Andreessen Horowitz

Watch: Marc Andreessen on Twitter, Secondary Sales, Pulling the Plug, and More

On Thursday night, at a StrictlyVC insider event, I interviewed famed entrepreneur-investor Marc Andreessen, whose most recent headline-grabbing maneuver (intentionally or not) was to take a Twitter break one week ago.

I talked with Andreessen about why he has had enough of the social media platform for now, along with a lot of other things. For those of you without the time or inclination to watch the entire 50-minute interview, I’ve broken out some of what I asked Andreessen, and where you can find his specific answers. (I’d write out his comments, but anyone who has seen Andreessen speak can attest that he talks in wide-ranging paragraphs, so we thought this might make more sense.)

First 4 minutes or so: Twitter stuff. Andreessen suggests he left for now owing to today’s highly politicized environment, saying he feels “free as a bird” as a result. My colleague over at TechCrunch, Katie Roof, wrote a related story here.

At 4:00: We talk about whether he still believes that there are 15 companies per year that will go on to create at least $100 million in annual revenue (and that those are the firms top VCs must back to stay on top). It’s the thesis around which Andreessen’s venture firm, Andreessen Horowitz, was founded in 2009. My question more specifically is whether that number has grown larger or smaller or remained static.

Around 9:00: I asked if more of the winners — no matter their number — are being created outside of the U.S., Silicon Valley-focused Andreessen Horowitz is perhaps missing them.

At the 11:20 mark: Here, Andreessen answers whether too much money is finding its way to Silicon Valley and what the impact might be if so.

At 16 minutes: Andreessen answers why today’s private companies — which Andreessen has argued can better compete with public companies (versus other public companies) — won’t run into the same exact constraints as their public company counterparts when they eventually go public, too.

At 18.5 minutes: Here, I bring up Bill Gurley’s recent theorizing that once Uber goes public, it will be expected to be profitable, and its well-subsidized, still-private competitors will undercut it on price and try to steal market share. I ask whether this is a concern for Andreessen-backed Lyft and others of its portfolio companies.

At 22 minutes (ish): Andreessen talks about why it’s easier but not absolutely necessary for founders to implement a dual-class structure in order to maintain control of their companies once public.

Approaching 23:30 minutes: I’ve just asked Andreessen why, despite an uptick in M&A by nontraditional tech acquirers (think General Motors and the many private equity firms to go shopping this year), we aren’t seeing more acquisitions by Google, Facebook, or Amazon.

28:00: Now we’re getting into specific questions about Andreessen Horowitz, starting with whether or not Andreessen thinks the firm changed the game on the field by paying more for deals than Silicon Valley investors had ever seen.

At 31:30: I note that Andreessen Horowitz missed what seems to be the biggest winner of the last decade: Uber. I ask how that impacts the firm. He doesn’t love this particular question, and steers the conversation down the path of why it makes sense to lead more than one round in a winner (which also came up in my question).

At 35:00: I reference a 2015 New Yorker profile of Andreessen, which noted the daunting amount of capital the firm will need to produce for investors who’ve given the firm a whopping $6.2 billion, assuming they expect a venture-like 5x to 10x return. He tells me the firm is “elephant hunting,” a firm he has used frequently to describe Andreessen Horowitz’s investing style. (Evidently, that explanation is sufficiently convincing to the firm’s investors for now.)

Around 35:30: Here, I ask a question about whether or not he thinks Andreessen-backed Airbnb could possibly catch up to the valuation of Uber. (Btw, in the course of this answer, he says that Andreessen Horowitz has backed Airbnb “primarily in one round,” so make of that what you will. TC has reported that Airbnb is currently raising another humongous round.) Astute listeners might also note that in a reference to Sequoia Capital’s Alfred Lin, I accidentally refer to him as “Alfred Lee.” I sometimes have verbal dyslexia.

