Marc Andreessen and Ben Horowitz are launching their much-anticipated $300 million venture fund this evening, aptly called Andreessen Horowitz.
The fund will make investments of $50,000 to $50 million (yes, $50 million), but will generally focus on early stage opportunities. And here’s a fun fact: they don’t currently have a website, and apparently they aren’t sure they will have one in the future. For now they’ve reserved a16z.com for use if they do ever launch a site. Basically, if you don’t already know Andreessen or Horowitz, or know someone who knows them, getting in contact with them is going to be…difficult.
Andreessen has long been one of my favorite people to interview, because he is tapped into nearly every hot company and isn’t afraid to answer questions directly. That is, when you can actually get him to sit down with you and a camera, notepad or tape recorder. But last week, he had to chat it up with the press since he and long-time partner Ben Horowitz were announcing their the new venture fund. This is not going to be your typical venture capital firm.
For one thing, there’s that $300 million fund size. That’s pretty big for a first-time fund and gargantuan when you consider there are only two general partners, Andreessen and Horowitz. It’s big enough that some people didn’t think they’d be able to pull it off.
How did they? Well, did we mention Andreessen was one of the partners? Heard of the browser? And the lesser-known Horowitz is no slouch. He was the CEO of their second venture, Opsware, which sold to Hewlett-Packard for $1.6 billion. As instant as Netscape’s success may have been, Opsware was the opposite, a hard post-bubble slog.
It’s too early to tell how well Andreessen’s third company, Ning, will do, but Andreessen and Horowitz’s angel stakes in companies like LinkedIn, Delicious and Twitter show their savvy at picking good teams and how much other entrepreneurs in the Valley value their advice. For instance, Andreessen is the only independent member on Facebook’s tiny board of directors. And investors were impressed by the 45 or so companies that Andreessen has independently invested in over the years. Just one, TipMobile, has gone under so far.
So, that’s how they raised $300 million in the worst fundraising environment in 40 years, here’s why: Andreessen says there are only fifteen companies started each year that matter. By “matter,” he means they’ve got the potential to generate $100 million year or more in revenues, and those companies wind up making up 97% of the aggregate industry returns. The firm wants the flexibility to invest as much as they want in those fifteen names, whether it’s $500,000 or $50 million per deal. Considering the two have run big teams and small teams over their time at Netscape, Opsware and Ning, there’s no logical reason they should tether themselves to just one stage of investing.
Like Founders Fund and unlike most everyone else, Andreessen and Horowitz are more comfortable investing when an entrepreneur wants to stay the CEO. Hiring a “grown up” CEO always sounds like a great idea, but almost always hastens a company’s failure, Andreessen argues. There’s strong evidence that the biggest hits come when the founders stay engaged at a C-level position. See: Google, Oracle, Microsoft, Hewlett-Packard, Amazon, Apple and Facebook.
Another distinction: They’re not meddlers. Because there are just two of them, Horowitz and Andreessen won’t always take board seats. If they pick the right entrepreneurs, Andreessen argues they shouldn’t have to.
The whole interview lasted about an hour, and you can see many of the highlights on my Yahoo show, TechTicker, today. Meanwhile, here are five other interesting things he said:
1. Twitter and Facebook’s investors aren’t worried about monetization, but “it’s sweet” of you to. Twitter has spent about $15 million acquiring 30 million users. It’d be a no-brainer to recoup that if need be. Meanwhile, Facebook will generate more than $500 million in revenues this year—it’s spent far less than that to build the company to date. In other words, these are pretty fiscally conservatively run businesses with huge growth potential and no trouble raising additional cash.
2. Digg isn’t done. Andreessen is still bullish on Digg, citing the fact that Kevin Rose is no longer distracted with Pownce and Jay Adelson is moving to San Francisco to manage the company full-time. He thinks having both guys focused on the company will make a huge difference in the next twelve months.
3. The venture capital market should stop whining about Sarbox and other factors that are hurting their ability to take companies public. Says Andreessen, “Build Companies More Valuable and You Won’t Have this Problem.” That said, he sees a conceivable scenario where public markets are no longer how investors get returns at all. Instead, the same institutional names that used to buy the bulk of the shares at an issue, will just buy out VCs at premiums in private deals. That’ll essentially mean everyday Joes can no longer invest in high growth companies. That’s a good thing or a bad thing, depending on how many scars you have from the dot com bust.
4. At least 300 venture firms will go out of business in the next five-to-ten years.
5. Innovation and opportunities to build businesses on the Web aren’t done. They won’t be done for a long time because the Web is one of the only inventions that’s pure software, compared to computers, the television or even the railroads. That means it can completely change without having to fit into set molds. Anyone—Andreessen included—is deluding themselves if they think they know where it’s going. (In other words, don’t listen to anyone making Web 3.0 predictions.)
