic – a  sense of scale that I’ve never seen. We are talking about software taking on the entire world.

John: What about Silicon Valley?

Ashmeet: Silicon Valley is where the world championship of entrepreneurship takes place, played every day and all year long.  However, there are lots of “tourists” coming here. Most tourists think it is easy to be the next Zuckerberg. Startups fail all the time. Startups are not easy. However, there are lots of “tourists” coming here. Most tourists think it is easy to be the next Zuckerberg. Startups fail all the time. Startups are not easy.

John: There are decades of support systems in the Silicon Valley ecosystem.

Ashmeet: The sense of scale is the talk on the streets in Silicon Valley. For the enterprise business, the concept of scale is now in the boardroom. For consumer companies, this has been around for a while but now all enterprises businesses are looking for scale not just technology but the diversity of applications. It’s not just IT.

John: There is no discrimination for innovation on where it can be disruptive.