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How Andreessen Horowitz Fumbled An Instagram Investment
- rexf 14y agoWas the NYT headline updated? It currently reads 'How Andreessen Horowitz Bunted on an Instagram Investment'. The piece describes how Andreessen Horowitz invested in both Burbn & Picplz. After Burbn pivoted to Instagram, Andreessen Horowitz had to choose between the two - since they competed directly. Andreessen Horowitz chose to go with the company that they put money for photo sharing.
- dkrich 14y agoHa, it must have been, because the URL still says "fumbled."
- dkrich 14y agoIs it just me, or does this seem like a pretty savvy investment by A/H? They got their money into both companies, and ended up getting back (if the article is to be believed), a 400x return on their investment. There was a time and place where that was considered not too shabby, some might even say quite good. Nobody can maximize every investment. How often does it happen that anybody maximizes their investment potential on any given deal? I wish I would have bought Apple stock in 1998 instead of 2005, but I wouldn't say I "fumbled an investment opportunity." When I first saw this headline, not knowing the backstory, I thought this meant that they did something to piss off the Instagram founders and lost out on the chance to put anything into the company at all.
- ianterrell 14y agoExtra, extra, read all about it! Firm makes wrong bet in high risk industry and still comes out with 40000% return! Epic fail!
- fruchtose 14y agoWhat a tragedy! Andreeson Horowitz only earned $100 million on a $250 thousand investment. What amateurs! They might as well go work at McDonalds.
- droithomme 14y agoI know, right? For his next hit piece, that NYT "journalist" should write how Andreeson Horowitz are losers because they failed to buy enough Apple stock at $8 a share.
- fruchtose 14y agoIf Andreeson Horowitz invested in a company that produced a time machine, the New York Times would criticize them for not using the time machine to go back in time and invest in an earlier funding round.
- lpolovets 14y agoI'd hardly call a 400x return 'fumbling'.
- larrys 14y ago"At that market capitalization, Andreessen Horowitz’s stake would be worth $100 million — not bad for a $250,000 investment, but $200 million short of the return it could have earned had it stayed the course." Amazing that you can turn $250k into (possibly) $100,000,000 and in the eyes of a NYT writer you have fallen short. The writer will make a great parent.
- mapgrep 14y agoI don't know Nicole, nor do I work for or with the NYT, but attacking her parenting because you disagree with the article does not seem reasonable. By all means, make your point about the headline and story. Nicole is, presumably, an adult. But so are Andreessen Horowitz, and comparing them to a vulnerable child is not particularly convincing.
- larrys 14y agoI am attacking (if you want to call it that) the tone of the article and the angle she choose to take. She could have just as easily said "while some might say that they missed $200 million, others are impressed with the way they made what they believed to be an honorable decision". Of course in the end it's about selling newspapers or page views so she was just doing her job.
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- mapgrep 14y agoSpeculating that the author would be a bad parent, and now additionally speculating she's a page-view whore, is completely orthogonal to your main point about the tone of the article. It's a gratuitous attack that flies in the face of this specific community guideline: "Be civil. Don't say things you wouldn't say in a face to face conversation" Just because this is a journalist you are unlikely to meet doesn't mean you should so cavalierly impugn her morals. You can criticize an article without making it into an attack on the author. How would you feel if I replied to one of your comments with a sarcastic, "Gee, you'll sure make a GREAT parent some day"?
- pcwalton 14y agoI'm personally sad to see what happened to picplz; they were the main option around for Android at the time and I always preferred their low-key feel to the more showy feel of Instagram. Competition is a good thing.
- tzz 14y agoWhy didn't he just invest in both?
- eternalban 14y agoBecause it would dilute the trust relationship between the investor and the companies involved. ... "never discussed strategy again" ... That is not a good vantage point to be in if you are investing in a company. How do you make effective decisions if you are not privy to the entire picture? "moral reasons" ... Give me a break.
- dalton 14y agoAnyone reading this article needs to remember to never be afraid of putting yourself out there because you are afraid of failure. I saw the market first, I created picplz, and I went for it. I was a huge believe in the mobile photo sharing opportunity, and I went for it with all of my heart. Clearly, picplz didn't win, but I have ZERO shame or regret for doing my best. When I read articles like these, which are about myself, my company and people that I know well, I can't help but feel vitriol aimed at me for DARING to create, launch and raise funding for picplz. I am not clear on what exactly people want, an apology for trying? The fact is, I saw the writing on the wall that we wouldn't win early and pivoted out of photo sharing which I had ~90% of my series A cash still in the bank. It certainly seems like that was the right move, but all of this press makes it look like pivoting was the wrong call(?) The press I read is written in such a way that it assumed that the A16Z investment is dead and my entire company should just be written off to zero today. That is bullshit. If I started to take press like this too seriously I might as well just dissolve my company and stop coming into work. I say this to the hn comminity: never be afraid of failure. No one knows what will happen. All of this arm-chair quarterbacking is a waste of time. Stop reading this kind of crap and instead put your energy into doing your best work. Sometimes you win, and sometimes you lose, but if you give yourself the opportunity to win enough times, you WILL be successful.
