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469 points by dwynings 15y ago

staunch 15y ago
If I was Dalton (PicPlz) I would have been fine with my investor exercising their pro-rata rights in another investment, even it had become competitive. It's not ideal, but I don't think it's unethical. I'd be much more concerned about them sharing information, so there would have be a discussion about that.
- jcitme 15y ago
  I agree with this statement. If someone invested in my service and something else who competed with mines, this doesn't represent an ethical problem, but just that the investor is interested in the field in general.
  - fredoliveira 15y ago
    This is a statement I appreciate (and that I personally agree with) but that is, well, rational. When things get real, rationality is often forgotten. It would be easy to take the opposite position if you were to consider that an investment is usually (or supposedly) a product of the investor's passion for your particular business, not necessarily the field it belongs to. It can be seen as the investor saying "we're with you on this, and we'll fight your competition by your side". It's a matter of perspective, and in this case, it is easy to see things from both sides. All this being said, I love Dalton's honesty, and Ben's post. A ton of ink was used to cover this matter, but the fact is, everyone's happy here.
- jasoncrawford 15y ago
  See my answer to "yabbadabbadoo". It's just too hard to not share information, at least implicitly, when a VC takes a board seat on competing companies. So most VCs have a policy like Andreessen's.
  - deleted 15y ago
    [deleted]
- dbul 15y ago
  Since maximizing return is in the interest of the LPs, as a VC wouldn't you at least have a conversation with PicPlz about investing in an additional round with a competitor? Especially: Dalton later pivoted out of PicPlz and is now building an exciting new service called App.Net. If the App.Net concept was on the alternative idea list (likely considering the generalist nature of the entrepreneur [music, photos, whatever app.net does]), maybe the pivot would have happened sooner.
dantiberian 15y ago
Is this standard of ethics amongst VC firms the exception or the rule? A lot of news and comments paint VC firms in a bad light but this story seems to suggest that strong ethics are still alive and well.
Mystalic 15y ago
Andreessen Horowitz did the only ethical and logical thing it could do. It was in a tough spot, so it did the thing that wouldn't violate its implicit agreements with Kevin and Dalton. I don't think either side is complaining, and I doubt Andreessen's LPs are either. Can we put this matter to bed now?
benihana 15y ago
So when faced with a sticky situation, he does what he thinks is ethically right, then makes $78,000,000 (with six zeros). If someone can't step back and evaluate that situation for what it is, they have a serious issue with perspective.
yabbadabbadoo 15y ago
funding Kevin to compete with Dalton would be a violation of the original implicit commitment we made to Dalton—to not fund competitors to PicPlz. This is very interesting. Is this common practice among VCs? PG has said that they don't reject YC aspirants simply because they're building something that competes directly with another YC company: The way we deal with it is that when two startups are working on related stuff, we don't talk to one about what the other's doing.[1] For some reason, I assumed this practice extended to VCs as well. [1] http://ycombinator.com/faq.html http://ycombinator.com/faq.html
- jasoncrawford 15y ago
  Different investors approach this differently; it depends on the velocity of investments they make and on how hands-on they are. For instance, SV Angel (Ron Conway's fund) has an explicit policy much like YC's: they will invest in competing companies, but that they won't reveal one company's private information to another (and they don't really get involved in the management of their portfolio companies). Both SV and YC are making a lot of small, early-stage investments, so this makes sense for them. A traditional VC, though, is very hands-on (usually a partner takes a board seat after an investment) and thus often has a policy of not investing in competing companies--it would just be too hard to not share information, at least implicitly, when you are sitting on the board and actively helping manage the company. Andreessen-Horowitz is a VC firm, and this seems to be their approach as well. It makes sense when you're making fewer, larger, later-stage investments.
  - malay 15y ago
