In-depth Breakdown of a16z, Media That Doesn’t Want to Be a Broker Is Not a Good Venture Capitalist

On June 24, with the announcement of Andreessen Horowitz (aka a16z) launching Crypto Fund III, its third crypto asset investment fund of over $2.2 billion, a16z, known as the bad boy of Silicon Valley, once again caught the eye.

In-depth Breakdown of a16z, Media That Doesn't Want to Be a Broker Is Not a Good Venture Capitalist

Eight times betting on Coinbase, selling shares in the secondary market for a profit of over $4.3 billion; cumulatively raising over $3 billion to reposition cryptocurrencies ……a16z has now become a capital lighthouse in the crypto world, yet more than these labels, a16z has an essential kernel – a media company that makes profits through venture capital.

Deep Tide TechFlow fully dismantles a16z and takes you through the alternative investment path of the bad boys of Silicon Valley.

Alternative VC, the king of post-investment

a16z has been a conversation starter since its inception.

It is like a group of harsh dark horses, with a bold and avant-garde style of action, unconventional investment philosophy and investment history of brilliant results, in the last decade successfully jumped to the legend of the Silicon Valley venture capital industry.

In 2009, Marc Andreessen and Ben Horowitz co-founded Andreessen Horowitz, or a16z for short, named for the A in Andreessen and the Z in Horowitz, and the 16 letters in between.

Before founding a16z, the two founders had long been successful entrepreneurs who had made a name for themselves in Silicon Valley.

In-depth Breakdown of a16z, Media That Doesn't Want to Be a Broker Is Not a Good Venture Capitalist

Mark Anderson, a Silicon Valley golden boy, was introduced to computers at age 9 and taught himself the Bacic language in a country library, and began developing browser software before graduating from college.

In March 1994, a newly graduated Anderson teamed up with veteran venture capitalist Jim Clark to found Mosaic Communications, later Netscape, which was later crushed by Microsoft.

A perfect partner for Anderson, Horowitz was also a technology entrepreneur, and in 1999, Mark Anderson and Ben Horowitz, who had worked for Netscape, co-founded Loudcloud.

It was the first cloud computing company to automate a data center, a track that seems to be on the cusp of the times today, but around 2000, “cloud computing” was still a vague concept, and with the bursting of the Internet bubble, LoudCloud lost 90% of its customers.

At the moment of life and death, LoudCloud had to break its arms to survive, splitting the company, selling part of it to EDS and another part to Opsware, a software-only company, until it was sold to Hewlett-Packard for $1.65 billion in 2007.

In 2009, Horowitz and his old partner Anderson joined forces again and founded Andreessen Horowitz (a16z), a collaboration that has changed the investment ecology of Silicon Valley to some extent.

Compared with traditional old Silicon Valley investment institutions such as Sequoia Capital, a16z is considered an alternative VC, mainly in the following aspects.

First, firm belief: software is swallowing the whole world.

In 2011, Mark Anderson published his famous article “Software is eating the whole world” in the Wall Street Journal, saying “Today’s software applications are ubiquitous and are eating the whole world, which is a great opportunity, and I understand where to invest my money.

So far, a16z’s investment has a programmatic guidance, since then, a16z’s investment is also almost all around the software and development, especially stepped on the wind of the mobile Internet, captured Skype, Facebook, Twitter, Airbnb and other star companies.

Second, imitate the Hollywood brokerage, to create a super investment after.

If you want to choose the king of the post-investment in Silicon Valley, a16z is certainly on the list.

Where a16z really changed the rules of the game in Silicon Valley is that they turned simply investing in companies, into serving startups.

“They impressed us by saying they had a different understanding of venture capital,” recalls Skout founder Wiklund, “that venture capital is not just about money, it’s about value-added services.”

More than 70% of a16z’s 358-person team is involved in post-investment management and empowerment, providing consulting, talent acquisition and mentoring teams, business expansion, people management, external relations and resource matching to help startups grow quickly.

a16z’s investment services philosophy is drawn from Hollywood mogul Michael Ovitz.

In the 1980s and 1990s, he founded CAA (Creative Artists Agency), which became the most powerful talent agency in Hollywood and the world, in large part because it changed the model of one agent taking care of all of a client’s business to a team of experts doing their own thing.

At a16z, there is no one carrot and one hole for partners to work independently on a project, but rather a shared resource where each partner can work for the same startup.

You can liken a16z to a Silicon Valley agency, dedicated to packaging and promoting its artists (startups). a16z will step up to the plate whether the artist is in a negative crisis or needs an outside partner.

