I am curious to see how a16z's investment results eventually pan out. I don't believe any of their funds have gone through a full cycle, nor have they experienced a down market, so its still too early to declare him a top dawg.
His "twitter schools" parrot things like Buffett's shareholder letters pretty closely ("When the tide goes out, we find out who's been swimming naked."), so at least at an intellectual level he gets it, but his investment behavior contrasts this strongly, where he seems willing to pay any price for growth. Unfortunately this is common in the investment world, where everyone is a value investor in words, but rarely in behavior.
I guess I am mostly interested to see how the "founder as rockstar" thesis that is central to a16z works in practice.
> I am curious to see how a16z's investment results eventually pan out. I don't believe any of their funds have gone through a full cycle, nor have they experienced a down market, so its still too early to declare him a top dawg.
And the only reason they've been able to reach $4B in AUM so quickly is because record-low interest rates and stagnating growth in the developing world have created a rush of capital to Silicon Valley looking for any semblance of alpha.
The real question we should be asking is what sector of the economy all this roving capital will target next, when it becomes clear that tech startups can't live up to the promises of the VCs.
> I guess I am mostly interested to see how the "founder as rockstar" thesis that is central to a16z works in practice.
That's just a sales message used to get gullible and desperate founders to take money from them without giving it a second thought. When things go south, like they did for Zenefits (YC W13), a16z won't be so nice anymore:
> On Feb. 1, Zenefits held an emergency board meeting. The licensing problems and the macro were discussed. [a16z partner] Dalgaard suggested to Conrad that, as the person who created the program, he needed to leave.[0]
I'm talking about might, not right. Half of Wall Street was committing fraud in the years leading up to the financial crisis, and it was a hell of a lot worse than anything Conrad did. How many of them have been held accountable the way he was? From that perspective, who are the real "rockstars"?
Pro-founder does not mean they drop all standards and expectations. I'm not familiar with their entire portfolio, but using the Zenefits case (where the founder is accused of fraud) is a poor argument to support your claim that they are not pro-founder.
I'm not saying they are or aren't profounder. I just think Zenefits is not a good example to use to make sweeping accusations about the firm.
You can be pro-founder and still toss frauds out of office. This is a spectrum and a16z appears to be more founder friendly than 90s era VCs who were more likely to be ex-bankers and quicker to replace founders.
I am curious to see how a16z's investment results eventually pan out. I don't believe any of their funds have gone through a full cycle, nor have they experienced a down market, so its still too early to declare him a top dawg.
They returned their first fund twice over ... in three years.
No, the Skype deal was very idiosyncratic: Andreessen was on the eBay board and no-shopped the Skype spinout to himself. That isn't going to happen again.
Their second fund had Nicra ($1.26B), Instagram ($1B) and others. Not sure if the GroupOn and Zynga IPOs were first or second fund. Either way, that fund was a big success.
The guy was a programmer (no insult, so was I) who wrote, while young and enthusiastic, a derivative copy of well known software idea... he got rich, good for him (no sour grapes, so did I) but that hardly makes him a genius of business savvy and economics. His name and commentaries started popping up everywhere a few short years ago which to me smells strongly of having a PR agency (insult+sour grapes, I don't have one)
So, when I say Marc Andreessen is a bubble, I mean his money came from a bubble, and his portfolio has expanded in a bubble, and so has his apparent influence, but I don't myself see evidence of extra-technical genius or being able to see the future. I have no problem with his living the dream; and if you're living the dream, it wouldn't even be surprising if you fell in love with sniffing your own farts (sour, not grapes!) that's human nature. What I have a problem with is, why is everybody else always hanging on his every word, what is notable in what he purportedly says?
> His name and commentaries started popping up everywhere a few short years ago which to me smells strongly of having a PR agency
This is exactly right. One of the first things a16z did after it was founded was to hire Margit Wennmachers[0] and her PR firm [1].
Horowitz openly addresses the topic in his book, The Hard Thing About Hard Things[2]:
> “We hired the Outcast marketing agency, headed up by its formidable founder, Margit Wennmachers, to generate media interest. We needed people to know what we were about as we had decided to defy the conventional venture capital theory of no PR. The daughter of a German pig farmer, Margit was the furthest thing from a swine wrangler imaginable. Smart and sophisticated, she was the Babe Ruth of PR. She worked her contacts, landing a cover story in Fortune in 2009 that featured Marc posing as Uncle Sam. Andreessen Horowitz was an overnight sensation, and yet Marc and I were still the only two people in the firm.”
