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A16Z isn't doing $500k checks in the next Facebook. They're waiting for the "15 important companies" to emerge every year and trying to snatch them up on the ba
by staunch 11y ago
A16Z isn't doing $500k checks in the next Facebook. They're waiting for the "15 important companies" to emerge every year and trying to snatch them up on the basis of their superior brand and checkbook. Exactly what the old guard of VCs used to do.
They used to claim their partners were all successful founders. They gave that up a long time ago. Now they hire pedigreed market analysts to be partners. Their primary job seems to be to judge startups and tweet wisdom about them, even though they've never done it themselves.
They passed on investing in Oculus because they thought Microsoft would crush them. Probably because they underestimated the creator of Oculus, Palmer Luckey, because he didn't go to any of the fancy schools.
Then, later, when they realized what millions of Carmack fans had already realized (Carmack was involved long before any investor) they bought their way in to a later round and flipped the company to their friends at Facebook for a cool $2 billion.
And of course, when it came to funding RapGenius.com, they had tens of millions to spare. They weren't worried Microsoft would beat them at the lyrics SEO game.
The ultimate test of a Silicon Valley investor is whether they help bring about great new stuff that would otherwise not exist. Most VCs do not pass this test with a very high grade.
- drumdance 11y agoWell, to be fair, Andreessen's first company was crushed by Microsoft.
- npalli 11y agoYes, it was bought by AOL for $4.2 Billion. Wish someone would crush my company that way.
- brazzledazzle 11y agoYes, I'll have the $4+ Billion disappointment please.
- austenallred 11y agoYes, they mostly invest in later stages than the seed round. They do some seed but it's not their bread and butter. Does that make them a shitty VC? They're still making big bets and hoping for a few winners to return the fund. That's what VC has always been and will always be.
- flylib 11y ago"They used to claim their partners were all real founders. They gave that up a long time ago." no all the general partners are still founders who seem to have an overwhelming stake in who they actually fund, granted they hide who the general partners are on their site, they use the term partner loosely as another word for associate
- austenallred 11y agoNo one is an associate anymore in VC, because founders learned that if you're an associate you're just a gatekeeper. So now everyone is a "partner."
- harryh 11y agoa16z invested $250k in the Instagram seed round before it was even called Instagram.
- fraserharris 11y agoActually, the ultimate test of a Silicon Valley investor is their return on capital. Your test is projecting your desire onto investors.
- supster 11y agowell said
- livecodingwtf 11y agoActually, the ultimate test of an SV investor depends on what they've promised their LPs. Don't project your own grossly naive understanding of the industry on them just so you can pretend that you're oh-so-superior to somebody else. It's gross. But this is HN, so gross assholes like you get upvoted.
- staunch 11y agoI was obviously not making a claim about how LPs judge VCs, just stating my own opinion about how I think VCs should be judged. Try to imagine every sentence in a comment is prefixed with "I think..." to test if you're just being snarky or not. In this case, you're just being snarky. (And like most snarky comments, it's not even correct. There is in fact no official test for VCs. Some LPs are socially motivated and would rather lose money than invest in evil companies. Your test is not the one they use.)
- fraserharris 11y agoThe bulk of your comment is an highly speculative attack on A16Z. Chris Dixon publicly stated they passed on investing initially because of technical obstacles.[1] Their investment in RapGenius was in part because Marc Andreessen tried to build it himself as part of Netscape.[2] A VCs job is to make an ROI for the LPs. "Socially motivated" is just window dressing to attract capital that might otherwise go to a different fund.[3] The significant LPs are primarily restricted by asset allocations. You are projecting your desires onto VC to hope that it is anything different. [1] http://www.wired.com/2013/12/oculus-vr-funding/ http://www.wired.com/2013/12/oculus-vr-funding/ [2] http://genius.com/1107425 http://genius.com/1107425 [3] Pessimistic? Sure. Better to be honest about the underlying motivations and surprised by the outcomes than not.
- nostrademons 11y agoA16Z's thesis is that companies require less and less capital to get started but more and more capital to scale these days. That's why the fund bifurcates into small seed rounds like Instagram and then large growth rounds like AirBnB. This is still "bringing into existence great new stuff that would not otherwise exist", but it's "bringing it into existence" in the sense of making sure great new products that are beloved by a small core group can get exposure in front of billions of people.
- staunch 11y agoThere's a line of investors out the door waiting to give successful startups growth funding. It's an easy way to extract wealth with very little risk, if you're positioned well. No one needs another firm doing this and it doesn't count as adding value.
- rwmj 11y agoHas Oculus made any real money (apart from the pure luck money involved in being acquired by Facebook)? Maybe they were right to pass over Oculus.
- SandB0x 11y agoThe consumer Rift is coming out next year. So far they have only released development kits.
- deleted 11y ago[deleted]