For example, shortly after leading a Series B round of funding for Airbnb, a tenant destroyed a San Francisco home that he had rented, and Airbnb was in the news, Anderson went to founder Chesky’s office in the middle of the night that day to provide guidance on PR and follow-up.

This full-service approach by a16z was once mocked by Sequoia Capital founder Roelof Botha, who implied that they would only teach fish to fish, but it turns out that this strong investment followed by deep involvement has indeed helped many startups become unicorns in the industry.

In 2006, Yahoo proposed a price of $1 billion to buy Facebook, when Facebook’s largest investor Accel Partners has been urging Zuckerberg to accept the offer, while Anderson stressed not to sell, the 22-year-old Zuckerberg chose to listen to Anderson’s advice, and now Facebook’s valuation has exceeded a trillion dollars.

Third, dare to bet heavily and continue to follow the investment.

Traditional VC is more like a hunter, first a large range to find the subject, find a good project, independent investment.

a16z 40% of the projects are early projects with ecological partners co-investment, first cast a wide net, with a little small investment to take up a pit, once found that the project has growth potential, a16z will be heavy gold, heavy resources smashed into, not only to participate in investment, but also deep incubation.

Generally speaking, 90% of the startups will fall in the angel and A round, how to reduce the risk of “A round death” of the startup project?

For example, when GitHub raised its Series A funding, a16z raised GitHub’s valuation to $750 million, making it the only investor in Series A. Then a16z leveraged its strong capital reserves and post-investment team to deeply service the project, even using Series B money to directly invest in Series A. When GitHub raised its Series A funding, a16z raised GitHub’s valuation to $750 million, making it the only investor in Series A.

Then, a16z then used its strong post-investment team to help the startup grow quickly and get out of the danger zone.

Don’t underestimate a16z’s network and resources, which includes 1,000 executives and 5,000 engineers, designers, and product managers in Silicon Valley. a16z provides whatever a startup needs.

Once a16z is attracted to a certain project, it will continue to increase, continue to bet, support the good projects, more than 50% of the investment cases in recent years are additional investment.

Previously, the once hot audio social platform Clubhouse is a16z strong resources incubation, a typical case of continuous investment, from the angel round to the C round, the founder personally for Clubhouse stand endorsement, typical of the daddy type VC.

Media in the guise of venture capital

More than a Silicon Valley investment institution, a16z is more like a media empire.

In 2011, a16z invested $80 million in Twitter, making it the first organization to hold shares in four of the highest-valued social media companies at the time – Facebook, Groupon, Twitter and Zynga.

From its inception, a16z has placed great emphasis on building momentum through media channels. In addition to accumulating and drawing on traditional media and journalist resources, founder Anderson has made frequent appearances on social media and tweeted extensively, making a name for himself through a variety of marketing tactics, while also helping to raise funds for the company.

Benedict Evans, the original partner of a16z, jokingly said in 2015 that a16z was a media company that was profitable through venture capital.

However, with the rise of self-publishing, a16z began to gradually move away from its dependence on traditional media sources, replacing them with a proactive approach to get off the ground, setting up its own content team and media brand, and covering content with a more positive tone from a practitioner’s perspective.

The rift between a16z and traditional institutional media has not been overnight, in fact, Anderson and other a16z executives have long been a deep resentment of traditional media, that they are both ignorant and arrogant, the inherent lack of in-depth understanding of the industry, but also tend to write negative reports to gain attention, the lack of positive guidance and truly valuable statements.

The “Theranos scam” controversy in 2015 became a trigger for a16z and the institutional media.

At the time, a16z’s highly touted blood testing company Theranos was exposed as a scam by the Wall Street Journal, and the entire Silicon Valley tech community was in an uproar.

In response, a16z had to come out several times to explain, but doubts still poured in, which made them realize that they had to break the monopoly of traditional institutional media, create a direct channel to communicate with users and express their views, and give the power of reporting to people who really know what they are doing.

If you open the official website of a16z, you might mistakenly think you’ve opened a page of some technology media, where the most prominent position on the website reads – Understanding the Future, Now. This is Future, the media platform created by a16z.

At the bottom of the page, there are still various content sections – News, Clubhouse Live, Podcast.

In-depth Breakdown of a16z, Media That Doesn't Want to Be a Broker Is Not a Good Venture Capitalist

In this process, a16z started the “everyone is a self-publisher” mode within the company, from the CEO down to ordinary employees are in the content output, committed to each member to become a certain field of opinion leaders.