As someone who has been around the web from the beginning, I will tell you this is horse shit.
Andreessen was building Mosaic at NCSA when very few people knew what a web browser even was. (There were only a few browsers in existence at that time, most of them were unusable, and the most popular one displayed only text. ftp was still massively more 'popular' than the Web, and in fact so was gopher ... gopher, FFS.) O'Reilly hosted what was basically the first WWW conference, in New Orleans, sometime in 1992. The attendance was about 40 people -- that is how big a Web conference was at that time. Marc was there. (So was I). People were mad at him because Mosaic was hacking the IMG tag into HTML without waiting for everyone else to discuss and agree on a standard.
So yeah, you are denigrating someone despite having no idea what you're talking about. But hey, I guess that is par for the course on an internet forum.
I don't think that's fair. Andreessen had an avid following on HN in the years before A16Z because his pmarca blog was one of the most astute out there. Or at least seemed so; I haven't gone back and read those posts. I do know that smart readers frequently lamented when he stopped producing them.
EDIT: he explains (in an interview which I can't find ATM) that people (someone he respected/knew, IIRC) add 'p' to the front of their name@domain.com to help filter out spam.
I believe he tells the story in this podcast. A professor put the P in front of his email address to avoid unwanted emails. Possibly the P stood for private.
This P became an inside joke among friends or coworkers, and this is a continuation of that joke.
Be careful with this line of reasoning, or you might notice that pretty much all the valley hero pundits don't have any kind of track record of real prescience or predicting the future through periods of genuine upheaval at all, and mostly just talk their own book and spout Tom Friedman style business folk-inanities about how the world is changing fast and stuff.
I worked a short internship as an analyst at a mid tier regional VC that was affiliated with a larger well-known Sand Hill firm. I won't claim to be an insider, nor will I claim to be especially knowledgeable about VC or visionary of the future. But I will tell you this: your description of Marc Andreessen as a lucky know-nothing fits 99.9% of VC partners out there, even in the top tier firms. They are all bumbling bufoons, spouting fortune-cookie wisdom and clinging to their solitary past success as an entrepreneur with unparalleled hindsight bias. They are completely unable to critically analyze anything. You could throw that description against any wall in Sand Hill and be guaranteed to hit at least one VC partner.
The thing is, the description doesn't really fit Marc. I don't believe in hero worship; I don't think he is invincible, nor do I think he is especially prescient about the future. And I don't give credence to everything he says as if it is some sort of unique nugget of wisdom. But he does do one thing well that the rest of Silicon Valley hasn't figured out yet: He forms his own opinion and when he likes something, he throws his whole weight behind it.
The rest of Silicon Valley relies heavily (and by heavily, I mean solely) on social proof. It's actually quite amusing to watch a forum of partners from different firms sit in the same room and listen to a pitch. They rarely listen to the pitch, cause they are so fucking busy looking around the room to try to gauge the reactions of the other VCs in the room. They are incapable of making decisions for themselves. They will only decide to invest if they see other VCs investing.
This groupthink behavior of most Silicon Valley VCs has a real effect beyond it's soundbite-ness: It bounds their upsides. If you are only willing to invest in a company if other investors also invest, you might get slightly better at picking winners, but you end up taking smaller stakes in those winners, and you end up spending more for those stakes because you essentially are bidding up their valuations. This kills the power law distribution of returns that is supposedly obvious to the VC industry. It dooms these firms to making the approximate same level of returns as everyone else in the industry.
Marc has been a successful entrepreneur no doubt. Even after three very large successes, you might be able to attribute that to luck. I still consider that to be mostly irrelevant. Marc has no problem throwing big money around to acquire as much as possible in a promising firm, and he gives zero shits about what other VC's think about the investment. This behavior is inherently risky. Throw your weight behind losers and you go bankrupt. But he got in on the ground floor of some of the biggest exits in the last decade, and the ground floor is where those power law exits really pay off. This makes him different, and worth listening to, even if you ultimately disagree with him.
> It's actually quite amusing to watch a forum of partners from different firms sit in the same room and listen to a pitch. They rarely listen to the pitch, cause they are so fucking busy looking around the room to try to gauge the reactions of the other VCs in the room. They are incapable of making decisions for themselves. They will only decide to invest if they see other VCs investing.