36:30: Has Andreessen Horowitz sold stakes via the secondary market? (He takes his time here, but the answer is yes. I missed the chance to ask where/when, because of his lengthy reply, though the WSJ has reported that the firm sold some of its shares in the ride-share company Lyft earlier this year. )

At 40:35: Andreessen talks here about the firm’s philosophy about selling after an IPO. (“Our LPS are very clear with us, which is that they’re paying us to manage private, not public, money.”) His answer is characteristically more nuanced than that, but it sounds like they distribute stock to their investors faster than other VCs might.

At 42:15: I share an observation that I’ve heard from entrepreneurs, which is that they are sometimes disappointed by how little time they get with the AH partner who leads the investment in their company, and that they are sometimes passed off to non-investing partners quickly (and sometimes, those non-investing partners’ junior staffers). He responds.

At 45 minutes: The WSJ recently reported that AH’s returns trail those of other firms, but because it’s frankly too soon to know how it will stack up, here I ask Andreessen how he measures the firm’s success in the meantime, and what makes him think his firm’s whole agency-style network set-up is working.

At 48:30: Here, I ask how AH decides to pull the plug on an investment.

51:20: This is the last question (I was dinged by an assistant for running over our allotted time): Andreessen, whose son was born last year, answers how fatherhood has surprised him.

Photo: Dani Padgett

SkySafe Lands $3 Million to Disable Badly Behaving Drones

SkySafe, a six-month-old, San Diego, Ca.-based company whose technology can disable drones that are flying where they shouldn’t, has raised $3 million in seed funding. Andreessen Horowitz led the round, with participation from Founder Collective, SV Angel, and BoxGroup.

No doubt the company is serving a fast-growing need, particularly given the number of drones poised to wreak havoc on public spaces from sports arenas to airports. Consider the British Airways flight that was hit by a commercial drone as it approached Heathrow Airport on Sunday, or the World Cup skier nearly done in by a falling drone in December. The FAA estimates there will be 2.5 million drones sold in the U.S. alone just this year.

“We’re very excited about a future where drones are used by consumers and businesses for all sorts of purposes, but to get there, drones need to be made extremely reliable and safe,” says venture capitalist Chris Dixon, who led the deal for Andreessen Horowitz.

Dixon suggests SkySafe can ensure that drones don’t go rogue, largely via radio waves, which it uses to override a drone’s remote and take control of the aircraft. Perhaps so. What SkySafe is building certainly sounds less menacing than some of the other options to emerge recently, including an anti-drone laser and an anti-drone rifle. Unfortunately, for competitive reasons, the six-person company isn’t willing to dive much more deeply into how its tech works, as we learned when we talked yesterday with cofounder and CEO Grant Jordan. Our chat has been edited for length.

SkySafe has four founders. What’s your background, and how did you come together?

I graduated from MIT, then spent four years as an officer in the Air Force Research Lab testing anti-drone tech, where I got a lot of exposure to various ways that different groups have come up with for taking down small drones. After I finished my time there, I went to grad school at USCD for computer security, and I [connected with my cofounders] for a security company consulting firm that we founded called Somerset Recon. Between that security work and [my] drone work, we saw a growing threat in the drone space.

What types of customers will you be trying to persuade to use SkySafe?

Pretty much the entire space of public safety. Airports, prisons, stadiums, other event venues, border protection, critical infrastructure. The number of places that have seen incidents in the past year has grown tremendously.

Would you characterize most of those incidents as accidents or otherwise?

In the aviation industry, at airports, those look like accidents. But in prisons, there are no accidents. Those are drones that are trying to smuggle in weapons, drugs and other contraband. I wouldn’t classify what we’ve seen in stadiums as accidents, either. [Drone operators] might not mean any harm, but they’re going out of their way to fly into an area they aren’t supposed to be, and right now, there’s nothing an event venue can do about it.

More here.

Chris Dixon on Competing with Internet Giants for AI and VR Talent

VC Chris Dixon of Andreessen Horowitz thinks it’s a lot harder to predict financial cycles than it is to see a new computing platform coming down the pike. As he noted in a recent post, new cycles tend to begin every 10 to 15 years; assuming the 2007 introduction of the iPhone kicked off the last wave, we’re fast heading toward the Next New Thing.

