“They are like lunatics, domineeringly insert a foot in every transaction.”

This sentence comes from an executive at Google, describing one of the most compelling venture capital institutions in the world-a16z.

The full name of a16z is Andreessen Horowitz, taken from the surnames of the two founders. It was founded in 2009 by Marc Andreessen and Ben Horowitz. It manages a total of 19.2 billion US dollars of funds and rapidly expands its investment territory with its rampage style. As a well-known software catcher, almost all the most dazzling companies in the Internet field are being held: Facebook, Twitter, Airbnb, Okta, Github, Stripe, etc., and their investment strategies are both early sensitive and decisive in the growth period, and can be both in the seed round. Invested in Instagram, grabbed Github in the A round of competition (which brought more than 1 billion US dollars in return when acquired by Microsoft), and can also lead Roblox with 150 million US dollars in the G round.

Its keen forward-looking and radical and bold investment style is even more vividly reflected in the layout of the encryption field. Coinbase, which was invested in 2013, was listed with a market value of up to 85.8 billion U.S. dollars. It is one of the largest listed companies in the history of technology (a16z in After cashing out 4.4 billion US dollars, he still holds 7% of the company’s shares). Well-known crypto projects such as OpenSea, Dapper Labs, Uniswap, dYdX, etc. are also representative works of the a16z crypto fund.

Compared with Sequoia and KPCB established in 1972, Accel Partner in 1983, and even Benchmark established in 1995, a16z, which was established in 2009, is quite young, but it is undoubtedly the top venture capital institution in Silicon Valley.

As eye-catching as its investment performance is, a16z has created a new set of styles and rewrote the criteria for startups to choose venture capital institutions. a16z draws on the operating model of CAA, Hollywood’s top brokerage company , and builds a large and professional talent system to provide founders with marketing, legal, lobbying, technical support, etc. This has made a16z a powerful network platform and increased support for projects. The attractiveness of the company also imposes a brand-new cost structure on competitors, improving the friendliness of the entire venture capital industry to startups.

a16z is also a “media company that makes money through investment”. Almost all of its employees have amazing output capabilities. It also vigorously promotes investment concepts through self-built media channels, and promotes industry information circulation and cognitive education.

All of this is related to the experience of the two founders, and also to the changes in the times of a16z-they started their business twice in the Internet bubble. After the founding of a16z, it was accompanied by the golden decade of Internet companies, which witnessed the traditional institutional media being affected. The decomposition of social media and several fluctuations in the crypto market have ushered in a full-scale explosion of crypto applications.

Starmaking machine: “Hollywood” victory

  • Talent network construction and post-investment services
  • Media volume
  • Competitive advantage and industry innovation

Founding: the Internet’s ignitor

The road to rise: the leader of the next generation network

  • The era of mobile Internet: “software swallows the world”
  • Web3 era: encryption hurricane

Concluding remarks

Starmaking machine: a “Hollywood” victory

Sand Hill Road in Palo Alto, California is the highest-rent office space in the United States. The shade of oak and eucalyptus surrounds this two-mile-long avenue, winding into the center of Stanford University.

Every day, countless entrepreneurs visit this place with business plans in their pockets, knocking on the doors of the major venture capital companies among them. Among them, a16z is one of the venture capital companies that these dreamers are most eager to admire.

The hall of a16z is like a library, with bookshelves extending almost from the floor to the ceiling. The founder Andreessen spent three nights categorizing these books: one is programming books, the other is business books, and the other is Hollywood books. Yes, there are a considerable number of books that discuss the early development of Hollywood. The reason for this is the creation of a16z.

"They are like lunatics, domineeringly insert a foot in every transaction."

In order to attract more investment opportunities, venture capital institutions often publicize their past investment cases and returns. However, in 2009, when a16z was just established, they did not have any investment records to promote themselves. Andreessen knows very well: “The top 15 companies account for 98% of the market value of listed companies. If you are in a second-rate institution, you will never be able to reach first-class companies.” In order to break this ice, they believe that the company’s choice must be changed. The measurement standard for venture capital companies.

He and Horowitz consulted with their old friend Michael Ovitz, the co-founder of Hollywood’s top talent agency CAA (Creative Artists Agency). Ovitz’s advice is: “Treat entrepreneurs as customers, and look at your platform from a long-term perspective, rather than a transactional perspective. Treat everyone as a partner and provide services that others don’t have. By becoming A “dream execution machine” to achieve differentiation. “

This is why CAA has represented 90% of Hollywood’s top stars in less than 15 years and successfully rewritten industry rules.

"They are like lunatics, domineeringly insert a foot in every transaction."

Ovitz’s biggest innovation at CAA is to invest in the client’s career (time, money, labor), and to have the ability to influence the outcome of the investment. Ovitz believes: “If you plan to make a living by drawing 10% of someone’s income, then you should make sure to maximize their income.”

Before CAA, a brokerage company was a loose agency composed of various brokers. Although brokers worked for the same company, they were only responsible for contacting their artists in a single line. In terms of working methods, he is also very passive, sending notices to customers, and if the customers accept, they will charge 10% of the agency fee.

