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I'm fascinated by the A16Z investment strategy. It looks like they will put in any kind of money into companies deemed as winners (GitHub, Oculus), with some sm

I'm fascinated by the A16Z investment strategy. It looks like they will put in any kind of money into companies deemed as winners (GitHub, Oculus), with some small investments thrown in here and there just so they're still considered a VC and not a private equity fund of sorts. I think it's going to work very well for them in the long term, and possibly change the investment landscape for future VC funds. Either you go huge and buy a stake in the winners at all costs, or you go wide and super early like YC. It does leave a large seed/series A financing gap someone will need to close, and I suspect their returns won't be as stellar as those in the extreme ends of companies financing.

cdixon 13y ago
We invested in Oculus after we saw a demo of the new prototype. For me, it was up there with the first time I saw Apple II, Mac, the web, Google, iPhone etc.
- adventured 13y ago
  At first I glanced over the "new" in there. Now I'm jealous.
- flyinglizard 13y ago
  I have no doubt about Oculus - I just wonder how the startup landscape will look if your model proves successful and other large VCs begin implementing it, instead of their more traditional returns model. Being that only the largest, most successful funds can partake in this huge money game, this may significantly reduce the overall market capital available for Series A investment and create an even narrower funnel.
  - deleted 13y ago
    [deleted]
  - pmarca 13y ago
    I'd argue you're actually seeing the emergence of a "new series A"/"first money in" investor category. Often angel investors who raise seed funds or small venture funds fit in this category. These include (but not limited to) Mike Maples/Floodgate, Aydin Senkut/Felicis, Hunter Walk/Homebrew, Aileen Lee/Cowboy, Michael Deering/Harrison, and several others. Also see Heavybit for a recent category-specific innovation. Also Union Square, Foundry, Upfront (Mark Suster) do a lot of this. I think there may be more high quality investors at the early Series A tier than ever before, but many of them are new.
- hershel 13y ago
  What about potential negative side effects[1] of VR ? Some of them are quite serious(depersonalization and derealization which are pretty serious mental illnesses). Combining those side effects with the probably addictive nature of VR should be done with caution. Is there any thought given to this issue before massively marketing this technology to the public ? [1]http://www.quora.com/Oculus-Rift/Virtual-Reality-Oculus-Rift-side-effects-of-extended-use http://www.quora.com/Oculus-Rift/Virtual-Reality-Oculus-Rift...
  - widdershins 13y ago
    Ha ha ha ha, of course not! This is venture capital, not freaking moral philosophy. If it's addictive, good, we'll make more money.
  - Cthulhu_ 13y ago
    Erm, addictive nature of VR? What about the addictive nature of video games themselves? The Quora article there describes a kind of escapism; perhaps more immersive than video games already are, but tbh I don't think there will be that big of a difference in the end.
    - hershel 13y ago
      I edited my question : the addictive nature of VR combined with potential mental illnesses.
  - coffeemug 13y ago
    Asking innovators to exercise caution because they might exacerbate the hikikomori phenomenon is like asking defense attorneys to exercise caution because they might exacerbate the rates of criminal activity. In both cases, that's not what these people do. There are obvious ethical lines, but it's not like these guys are building viruses in a petri dish.
    - hershel 13y ago
      >> but it's not like these guys are building viruses in a petri dish. Why compare them to one of the most extreme things humans can do ? Why not compare them to the food industry(under some regulation , and there's a debate if should have more) And Doctors (a single doctor can harm dozens/hundreds of people max , while an innovator can hurt million)?
pmarca 13y ago
It may look like that, but that's not quite how we look at it :-). We think about it as trying to back the winners for sure, but being stage agnostic in our approach -- focus on identifying the best companies with the most amazing people and the biggest opportunities, and then invest regardless of stage. Internally we run very different evaluation processes for seed vs A/B vs growth of course.
- wamatt 13y ago
  Warren Buffett could be considered conservative, and having a generous aversion to all things tech. a16z, OTOH is almost on the opposite side of the spectrum when compared to Berkshire Hathaway. And yet, they both appear to following a similar fundamental principle: Invest in truly exceptional companies and people, at a good price. Rather than a good company, at an exceptional price. [1] [1] http://www.berkshirehathaway.com/letters/1989.html http://www.berkshirehathaway.com/letters/1989.html
  - pmarca 13y ago
    That's exactly what we're trying to do.

