In Silicon Valley it’s not just who you invest in that matters– it’s also when you invest in them. The earlier the investment, the riskier the bet. But the more jawdropping the returns if the company hits it big. It’s so lopsided, that typically just 5% of those unsure early bets create some 95% of the entire venture industry’s returns. Miss one of them, and it haunts you for years. Snag it, and you can brag for even longer. This simple reality is precisely what makes the venture business hard, and the justification for why partners make such huge fees.
So what’s up with the surge of the strongest early stage firms jumping so heavily into late stage mega-deal fray? Have the Valley’s superstars lost sight of these rules or are the rules changing?
Earlier this year, we wrote a lot about the shift in power at the early stages with the rise of super angels, but you could argue there are far greater ripple effects to this new late stage frenzy. That’s not only true for the Valley, it’s true for the stock market. And you could argue, those ripple effects are less well-understood. → Read More
Jawbone, the company most known for its headsets seen on the terminally hip kid to your left, has raised $49 million from Andreessen Horowitz to continue to build new devices to take advantage of the smart phone/mobile Web boom. Marc Andreessen and Ben Horowitz invested in Jawbone as angel investors back in 2007, and CEO Hosain Rahman credits Horowitz as one of his most important mentors. Finally, he’ll be on Jawbone’s board.
This round brings Jawbone’s capital raised to date to just under $100 million. That’s a lot of money. But I’m actually surprised they hadn’t raised more. The biggest reason VCs give for not backing more consumer electronics companies is how capital intensive they are, compared to lean and mean Web companies. But getting to a point where you sell 10 million devices in three years doesn’t sound capital intensive– especially when you consider the mega rounds it’s taking to scale the biggest consumer Web names. → Read More
This week’s Ask a VC has a different twist, since we had a different kind of VC on the show, John O’Farrell Andressen Horowitz’s guru on business development and deal-making.
The questions you asked O’Farrell are below. As usual, feel free to watch the whole show or use the links to skip ahead to your question.
“Have you ever invested in a single employee startup? Would this be a situation in which you guys would make a deal?” → Read More
When Marc Andreessen and Ben Horowitz launched their venture firm, they talked a good game about things being different; about having a smorgasbord of partners skilled in different areas that could tag in-and-out of portfolio companies as appropriate. And a lot of that sounded like the usual “value-add” venture capital spiel.
But two funds into the firm’s life, that vision is starting to take shape. Witness today’s announcement that Mark Cranney will be joining the firm as a partner. Cranney isn’t some techy whiz-kid, visionary founder or even a financial wizard. He’s a sales and operations guy and his job will be to help teach Andreessen Horowitz’s predominately engineer-centric founders and CEOs to be a little bit more like those things many of them decry: a sales guy, an MBA, a grown-up manager. Look at him! He even looks like a sales guy! → Read More
Ben Horowitz is a partner at Andreessen Horowitz and the former co-founder and CEO of Opsware.
Every day I hear from entrepreneurs, angel investors and venture capitalists about an exciting new movement called “the consumerization of the enterprise.” They tell me how the old expensive Rolex wearing sales forces are a thing of the past and, in the future, companies will “consume” enterprise products proactively like consumers pick up Twitter.
But when I talk to the most successful new enterprise companies like WorkDay, Apptio, Jive, Zuora, and Cloudera, they all employ serious and large enterprise sales efforts that usually include expensive people some of who indeed wear Rolex watches. In fact, companies like Yammer who originally started with new age models have transitioned to more traditional enterprise sales approaches after experiencing the market without them.
So what gives? Are all these smart people out of their minds? Has nothing changed since the early days of IBM? Some things have changed, but others are exactly as they were. → Read More
Every day I hear from entrepreneurs, angel investors and venture capitalists about an exciting new movement called “the consumerization of the enterprise.” They tell me how the old expensive Rolex wearing sales forces are a thing of the past and, in the future, companies will “consume” enterprise products proactively like consumers pick up Twitter.
But when I talk to the most successful new enterprise companies like WorkDay, Apptio, Jive, Zuora, and Cloudera, they all employ serious and large enterprise sales efforts that usually include expensive people some of who indeed wear Rolex watches. In fact, companies like Yammer who originally started with new age models have transitioned to more traditional enterprise sales approaches after experiencing the market without them.
So what gives? Are all these smart people out of their minds? Has nothing changed since the early days of IBM? Some things have changed, but others are exactly as they were. → Read More
It’s a chaotic week for Instagram. First it becomes the darling of the app world, then its investors Andreessen-Horowitz decide to double-down on competitor Picplz instead, effectively making the company an orphan. Of course it’s one sexy little orphan half of Sand Hill Road would just love to adopt. Cue swirling rumors that Instagram is in the process of putting together a series A and even weirder rumors that the company is selling to Facebook. We’ve called Instagram, people close to Instagram and the top five likely suspects that would be doing the deal or have knowledge of that deal and every single one has told us both rumors seem made up out of whole cloth, and that while the company has had the normal “Ok, we’ll call you when we’re ready” conversations around the Valley, no deal is imminent.