“Innovation and opportunities to build businesses on the Web aren’t done.”
Clones are done. White labeling old software like Ning and EZBoard is done.
Taking a popular idea and rebranding it for enterprise consulting sales like Kickapps is done.
The garbage floated to the bottom this time and the web will re-invent itself. Without our greedy friends from the last round. I saw some of that at IO.
Software built in 2 weeks and funded by 5k per member investments wasn’t ever going to make it anyway. It was nice to think that it could work beyond a quick sell to an ignorant buyer though.
There are monetization whiners. They dont know the impact of some websites on the whole mankind.
Hi Marc & Ben…! Wish you the best for your venture. If you are really begun looking at investable startups then please do visit http://yousuggest.us my product and http://latticepurple.com my startup for the same. I can be reached at arvind [@] latticepurple [dot]com … cheers, I have no means to reach you directly but this spam.
Sorry about this.
Regards,
Marvin
During the launch of the Ning, Marc was answering questions in the Ning forum. I was impressed.
You should be able to get attention to good VCs through their blogs. Enjoy their ideas, contribute yours, and build a relationship.
Subhankar Ray
AAfter Search
“Like Founders Fund and unlike most everyone else, Andreessen and Horowitz are more comfortable investing when an entrepreneur wants to stay the CEO. Hiring a “grown up” CEO always sounds like a great idea, but almost always hastens a company’s failure, Andreessen argues. There’s strong evidence that the biggest hits come when the founders stay engaged at a C-level position. See: Google, Oracle, Microsoft, Hewlett-Packard, Amazon, Apple and Facebook.”
I’m confused. Google’s VCs told them they had to hire a “grown up” CEO or they were pulling their money out (according to Vise’s Google Story, and I trust everything in that book). Google’s founders had multiple meetings with people who told them to hire Schmidt or some other “grown up” CEO.
Why wouldn’t you want to hire a real CEO? The often spouted analogy is that you can cross the Atlantic in a raft or in a cruise ship…which would you rather pick? Apple hired a real CEO in Sculley, and it exploded.
“The often spouted analogy is that you can cross the Atlantic in a raft or in a cruise ship…which would you rather pick?”
The one that gets across safer. Didn’t the unsinkable sink (The Titanic)?
Also, what’s this talk about “Grown up” CEOs? Is this someone with just a piece of paper (Degree) that says you’re qualified?
This is all hindsight 20/20 BS.
If these people really had that type of vision, or even basic statistical compilation skills, they would be billionaires on Wall Street like Warren Buffet, and not dicking around with little internet companies.
And that’s one to grow on…
you’re right. only billionaires are smart.
“unlike most everyone else sarah”? – check our portfolio and you’ll see a lot of founders running their companies.
i could name ten other VC firms where that is true as well. don’t buy some VC firms marketing bullshit. do some work to see if its true.
How does that make the “unlike most everyone else” untrue? – truth is the majority of VC firms tend to include the hiring of an experienced CEO in their standard advice package, whether it’s necessary or not.
“truth is the majority of VC firms tend to include the hiring of an experienced CEO in their standard advice package”
If that’s fact, cite the source of the fact. Otherwise it’s just conjecture. What is true is that VCs are partly in the business of risk mitigation, and if the founders don’t have the CEO chops or judgment, they’ll seek another steward of their investment (call it adult supervision).
Oh, and Andreeson didn’t invent the browser. Smart guy, talks fast, but didn’t invent the browser. Tim Berners-Lee did, I believe.
Bullish on Digg. You would expect that. It’s very unlikely an investor would talked down a company he/she invested in.
I said unlikely.
Please don’t compare facebook (the company and its management) to the other 6.
1. Twitter and Facebook’s investors aren’t worried about monetization, but “it’s sweet” of you to.
I think we are kind of sick of that BS line by now. If VC’s are not worried of monetization, then please do not ask about monetization during a pitch or VC presentation. You guys are so full of it.
It will be funny if they keep saying that line until they go bankrupt.
In full context, I took that comment to mean that with the user base and operating costs they think the business model will show-up eventually, and because of the popularity, it won’t take much for that business model to make the companies profitable.
Also, don’t forget that the longer these companies continue to loose money, the more opportunities for VC’s to grab a larger share on following rounds.
This way when the company sells, goes public, etc. the VC’s make more $$$
“Digg isn’t done”
See, he’s a great guy but when he says stuff like this, how can you take anything else seriously?
I would have loved a video.
Anybody fancy putting me in contact with these fellows? I could do with $50m. Seriously.
Don’t worry about these people. Work on your software. I have worked for some well known VCs, and I have also sold IP, and worked for some great firms in the big California and Florida tech industries.
Nothing matters except the software and the brand.
The people do not matter as they are replacable, the technique does not matter, the process does not matter, the financing does not matter.