CAA hopes to break this pattern and integrate the independent businesses of brokers, so that everyone can find opportunities for customers as much as possible on the crisscrossed network. A dedicated person is responsible for customers and resources in specific fields, such as music, publishing, international cooperation, etc. Through this network effect, the company’s overall business capabilities will be 100 times that of a single broker. CAA is therefore able to create jobs for customers, rather than just issuing announcements.

In this way, CAA has signed enough good directors, screenwriters and actors to form a monopoly on top talents and increase its bargaining chips against film companies.

They charge a 10% fee to each customer. These customers themselves are also big stars and usually get 20%~30% of the film remuneration in the film, so in the end, CAA can get 2%~3% of the total revenue. For example, the total revenue of “Jurassic Park” is close to 1 billion U.S. dollars, and CAA gets 3% of it, which is a considerable amount.

If Michael Ovitz ran a venture capital company, what would he do? He will maximize the results of all invested resources . Suppose that the success of a technology startup is driven by several factors:

  • Technology and recruitment (you need to hire good engineers)
  • Sales and marketing (you need good distribution)
  • Effective leadership and capital allocation (you need a good CEO)

To maximize these factors, as a venture capitalist, you want to know the best engineers, sales and marketing personnel, and introduce them to the investment company; you have to build a network of personnel and transported to the Investment company; you have to coach founders and teach them to become CEOs. This is exactly how a16z works. Just as CAA is committed to maximizing the success rate of its customers, a16z has made a lot of investment in the post-investment team.

Especially with regard to helping CEOs grow, most venture capital companies used to replace CEOs to solve problems instead of providing support, but the core idea of ​​a16z is based on the following two points:

  1. Technical founders are the best candidates to run a technical company. Those admirable technology companies with a long history—HP, Intel, Amazon, Apple, Google, Facebook—have been run by their founders. More precisely, the company is run by the person who pioneered the world.
  2. But the process for a technical founder to become a CEO is extremely difficult. The two founders of a16z have a deep understanding of this because of their own experience, and we will discuss this in detail later.

Talent network construction and post-investment services

In order to provide the most professional and high-quality services to the invested companies, a16z has recruited the world’s best professionals. When Andreessen and Ben established a16z, they hoped to give the founders better guidance to accelerate their learning process. Therefore, the criteria for choosing investment partners is that they must have established a company or have experience as a CEO:

Alex Rampell , co-founded a number of companies, including Affirm ($AFRM), FraudEliminator (acquired by McAfee in 2006), Point, TrialPay (acquired by Visa in 2015), TXN (acquired by Envestnest in 2019) and Yub (acquired by Envestnest in 2013) Acquired by Coupons.com). After joining a16z, Alex led the investment in OpenDoor ($OPEN), Plaid, Quantopian (acquired by Robinhood) and Rival (acquired by LiveNation).

Bob Swan , before joining a16z, Bob was the CEO of Intel. During his tenure, he managed 110,000 employees, with sales of 78 billion U.S. dollars and an annual sales increase of more than 20 billion U.S. dollars.

David Ulevitch , the founder and CEO of OpenDNS, OpenDNS is a cloud-delivered security service that was acquired by Cisco in 2015. Today, the service protects corporate customers for more than 85 million people in more than 10,000 countries around the world.

Vijay Pande , Professor of Chemistry and Professor of Structural Biology and Computer Science at Stanford University, pioneered computational methods applied in the fields of medicine and biology (published more than 300 publications, two patents, and two new drug candidates). While at Stanford University, Vijay founded Globavir Biosciences, turning his research progress into a successful start-up company aimed at discovering treatments for dengue fever and Ebola.

Chris Dixon , co-founder and CEO of two startups SiteAdvisor and Hunch. SiteAdvisor is an Internet security company that was acquired by McAfee in 2006. Hunch is a recommendation technology company that was acquired by eBay in 2011. In 2013, after Chris Dixon joined a16z, he led Coinbase, the most amazing investment case in crypto, and voted for eight consecutive rounds.

After committing to encryption in 2013, in order to enhance its vision and competitiveness, and to deal with regulatory issues, a16z persuaded a number of heavyweight capital market executives and senior government officials to join the team when the encryption market was at an early stage and the policy was unclear. :

Katie Haun, the founder of the first federal cryptocurrency working group of the U.S. Department of Justice, served as a partner; Anthony Albanese, former head of the New York Stock Exchange regulatory department and former head of the New York State Department of Financial Services, served as chief supervisory officer of crypto investments; United States Bill Hinman, former head of the SEC’s finance department, Tomicah Tillemann, former senior adviser to President Biden, Brent McIntosh, US Deputy Secretary of the Treasury, and Rachael Horwitz, Coinbase’s first vice president of communications, are all under a16z revenue.

In the 1990s, Hollywood brokerage companies were basically loose agencies formed by the merger of various brokers affiliated to the company. These agents work for the same company, but each is only responsible for some of the artists who have single-line contact with them. This traditional mode of operation is very similar to the previous venture capital industry. Investors serve the same company, but they control their respective networks and customer information.

Michael Ovitz integrates the independent businesses of the brokers so that everyone can find as many opportunities as possible for customers on this crisscross network of relationships. He assigns a dedicated person to be responsible for the relationship network and customer information in each field, such as the publishing industry, the film industry, the field of national music, and the field of international exchanges. In this way, the company’s business capabilities will be 100 times that of a single broker, and artists will also get more options and greater economic benefits when looking for development opportunities.