Or things, technically, according to Dixon, who we caught up with yesterday. Among the trends that Dixon is watching closely, he says, are virtual reality, augmented reality, IoT, wearables, drones and cars. (Missing from the list: bitcoin, which has long held Dixon’s fascination but that he refers to as a “long-term project.”)

Not that it’ll be easy to make money off these newer technologies. In fact, Dixon suggests it could be ridiculously challenging, given how quickly Facebook, Google, and Amazon are bringing aboard related talent. Here’s more from yesterday’s interview, edited for length:

People think of you as the person at Andreessen Horowitz who invests in weird stuff.

We obviously invest in a wide range of things. My own area of interest has been in drones and VR and AI and maybe more speculative categories. Some startups, the question is more about ‘Will this startup win versus other solutions,’ where, in speculative categories, the question is whether it’s going to work at all.

You can kind of jokingly call it weird, but if you look at where Amazon, Facebook, and Google are investing — I think Google’s VR team is significantly bigger than Facebook’s; Microsoft has 1,500 people working on HoloLens; and from what I can tell from its hiring and acquisitions, Apple is [investing a lot of money] — probably the biggest area [of interest and investment] is AI. Large tech companies are investing very heavily in this stuff [whereas] there’s much less investment by VCs.

Because VCs don’t understand the tech or else the opportunity?

No, because it’s hard to figure out where the start-up opportunities are and because [some of this tech] requires so much money. With virtual reality, you have to build a complex platform then line up content partners. Or self-driving cars — I’d assume that Google has spent many billions of dollars on it already, including mapping. The venture world isn’t set up for that. It works around the model of seed rounds, A rounds, $20 million B rounds, not for massive projects. It’s kind of a puzzle if you’re in VC how to make those investments.

You’ve remarked before how quickly teams are getting snapped up, which must compound the issue.

Wit.ai [a Y Combinator startup that built voice-activated interfaces] that Facebook bought and now powers its Messenger platform was only [in our portfolio] for a few months when Facebook bought it. It sounds paradoxical, but our model depends on companies staying independent for a period of time, and because large companies have been so aggressive, it’s harder for us.

When it comes to machine learning, you’re competing with offers from Facebook and Google and Amazon and [their offers] are considerably higher in terms of cash compensation. They pay a lot for people with that expertise, and startups will never [be able to match it]. So you have to really convince people that what you’re building is important.

VCs can’t wait out this next computing cycle obviously. So how do they nurture lower-capital models?

More here.

Ground Delivery Robots — Passing Fancy or Next Wave?

“Every failed on demand startup will reappear as a successful robotics driven business in five to 10 years.” So tweeted Jeremy Conrad, founding partner of the San Francisco-based hardware fund Lemnos Labs, one recent afternoon.

Conrad apparently means what he tweets, having investing in Marble, a new, San Francisco-based ground-delivery robot that will focus on ground-based last-mile delivery for business, then consumer, applications. (Conrad wouldn’t discuss the still-stealth startup’s funding picture, but another source tells us it’s currently meeting with investors.)

He’s hardly alone in thinking that ground robots will be bringing us everything from canned goods to Christmas lights sooner than we think. For example, last week, Andreessen Horowitz announced it had led a $2 million investment in Dispatch, a company whose self-driving ground delivery robots look like minibars on wheels.

And Dispatch’s machines look an awful lot like the robots of Starship, an Estonia-based outfit created by Skype cofounders Ahti Heinla and Janus Friis, who took the wraps off their still-in-beta machines late last year. The robots, which also look like little refrigerators, are designed to deliver goods like groceries – about two bag’s worth – in 30 minutes of less.

In each case, the idea is to save money on deliveries by cutting out costly humans. Starship is also promising to give customers more control over the delivery process. It says it will enable residents to schedule deliveries only when the timing works, as well as track in real time the whereabouts of the robots, whose tech includes GPS, gyroscopes, and nine cameras. (As an added bonus, its robots will produce zero emissions, says Starship.)