In a16z’s view, this is perhaps the most cost-effective way to attract entrepreneurs and new projects in this era.

Crypto Pioneers

a16z was also one of the first investment institutions to get into cryptocurrency investing.

In 2013, a16z led a $25 million Series B round of funding for Coinbase, a company that the majority of people on social media platforms called a “Ponzi scheme” with just eight people. The Wall Street Journal reported that this was probably the largest venture capital investment in the Bitcoin space at the time.

By January 2014, a16z had invested nearly $50 million in bitcoin-related startups, and as bitcoin continued to fall, back down to $860, founder Anderson wrote the article “Why Bitcoin Matters,” which laid out a16z’s belief in investing in cryptocurrencies for the long term going forward.

Far from being a pure libertarian fairy tale or simple Silicon Valley hype, Bitcoin offered a broad opportunity to reimagine how the financial system could and should work in the Internet age, while also providing a catalyst to reinvent the system in ways that are more powerful for individuals and businesses.

Since then, a16z has invested in Coinbase eight times from 2013 to 2020, ultimately becoming the biggest external winner of Coinbase’s IPO. According to Fidelity data, a16z has reduced its holdings in Coinbase by 15,459,600 shares, worth approximately $4.375 billion.

So far, a16z has released three crypto funds: the first fund was established in June 2018 with a size of about $350 million; the second was established in April 2020 with a size of about $515 million; and the third fund, which was recently released, has a size of $2.2 billion.

Today, a16z has invested in 34 blockchain projects in total, including star projects such as Coinbase, Uniswap, Solana, MakerDao, Dfinity, Chia, etc., covering various tracks such as public chain, stablecoin, exchange, payment, DeFi, NFT, etc., becoming the wind vane of cryptocurrency investment.

In-depth Breakdown of a16z, Media That Doesn't Want to Be a Broker Is Not a Good Venture Capitalist

Even more valuable are the five investment philosophies of a16z in the crypto sector, which were specifically mentioned at the inception of Crypto Fund I

Long-term investor, built to hold investments for more than 10 years

Investing “24/7”, actively investing even when the market is in “winter”

Operational support for entrepreneurs, with an 80+ person operations team to help with hiring, marketing, etc.

Flexibility in terms of stage, asset type and geography

Focus on non-speculative projects

In terms of the selection of investment projects, early on a16z was keen on investing in technology stream hardcore projects, such as infrastructure-based public chains and exchanges, and after entering 2020, the investments are more and more inclined to the application side.

In response to the latest $2.2 billion crypto fund raised, manager Katie Haun said it will focus on projects in three main areas.

Infrastructure to enable mainstream consumers to use cryptocurrency products and services

NFT and gaming related

Decentralized finance (DeFi)

Apocalypse

What can the rise of a16z teach us?

Whether it’s China or overseas, institutions or individuals, everyone is a self-publisher, and this is not an empty slogan; content is still one of the most powerful levers in this era.

For VCs or startups, building their own content and channels without relying on traditional media may be the “dividend of the times”, or the “immediate need”.

Influence is wealth.

In late May, Coinbase founder Brian Armstrong posted a blog post saying that “every tech company should go directly to their audience and become a media company,” and that Coinbase was forming a media division.

Startup Insider, a non-serious audio business interview podcast launched in late 2019 by top investment firm GGV Genealogy Capital, is now a key content channel for many VC practitioners and entrepreneurs to learn about cutting-edge projects and has been selected as an Apple Best Podcast.

In the cryptocurrency space, Multicoin Capital partner Mable launched an interview-based podcast called “Woody Says”, and DeribitInsights, a research platform of options platform Deribit, launched a podcast called “Uncommon Core” ……

Strong as Musk, Lei Jun and other super individuals are also actively shaping their personal influence on social platforms, for ordinary people, one of the shortcuts to complete the lowest cost from 0 to 1, is to become a content Netflix, in Jitterbug, Express, B station and other content platforms to express their views, bravely show themselves is the beginning of success, traffic business, never go out of fashion.

Secondly, strong post-investment service capability has gradually become the core competitiveness of PE/VC industry, especially for high-risk Internet or blockchain early-stage projects, using the strong industry resources of investment institutions to help projects through the dangerous period to complete the metamorphosis may be an important magic weapon to improve the discourse and enhance the investment winning rate.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/in-depth-breakdown-of-a16z-media-that-doesnt-want-to-be-a-broker-is-not-a-good-venture-capitalist/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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