- guccimane 14y agoI don't really understand your defensiveness, I didn't get that vibe from the article. Good on you for trying.
- michael_nielsen 14y agoI think you're reading something into the article that isn't there. I saw no vitriol aimed at picplz.
- sachingulaya 14y agoI read the article as being unnecessarily harsh towards picplz to bolster the 'fumble' that was Andreesen Horowitz's 4,000% return on instagram. This article is definitely a non-article and could easily be changed around to say "Andreesen Horowitz has done it again!".
- sriramk 14y agoAlso tells you how difficult it is to figure out who is going to make it big. picplz had Dalton Caldwell, both an Android and an iPhone version and a several month head start. You can't blame a16z for picking them. Besides, it looks like they did the most ethical/default thing they could - back the company they had already funded for photo sharing and avoid a conflict.
- zackattack 14y agoMarc ensured the market expanded with his wise bet. I doubt he has any regrets. Who knows whether Instagram would have expanded unless they were motivated to get to a point of turning their backs on A16Z. $ talks.
- zackattack 14y agooh yeah i'm sure that marc andreesen is in cahoots with paul graham and has the extension to see your downvote..... way to curry favor there champ
- zackattack 14y agodid not mean to imply that paul graham, of all people, would not respect privacy. i was just trying to be satirical, and i guess my attempt failed.
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- tptacek 14y agoIt's helpful to know as an entrepreneur that, whatever "A16Z" (heh) thinks about this particular instance, venture capitalists are, allegedly, as a species, way more motivated by fear of stories like this than they are of the fear that their investment in you will come to nothing. When they need to raise money for their next fund, nobody is going to hear about the investments that came to nothing, but the obvious missed opportunities are going to sting. This helps explain why they'll plow money into shoot-the-moon me-too startups that have no discernable chance of success, but might turn you down even if you have steadily growing revenue.
- larrys 14y ago"fear of stories like this". As a matter of fact, Fred Wilson on his blog the day after the deal was announced was asked this by a commenter: "I was looking for a lively discussion of the FB/Instagram deal today" To which Fred replied: "i'm not interested in that discussion really. somehow that takes energy from me. i am not inspired." As you said "obvious missed opportunities are going to sting" http://www.avc.com/a_vc/2012/04/life-liberty-and-blazing-broadband.html http://www.avc.com/a_vc/2012/04/life-liberty-and-blazing-bro...
- chimeracoder 14y agoArticles like these both reflect and perpetuate this problem. I'd don't like the idea of blaming successful people for the opportunities that they declined on principle - I'd rather look at the ones they chose to focus on, and see whether those were well-executed. But furthermore, I'd rather have the decision to fund actually mean something more than "This is just barely convincing enough that there's a slight chance I might look like an idiot if I don't throw a bit of money at it'. I'm painting a picture of extremes, but you get the idea. Fine, a16z made X on this investment when they could have made Y, where Y > X. But look at X itself - is that a respectable rate of return? And if not, do they make up for it by getting good returns on the other investments that they've also invested money (and time!) into? The VC game is about identifying enough companies - not all companies - that will be successful. Errors of the first kind and errors of the second kind are not equally noteworthy, and it seems we're focusing too much on the wrong one. There are valid reasons for turning down a company even if you think it may be successful - if you feel that your limited time/money/effort will be more valuable other companies.
- bravura 14y agoIt was a calculated bet against Instagram and it left Mr. Systrom livid, these people said. Instagram’s founders never discussed strategy with the firm again. Curious: To what extent can you avoid disclosing information to your investors, once it becomes clear that they are competing against you. But Mr. Systrom’s experience with Andreessen Horowitz taught him to choose his investors warily. Why? It seems like A16Z did the most ethical thing, which was support the company that the original founded for this idea. When Instagram pivoted into a competing position, why would they expect A16Z to back them and bury picplz? By the time Facebook acquired Instagram for $1 billion in a cash-stock deal a week ago, Andreessen Horowitz’s stake in the company had fallen to less than 10 percent. If A16Z had half the seed round, then that means that the seed investors owned 20%, diluted. If Benchmark own 30% at the sale, that means that the seed angels must have took >30% of the company at the $500K seeding. Is this correct?
- kposehn 14y agoI actually find this article rather unfair to all involved. It is quite clear that the author seems to have it out for AH - after all, a $100m return is freaking AMAZING for $250,000, and Benchmark made a far lower multiple for the amount they invested. In the end, I'd say the win goes to AH - they made a mistake, but also didn't exactly lose either.
- droithomme 14y agoThe article failed to convince me of the truth of the thesis proposed in its headline. Seems more a hit piece than anything solid or impartial.