    The idea that you can mask learned knowledge of a company's strategy by simply not explicitly revealing sensitive information is a difficult concept to wrap my mind around. It is not possible to unlearn the information. If you are acting as a strategic advisor, the information has to weigh in your mind and you implicitly will end up revealing information, practically subconsciously. A simple case would be where one company explains an experiment they ran (perhaps testing a feature with a small part of their customer group) and the result of the experiment. If the competitive company comes in and says they are thinking of running a similar experiment and explicitly asks the advisors what they think—what is the response given? I have a hard time understanding how this type of accumulated information could not enter into future judgments the advisors are making. As a management consultant who faces this type of challenge frequently (and overcomes it by avoiding competitive clients and never sharing my work) I am honestly curious how one elevates themselves above this type of subconscious thinking.
kposehn 15y ago
What else is there to say now? He makes it very clear, shows how they value and respect both entrepreneurs and sets the record straight. Very well done.
andrewfelix 15y ago
There is something wrong with a world that allows an investment of $250,000 to turn into $78,000,000 in such a short period. Now before you downvote me, I'm not suggesting what these guys did was wrong, or that FB's money is dirty, or even that anyone directly suffered as a result of this transaction. But capital is like a liquid, it ebbs and flows. The fact that so much of it can flow in such a small amount of time toward such a small group of people bothers me. Especially when you consider the impact that investment could have made in other places. Ok now you can downvote me.
- _delirium 15y ago
  I do think it's a bit strange, but I think the VC/tech world isn't that big a part of the strangeness, at least unless it gets to 1999 proportions again. Instagram is pretty much an outlier, and most of the other "big" multipliers, like Google and Apple, have huge R&D behind them. Even this post, written by a VC, considers a two-year billion-dollar exit to be an outlier that you won't see again. Finance is where the pervasive ebbs and flows are more obvious, imo. Once you have flows that are gigantic, it becomes more profitable to try to skim a little tiny percentage off the top of them than to do lots of other kinds of work. You could spend your whole life building up a $5m small business (a perfectly respectable, successful thing to do!) and make less money at it than finding a way to skim 0.001% off a $10 billion transaction a few times in your career. So if you're motivated mainly by money, rather than figuring out how to build up that business, it might be better to start boning up on how to maneuver yourself into a position to take tiny percentages from large flows. There are lots of opportunities in the dense web of management fees, M&A deals, etc.
- jrockway 15y ago
  Keep in mind that although $78,000,000 is 312x the investment, it's likely that more than 312 investments of $250,000 turn out making absolutely nothing. That's why the rewards are so high: the risks are even higher.
  - andrewfelix 15y ago
    That is an interesting way of framing it. But are the risks that high? If you took an average sample of investments at $250k would you expect the rate of failure to be 311 for every 312 investments?
earbitscom 15y ago
All I know is this...this is the kind of support I want from the people I work with. A16Z consistently show me they're the kind of people I want to be working with.
waterlesscloud 15y ago
A couple of things I thought about while reading this, unrelated to the ethics... 1- If he's able to assign a precise value to the investment outcome, that implies that Facebook assigned an explicit value to their stock involved in the transaction. I don't know if that had to be the case or not, maybe it did. But what it makes me curious about is...what valuation did they use? The current second market valuation? Something else? The $100 billion bandied about isn't an official valuation is it? 2- What Facebook bought was an open social graph, as opposed to their current private one. Now that makes a lot of sense as something worth a lot of money, specifically to Facebook that otherwise has no way to make their private graph public, at least not in any way that doesn't piss off their users. Of course, now they have some verrrrrry tricky waters to navigate.
- jwegan 15y ago
  1. It was published the day after the Instagram acquisition that Facebook had assigned a valuation of $75 billion to their stock. 2. I doubt Facebook bought Instagram for the "social graph" . Facebook has always been laser focused on user engagement. One of the core features on Facebook that keeps users engaged is photo sharing with their friends. Instagram was an up and coming challenger in the sharing photos with your friends arena and that is the primary reason Facebook bought them.