With the support of Ovitz, a16z has built a network of nearly 20,000 people around the following aspects, through these professionals in various fields to meet the needs of start-ups in various aspects:

  • big company. Every start-up company must have business dealings with large companies, either in a sales relationship or a cooperative relationship.
  • manager. To be successful, management talent is essential.
  • Technical staff. In the high-tech industry, the more excellent technical talents, the better.
  • Media personnel and analysts. There is a catch phrase in a16z: “I can sell, I can make money; I am shy and I have no food to eat. (Show it, sell it; hide it, keep it)”.
  • Investor and acquirer. The job of a venture capitalist is to invest and finance.

The “entrepreneurial philosophy” behind a16z is: Instead of spending most of the fund’s expenses on partners’ salaries, it is better to spend on operations to help entrepreneurs. There is a marketing team (=help you get attention), a talent team (=help you recruit), a market development team (=help you get customers) and a research team (=help you solve problems).

Therefore, it introduced a new compensation model: its general partners earn approximately US$300,000 per year, which is far below the industry standard of at least US$1 million, and the money saved is used to pay hundreds of experts The expenses include executive talents, technical talents, market development, enterprise development and marketing.

So why are these people willing to join a16z at a relatively low salary?

It should be noted that the a16z investment team is a full-member partner system without a hierarchical system. On the one hand, it can flatten management; on the other hand, Andreessen believes that employees who work for the company always hope to get corresponding returns, such as salary and bonuses. , Shares, rights, titles, etc. Among them, the cost of the title is the lowest, so it can be set as high as possible to make the company more attractive when recruiting talents. In a16z, in addition to senior partners, the hierarchical design of “full partners” also makes up for the disadvantage of its low salary.

In a16z’s 326-person team, more than 70% are engaged in post-investment management and empowerment, providing services such as consulting, talent recruitment, business expansion, personnel management, external relations and resource docking to help startups grow rapidly. Andreessen said: “We use a huge network of resources to serve entrepreneurs, and build the founders into qualified CEOs as quickly as possible .” They regard entrepreneurs as God and uphold the principle of “Entrepreneur-centered in everything”, and even In order to sound a wake-up call for employees, the policy of “one minute late for meeting with entrepreneurs and a fine of $10” was established.

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: a16z official website

It is such a large, dedicated team that can help companies solve problems throughout the entire chain and meets the needs of all aspects of the startup company’s growth process. GitHub once received a16z $100 million in Series A financing, which was called “Silicon Valley’s most competitive transaction in five years.” GitHub co-founder and CEO Chris Wanstrath said that a16z’s service is a major attraction. “It’s like a buffet-they offer a bunch of good dishes, and we want to try them all.”

"They are like lunatics, domineeringly insert a foot in every transaction."

Media volume

At the beginning, Andreessen and Horowitz turned to Outcast marketing company led by Margit Wennmachers, hoping to use it to build momentum for the company. Wennmachers is known as the “home run king” of the public relations industry. She is agile and thoughtful, mobilizing her network to help Marc Andreessen appear on the cover of Fortune magazine in 2009 with the image of Uncle Sam . The reputation of venture capital firm Andreessen Horowitz was such an instant hit, and at that time, the company had only their two polished commanders.

"They are like lunatics, domineeringly insert a foot in every transaction."

Later, Wennmachers was accepted by a16z to build a marketing network. Wennmachers made public relations a priority for a16z and its portfolio companies. She hosts an exclusive party at home, where technology journalists can chat with startup founders and executives over cocktails. According to tradition, venture capitalists will avoid propaganda (this is the tradition left by the venture capitalists providing support to the warring parties during the war), while Wennmachers actively invite the media to pay attention to a16z.

While using the media to build momentum for itself, a16z has gradually shown a tendency to ” anti-organize media and build media by itself” .

It is reported that after a16z spent more than ten years cultivating relationships with reporters, it decided that this group was no longer needed. It has established a large editorial team of its own to report on encryption, fintech and other topics in a more positive tone.

The rift between a16z and the institutional media began with the “Theranos scam” in 2015.

"They are like lunatics, domineeringly insert a foot in every transaction."

Elizabeth Holmes founded Theranos, a blood testing company, at the age of 19.

Was valued at tens of billions of dollars, and was later accused of being a scam

At that time, Theranos, a blood testing company touted by Andreessen and others, was exposed by the institutional media as a scam, and the entire Silicon Valley technology circle was in an uproar. The impact of this turmoil was far-reaching. Since then, the media’s attitude towards startups has changed from “praising” to “judging and questioning.”

Since then, a16z has been continuously watched by the media. For example, Zenefits, the HR software company it invested in, was questioned by the media due to huge losses. A16z had to come forward and explain that burning money for growth was a proven business model. However, this explanation failed to be accepted by the media, and doubts still flooded.

In the eyes of a16z executives, the institutional media knows very little about the truth and is always biased. In order to gain attention, reporters report negative news at will, and sometimes even write random articles.

Therefore, a16z decided to do its own media, master the voice channels, and confront the institutional media.

