I'll be honest -- my first impression after reading this piece was to research Peter Sims and figure out his connection to a16z, since my gut reaction was that blatant puff pieces usually have some sort of connection hidden below the surface. (I was unable to find anything.)<p>Sims brings up the following point about VC returns:<p><i>> The predominant old way of thinking about venture capital is that you: a) build up a great brand and reputation with a large portfolio of investments, b) hire partners who have individually strong brands of their own, and c) collect hefty management fees on each fund. The industry standard is a 2–2.5% yearly “management” fee, a figure that gets pretty large on a billion dollar fund. And, in my experience, not surprisingly, the senior people get a disproportionate slice of that management fee. At the same time, the venture capital industry has been a glaringly poor-performing asset management group, consistently underperforming the S&P 500. (For more detail on the struggles within the VC industry, a recent article on the Harvard Business Review Blog by Diane Mulcahy, a senior fellow at the Kauffman Foundation, entitled “Venture Capitalists Get Paid Well to Lose Money” is well worth reading).</i><p>But never swings back around to it (unless I missed it amongst the flowery prose). Which leads me to ask: are there data points that compares a16z (or other VC firms!) against the S&P 500, besides the aggregate?
That made me ill. I'm sure a16z is great and all, but there wasn't even a hint of criticism there. They couldn't find one slightly pejorative anecdote to contrast with the endless amount of fawning? I had to double check the byline, because by the end of it, I was convinced it had to be written by Robin Leach. Champagne wishes...
Andreesen Horowitz became the apple of every startup founder's eye because they were the new guys who had success as investors while being friendly to startups<p>I'd rather raise money from a guy who wears a 'No Bitchassness' [0] shirt who wants to pump up my valuation, help me recruit tech talent, and allow me to give equity to compensate my best people versus some stodgy old guy who thinks he's better than everyone because he invested in [insert successful company from the 90s/early 2000s].<p>Basically, they were the uber of VCs in terms of how they treated their portfolio companies.<p>That said, I generally don't like media that praises investors because once we start glorifying the fund-raising process rather than bootstrapping and making money, we'll have tons of companies with too much money and no exit. Bubble burst.<p>0: <a href="http://www.jasonshen.com/wp-content/uploads/2012/10/benhorowitz-150x150.png" rel="nofollow">http://www.jasonshen.com/wp-content/uploads/2012/10/benhorow...</a>
AH is doing some remarkable stuff.<p>1) Like any great knowledge based firm - which strives to differentiate over and above its people - they have invested in tools. While the inspiration maybe CAA, firms like Mckinsey (knowledge management system) and Goldman (SecDB / Slang on the trading side and a detailed CRM system for the banking side) used the software / infra layer to develop a sustainable advantage which did not just depend on hiring the "smartest people" I.e. if people quit Goldman / Mckinsey - suddenly they were not able to outperform. On wall street - they call it seat value (how much value are you adding versus the seat/organization)<p>2) As a complete outsider - one can still easily see how the CRM software + sales connectors capability translates to $$$ for portfolio companies. For e.g. Box's recent deal with GE.<p>3) Therefore, on the enterprise side , if AH acts like a sales force (led by Mark Cranney) - then how does an enterprise company that is not backed by AH compete? In other words, over and above the prestige factor of being backed by a top tier VC firm- will NOT raising money from AH in the enterprise side put you at a disadvantage?<p>4) How much of this sales force / business development muscle applies to the consumer side? AH partners have referred to consumer startups as fruit fly experiments and will invest with a strong offer post-traction/ series B? But is there value in the consumer side as well in BD deals like how Moritz/Doerr helped Google power yahoo search and collect valuable search engine user behavior which was used to refine and test thier algorithms.<p>5) The article did mention in passing about recruiting support. But - I have read about a detailed software + people capability on talent hiring.<p>6) So, if sales + recruiting + strategy/advise are three value adds by VC firms (not counting money!) - does AH have a lock on 2 of the three?
What would be the (software) VC equivalent of contrarian investing?<p>Let's see, we could invest in companies that<p>- are tackling problems for which solutions already exist<p>- are staffed by experienced people, not youth<p>- use mature technology<p>- have nothing to do with the web or even the internet<p>- are run outside of the valley (bonus points for flyover country)<p>Surely there must be other things that warm the heart of the contrarian investor?
I wasn't aware of all the great stuff AH is doing. It looks impressive.<p>They're not the only VC firm innovating, though. First Round Capital, for example, also has a terrific recruiting division (I know this is common at other firms as well). FRC also created the Dorm Room Fund[0], which invests small amounts in student-run companies and gives them access to FRC resources. FRC has an internal "platform team", developing technology to enable knowledge sharing between portfolio firms. In short, they work hard and do new things to help entrepreneurs succeed.<p>I'm speaking about First Round because I have direct experience with them, but I'm sure the same is true of some of the other VC's as well.<p>[0] dormroomfund.com - disclaimer, my former startup received funding from them.
It seems really odd to have such an powerful part of the Silicon Valley establishment accused of disrupting anything. Unless there's some aspect to their business model that differes from venture capital in the most traditional sense, and that I am missing.
Andreessen Horowitz has generated a positive reputation (in a field where most of its counterparts are ridiculous, incompetent assholes, so seeming strongly competent provides prominence) but here's a stark indicator for "wolf in sheep's clothing": <a href="http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engineer/" rel="nofollow">http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engin...</a> . Read it.<p>If you don't have a nose for rot, I'll point your way to it:<p><pre><code> Today, if you have a great idea for a software product, you need to either
be an engineer or find one. Tomorrow, that billion-dollar startup acquisition
might not need an engineer at all.
</code></pre>
I have no direct knowledge of A16Z, but admitting a desire to make software "a low-skill trade" is chewing our food for us. The moral conclusion is right there. They've actually admitted to being the bad guys, to wanting to commoditize top talent in favor of our MBA-culture colonizers.<p>Most of the time, the bad guys don't say, "We're the bad guys". You actually have to do some research. You have to poke around the countryside and find the emaciated political prisoners and the mass graves to figure out who the bad guys are. Not here. The good news is that the Silicon Valley elite have such unprecedented arrogance that, often times, they'll actually admit what they are. They'll flat out say, "fuck you programmers, you had your turn."<p>For those who aren't educated on the matter, the evil of Silicon Valley's last 20 years is that it has become an economy of resource extraction (like Saudi Arabia) instead of one that genuinely creates wealth. The difference is that, instead of said resource being oil or natural gas, it's the intelligence and energy of each generation of young people that hasn't figured out, yet, that the only people with a decent chance of getting rich in this Valley game are VCs and landlords (i.e. not them, the people doing the actual work).