  - repsilat 15y ago
    Re: #1, this is a part of a reasonable answer to "How are they worth so much?" - the purchase of Instagram was made "roughly 30 percent in cash and 70 percent in stock[1]", meaning that the $1B was really ~$300M in cash and a bit under 1% of Facebook. Maybe that still looks high, but it's certainly not as outrageous as a billion dollars. The bit that makes it look crazy is Facebook's valuation at nearly $100 per active user. 1: http://dealbook.nytimes.com/2012/04/18/with-instagram-deal-facebook-shows-its-worth/ http://dealbook.nytimes.com/2012/04/18/with-instagram-deal-f...
cletus 15y ago
Congratulations on the investment. The return is nothing short of spectacular. It's a truly excellent example of execution and timing. But the point that keeps resurfacing in my mind is SpaceX. SpaceX, from nothing, created a low-earth orbit delivery system that is revolutionizing satellite launches and (soon) the cost of getting men into space... for less than the price that a bunch of people can send photos to each other with cheesy filters [1]. It would be difficult to overstate the impact Elon Musk has had, is having and will have on humanity (and no this isn't hyperbole) through SpaceX (and maybe even Tesla). And it didn't even require, relate to or is connected with some bullshit social network. I'm also reminded of Steve Yegge's OSCON talk [2] from some months back. The computer power we have available now is stunning. used for the right purposes it could fundamentally change humanity for the good, whether that be in bioinformatics or whatever, is hard to overstate. Yet we're using all this power and the brightest minds on the planet... to send cat pictures. It's actually reached the point that when I get unsolicited recruitment email or read about some new startup on HN that I tune out as soon as I see the word "social". There's something astoundingly depressing about all this. EDIt: I should add that my issue isn't that the founders and investors sought wealth. I don't begrudge them that at all. Not by any means am I anti-capitalist. Bill Gates, as one example, is doing huge amounts of good with his accrued wealth. The issue is more on what society values. [1]: http://news.ycombinator.com/item?id=3857904 http://news.ycombinator.com/item?id=3857904 [2]: http://www.youtube.com/watch?v=vKmQW_Nkfk8 http://www.youtube.com/watch?v=vKmQW_Nkfk8
- sethbannon 15y ago
  I agree. It's quite sad that some of the best and brightest minds of our time are spending their days working to increase revenue per click of advertisements. We could achieve so much more if our focus shifted towards more meaningful endeavors. I am, however, encouraged by the recent rise of impact entrepreneurship, where for-profit ventures tackle large societal problems. It's something we certainly need to see more of.
  - cletus 15y ago
    Actually on advertising I will have to respectfully disagree. This may be controversial but: My opinion is that Internet advertising has done an inordinate amount of good for the world. Advertising has allowed the creation of amazing services that are free to use. Let's imagine a world where search or GMail might otherwise cost you $20/month (completely made up number) to use. You could afford that right? Even if you could you may not pay for it (people are remarkably fickle when it comes to paid services). That's not a lot of money. But what about to the poor or those in developing countries to whom $20/month is a significant amount of money? They get the same service you do because of advertising. Consider that the next time a text ad at the top of Google otherwise offends your (and I'm talking the general "you" rather than you specifically) aesthetic sensibilities.
sethbannon 15y ago
Ethical and transparent -- two phenomenal qualities in a VC.
- JabavuAdams 15y ago
  What do you expect? People don't talk about their unethical dealings. This is not to say anything about Andreesen Horowitz -- but recognize that this is a savvy piece of marketing, just as the Valve employee manual "leak" is a savvy piece of hiring material.
sakopov 15y ago
Christ, 78 mil for an app that shares pictures. I must be the only one thinking this is money which could be used more wisely developing better medical equipment and generally solving real engineering problems.
- wpietri 15y ago
  Well, actually it's $1bn for an app that shares pictures. It's only worth that because people use it. 40 million people according to recent reports. If you want resources spent on more serious stuff, you'll have to start by getting the general public to spend their time more seriously, because that's the root problem.
- caycep 15y ago