Institutional media such as “The New York Times” and “Fortune” once monopolized news dissemination channels, and Silicon Valley’s technology companies need to rely on them to show their image to the outside world. However, with the rise of the Internet and the rise of emerging social media such as Twitter and Facebook, this traditional model has been broken, and companies have more channels to directly communicate with users and publish their opinions.

a16z has invested in social media such as Twitter and Facebook very early, and naturally has a stronger confidence to “break the monopoly of institutional media.” In addition, it is also making frequent efforts in the layout of self-media, and almost all of its staff are highly popular self-media writers. Today, a16z has formed a very large self-media matrix. Among them, Marc Andreessen has nearly 870,000 twitter followers, Ben Horowitz is an entrepreneurial best-selling author, and Chris Dixon twitter has 740,000 followers, and is the most influential top opinion leader in crypto.

In June of this year, a16z’s self-built media website, Future, was officially launched, including articles, videos, podcasts and other content formats. In addition to a16z’s internal authors, there are also industry senior experts in collaboration with external writers such as rising stars. creation.

"They are like lunatics, domineeringly insert a foot in every transaction."

Competitive advantage and industry innovation

a16z recruited a large number of new partners, government officials, editors, etc., through a strong and extensive network of functional talents, to provide marketing, legal, lobbying and technical resource support for its portfolio companies. In this way, the attractiveness of a16z to startups is greatly increased, and there are more opportunities to vote for the “biggest winner.”

The only problem is that all this costs a lot of money. The cost of providing these services and staffing them is very expensive. Does this mean that a16z will soon go bankrupt?

Not at all. Economic historian Dror Poleg gave a novel interpretation of the operating model of a16z in the article “Andreessen Stealing the Master Bezos”. He believes that the operating model of a16z is similar to Amazon’s successful experience.

Jeff Bezos famously said: “Your profit is my opportunity.”

This shows that he is willing to minimize short- and medium-term profits for the sake of huge long-term profits. Over the years, Amazon has operated at or near loss, investing in infrastructure, new business lines, and various other things that don’t seem to be focused on “sell sites.” But in the long run, these investments not only make Amazon ultimately profitable, but also make Amazon the biggest winner in the market competition of e-commerce, cloud computing, and third-party logistics.

More importantly, Amazon not only won the competition, but also completely changed the economic system of e-commerce, forcing its competitors to bear new costs. Other retailers are now forced to catch up with Amazon’s various activities, or rely on cooperation with Shopify, Facebook, Stripe and other companies.

Poleg believes that a16z is doing the same with the venture capital industry. It is more than just taking strategic action to gain an advantage. It is imposing a new cost structure on competitors. As a result, a few other companies will try to catch up and become the same giant. Various “boutique” angel investment teams can only survive on small investment projects, while many large but not strong funds are gradually disappearing.

Doug Leone of Sequoia Capital said: “a16z has upgraded our marketing game. Young founders pay attention to the media. We don’t want to be out of their sight.” Okta CEO Todd McKinnon once said when raising funds: “Now every When every organization talks to us, they will say “Hey, we can help you with recruitment work and introduce you to major customers.” Value-added services have become a necessary bargaining chip. “

It can be said that the innovation of a16z is a subversive improvement of the venture capital industry, bringing better services to more outstanding founders and enterprises, and improving the industry ecology.

Founding: the Internet’s ignitor

Why design such a model to operate VC? This is inseparable from the experience of the two founders.

One of the founders, Andreessen, is known as the “ignitor of the Internet”. He was born in New Lisbon, a typical small town on the prairie in the Midwest of the United States. It seems to have nothing to do with computers. The locals are keen on rugby, and Andreessen seems to be an outlier. He started working with computers at the age of 9 and was in the library. I learned Basic language by myself.

After graduating from the University of Illinois, Andreessen led the development of the earliest Internet browser Mosaic at the National Supercomputing Application Center in the United States. In February 1994, veteran venture capitalist Jim Clark found the talented teenager with $4 million, and the two co-founded Mosaic Communications (the predecessor of Netscape).

On August 9, 1995, Netscape conducted an extremely successful IPO 16 months after its establishment. The stock was originally scheduled to be issued at a price of US$14 per share, but the last-minute decision made the price of the initial offering doubled. After a while, it reached $28 per share. The stock’s trading price soared to $75 on the first day, setting a record for the first day’s gains. The stock closed at $58.25, bringing Netscape’s market value to $2.9 billion. Although it is a bit unusual for a company to go public before it becomes profitable, in fact, Netscape’s revenue doubled every quarter in 1995. The success of this IPO subsequently inspired the use of the term “Netscape Moment” to describe a high-profile IPO, marking the dawn of a new industry. As the founder, Marc Andreessen also appeared on the cover of “Time” magazine.

"They are like lunatics, domineeringly insert a foot in every transaction."

Until the end of 1998, Microsoft took full advantage of its monopoly in the field of operating systems to implement subsidies for all types of free products that Netscape competed in. Netscape was not allowed to sell to AOL. In the short term, this is a big victory for Microsoft, because its biggest threat has been driven away and thrown into the arms of a competitor that is far from being able to compete with it. However, in the long run, Netscape will make developers who write new functions for computers no longer serve Microsoft’s proprietary platform, and instead begin to write based on the standard interfaces of the Internet and the World Wide Web. Over the years, many basic technologies of the modern Internet were invented by Netscape, including JavaScript (a programming language), SSL, and cookies (information recording program).