Whether these new ground-based robot couriers represent the beginnings of a broader trend or a series of one-off bets remains a question mark. We’d bet on the former, though.

More here.

Andreessen Horowitz Talking with LPs About a New $1.5 Billion Fund

The venture firm Andreessen Horowitz is talking with investors about a fresh $1.5 billion fund, according to several sources who note the fund could always close at a higher number.

It was almost exactly two years ago that the firm closed its forth, multi-stage venture capital fund, Andreessen Horowitz Fund IV, with $1.5 billion.

The money also comes on the heels of a $200 million fund that the firm announced in November called the AH Bio Fund, a vehicle that’s being used to invest in mostly early-stage startups at the intersection of computer science and life sciences.

Altogether, Andreessen Horowitz, which launched in June 2009, has so far raised $4.35 billion, including three previous funds.

The firm declined to comment for this story, but it’s easy to imagine that even Andreessen Horowitz – considered one of the top venture firms in the world — isn’t finding fundraising quite as easy as it has in the past given uncertainty in the broader market.

Though it will undoubtedly reach its target, the young firm is looking for capital at a time when its own investors may not be feeling terribly flush.

As Chris Douvos, a limited partner with Venture Investment Associates, recently told us, “LPs are definitely yelling at VCs to put some ‘moolah in the coolah.’” Institutional funds “give out money [to VCs] expecting it will come back with profits in a reasonable amount of time,” said Douvos. “When it doesn’t, we can’t put more money into the asset class because a.) we’re at the top of our allocation [to venture capital and b.) we’re out of money.”

Indeed, the firm looks to have spent recent months preparing to woo investors, including by liquidating part of its stake in the car-sharing company Lyft in December.

As the WSJ reported earlier this month, both Andreessen Horowitz and early Lyft backer Founders Fund sold some of their shares to Saudi Arabia’s Prince al-Waleed bin Talal and his Kingdom Holding Co. (Taking money off the table and making distributions to LPs is a decision their fellow investor Fred Wilson recently argued more venture firms should be doing more frequently.)

Andreessen Horowitz has also been shifting its staff around quite a bit.

More here.

TrialPay Cofounder Back with Fractional Home Ownership Startup

Point — an 11-month-old, Palo Alto-based home equity marketplace that plans to take people’s homes and make them completely liquid, divisible and tradable by letting owners sell fractional equity in them — is raising funding, shows a new SEC filing.

It’s a fascinating concept that we think has only been tried in the past with vacation rentals by high-end developers, including Four Seasons and Ritz-Carlton.

Point was co-founded by Eddie Lim, who co-founded the e-commerce payment platform TrialPay, which Visa acquired in 2013 for undisclosed terms.

Don’t be surprised to see Andreessen Horowitz lead or participate in this round. In August, the Sand Hill Road firm brought aboard another TrialPay co-founder (and Lim’s fellow Harvard classmate), Alex Rampell, as a general partner to focus on financial tech startups.

More here.

uBiome’s Founders Launch a Microbiome Syndicate on AngelList

Ubiome is an unusual startup. The three-year-old sequences the collected microbes in the human body and sells $89 kits to those curious to understand their own microbiome better.

Now uBiome founders and academics Jessica Richman and Zachary Apte — who’ve raised$6.5 million from investors like Andreessen Horowitz for the San Francisco company — are taking an even more unusual step. They’re launching an AngelList Syndicate to fund other microbiome startups.

It’s not an entirely novel concept. There are plenty of corporations that create funds expressly to get a look at startups whose work might be of strategic interest to them. There are also a sprinkling of founders who are running early-stage startups and forming Syndicates to make startup bets of their own, including Joshua Reeves of four-year-old Gusto, a payroll startup that was formerly called ZenPayroll.