  well, one of the technical challenges in medicine is how to share medical imaging between different hospitals and doctors. the current "PACS" systems that do that suck. Instagram or something like that would be a neat way to accomplish that. Turing completeness and all...
  - mkopinsky 15y ago
    I've heard that sepia is all the rage in radiology reading rooms.....
  - colbyolson 15y ago
    Could you explain your thoughts on sharing images/use of PACS? I do IT work for an imaging center and would be interested in your experience with such software.
  - jpadkins 15y ago
    The reason why it is a hard problem is HIPAA regulations, not because of some deficiency with the PACS. Any social or semi-public solution would be instantly shut down.
hooande 15y ago
This deal absolutely stinks. It sure seems like someone said, "Hey Facebook, you just got paid. Why don't you buy instagram for an amount of money that we made up so that my buddies and I can get even richer?" And they made 78 million dollars behind that. 1. If people can make up money, then it lowers the value of money for everyone. 2. If people can make up money, then it destroys any semblance of fairness in the system. Why are we working every day when some people can just invent tens of millions of dollars for themselves? This isn't how markets are supposed to work. An asset isn't worth one billion dollars just because someone you know has a billion dollars to spend. The last thing I expected to see was a blog post bragging about it.
- ericflo 15y ago
  > An asset isn't worth one billion dollars just because someone you know has a billion dollars to spend. Actually that's nearly the definition of what something is worth: how much someone is willing to pay for it.
- orky56 15y ago
  As my finance professor says, "Price is what you pay; value is what you get."
- wpietri 15y ago
  I have no inside knowledge, but I doubt it. Look at the funding (left side, half way down the page): http://www.crunchbase.com/company/instagram http://www.crunchbase.com/company/instagram There are quite a number of people involved. The seed round people apparently had about 15% of the company. If I had to guess, the A and B round had 20-35%. The non-founder employees, could have another 10% or so. Leaving 40-55% for the founders. If you're trying to funnel money to somebody in specific, this is terribly inefficient; 80% of the money would go to other people. Also, Facebook is about to IPO, and this is a very high-profile deal. It's the worst time and the worst way to do something fishy.
DanI-S 15y ago
Imagine if other industries were this transparent.
kjhughes 15y ago
So our choices were: a) invest in Dalton b) invest in neither or c) invest in Kevin and violate our commitment to Dalton. I would have thought that suggesting that Dalton and Kevin join forces would have been one of the options.
- waterlesscloud 15y ago
  What happens when the idea doesn't work out and they pivot? Do they stay together then?
  - kjhughes 15y ago
    Presumably they'd then be in the same position as any co-founders regarding a pivot: They'd have to reach agreement on whether and how to alter their plan.
2pasc 15y ago
That means that our friend Jack Dorsey also pocketed another 78M - along with Adam D'angelo? When most people will never strike 10M in their entrepreneurial/investment career, these guys have pulled three already... That's really impressive.
- spullara 15y ago
  They were probably not invested at the same level but I'm sure they did well.
EGreg 15y ago
I am really thrilled to read something like this from the venture capital community :)
deleted 15y ago
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ricardonunez 15y ago
I think it was a great investment and great for them for the transparency. For those that criticize how much money was in so short period of time. You are probably in the wrong industry. I'm sure nobody feel bad for when somebody else do a bad investment. Thinks can go in both ways.
mhartl 15y ago
Andreessen Horowitz continues to show that they are among the classiest investment firms in the business, as well as being one of the best. Bravo.
villagefool 15y ago
Can someone please explain what "...Kevin came to it organically based on the Burbn data" means?
- kjhughes 15y ago
  Ben Horowitz is countering accusations that Kevin pivoted into photo sharing based on Dalton's work. He's saying that Kevin saw that Burbn's photo sharing was its most popular feature and so naturally (organically) Kevin pivoted in that direction.
deleted 15y ago
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nazgulnarsil 15y ago
all of the anger over instagram seems to come from zero-sum thinking. I liked one of the touches of David Brin's novel Sundiver, where people who think in terms of zero or negative sum games are deemed insane.