cdixon 13y ago

We invested in Oculus after we saw a demo of the new prototype. For me, it was up there with the first time I saw Apple II, Mac, the web, Google, iPhone etc.

adventured 13y ago
At first I glanced over the "new" in there. Now I'm jealous.
flyinglizard 13y ago
I have no doubt about Oculus - I just wonder how the startup landscape will look if your model proves successful and other large VCs begin implementing it, instead of their more traditional returns model. Being that only the largest, most successful funds can partake in this huge money game, this may significantly reduce the overall market capital available for Series A investment and create an even narrower funnel.
- deleted 13y ago
  [deleted]
- pmarca 13y ago
  I'd argue you're actually seeing the emergence of a "new series A"/"first money in" investor category. Often angel investors who raise seed funds or small venture funds fit in this category. These include (but not limited to) Mike Maples/Floodgate, Aydin Senkut/Felicis, Hunter Walk/Homebrew, Aileen Lee/Cowboy, Michael Deering/Harrison, and several others. Also see Heavybit for a recent category-specific innovation. Also Union Square, Foundry, Upfront (Mark Suster) do a lot of this. I think there may be more high quality investors at the early Series A tier than ever before, but many of them are new.
hershel 13y ago
What about potential negative side effects[1] of VR ? Some of them are quite serious(depersonalization and derealization which are pretty serious mental illnesses). Combining those side effects with the probably addictive nature of VR should be done with caution. Is there any thought given to this issue before massively marketing this technology to the public ? [1]http://www.quora.com/Oculus-Rift/Virtual-Reality-Oculus-Rift-side-effects-of-extended-use http://www.quora.com/Oculus-Rift/Virtual-Reality-Oculus-Rift...
- widdershins 13y ago
  Ha ha ha ha, of course not! This is venture capital, not freaking moral philosophy. If it's addictive, good, we'll make more money.
- Cthulhu_ 13y ago
  Erm, addictive nature of VR? What about the addictive nature of video games themselves? The Quora article there describes a kind of escapism; perhaps more immersive than video games already are, but tbh I don't think there will be that big of a difference in the end.
  - hershel 13y ago
    I edited my question : the addictive nature of VR combined with potential mental illnesses.
- coffeemug 13y ago
  Asking innovators to exercise caution because they might exacerbate the hikikomori phenomenon is like asking defense attorneys to exercise caution because they might exacerbate the rates of criminal activity. In both cases, that's not what these people do. There are obvious ethical lines, but it's not like these guys are building viruses in a petri dish.
  - hershel 13y ago
    >> but it's not like these guys are building viruses in a petri dish. Why compare them to one of the most extreme things humans can do ? Why not compare them to the food industry(under some regulation , and there's a debate if should have more) And Doctors (a single doctor can harm dozens/hundreds of people max , while an innovator can hurt million)?

pmarca 13y ago

It may look like that, but that's not quite how we look at it :-). We think about it as trying to back the winners for sure, but being stage agnostic in our approach -- focus on identifying the best companies with the most amazing people and the biggest opportunities, and then invest regardless of stage. Internally we run very different evaluation processes for seed vs A/B vs growth of course.

wamatt 13y ago
Warren Buffett could be considered conservative, and having a generous aversion to all things tech. a16z, OTOH is almost on the opposite side of the spectrum when compared to Berkshire Hathaway. And yet, they both appear to following a similar fundamental principle: Invest in truly exceptional companies and people, at a good price. Rather than a good company, at an exceptional price. [1] [1] http://www.berkshirehathaway.com/letters/1989.html http://www.berkshirehathaway.com/letters/1989.html
- pmarca 13y ago
  That's exactly what we're trying to do.