Still, investing in young startups that could eventually compete with your own young startup isn’t something one sees every day; we talked earlier with Richman to learn more about her Microbiome Fund — and why she and Apte decided to do it.

Understanding of the role played by the microbiome in many health conditions is relatively recent and you have a very young company, Why shift some of your focus to investing in other startups?

More here.

Andreessen Horowitz Lands a New GP — and a New Fund

Andreessen Horowitz is making a big move into biotech, and it’s using a $200 million new fund called the AH Bio Fund – and new general partner, Vijay Pande — to plant its stake in the ground.

The fund will be used to invest in mostly early-stage startups at the intersection of computer science and life sciences. It’s the first sector-focused fund for Andreessen Horowitz, which is halfway through its main fund, a $1.5 billion vehicle that it announced in March of last year.

Pande seems a good choice to lead it. He has the know-how and the connections, having spent the last 16 years teaching chemistry, structural biology and computer science at Stanford University, where he says he’ll continue “spending a very small percentage of my time” with his research group there.

Pande also knows startups, having been involved in a number of them already. Last year, he cofounded Globavir, a seed-funded infectious disease company. Pande also founded Folding@home, a now 16-year-old distributed computing project for disease research that remains his highest-profile work to date.

Asked if it will be hard to say no to some of the many Stanford-related startups now working on health care-focused, machine-learning startups, Pande calls it a “kid in a candy store” issue, adding that he expects to “see a lot [of startups] from Stanford, Berkeley, and M.I.T.,” among other places. (Conveniently, he notes, he has spent time at all three. He was once a Miller Fellow at U.C. Berkeley and nabbed his PhD in physics from M.I.T.)

Andreessen Horowitz is quick to note that Pande won’t be making decisions about what to fund on his own.

More here.

Quick Chat with Ryan Hoover of Product Hunt

By Semil Shah

Though not quite two years old, Product Hunt has become a highly popular platform for an expanding community of users who vote on and discuss tech tools. VCs clearly like it, too. The company has already raised $7.5 million from some notable investors, including Andreessen Horowitz, Slow Ventures, and investor-entrepeneur Alexis Ohanian. Recently, we caught up with the company’s founder, Ryan Hoover, to ask how things are going.

Almost overnight, you became “Internet famous” in tech circles. What’s that like?

My life has changed a lot in the past 12 months, professionally and personally. Since the beginning, I’ve been a very public and approachable “face” of the company. As a result, my following has grown and inbox has become unmanageable with people asking for feedback on their product, advice on how to market their product, and other requests. The flood of outreach can make me anxious because I genuinely want to help but I simply can’t without deprioritizing what’s most important — my family, friends, team, and health.

I’ve also become more self-aware in public as it’s not uncommon for someone to recognize me and introduce themselves as I’m walking down Market Street [in San Francisco] or grabbing food with friends at a restaurant. It’s flattering and I sincerely enjoy meeting Product Hunt fans, but we all want to escape work sometimes.

What’s the most-cited critique of Product Hunt?

When I invited the first few dozen people to contribute to the Product Hunt “MPV” — an email list highlighting new products — I reached out to startup folks I knew and respected. We quickly expanded beyond these initial curators by referral from others in the community and since then it’s grown far beyond my relatively tiny network to a global audience, with half the community outside the U.S. Still, not everyone can post and comment on Product Hunt — you have to receive an invite from someone else in the community – and understandably, this frustrates some people. Eventually, Product Hunt will be open to all, but right now we’re focusing on slowly building the community.

Product Hunt recently launched Games.

Last year, after Product Hunt gained early traction within the startup community, I thought hard about what it could become and what I wanted to build. Our longer-term vision is build a platform and communities around all types of products. Games was toward the top of that list.

How do you balance your taste and instincts versus pleasing the crowd?

The truth is, all of the products on Product Hunt are submitted by those in the community, with the exception of those that I and my teammates personally hunt. Once posted, products rise or fall based on the number of legitimate upvotes they receives, discounting voting rings or fraudulent votes from those trying to game the system.

