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>"the industry's deal flow is large enough that they are fine with a small number of false negatives since false positives in their portfolio hurt more" This i
by xiaoma 9y ago
>"the industry's deal flow is large enough that they are fine with a small number of false negatives since false positives in their portfolio hurt more"
This is backwards. Funding a company that goes nowhere is far smaller an error than turning down the next SpaceX.
- hkmurakami 9y agoA fund only has 10~20 bets it can make though. That likely influences the human decision making (could still be suboptimal). Afterall didn't A16Z catch some criticism for not investing a large enough sum into Instagram (which iirc had 500x returns or something) to make a large enough difference to the fund?
- ericb 9y agoTrue, but is "my buddies' buddies" the smartest filter you can apply to increase the chances of finding a company that can return the fund?
- ryandamm 9y agoA16Z didn't invest more in Instagram because of a portfolio conflict; they had already invested in Picplz, and decided they couldn't continue to back Instagram (which was Brbn, a social check-in app, when they invested). A costly adherence to their own ethical rules, but it reinforces how seriously Andreessen Horowitz takes portfolio conflict. source: https://bits.blogs.nytimes.com/2012/04/20/how-andreessen-horowitz-fumbled-an-instagram-investment/ https://bits.blogs.nytimes.com/2012/04/20/how-andreessen-hor...