Only the software product and the brand matter.
And you can largely build that with no VC money at all and market it online.
The assumption that I’m writing software is somewhat off.
You’re right, of course though, the quality of the product and the brand name matter the most.
And I am building with no VC money, and doing very well (or so I like to think). But VC money would make things move even quicker.
What would you do if someone gave you 50 mil? I would be like thanks.. mom I can move out of your basement..and hire someone to write a business plan..lol
I’d buy thousands of business cards, and scatter them across the planet. The white background of my business card would raise the albedo, thereby ending global warming.
Same. I’m sick of the old ” you gotta know them or someone that knows them” BS. If I have a great investment opp then I should not also have to have great connections just to get an investors attention.
I’m located in Sydney Australia. What chance do I have of making those sorts of contacts. 9 times out of 10 I get zero response to my approaches to these types of guys.
I have a theory that Australians are some of the worst people in the world, though I’m sure there are exceptions to that rule. Maybe VCs feel the same way? Perhaps try leaving Australia?
Grow up.
Thanks for being such a lovely human (and further confirming my Australians-are-douchebags Hypothesis)!
Your comments below on totalitarianism in Canada were very mature by the way. I really hope you get VC funding!
Chris, that’s not how it works. A VC will come to you to ask you to complete a task on X, Y, Z project that they thought up on their vacation or in the bathroom or something.
You as a lowly coder or manager accept for a part of the deal.
That is how Chris DeWolfe got to be the CEO of MySpace from working at XDrive.
That’s basically how everything works. I had a VC hit me up for a VOD project a couple weeks ago and I said no. It happens now and then.
You have to start working for others before they will start asking you to program their ideas. After you have a small team, then you can start to build your own stuff.
It doesn’t work any other way.
Working on other people’s stuff and seeing why it failed from the server side, can really give you a huge advantage too.
I think you misunderstood. I do have a small team of developers already working on a project that is near completion. I have struggled for years funding everything myself – I’ve easily spent a few hundred thousand dollars already. I have 15 years experience running my quite successful web development company but I have no VC contacts in the US at all.
My beef is that in order to get the attention of a US based VC then I either have to move to the US and start meeting people who know these guys or forget it.
It’s just very frustrating and when I read that this fund aparently has no web site or way of contacting them it really makes me wonder why they bother at all!
Chris.. try living in Canada.. I was in the US, stopped at a hotel and she said what state are you from.. I said I am from Canada.. she said is that in the district of columbia.. I smiled, thought of Jeff Foxworthy and said sure I will go with that. The real reason behind your frustration is location. When you are giving people money you want to look them in the eye and then you are dealing with the fact the legal system in Australia is far different not to mention how will your product be able to relate to the US market which is still the top consumer market.. Americans prefer to buy from American companies..
Do you have a facebook fan page.. do you have a active twitter account..have you done an elevoter pitch on TC’s thingy… too many people have this idea if you build it they will come.. and it does not work.. make yourself know.. have your people make contacts with other developers in the US through the free social network points.. help other people.. there is so much you can do to create the Chris brand..
If you want US based funding, and moving to/networking in the US is the way to get it, then maybe you should?
@Gebadia – thanks for the comment – yes, I have set up a twitter account and facebook page for my project but for now am still operating in stealth.
I recently traveled to SF to make some contacts (and did to some extent) however the option of actually moving the States at the moment just isn’t feasible.
I wish Australian VC’s were as keen and as active as their US counterparts but unfortunately most Aussies are more cynical than your average American imho.
I’ll get there …, it’ll just longer doing the hard way (self funded).
BTW – if any US based VC’s do happen to read this and are interested in looking at our opportunity then I’d be more than happy to respond to any enquiries. We’re in the final stages of producing a Flash-based SaaS CMS which is completely cloud-based. The product rivals desktop software from companies like Adobe or Microsoft both in terms of features and usability. The development team I have assembled has been working with Flash since before it was called Flash (back when it was still FutureSplash) – we’ve built the product we wished was available to us as long time Flash developers but wasn’t.
I can be contacted at chris at marchdigital.com.au
Let’s say you’re a VC. Do you want to fund the guy who is resourceful enough to get in touch with you, or the guy who whines about how hard it is to get in touch on some tech blog?
Fair statement. I didn’t think I was whining – but making a long time observation about just how hard it is when physical distance and lack of contacts prevents any form of contact in the first place.
I applaud the efforts that VC’s make to help projects like mine see their full potential but I wish the process of making contact was less difficult.