469 points by dwynings 15y ago

If I was Dalton (PicPlz) I would have been fine with my investor exercising their pro-rata rights in another investment, even it had become competitive. It's not ideal, but I don't think it's unethical. I'd be much more concerned about them sharing information, so there would have be a discussion about that.

jcitme 15y ago
I agree with this statement. If someone invested in my service and something else who competed with mines, this doesn't represent an ethical problem, but just that the investor is interested in the field in general.
- fredoliveira 15y ago
  This is a statement I appreciate (and that I personally agree with) but that is, well, rational. When things get real, rationality is often forgotten. It would be easy to take the opposite position if you were to consider that an investment is usually (or supposedly) a product of the investor's passion for your particular business, not necessarily the field it belongs to. It can be seen as the investor saying "we're with you on this, and we'll fight your competition by your side". It's a matter of perspective, and in this case, it is easy to see things from both sides. All this being said, I love Dalton's honesty, and Ben's post. A ton of ink was used to cover this matter, but the fact is, everyone's happy here.
jasoncrawford 15y ago
See my answer to "yabbadabbadoo". It's just too hard to not share information, at least implicitly, when a VC takes a board seat on competing companies. So most VCs have a policy like Andreessen's.
- deleted 15y ago
  [deleted]
dbul 15y ago
Since maximizing return is in the interest of the LPs, as a VC wouldn't you at least have a conversation with PicPlz about investing in an additional round with a competitor? Especially: Dalton later pivoted out of PicPlz and is now building an exciting new service called App.Net. If the App.Net concept was on the alternative idea list (likely considering the generalist nature of the entrepreneur [music, photos, whatever app.net does]), maybe the pivot would have happened sooner.

dantiberian 15y ago

Is this standard of ethics amongst VC firms the exception or the rule? A lot of news and comments paint VC firms in a bad light but this story seems to suggest that strong ethics are still alive and well.

Mystalic 15y ago

Andreessen Horowitz did the only ethical and logical thing it could do. It was in a tough spot, so it did the thing that wouldn't violate its implicit agreements with Kevin and Dalton. I don't think either side is complaining, and I doubt Andreessen's LPs are either. Can we put this matter to bed now?

benihana 15y ago

So when faced with a sticky situation, he does what he thinks is ethically right, then makes $78,000,000 (with six zeros). If someone can't step back and evaluate that situation for what it is, they have a serious issue with perspective.

yabbadabbadoo 15y ago

funding Kevin to compete with Dalton would be a violation of the original implicit commitment we made to Dalton—to not fund competitors to PicPlz. This is very interesting. Is this common practice among VCs? PG has said that they don't reject YC aspirants simply because they're building something that competes directly with another YC company: The way we deal with it is that when two startups are working on related stuff, we don't talk to one about what the other's doing.[1] For some reason, I assumed this practice extended to VCs as well. [1] http://ycombinator.com/faq.html http://ycombinator.com/faq.html

jasoncrawford 15y ago
Different investors approach this differently; it depends on the velocity of investments they make and on how hands-on they are. For instance, SV Angel (Ron Conway's fund) has an explicit policy much like YC's: they will invest in competing companies, but that they won't reveal one company's private information to another (and they don't really get involved in the management of their portfolio companies). Both SV and YC are making a lot of small, early-stage investments, so this makes sense for them. A traditional VC, though, is very hands-on (usually a partner takes a board seat after an investment) and thus often has a policy of not investing in competing companies--it would just be too hard to not share information, at least implicitly, when you are sitting on the board and actively helping manage the company. Andreessen-Horowitz is a VC firm, and this seems to be their approach as well. It makes sense when you're making fewer, larger, later-stage investments.
- malay 15y ago
  The idea that you can mask learned knowledge of a company's strategy by simply not explicitly revealing sensitive information is a difficult concept to wrap my mind around. It is not possible to unlearn the information. If you are acting as a strategic advisor, the information has to weigh in your mind and you implicitly will end up revealing information, practically subconsciously. A simple case would be where one company explains an experiment they ran (perhaps testing a feature with a small part of their customer group) and the result of the experiment. If the competitive company comes in and says they are thinking of running a similar experiment and explicitly asks the advisors what they think—what is the response given? I have a hard time understanding how this type of accumulated information could not enter into future judgments the advisors are making. As a management consultant who faces this type of challenge frequently (and overcomes it by avoiding competitive clients and never sharing my work) I am honestly curious how one elevates themselves above this type of subconscious thinking.