"They are like lunatics, domineeringly insert a foot in every transaction."

Ben Horowitz, the other founder of a16z, was born in London, England, and grew up in California, USA. In 1988, he obtained a degree in computer science from Columbia University; in 1990, he obtained a master degree in computer science from the University of California, Los Angeles. In 1995, Ben Horowitz joined Netscape as a project manager. After Netscape was acquired in 1999, the two co-founded Loudcloud, a cloud computing and cloud storage service company. However, bad luck caught up with the bursting of the Internet bubble in 2000, resulting in financing difficulties.

Later, the two decided to transform, spin off part of Loudcloud’s business, and set up a new company Opsware, which specializes in enterprise data management and data storage. In 2017, Opsware was acquired by HP for USD 1.65 billion.

Nowadays, people think that Marc Andreessen and Ben Horowitz are the perfect entrepreneurial partners: Andreessen is visionary and good at strategic planning; Ben Horowitz has super management talents and complements the shortcomings of technical man Andreessen. But the two decades of their business together are far more difficult than we thought, and the road to glory is covered with countless stumbling scars and pains.

Horowitz described in detail in “Starting a Business Difficulties” (now this book is a must-read best-seller in entrepreneurship), he and Andreessen were at Netscape when they faced Microsoft’s strong offensive and helpless anxiety, and eventually had to sell the company. Unwilling to resign, Netscape has become a meteor in business history. Although brilliant, it is also short-lived. Later, Loudcloud was founded and devoted to the too early trend. When the Internet bubble burst and the technology stocks collapsed, they went all out for eight years of business. They returned to the original point again and were acquired by HP at a very low price. .

Andreessen saw the future trend every time, but either the opponent was too strong or the timing was wrong….Neither of these two ventures achieved the kind of success he expected, which made him reflect that he may not be the same. A qualified manager, an outstanding entrepreneur.

And Horowitz also pondered over and over again after this painful and helpless entrepreneurial experience: Why is the art of entrepreneurship so profound? Does every CEO have the same problems? If so, why has no one recorded these issues? Why do the consultants and venture capitalists of start-up companies have little experience in setting up companies in person?

He has never forgotten that after completing Loudcloud’s first round of financing, he visited his investors as the CEO. At that time, a senior partner of Benchmark, David Beirne, asked him in front of everyone: “When do you plan to hire A real CEO? You should find someone who has done organizational design for a large company, has a strong network and has ready customer resources to be the CEO.” Horowitz has been tortured by this problem-he has none of these abilities, he It is a self-made CEO, not a professional CEO. He always asks himself: How can I become a qualified CEO?

Therefore, Horowitz sent a message to Andreessen: “We should start a venture capital company. The purpose of choosing partners is set as “experienced first”, to provide advice to those who plan to start a company and help founders become outstanding CEO. “ Andreessen he replies:” I feel the same. “

They believe that the design of a16z will correct the mistakes Andreessen and Horowitz made as entrepreneurs. In their view, part of these errors came from Benchmark-at the time this boutique investment institution had only five people, and there were no back-end expert supporters to provide the services they desired.

Horowitz once said: “We have always been anti-Benchmark, and our design is not to do what they do.” It is the pain they experienced personally that made them keenly capture the core demands of entrepreneurs, and have since rewritten venture capital. The rules of the industry.

The road to rise: the leader of the next generation network

According to Pitchbook data, a16z has invested 1,218 times and generated 299 exit projects. According to the official website of a16z, 18 projects are exited by IPO and 4 projects are exited by DPO.

Note: A direct listing (DPO) is not like an initial public offering (IPO) to raise capital, but a company’s employees and investors convert their ownership into stocks and then list them on the stock exchange. Once the stock is listed, the public can buy the shares, and existing investors can cash it out at any time, instead of having a lock-up period like a traditional IPO (DPO has no lock-up period).

The largest listing project of a16z is Coinbase, the largest U.S. cryptocurrency exchange listed using DPO this year. Coinbase’s market capitalization was as high as 85.8 billion U.S. dollars at the time of its listing. A16z holds 25% of Class A shares and 14.8% of Class B shares, with an investment return of more than $7 billion. Other listed projects where a16z’s shares account for more than 5% include Lyft, Slack and Pinterest, etc. In addition, a total of 8 invested companies were acquired at a price of more than 1 billion U.S. dollars, including:

GitHub (entered in round A, acquired by Microsoft for $7.5 billion), Oculus (entered in round B, acquired by Zuckberg for $2 billion), Instagram (entered during the seed round, acquired by Zuckerberg for $1 billion), Dollar Shave Club (entered during the seed round, acquired by Unilever for 1 billion U.S. dollars) and so on.

At present, a16z has 58 unicorn companies in the primary market , including Stripe, the private technology company with the highest valuation (95 billion US dollars) in the United States (a16z invests in its seed round).

It is estimated that the first fund of a16z has returned twice the return to investors, and the expected return of the second and fourth funds will also reach three times. All of this used strength to counter the famous article of the Wall Street Journal that questioned the actual profitability of a16z.

"They are like lunatics, domineeringly insert a foot in every transaction."