“We’re not selling to Facebook, we are not selling to anyone and we are announcing that to our users because they have been worried,” Instagram CEO and co-founder Kevin Systrom says. “Of course at some point we’re going to be raising a round, but I haven’t even created a pitch deck. I haven’t signed a term sheet. We’re sitting in the office programming all day. We’re just not at the stage where we need to raise a series A.”
Indeed, the rumors seem to have caused more problems in the short term for the hot, young company. → Read More
It’s a strict rule in the venture business that you don’t fund two direct competitors, for obvious reasons. There’s a massive difference between the valuation of the number one player in the market (think YouTube) and the number two player (think any of the other hundreds of online video companies launched in the mid-2000s). It’s in a venture capitalist’s best interest to make his presence on a board of directors a competitive advantage, otherwise he’s just a checkbook and checkbooks are interchangeable in an industry with too much money floating around. Two companies can’t very well have the same competitive advantage.
So yesterday’s announcement that Andreessen Horowitz was following up a seed investment with a venture investment in Dalton Caldwell and Bryan Berg’s new company Picplz was a bit of a surprise, given the firm’s existing investment in Halloween-costume-capturing-darling Instagram. The two are essentially direct competitors. I asked Marc Andreessen about it today, and he was quick to point out that’s not how the two started, and if they had the firm wouldn’t have invested in both of them.
What’s more– now that the firm has made the decision to do a venture capital round in Picplz, it has essentially picked between the two. Without another pivot, the firm will not make another investment in Instagram, he said. → Read More
Just 15 months after Marc Andreessen and Ben Horowitz officially jumped to the venture capital darkside with the close of a $300 million fund, Andreessen Horowitz is announcing the close of a second $650 million fund. In less than two years, the firm has rocketed up to a whopping $950 million under management, an investment staff of 18 people and a portfolio that includes everything from Skype to Zynga to Foursquare.
What’s more? This fund closed in three weeks time. “It was a busy three weeks,” Andreessen offers to those VCs struggling to raise money. (I have a feeling some haters are gonna hate for that quip, Marc…) → Read More
Apptio, a Bellevue, Washington-based provider of SaaS-delivered Technology Business Management solutions this morning announced that it has closed a $16.5 million Series C round – the company has now raised up to $37.5 million in venture capital.
The financing round, which the company says was oversubscribed, was led by Shasta Ventures, with participation from all current investors including Andreessen Horowitz, Greylock Partners and Madrona Venture Group. → Read More
Long before he was part of the powerful investing duo behind venture fund Andreessen Horowitz, Ben Horowitz was a co-founder and CEO of Opsware (previously known as Loudcloud) a pioneer for cloud computing companies (Opsware was eventually sold to HP in 2007 for $1.6 billion). He’s considered an expert in the cloud so his first investment in a cloud computing startup is something to pay attention to.
Okta, which raised $10 million in funding from Andreessen Horowitz, is a cloud application management service. Okta’s platform allows companies to have control of their users, applications, and data both in the cloud and behind the firewall. → Read More
Foursquare, the geo-mobile startup everybody tried to invest in or buy, now has officially closed its Series B funding round. The “wire transfer heard ’round the world,” as board member Bryce Roberts puts it, was for $20 million, giving the company a $95 million pre-money valuation. The round was led by Andreessen Horowitz, as previously reported, with existing investors Union Square Ventures and O’Reilly AlphaTech Ventures participating.
CEO Dennis Crowley says the fundraising was “a lot of work” and plans to use the money to staff up and keep adding to the product. “It’s all about building a team that can churn out new product,” he tells me. “We’ve been dreaming up these things for the past 10 years and now we have the opportunity to build them all.” The money will also help pay for more office space. His 27 employees are already too big for the startup’s current New York City offices, and Foursquare is about to move into new digs upstairs in the same building. “It’s awesome,” he says, “we can hear them building it upstairs right now!” He plans on hiring a lot more engineers. → Read More
The long dalliance between investors and Foursquare appears to almost be consummated. According to a Tweet by Foursquare board member Bryce Roberts of O’Reilly AlphaTech Ventures, about an hour ago he was “approving the wire transfer heard ’round the world.”