kposehn 15y ago

What else is there to say now? He makes it very clear, shows how they value and respect both entrepreneurs and sets the record straight. Very well done.

andrewfelix 15y ago

There is something wrong with a world that allows an investment of $250,000 to turn into $78,000,000 in such a short period. Now before you downvote me, I'm not suggesting what these guys did was wrong, or that FB's money is dirty, or even that anyone directly suffered as a result of this transaction. But capital is like a liquid, it ebbs and flows. The fact that so much of it can flow in such a small amount of time toward such a small group of people bothers me. Especially when you consider the impact that investment could have made in other places. Ok now you can downvote me.

_delirium 15y ago
I do think it's a bit strange, but I think the VC/tech world isn't that big a part of the strangeness, at least unless it gets to 1999 proportions again. Instagram is pretty much an outlier, and most of the other "big" multipliers, like Google and Apple, have huge R&D behind them. Even this post, written by a VC, considers a two-year billion-dollar exit to be an outlier that you won't see again. Finance is where the pervasive ebbs and flows are more obvious, imo. Once you have flows that are gigantic, it becomes more profitable to try to skim a little tiny percentage off the top of them than to do lots of other kinds of work. You could spend your whole life building up a $5m small business (a perfectly respectable, successful thing to do!) and make less money at it than finding a way to skim 0.001% off a $10 billion transaction a few times in your career. So if you're motivated mainly by money, rather than figuring out how to build up that business, it might be better to start boning up on how to maneuver yourself into a position to take tiny percentages from large flows. There are lots of opportunities in the dense web of management fees, M&A deals, etc.
jrockway 15y ago
Keep in mind that although $78,000,000 is 312x the investment, it's likely that more than 312 investments of $250,000 turn out making absolutely nothing. That's why the rewards are so high: the risks are even higher.
- andrewfelix 15y ago
  That is an interesting way of framing it. But are the risks that high? If you took an average sample of investments at $250k would you expect the rate of failure to be 311 for every 312 investments?

earbitscom 15y ago

All I know is this...this is the kind of support I want from the people I work with. A16Z consistently show me they're the kind of people I want to be working with.

waterlesscloud 15y ago

A couple of things I thought about while reading this, unrelated to the ethics... 1- If he's able to assign a precise value to the investment outcome, that implies that Facebook assigned an explicit value to their stock involved in the transaction. I don't know if that had to be the case or not, maybe it did. But what it makes me curious about is...what valuation did they use? The current second market valuation? Something else? The $100 billion bandied about isn't an official valuation is it? 2- What Facebook bought was an open social graph, as opposed to their current private one. Now that makes a lot of sense as something worth a lot of money, specifically to Facebook that otherwise has no way to make their private graph public, at least not in any way that doesn't piss off their users. Of course, now they have some verrrrrry tricky waters to navigate.