Mobile Internet era: “software swallows the world” “software catcher”

At the beginning of its establishment in 2009, a16z only invested in a few projects, all in the software field, including the project management product Asana (listed on the market, with a current market value of US$12.7 billion), and online video calling software Skype (purchased from eBay for US$50 million) Part of the equity), as well as the social gaming company Zynga (listed, with a current market value of 7 billion U.S. dollars).

In May 2011, Skype was acquired by Microsoft for 8.5 billion US dollars, which was the highest acquisition amount in Microsoft’s history at that time. This case caused a sensation in the world and made a16z, which was just two years old, famous. Taking this opportunity, Andreessen published the famous “Why software was eating the world” in The Wall Street Journal. “

He wrote: “We are in the midst of a dramatic, extensive technological and economic change. New software concepts will bring about the rise of new Silicon Valley-style start-ups that will invade existing industries unscrupulously.” Andreessen It is predicted that the next decade will see an epic battle between “incumbents and software-driven insurgents”. This column, which is both a prediction and investment insight, has been widely read, greatly enhancing Andreessen’s reputation as a Silicon Valley thought leader, and also established a16z as a “software catcher”.

In fact, a16z established the investment route of focusing on software at the beginning of its establishment. Scott Kupor, employee No. 1 of a16z, explained on Quora why the company was named a16z: “The real reason is that we are software people, and a16z is represented in Andreessen. There are 16 letters between the A in Horowitz and the Z in Horowitz. Those with a software background will remember that internationalization is called i18n and localization is called i10n.”

In addition to the software field, it also has a broad layout in other industries.

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: Pitchbook

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: Pitchbook

According to Pitchbook data, as of now, a16z has invested 842 in the software sector (including information technology and corporate services), accounting for 69.25% of the overall investment; secondly, a16z has invested more in medical and financial services. . This stems from the five major technological trends proposed by a16z in early 2019, including biomedical, digital currency, blockchain, artificial intelligence, and financial technology industries.

Unlimited “all-weather” funds

"They are like lunatics, domineeringly insert a foot in every transaction."

Annual investment trend line

a16z does not impose restrictions on the investment stage, from seed to growth, covering the entire cycle in the primary market. In the first year of its establishment, a16z made 2 shots. The number of investment transactions in the second and third years were 25 and 59, respectively. In 2012, it surged to 95. According to data from PitchBook, the number of investment shots in each year after 2011 has never been less than 60. In 2020, the number of investments made by a16z is ranked second in Silicon Valley. They also claim to be an “All weather fund” and there is no “capital winter”.

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: Pitchbook

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: Pitchbook

Note: Seed investment refers to investment before the A round, early investment refers to the A round and B round investment, and mid-to-late investment refers to the C round and subsequent pre-IPO investments

In general, the investment rounds of a16z are dominated by early and mid-to-late investment rounds, with the early stage accounting for 45.57%, the mid-late stage accounting for 29.64%, and the seed round investment accounting for 22.82%.

Impressive record

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: Pitchbook

"They are like lunatics, domineeringly insert a foot in every transaction."

Data source: Pitchbook

There are 221 exit cases publicly mentioned by a16z. The main exit methods are listings or mergers and acquisitions. The well-known ones are Skype and GitHub mentioned above. Despite only owning a 2% stake in Skype, a16z played a key role in persuading Microsoft to acquire Skype for $8.5 billion, making the purchase price three times the market value of Skype. With this order, a16z made a net profit of US$100 million. In 2015, a16z invested US$100 million in the developer code sharing community GitHub. In 2018, Microsoft acquired GitHub for US$7.5 billion, and the fund made a net profit of US$1 billion.

"They are like lunatics, domineeringly insert a foot in every transaction."

The third phase of fund investment performance

According to the data of Pitchbook, in the investment portfolio of the third phase of a16z fund, there are 6 companies with a return of more than 50 times, 5 companies with a return of 20 to 50 times, 2 companies with a return of 10 to 20 times, and 5 to 10 There are 6 companies with double returns, 13 with 1~5 times returns, and 3 with 0~1 times returns. It is estimated that the first fund has returned twice the return to investors, and the expected return of the second and fourth funds will also reach three times. For institutions that have been established for 12 years, such results are excellent, making a16z one of the top investment institutions in Silicon Valley.

Web3 era: encryption hurricane

In 2019, a16z ushered in a turning point——

The four most eye-catching companies in the portfolio, Lyft, Pinterest, Slack, and PagerDuty, fell sharply after their listing. Although a16z has reaped substantial returns, they are keenly aware that the era of the mobile Internet has passed.

a16z began to transform, looking for new fields worth investing in in the next few decades. They set their sights on encryption.

The Internet is ultimately a software-based network, and an encrypted network is built on the Internet. a16z’s emphasis on encryption is the same as its previous understanding of the software field.

From a16z’s point of view, software is the code of human thought, so it has almost unlimited design space. Encryption technology is a pure software movement that does not rely on the expansion of hardware (the Internet needs to lay cables and build base stations). It represents a structural change in the way the technology works and the way the world works, making many untrusted participants in the network The ability to establish consistency and trust is the most important positive meaning of encryption technology.

In 2013, the joining of Chris Dixon officially opened the curtain of a16z’s crypto investment layout. He believes: “Blockchain is a brand-new, architectural redesign and adjustment of the Internet. This adjustment will give all people participating in the Internet have the opportunity to occupy a part of the Internet. Encryption technology is not only the future of finance, but also Like the early Internet, it is expected to change every aspect of our lives and drive the next wave of computer innovation.”