That would be the wire transfer from the new group of investors led by Andreessen Horowiitz, as we reported a few weeks ago. Despite being one of the hottest startups around, or perhaps because of it, Foursquare took along time to close this round. Mostly that was because the company got distracted by acquisition talks with Yahoo and Facebook. When I asked Foursquare CEo Dennis Crowley about this drawn out process ten days ago, he responded, “You don’t have to rush through it.” → Read More
Andreessen Horowitz celebrates its first birthday with a number of new hires, including its third general partner – John O’Farrell – who joins founding general partners Marc Andreessen and Ben Horowitz. O’Farrell was most recently a vice president at Silver Spring Networks.
We covered the launch of Andreessen Horowitz a year ago here.
The company has also recently hired two partners – Margit Wennmachers to run marketing and Jeff Stump to help portfolio companies recruit executive talent. → Read More
A months long fundraising process for Foursquare is in its last stages, we’ve heard from multiple sources, and Andreessen Horowitz looks to be preparing to check-in to Foursquare to take an investor badge.
The company has delayed committing to new venture capital as they considered buyout offers – negotiations went deep with both Yahoo and Facebook, and possibly Microsoft. The Yahoo discussions ended weeks ago, and Facebook passed on an acquisition earlier this week, we’ve heard. → Read More
Editor’s note: When venture capitalists invest in early stage startups, more than anything else they are investing in the founders of the company and their ability to lead their employees through the most improbable set of circumstances to take an idea from a germ to a real and profitable business. In this guest post, Ben Horowitz of VC firm Andreessen Horowitz explains the leadership traits he and his co-founder Marc Andreessen look for before they invest in a startup. Some of their investments include Skype, Zynga, Factual, and RockMelt. Before becoming investing partners, Horowitz and Andreessen co-founded Opsware, which they sold to HP for $1.6 billion, and prior to that Horowitz was an executive at Netscape.
At Andreessen Horowitz, we favor founders running the company. The reasons are many (and will be the topic of a future blog post). As a result, we spend a great deal of time thinking about the characteristics required to be a founding CEO. Perhaps the most important attribute required to be a successful founding CEO is leadership. So what is leadership and how do we think about it in the context of the CEO job? Are great leaders born or made?
Most people define leadership in the same way that Supreme Court Justice Potter Stewart famously defined pornography when he said: “I know it when I see it.”
A better definition comes from former Secretary of State Colin Powell who said: “You have achieved excellence as a leader when people will follow you anywhere if only out of curiosity.” For our purposes, we can generalize this to be the measure of the quality of a leader: the quantity, quality and diversity of people who want to follow her. → Read More
Facebook co-founder Dustin Moskovitz is starting a new startup called Asana to solve enterprise collaboration, and he just closed a $9 million series A round from Benchmark Capital and Andreessen-Horowitz. this follows $1.2 million angel round last spring from investors including Ron Conway, Peter Thiel, Mitch Kapor, MySpace CEO Owen van Natta, Sean Parker, and former Facebook Director of Mobile Jed Stremel.
Moskovitz, who was Facebook’s first CTO, founded Asana with another former Facebook (and before that, Google) engineer, Justin Rosenstein. Matt Cohler, also a former Facebook executive who is now a partner at Benchmark, will be taking a seat on Asana’s board. And two of its investors, Marc Andreesen and Peter Thiel, currently sit on Facebook’s board. → Read More
eBay has just announced that it has reached a settlement with the founders of Skype, clearing the way for the sale of the Internet communication company to a consortium formed by private equity firm Silver Lake Partners, Andreessen Horowitz and the Canada Pension Plan Investment Board.
Index Ventures, a historical investor in Skype, is not going to be part of that buying party after all, and its partner Mike Volpi is definitely out of the picture (no surprises there). Marc Andreessen, partner of Andreessen Horowitz, tells us: “Everything is settled—all lawsuits, all IP. The Joltid IP is now owned by Skype. The company is free and clear to execute to its full potential.”
The original Skype founders, Niklas Zennström and Janus Friis, are now back in the game. The Scandinavian businessmen are getting 14 percent of Skype back for rights to the Global Index P2P technology their company Joltid controls (which is key to the Skype software) – and not 10% like previously reported by other media. In addition, Friis and Zennström gain representation on the board of the new entity. The two men are also putting in a ‘significant amount of capital’ of their own in exchange for the stake in the new company, presumably through their Atomico Ventures fund. → Read More
Getting a meeting with Marc Andreessen isn’t easy so I made sure I cornered him and shoved a camera in his face backstage at TechCrunch50 to ask him about his new life as a VC. It’s been seven weeks and one day, and so far, he says he loves it and it’s fun. Of course, as he notes, seven weeks in there’s no expectation that companies will have exited and it’s not enough time for any of them to fail yet either.
Andreessen also reiterated what Ron Conway said earlier: There’s no dearth of funding for good start-ups in the Valley. More on why he did that Skype deal and what he’d rather hear TC50 companies talk about in their pitches on the clip. → Read More
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