jwegan 15y ago
1. It was published the day after the Instagram acquisition that Facebook had assigned a valuation of $75 billion to their stock. 2. I doubt Facebook bought Instagram for the "social graph" . Facebook has always been laser focused on user engagement. One of the core features on Facebook that keeps users engaged is photo sharing with their friends. Instagram was an up and coming challenger in the sharing photos with your friends arena and that is the primary reason Facebook bought them.
- repsilat 15y ago
  Re: #1, this is a part of a reasonable answer to "How are they worth so much?" - the purchase of Instagram was made "roughly 30 percent in cash and 70 percent in stock[1]", meaning that the $1B was really ~$300M in cash and a bit under 1% of Facebook. Maybe that still looks high, but it's certainly not as outrageous as a billion dollars. The bit that makes it look crazy is Facebook's valuation at nearly $100 per active user. 1: http://dealbook.nytimes.com/2012/04/18/with-instagram-deal-facebook-shows-its-worth/ http://dealbook.nytimes.com/2012/04/18/with-instagram-deal-f...

cletus 15y ago

Congratulations on the investment. The return is nothing short of spectacular. It's a truly excellent example of execution and timing. But the point that keeps resurfacing in my mind is SpaceX. SpaceX, from nothing, created a low-earth orbit delivery system that is revolutionizing satellite launches and (soon) the cost of getting men into space... for less than the price that a bunch of people can send photos to each other with cheesy filters [1]. It would be difficult to overstate the impact Elon Musk has had, is having and will have on humanity (and no this isn't hyperbole) through SpaceX (and maybe even Tesla). And it didn't even require, relate to or is connected with some bullshit social network. I'm also reminded of Steve Yegge's OSCON talk [2] from some months back. The computer power we have available now is stunning. used for the right purposes it could fundamentally change humanity for the good, whether that be in bioinformatics or whatever, is hard to overstate. Yet we're using all this power and the brightest minds on the planet... to send cat pictures. It's actually reached the point that when I get unsolicited recruitment email or read about some new startup on HN that I tune out as soon as I see the word "social". There's something astoundingly depressing about all this. EDIt: I should add that my issue isn't that the founders and investors sought wealth. I don't begrudge them that at all. Not by any means am I anti-capitalist. Bill Gates, as one example, is doing huge amounts of good with his accrued wealth. The issue is more on what society values. [1]: http://news.ycombinator.com/item?id=3857904 http://news.ycombinator.com/item?id=3857904 [2]: http://www.youtube.com/watch?v=vKmQW_Nkfk8 http://www.youtube.com/watch?v=vKmQW_Nkfk8

sethbannon 15y ago
I agree. It's quite sad that some of the best and brightest minds of our time are spending their days working to increase revenue per click of advertisements. We could achieve so much more if our focus shifted towards more meaningful endeavors. I am, however, encouraged by the recent rise of impact entrepreneurship, where for-profit ventures tackle large societal problems. It's something we certainly need to see more of.
- cletus 15y ago
  Actually on advertising I will have to respectfully disagree. This may be controversial but: My opinion is that Internet advertising has done an inordinate amount of good for the world. Advertising has allowed the creation of amazing services that are free to use. Let's imagine a world where search or GMail might otherwise cost you $20/month (completely made up number) to use. You could afford that right? Even if you could you may not pay for it (people are remarkably fickle when it comes to paid services). That's not a lot of money. But what about to the poor or those in developing countries to whom $20/month is a significant amount of money? They get the same service you do because of advertising. Consider that the next time a text ad at the top of Google otherwise offends your (and I'm talking the general "you" rather than you specifically) aesthetic sensibilities.

sethbannon 15y ago

Ethical and transparent -- two phenomenal qualities in a VC.

JabavuAdams 15y ago
What do you expect? People don't talk about their unethical dealings. This is not to say anything about Andreesen Horowitz -- but recognize that this is a savvy piece of marketing, just as the Valve employee manual "leak" is a savvy piece of hiring material.

sakopov 15y ago

Christ, 78 mil for an app that shares pictures. I must be the only one thinking this is money which could be used more wisely developing better medical equipment and generally solving real engineering problems.

