Inside Andreessen Horowitz’s Rise

From The Information — read the original.

Kyle’s reading notes, April 26th 2021. Quoted passages are from the article.

Notes

• Read ‘These Guys Are Very Different’: Inside Andreessen Horowitz’s Rise #a16z
• With this week’s Coinbase public listing, Andreessen Horowitz generated one of the biggest paper returns from a single-company investment in VC history.
• To accommodate the furious pace of its investments, the firm is raising bigger and bigger funds, hoping to solidify its position in the industry for generations **as the VC industry consolidates around fewer firms. **Bifurcation in Investing
• Andreessen Horowitz “inspired the next generation of investors to think beyond what it means to be a traditional VC firm,” said Arjun Sethi, a partner at Tribe Capital Investing 101 2.0
• “They have that visibility” into a company’s growth metrics or financials, she said. “These companies are gaining traction much faster than companies did in the past. To shut out [VC] competition or get ahead of competition,” firms like Andreessen Horowitz are “looking at their best companies in their portfolio and doubling down.”
• In addition, rivals say Andreessen Horowitz continues to reap the benefits of a novel practice: the Reverse Pitch. After the founders of especially hot startups pitch their product to Andreessen Horowitz partners, the partners pitch the founders on why the startups should take money from the firm.
• Other VC firms are also paying increasing attention to Andreessen Horowitz’s media strategy, which it has prioritized in an effort to increase the visibility of its portfolio companies and circumvent the press. VC Platform
• There are risks to this investment strategy. As with other firms like Tiger Global Management or SoftBank’s Vision Fund, Andreessen Horowitz’s bet-big-and-bet-often approach works best in a bull market like the current one.
• “The [traditional] VC game is about ROI,” or providing a return on the capital for the firm’s investors. “These guys are about legacy. These guys aren’t about ‘How much money can we make this year?’”
• Horowitz has said the duo tried to build a carbon copy of Creative Artists Agency (CAA), a talent agency created by Michael Ovitz that shook Hollywood by catering to the needs of movie and TV stars—only in their version the tech founders were the stars.
• More important, Andreessen has been consistently willing to pay higher prices for startup stock than nearly all of its VC brethren, based on the logic that a company that becomes the next Facebook or Microsoft is worth investing in at almost any price, even as a young business.
• The services model has influenced the rest of the VC industry, leading firms of all sizes to hire experts to help startup founders. “They really pushed the whole industry in that direction,” said Greg Sands, whose 8-year-old firm Costanoa Ventures has hired sales, marketing and talent professionals. “Seed [investment] firms 10 years ago, they didn’t have any of that,” he said.
• Andreessen and Horowitz aren’t involved in every deal. Instead, general partners have full authority to make investment decisions without requiring a consensus from the broader group, according to a person with direct knowledge of the matter. That’s different from most VC firms, where partners seek agreement about an investment.
• Horowitz was one of approximately 25 Andreessen Horowitz partners to attend the partner pitch meeting for ChartHop.
• Andreessen Horowitz has 21 general partners and a number of less experienced deal makers, all of whom it calls partners. The founders decided early on not to publicly provide more detailed titles, like associate or principal, which would denote experience. Generalized titles meant outsiders couldn’t be aware of the firm’s true hierarchy. Plus, entrepreneurs are more receptive to cold outreach from a partner than from an associate, they concluded, according to a former partner.