It's important for people to realize that people are people even if they have a fancy title attached to their name.
I find the commentary from (in no particular order): Chamath, Paul Graham, Sacca, Gurley, Chris Dixon, Balalji Srinivasan, Reid Hoffman mostly educational or at least entertaining. A random collection of notes on VC and investing: https://github.com/DeBraid/investing-notes
It is possible for people to be good at self promotion without needing a PR agency. Some people have the hubris to put themselves out there, and are skillful enough to be successful at it. Not everyone is like that, and we do dole a great deal of praise and attention to good self promoters, but no reason to be resentful of it or ascribe it to a paid professional service. It's a skill like anything else.
you're right, but that's Steve Jobs you're talking about. In contrast, Andreesen spent many years after Netscape in wealthy obscurity which makes me doubt his innate PR tendencies.
Speaking of the power of PR (whether innate or professional), take a look at this bit of Jobs-inalia https://www.youtube.com/watch?v=BNeXlJW70KQ nothing Steve says in that piece is at all remarkable or prescient, nor was it at the time.
Jobs had a great promotional ability, and a great leadership ability, he was a great man, but I'm deeply doubtful about the insight everybody credits him with.
> you're right, but that's Steve Jobs you're talking about.
Steve Jobs had many talents, but what I think people don't appreciate is that Steve worked very closely with his PR people. Most recently he'd worked closely with Katie Cotton for decades, from Apple's 90s "fat Elvis" years to its resurgence.
If you've never worked closely with PR folks, it's largely a "boots on the ground" exercise. Yes, there's the "vision stuff" and the storytelling, and part of what they do is help get that messaging across in consistent and interesting ways. But much of it is long-term network and relationship building that the PR person leverages in short bursts — product launches, damage control, etc. It's an interesting and tricky job, and people who can do it well make for great allies.
I've never heard of him but I do know that there's been noone at any point in history who has been any good at predicting the future, even the very near future, so you can take anything he/anyone says with a large pinch of salt. Bill Gates wrote a book which barely mentioned the internet right as it was happening!
Ray Kurzweil has done a fairly decent job of predicting the future and judging by some of the insights attributed to Tesla he also foresaw much of what we call life today.
Bill Gates is another person with extremely limited technical achievements who happened to be in the right place at the right time, with the right connections.
Gates was a real programmer. He wrote a number of early BASIC interpreters for early PCs in assembler, which was not easy and not a thing many could do. His story has a good bit of luck as a factor but so does anyone's.
Gates proved new bounds for Pancake sorting as a freshman @ Harvard. He famously published with Papadimitrou. Gates is a better computer scientist than 90% of your rockstars at Google.
I recall when they publicised their early investment thesis, to wit: most of the returns are from few companies, so let's invest in those.[0]
There was a great deal of fanfare and forehead slapping for what is, essentially, saying "most of the winnings in horse racing are from the winning horses, so we will only bet on the horses that are going to win".
Still, I am inspired. I'm announcing a new venture fund. We will only buy winning lottery tickets. Bring your slide deck describing your lottery ticket and we will decide whether to buy it off you.
(You may need to show how much money the ticket has already won -- we're not amateurs).
That is obviously not their "early investment thesis", nor what that article says. The circularity in fact is yours: you assume stupidity on the part of others, then find it. (And then mock it, which is presumably the point of the exercise.)
This is a good example of why I think we should add the Principle of Charity [1] to the HN guidelines. That's the one that says you should respond to the strongest plausible interpretation of another's position, not try to knock it down to the weakest. The word "charity" makes it sound like an ethical principle, but it isn't, or needn't be. It's simply that assuming stupidity on the part of others makes for weak discussion.
(FWIW, a stronger plausible interpretation of that passage is this: since our success depends on funding the few companies that generate most of the returns, we need a strategy that gives us an edge in getting to them, so let's focus on promoting ourselves to founders. Maybe that wasn't it, either—it's what I got from skimming the article for just a minute—but if we're practicing the Principle of Charity, it's preferable to a moronic one like "let's only fund winners", chosen because it's easy to caricature.)
You're being incredibly unfair. I read the article, and found the parent's comment to be almost a verbatim restatement of what it said.