A16z Encrypt’s first investment was Ripple, a cross-border payment solution. In the same year, it also invested in the cryptocurrency exchange Coinbase. Today, Ripple is valued at 10 billion U.S. dollars, and Coinbase was listed on the Nasdaq in April this year, with a market value of 85.8 billion U.S. dollars. It is one of the largest listed projects in the history of technology. When asked about the reasons for investing in Coinbase, Chris Dixon explained: “Bitcoin solves the serious problem of the existing payment system that relies on centralized services to verify the validity of transactions, but for widespread proliferation, Bitcoin needs a killer application. , Just like HTTP has a web browser and SMTP has an email client. This is Coinbase.”

In June 2018, a16z officially established a USD 350 million crypto fund, which mainly mentioned five investment concepts:

  • One is long-termism, which can be held for more than 10 years after investment;
  • The second is “all-weather” investment, which will not be affected by the “cold winter” of the market;
  • The third is to provide operation support for entrepreneurs. An operation team of more than 80 people will provide assistance in recruitment, marketing, management, etc.;
  • The fourth is flexibility in terms of stage, asset type and location;
  • The fifth is to focus on non-speculative projects.

These investment concepts ensure that a16z can discover high-quality projects to the greatest extent based on the characteristics of the encryption industry and projects, and use its own rich resources to help projects grow.

In April 2020, a16z established the second phase of crypto fund with a scale of 515 million U.S. dollars. In June this year, the third phase of crypto fund was established with a scale of 2.2 billion. It is currently the world’s second largest crypto fund (Paradigm announced in November this year) Established a USD 2.6 billion crypto fund). a16z manages a total of US$3 billion in crypto funds, and its future investment direction will focus on the following five themes:

  • One is the next generation of payment methods. Encrypted payment can significantly reduce friction and provide a pleasant user experience;
  • The second is the store of value. Bitcoin is being accepted and adopted globally;
  • The third is DeFi, which opens the door to financial components with programmable trust, scarcity and value as new building blocks;
  • The fourth is a new way for creators to monetize. Creators can use token models to allow fans to directly participate in their success, instead of attracting audiences through centralized platforms that charge high rents;
  • The fifth is Web3, a high-performance programmable blockchain will make decentralized network development easier.

At present, these investment directions are quite in line with the subsequent Bitcoin price rise, the rise of multiple public chains, the outbreak of DeFi and NFT markets, and the rise of social token platforms, reflecting a16z’s keen understanding and grasp of market trends .

Leading position

So far, the project with the highest single investment income of a16z is Coinbase. In 2013, a16z led Coinbase’s Series B financing with US$20 million. Despite the turbulence in the crypto market, a16z still participated in each subsequent round of Coinbase financing, totaling 8 rounds of investment. Such continuous injections are extremely rare in the VC industry and are also reflected. A16z is firmly optimistic about Coinbase.

According to Coinbase’s prospectus, a16z acquired 3.52 million shares from Union Square Ventures, the lead investment institution of Coinbase A round in 2019, and became its second largest shareholder. After the listing of Coinbase this year, a16z reduced its holdings of approximately US$4.375 billion worth of shares and currently still holds 7% of the shares. It is the largest external winner of the listing of Coinbase.

"They are like lunatics, domineeringly insert a foot in every transaction."

“We are excited about being able to continue investing in it, because Coinbase represents the best part of a completely different world, not only bringing Silicon Valley’s acumen to products and designs, but also serious compliance with regulations and compliance.” a16z Partner Katie Haun said.

In addition, a16z also completed the layout of the leading projects on the mainstream blockchain track earlier. It invested in projects such as Filecoin in 2017, invested in projects such as Chia, Dfinity, and MakerDAO in 2018, and led the investment in Compound and Dapper in 19 Labs, Arweave and other projects, almost all of these projects now become the head blockchain projects, and the rewards are generous.

Taking a comprehensive look at the investment style of a16z, it is particularly favored by track leading projects, and most of them lead the investment. In August 2020, when DeFi just broke out, a16z quickly invested in the head DEX project Uniswap, and at the end of the year it invested in the NFT head company Dapper Labs and the Layer2 head project Optimism. After the rapid outbreak of the Solana ecosystem this year, the previously missed a16z immediately led the investment of Solana Labs’ US$314 million financing.

"They are like lunatics, domineeringly insert a foot in every transaction."

Industry construction

In addition to supporting the growth of high-quality projects in the industry through investment, a16z also pays special attention to exporting its industry ideas and popularizing industry knowledge through various methods, and contributes to the construction of the blockchain industry in terms of talents, resources, and supervision.

For example, the official website of a16z is more like a learning website, unlike most other organizations that are just information display websites.

Since 2014, a16z partners have written a large number of articles on the website to promote the concept of blockchain and cryptocurrency, discuss topics such as the encryption economy, blockchain governance, etc., among which many industry classic articles have emerged, such as “Why Web3 Very Important”, “Past, Present, Future: From Cooperatives to Encrypted Networks”, etc.

"They are like lunatics, domineeringly insert a foot in every transaction."