wpietri 15y ago
Well, actually it's $1bn for an app that shares pictures. It's only worth that because people use it. 40 million people according to recent reports. If you want resources spent on more serious stuff, you'll have to start by getting the general public to spend their time more seriously, because that's the root problem.
caycep 15y ago
well, one of the technical challenges in medicine is how to share medical imaging between different hospitals and doctors. the current "PACS" systems that do that suck. Instagram or something like that would be a neat way to accomplish that. Turing completeness and all...
- mkopinsky 15y ago
  I've heard that sepia is all the rage in radiology reading rooms.....
- colbyolson 15y ago
  Could you explain your thoughts on sharing images/use of PACS? I do IT work for an imaging center and would be interested in your experience with such software.
- jpadkins 15y ago
  The reason why it is a hard problem is HIPAA regulations, not because of some deficiency with the PACS. Any social or semi-public solution would be instantly shut down.

hooande 15y ago

This deal absolutely stinks. It sure seems like someone said, "Hey Facebook, you just got paid. Why don't you buy instagram for an amount of money that we made up so that my buddies and I can get even richer?" And they made 78 million dollars behind that. 1. If people can make up money, then it lowers the value of money for everyone. 2. If people can make up money, then it destroys any semblance of fairness in the system. Why are we working every day when some people can just invent tens of millions of dollars for themselves? This isn't how markets are supposed to work. An asset isn't worth one billion dollars just because someone you know has a billion dollars to spend. The last thing I expected to see was a blog post bragging about it.

ericflo 15y ago
> An asset isn't worth one billion dollars just because someone you know has a billion dollars to spend. Actually that's nearly the definition of what something is worth: how much someone is willing to pay for it.
orky56 15y ago
As my finance professor says, "Price is what you pay; value is what you get."
wpietri 15y ago
I have no inside knowledge, but I doubt it. Look at the funding (left side, half way down the page): http://www.crunchbase.com/company/instagram http://www.crunchbase.com/company/instagram There are quite a number of people involved. The seed round people apparently had about 15% of the company. If I had to guess, the A and B round had 20-35%. The non-founder employees, could have another 10% or so. Leaving 40-55% for the founders. If you're trying to funnel money to somebody in specific, this is terribly inefficient; 80% of the money would go to other people. Also, Facebook is about to IPO, and this is a very high-profile deal. It's the worst time and the worst way to do something fishy.

DanI-S 15y ago

Imagine if other industries were this transparent.

kjhughes 15y ago

So our choices were: a) invest in Dalton b) invest in neither or c) invest in Kevin and violate our commitment to Dalton. I would have thought that suggesting that Dalton and Kevin join forces would have been one of the options.

waterlesscloud 15y ago
What happens when the idea doesn't work out and they pivot? Do they stay together then?
- kjhughes 15y ago
  Presumably they'd then be in the same position as any co-founders regarding a pivot: They'd have to reach agreement on whether and how to alter their plan.

2pasc 15y ago

That means that our friend Jack Dorsey also pocketed another 78M - along with Adam D'angelo? When most people will never strike 10M in their entrepreneurial/investment career, these guys have pulled three already... That's really impressive.

spullara 15y ago
They were probably not invested at the same level but I'm sure they did well.

EGreg 15y ago

I am really thrilled to read something like this from the venture capital community :)

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ricardonunez 15y ago

I think it was a great investment and great for them for the transparency. For those that criticize how much money was in so short period of time. You are probably in the wrong industry. I'm sure nobody feel bad for when somebody else do a bad investment. Thinks can go in both ways.

mhartl 15y ago

Andreessen Horowitz continues to show that they are among the classiest investment firms in the business, as well as being one of the best. Bravo.

villagefool 15y ago

Can someone please explain what "...Kevin came to it organically based on the Burbn data" means?

kjhughes 15y ago
Ben Horowitz is countering accusations that Kevin pivoted into photo sharing based on Dalton's work. He's saying that Kevin saw that Burbn's photo sharing was its most popular feature and so naturally (organically) Kevin pivoted in that direction.

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nazgulnarsil 15y ago

all of the anger over instagram seems to come from zero-sum thinking. I liked one of the touches of David Brin's novel Sundiver, where people who think in terms of zero or negative sum games are deemed insane.