Your observation that A16Z's tactics were presented as more nuanced than this strategy is also true, but that doesn't make the parent comment wrong, or even "uncharitable". The investment thesis, as presented by the article, is pretty much a truism. I don't find it to be interesting or insightful, and like you, I have to make arguments in my head as to why it might not be inane.
It seems to me that you're carrying one set of opinions about the subject, using them to interpret the issue in the most positive light, and then bludgeoning people who take a more critical view. You can call that "uncharitable", but it seems to me to be a literal interpretation of facts: A16Z's thesis was far less interesting than the tactics needed to get the deal flow to make it work.
> The investment thesis, as presented by the article, is pretty much a truism.
I'll give you this much: what the article says about their 'thesis', in a single throwaway line having nothing to do with the rest of the (long) text, is a truism. Now let's apply the Principle of Charity again. What are the odds that that's because the founders were morons vs. that the article didn't go deeply enough into their investment thinking to say anything interesting about it?
> It seems to me that you're carrying one set of opinions about the subject
What opinions do you have in mind? The one I think I'm carrying is that HN comments shouldn't make uncharitable assumptions to set up caricatures, because that makes for lame, bilious discussion. That's not a small matter, because whatever discussion we have here, it's what we're likely to get more of.
I partly see your point, but I am going on my recollection of the early splash, which was about everyone being dazzled by a restatement of the Pareto principle as applied to unknowable futures. It is one of my pet peeves that a lot of naked emperors get a lot of publicity. The blood rises, and then, here we are. My fondness for giving into impulse is why I don't use twitter.
That said, I always struggle to give anyone the benefit of the doubt. At work I have a mantra about code I don't like: "I might have done it differently". The coder on the other side of it was doing his or her best. I've seen things that on their face where just flatly crazy and only later learned the reasoning. A lot of them remain crazy, but crazy with a reason for the craziness. The usual missing ingredient is communication, which is why another useful thing to remind myself is "let's go ask".
In general, though, it is a long and widely accepted tradition that the powerful don't need us to be nice to them -- that mockery is one of the few inalienable counterbalances the plebs have against those living on top of the hills.
Benefit of the doubt is something we all struggle to give. I don't mean to single you out personally, and if it seems like I am it's because I know what good, reflective comments you're capable of.
No doubt there's a socio-physiological function to saying bad things about the rich and powerful. It feels good, and you can say literally anything in that genre and get applause (on HN, upvotes). So it's inevitable. But it goes against the mandate of this site, which is "gratify intellectual curiosity". Note how that excludes both other forms of curiosity and other forms of gratification.
There's no political or ideological dimension to this (e.g. pro-VC or anti-VC). For present purposes, none of that matters—what matters is the form of the comment: is it reflexive or reflective? Or, to use your term: is the blood rising? That's what seems to determine discussion quality. If there's a better principle than the Principle of Charity for encoding this distinction in an actionable form, I'd love to know. I haven't seen anything else that comes close.
The Principle of Charity you're espousing suggests to me that people would wander around accusing insufficiently genteel comments of uncharitability. Too many rules attract rules lawyering, which turn the agora into a tedious parody of a courtroom.
My own style of moderation, based on long observation, is very few, very simple rules backed by ruthless and unapologetic moderation. I appreciate your leniency.
I think the answer here is to answer, here, if you disagree. It's humiliating to be corrected in public, I always hate being on the receiving end of it, but if I'm stuck with an impulsive streak then that's just part of thinking out loud on the internet.
I don't think the consequences you're worried about are likely. People expressed similar worries when we introduced "avoid gratuitous negativity", which didn't happen; there's marginally less gratuitous negativity (at least I think so) and that's about it.
The falsehood here is in your claim that they said they would only invest in the winning companies.
The NYT article you reference doesn't say anything about them wanting to invest only in winners.
What they've always said is that they need to invest in all the companies that might be winners, knowing that many of them will turn out to be losers, and that in order to ensure they got all the promising companies in their portfolio, they need to be highly founder-friendly.
Indeed, the strategy has a self-determining aspect to it: in order to invest in more winners they also need to invest in more losers, and by ensuring they invest in all the winners, they can afford to fund more losers, which helps to ensure they capture more winners.
Andreessen explains this thoroughly in his EconTalk episode from a couple of years ago [1].
That NYT glossed over this point is their doing, not Andreessen's, but even then you've claimed something that isn't at all true and dang is right to point out that you're capable of much better.