As the community has grown, we’ve already begun to see bifurcation in the types of products people gravitate toward. For example, people have been posting and upvoting games on Product Hunt since the beginning. While appealing to the general Product Hunt community, an enthusiastic subset was particularly attracted to this category and asked for their own place to share and discuss games. That was part of the inspiration to expand into gaming; as we expand to other categories, we’ll create new, autonomous communities that adopt and grow their own taste and culture. [Editor’s note: the newest of these channels focuses on books. You can learn more here.]

Big-League LP: “It’s a Good Time to Be Asking Questions”

Roughly one year ago, FLAG Capital Management, the limited partnership, revealed that after 20 years, Diana Frazier would step down from her role as co-head of U.S. venture capital, and that Peter Denious, who formerly headed the firm’s emerging markets efforts, would assume her role.

Denious has been fairly quiet since then, possibly because the move came about as FLAG – which has backed Accel Partners, Andreessen Horowitz, Redpoint Ventures, Spark Capital and Union Square Ventures, among others — was beginning to raise its ninth fund of funds.

Denious still declines to discuss that effort, but he did talk with us this week about his observations – and concerns – about the current state of the venture industry. Here’s part of that conversation, edited for length.

You recently created a presentation called “Venture Portfolio Management in the Age of the Unicorn,” stating that FLAG has exposure to 56 so-called unicorns across 100 positions but suggesting that you have concerns about whether investors are taking enough money out of those deals. Are you talking with them about it?

We talk with them pretty openly and actively about it. We’ve always been big believers that you have to be both a great investor who can attract world-class entrepreneurs, as well as be a world-class portfolio manager.

It’s easy for VCs operating inside partnerships to get involved in their 10 or so investments, but it’s important for somebody to be thinking about the dynamics of generating returns, too. It’s a piece that we think is relevant in a time when things are up and to the right.

Given the number of secondary shops to descend on Silicon Valley in the last couple of years, I’d guess that plenty of firms are selling portions of their stakes. What are you seeing?

These are case by case situations. Obviously, we’ve looked into our portfolio and across those exposures, and where the VC has an embedded return of at least 10x, we’ve been seeing them take chips off the table. We think as long as managers are having the discussion, they’ll arrive at the right answer.

Are you concerned by how few companies are going public, relative to the number of richly funded late-stage companies we’re seeing?

I don’t think that each of whatever the number of agreed-upon unicorns that we’re seeing will do well. Some will be severely tested when the capital runs dry, and anyone who says otherwise must be wearing a pretty strong pair of rose-colored glasses.

By the same token, the amount of transformation and disruption in these companies’ respective industries is truly amazing. I do think there’s a subset of these companies that deserve to be very big. Do they deserve to be $50 billion, $100 billion [in value]? That’s subject to debate, but many will be very profitable if they aren’t already.

So you’re more troubled by valuations than underlying business models.

In most cases, we don’t have a business model problem. We don’t see a lot of nonsense, as with the last [late ‘90s] cycle. What’s debatable is valuation and are people paying too much for growth as these businesses scale, and I think that’s all to be determined. Who are we to say that this company at that valuation is too low or too high?

We’re typically early-stage and not growth or late-stage investors and part of the reason we don’t invest there is because as you move later and later on the continuum, you’re taking more of the valuation risk. I don’t think anyone would question the 10 most highly valued unicorns. The question is whether the premiums being paid for their growth is justified, and again, only time will tell. I do think that late-stage and crossover ventures are the most at risk, but that’s what they get paid to do.

But you anticipate a day of reckoning?

With respect to the pool of these late-stage companies, one can argue that so much late-stage capital has allowed for more unicorns to be created than would otherwise be the case. When that capital goes away, you’ll see more exits at the sub-$1 billion level.

Some [may go public.] I think it’s too early to draw too many conclusions about IPOs, which were down in the first quarter; we’ll know more in the next few quarters. But it’s a good time to be asking questions. I do think there will be a day of reckoning.