At the same time, a16z is still inviting celebrities inside and outside the industry to discuss encryption technology and produce audio podcasts, enriching its own concept of the outside world in the form of dialogue. In addition, a16z is accustomed to integrating high-quality reading resources in the industry, integrating links to high-quality articles in this field for readers based on the theme, and has produced an industry glossary.

At the beginning of 2020, a16z invited more than 20 industry celebrities to operate an online video course called “Encryption Entrepreneurship School”, covering the basics of encryption technology, governance, marketing, fundraising, compliance and other matters that need to be paid attention to when establishing an encryption company. Entrepreneurs in the encryption industry provide comprehensive information support.

In June 2020, a16z launched the “Talent x Opportunity Fund”, which aims to invest in talented and thoughtful entrepreneurs who lack educational background and resources. Entrepreneurs in each period can participate in a 10-month training program and have experience Rich entrepreneurs provide online guidance.

"They are like lunatics, domineeringly insert a foot in every transaction."

Prior to May 2019, a16z organized Washington’s regulators and its crypto portfolio companies to try to explain the potential of blockchain as a nascent technology to these high-level government agencies that have an important impact on the cryptocurrency industry. CFTC Chairman J. Christopher Giancarlo and many others participated.

Through the above measures, a16z has established itself as the most influential venture capital institution and industry builder in the crypto world, and is closely tied to the future of the crypto industry . At the same time, it also draws high-quality projects and talents in the industry to its surroundings. Own long-term value capture has laid a solid foundation.

Structural transformation

In 2019, on April 2nd, local time in the United States, Forbes issued a long report stating that a16z, a well-known venture capital firm in Silicon Valley, had submitted the registration documents for a registered investment advisor (RIA).

Encrypted investment activities are regulated by the Securities and Exchange Commission (SEC) on investment activities. This is exactly the “yoke” that a16z gave up the name of a venture capital company in order to let go.

A16z, which is no longer a venture capital company, is no longer subject to the SEC’s regulatory control of a venture capital company, which means that it can bypass supervision and make more risky investments. After the transformation, a16z will get rid of the investment scale restrictions of cryptocurrency, digital assets, etc., which are regarded by the SEC as high-risk investment fields (cannot exceed 20% of the fund size). Now it can throw 1 billion U.S. dollars on cryptocurrencies, and it can also be unlimited Buy stocks of listed companies or other investors.

This transformation also involved a lot of trouble. First of all, a16z will hire professional compliance consultants to review the company’s 150 employees at the time, including employee partners, parents and even children, and review their asset allocation and investment behavior, in case this “investment consulting company” and potential customers Stakes. This is a costly and time-consuming move, and the investment team cannot talk publicly about the portfolio or fund performance-including on the famous a16z podcast.

The second is the “confusion” of LPs. What are the uses of the funds they handed over to a16z for safekeeping? Which investment field does the transformed a16z belong to? I am afraid that a16z itself did not think clearly about this. In the report of TechCrunch, the company refused to answer this question.

However, it is advisable to increase the volume for a long time. For a16z, which values ​​trends and has long been optimistic about the cryptocurrency field, the cost of transformation may be much lower than the loss of non-transformation.

a16z partner Chris Dixon once described the blockchain as ” the pirate flag raised again in Silicon Valley, leading everyone to engage in interesting, slightly dangerous and disruptive activities. ” Today, a16z and its investment projects are holding huge amounts of money. We are leading the rudder of the pirate ship further afield, and a new era may be slowly unfolding

Concluding remarks

From the firm pursuit of software in the mobile Internet era to the heavy bet on encryption today, a16z’s bet on new trends has always been sharp and decisive. The founder Andreessen has always maintained his pioneering attitude, whether it is bringing the Internet that was originally only available to the government and the military to millions of households, or later investing in social networks, and today in the fields of SaaS, biotechnology, encryption, etc. The outstanding record.

Always betting on the next era, always looking for the next big opportunity to “swallow the world” , and being the person who “sees the future” is the secret of invincibility.

A well-known Silicon Valley LP commented on a16z: “I like the advantage of a16z. The two founders are both willing to learn and good at adjusting.” From the development of a16z, being good at learning from others is a very prominent feature. , Especially cross-field integrated innovation. Learning from the business model of CAA, the Hollywood talent agency, it not only won outstanding performance for itself, but also subverted the traditional model of venture capital, imposed a new cost structure on its opponents, and promoted the construction of the entire venture capital ecosystem.

As Andreessen’s famous saying: “A great career is always different.”

“The world is suffering for a long time” , from the institutional media era to the self-media era, today’s booming decentralized creator economy is also challenging the platform and algorithm-controlled self-media era, and the power to speak out The hands of “others” turn to the hands of “self”.

a16z is the first venture capital to establish independent media channels on a large scale. It firmly holds the power of public relations, communication, and knowledge education in its own hands, and also holds its influence assets in its own hands. This powerful influence has been particularly prominent in encryption in the past two years. Almost every outstanding talent in encryption has more or less maintained a good relationship with a16z.

Through self-built media to accumulate influential assets for itself, a16z has led the transformation of venture capital institutions around the world. It is also fully worth learning for every company, and mastering the initiative of narrative is an increasingly important issue for technology companies .

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/they-are-like-lunatics-domineeringly-insert-a-foot-in-every-transaction/
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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