> What they've always said is that they need to invest in all the companies that might be winners, knowing that many of them will turn out to be losers, and that in order to ensure they got all the promising companies in their portfolio, they need to be highly founder-friendly.
The key phrase here is "all the promising companies". This is the same as "I will bet on the promising horses". It's not a novel strategy.
And how are the promising companies selected? Either a16z selects them, in which case they are trying to pick winners, taking me back to my caricature from earlier. Or they base it on a shotgun approach, selecting anyone who shows up. Then the selection function becomes "which jockey thinks they have the race-winning horse?", which is just another variant of picking winners.
I bounced up and down the long (and very interesting, thank you) interview looking for something more. The closest I found to a thorough explanation was this:
> So, basically, here's the way to think about it in the math. There's about 4000 startups a year, [?] a year, that want to raise venture capital. Of those, maybe 400 will get funded by top venture capital firms. Of those, about 15 will be responsible for over 90% of the profits for that entire year of companies.
Which turned into a conversation about Google which I found myself nodding along to. Then:
> And so it's one of the things, again it goes back to what's humbling about what we do, is--it's limits of knowledge. There are real limits to what you can know. Which, by the way, means that if you are going to operate in the field and if your requirement for investing in something or backing something or going to work for something is you are going to know for sure that it is received[?], you are never going to do anything. There is no return above the risk.
Which is a much more reasonable position.
So now I'm wondering if my whole recollection really is based on the initial publicity.
> dang is right to point out that you're capable of much better.
This gives me flashbacks to every school report I ever got. I'm capable of better and worse. It generally depends on the weather that follows me around.
he's batting 1000 in life..not bad for someone who wrote a 'derivative copy of well known software idea'. Everything he has done has worked out perfectly, which reflects some luck but also genuine skill at understanding markets, trends, etc. Timed the Netscape exit perfectly got into the best start-ups early
> he's batting 1000 in life ... got into the best start-ups early
I don't think this is factually true. Besides Netscape, he's noted for cofounding Ning and Loudcloud. Loudcloud pivoted almost entirely, sold their old business, and rebranded the new idea as Opsware which had a successful exit (but even so wouldn't be "the best"). Ning I'd grant being successful in the sense of not having died, but I don't think there's any argument that it's anywhere near "the best". It feels like a huge stretch to count that as three-for-three.
If we're in a bubble, the opposite of what is listed in the article will be happening: investments will be increasing, VC backed companies will be splurging more etc.
It is amazing that they'd list a bunch things that support the position that there isn't a bubble and draw the conclusion that there is one! It is sunny and hot out and people are walking around in shorts in Seattle, clearly this means it is winter because people would click on an article about winter.
Who knows if we are actually in a "bubble" or not, but if anything we have to reach the opposite conclusion from the facts listed in the article.
Normally we wouldn't change from a text article to an audio piece that has no transcript, since the latter is much less accessible. But it feels wrong to reward the above behavior.
My belief why many people are calling this cycle a bubble is because they experienced two big bubbles almost back to back. I think much of the bubble calling over the past few years reeks of recency bias and people have been burned, not just once, but twice.
I have no idea if we are in a bubble or not, I'm sure some segments in tech are bubbles. I think focusing too much on whether or not we are in a bubble is a distraction of doing the work in front of us, whatever that work may be. Don't get distracted by the hype of bulls or the bears.
The worst thing about VC's is their herd-like behaviour. You work hard to get your biz funded and as soon as the valley gets wind of your funding, all the other VC's immediately fund X other copy-cat businesses (almost seemingly without regard to viability of the original business model).
And given a16z's huge reliance on PR, I'd argue that if they funded your biz, you'd then have even more copy-cat funded competition than if you went with a more low-key VC.
Are we in a "bubble" or just the latter stage of a business cycle? A lot of it depends on the definition you use for "bubble." Regardless of your definition, it doesn't matter much one way or another.
Central bank policies have been ridiculous the last 8 years. Nobody should be surprised there are market distortions - and nobody should pretend there aren't.
His "twitter schools" parrot things like Buffett's shareholder letters pretty closely ("When the tide goes out, we find out who's been swimming naked."), so at least at an intellectual level he gets it, but his investment behavior contrasts this strongly, where he seems willing to pay any price for growth. Unfortunately this is common in the investment world, where everyone is a value investor in words, but rarely in behavior.
I guess I am mostly interested to see how the "founder as rockstar" thesis that is central to a16z works in practice.