One might argue making a case in a comment on TC is trying.. we all wish the entry point to VC’s was easier.. the mind it takes to create something is different than the mind it takes to write a pretty business plan… lets be honest.. it takes a lot of hard work, time and money to write a VC ready business plan… is the that investment better spent on development? I don’t know…. I have tried to write a bus plan more than once.. but I have no idea how and the example of a plumber in some silly piece of software doesn’t help much when you are building a facebook app…
isn’t the reason most of us embed a URL beneath our name.. try to sound insightful.. or interesting because we are hoping someone discovers us…. why get all bent about it steve…
The fact that you are in Canada will only hurt you from a tax point of view. You actually pay about twice what we pay here in the USA.
It will not change what I said about the product and the brand.
If you have a good product with a strong brand it will not matter that you are in Canada. What will matter is that if you are successful and you stay in Canada, you may ultimately fail because the government there frowns on the tech industry and will redistribute your wealth to the lumber and auto industries which are fast dying.
I could go on about what they do with your money up there, but I will stop here for brevity.
Getting out of Canada to get better contracts probably won’t work. Getting out of Canada to escape socialism and totalitarianism probably will work.
Clearly you don’t matter to Canada as a small business owner. This is why there are no LLCs or SCORPs there to spare you from some of the burden. The same is not the case in the United States of America.
Oh and Gebadia, you can kiss employer side of EI and provincial tax, and interstate taxes goodbye too if you relocate. You can kiss 35-50% import duties goodbye, and you can kiss brokerage fees goodbye.
You can kiss 55% fuel tax goodbye, and you can also probably kiss any misery you face because of socialism goodbye.
Look at what happened to PlentyOfFish. For all intents and purposes it should have been one of the 10 biggest sites on the internet. Canada made it fail. Canada takes everything successful and burdens it so badly that it becomes total sh1t.
Don’t give me this shit about Canada and taxes and socialism… Our gov’t is less socialist that the US’s at this moment..
I would have loved to see a greater explanation on #4 on this recap article. I suppose I will have to go watch the video now.
And $300 million is a ridiculous amount of money for a first round venture fund.
It really sound exciting for companies developing innovative web based products ….
Great interview. The video player on TechTicker is a bit unstable though. It keeps disconnecting and dropping videos in the middle of playing.
neat site mate… facebook friends connect the sign in and say you don’t need a CC to sign up.. as a user I am always wary of companies and free accounts because some ask for a CC hoping you forget like box.net use to last time I gave them a look..
Facebook will generate more than $500 million in revenues this year.
It is cool.
When will Twitter have money?
MikeD said…
I think we are kind of sick of that BS line by now. If VC’s are not worried of monetization, then please do not ask about monetization during a pitch or VC presentation. You guys are so full of it.
Well-spotted MikeD. It is called quantum-logic, ie, being at 2 different states at once or a YES & a NO or a TRUE & a FALSE simultaneously which is a contradiction in its own term.
will Marc be too busy to blog now?
Uhm, he blogs??? Last time he blogged was 2 years ago. So he hasn’t blogged in a long time anyway.
2 years? (oops, I don’t get the feed) just checked was less than one year, but his posts are still being linked and referred to out and about. That’s some staying power.
Best Techcrunch post in a long time.
Marc Andreessen is not bullish on Desi entrepreneurs. Between Marc and Fred Wilson, they have back ZER0 desi’s. Value creation.
Marc invested $2.3M on his own money and garnered $300M from LP’s. The geniuses at Yale and Hewlett.
A-H has a weak “key man”. Being a VC is hard work. He is not cut out for that. He has ego the size of California.
Fred never took a chance on anyone. He is out there to find “trends”
The real deal is Y-combinator and Betaworks.
I think it’s great Lex Luthor has given up his life of crime and is using that great mind of his for something more productive. There is no hope for Brainiac I am afraid.
That’s quite a track record, makes you wish you could raise capital to piggy back off their investments. Wonder if they use a formula to assess an investment team.
Interesting to see that new funds (link A-H) or ways of funding (y-combinator, betaworks) are getting ready to detect and invest again.
While most corporates remain stuck in downward management and restructuring (also from the vc side), it seems like quite some people are lining up to take over.
First of all, congrats on the new fund!
However, I feel I should comment about point #2. I’m a big fan of Digg and wish them the best in the future, but I think it’s inaccurate to say that Kevin was distracted with Pownce. Kevin did a great job advising Pownce and making key decisions about the site, however, he was hardly “distracted” with day to day business. It’s hurtful to both the employees of Digg and Pownce to assume Kevin ever divided his time between them.
I really hope that Marc Andreessen can help revitalize Digg but I think the focus should be on good product development and marketing over perceived founder involvement.
Digg is joining deadpool very soon.
# Two tech enterpreneurs, good concept for investing (looking for founder+CEO), complex investing strategy to execute (can invest anywhere) – http://tinyurl.com/ns947n
# Most of Marc’s angel investments need lot of additional capital to be alive. He may be forced to make his investments there first – is this a conflict of interest for a VC ?