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Things I’ve Learned From Marc Andreessen

104 points by shazad 12y ago

bergerjac 12y ago
black text on dark red at 13px - not too reader-friendly
- apu 12y ago
  It's black-on-white for me.
deleted 12y ago
[deleted]
inaworld 12y ago
"be the market" is the advice that comes out of portfolio theory. To say that it applies to one type of investor but not to venture investors is to basically announce that you have absolutely no understanding of portfolio theory.
- Punoxysm 12y ago
  VCs deal in illiquid, information-asymmetric markets where prices are directly negotiated, capital is locked up for an extended period, and deals are large enough that investment is forced to be "lumpy". If you could somehow invest in a startup "index", it would be great, but there really is no such thing (especially not for the VCs).
  - etjossem 12y ago
    If you read section #1 in the article, you'll note that there are a lot of bad picks out there. To review: - 4,000 startups a year. - 3,000 seen by a16z. - 200 are "fundable." - 15 of those generate 95% of returns. If a single VC firm were to fund all 4,000 startups (or even a representative sample of them), they'd be out of business in a few years. A "startup index" unbiased by due diligence is a pretty bad idea from an investor perspective. That said, if you want an example of a seed fund with a pretty broad approach, take a look at the aptly-named 500 Startups.
    - cklaus 12y ago
      How has the 500 Startup Fund done?
- hglaser 12y ago
  This is an odd comment. Do you think that Marc Andreessen, who manages one of the most successful portfolios of startups in the history of startups, has "absolutely no understanding of portfolio theory"? Or do you think an alternate explanation might be more likely? Is it possible that you misunderstood something? Or is it possible that, if Marc is challenging this thesis of portfolio theory, he might be doing so from a place of great experience and be worth listening to?
  - lazyjones 12y ago
    > Marc Andreessen, who manages one of the most successful portfolios of startups in the history of startups, has "absolutely no understanding of portfolio theory"? He doesn't need to be above average there. Just like PG, he (mostly) invests in technology he actually comprehends, unlike some other delusionary VC from the investment banking world.
pud 12y ago
Marc said in an interview once, "being CEO is basically a constant stream of bad news." I love that.
- bjelkeman-again 12y ago
  That is the part I like the least of the job, or rather actually having to deal with the outcome of the bad news. But the good news are also a constant stream, which makes up for it all.
- lazyjones 12y ago
  > being CEO is basically a constant stream of bad news." Aw, poor CEOs (I'm one)... Perhaps ask an ER nurse how her job compares.
  - spindritf 12y ago
    Most ER patients recover (I would hope). It also wasn't a plea for pity.
md2be 12y ago
Thanks for the work that went into this post.
tonetheman 12y ago
Things I have learned from Marc Andreessen: he thinks Snowden is a traitor. And blames Snowden for causing problems for US companies to sell overseas.
- CamperBob2 12y ago
  Yes, I never expected Marc Andreessen to flip his own bozo bit, but that quote did the trick. Andreessen took the concept of "shooting the messenger" to new depths of stupidity when he said that. Still, this link is well worth the few minutes it takes to read. His blog has a lot of "Things I've learned from" entries from various people.
  - mpyne 12y ago
    > Andreessen took the concept of "shooting the messenger" to new depths of stupidity when he said that. And yet, not really. With the exception of RSA, American tech. companies are being hammered for the actions of NSA, not for their own "crimes". Even German companies obey German legal directives after all, and Vodafone made clear the other day the extent of government monitoring of networks around the world. To the extent that Snowden has made clear the reality that government (and not just criminals) can take advantage of the jurisdictional problems of an open Internet, that's not the fault of the U.S. tech sector either. After all, some of the most successful NSA programs are really liaisons with European security agencies that run the actual intake work, not conspiracies with Silicon Valley. The correct solution for Europe if they want to be free of the possibility of other nations (incl. the USA) doing targeted operations in their networks is to completely balkanize the Internet, which companies like Google and Facebook oppose for obvious reasons. You can credit Snowden with revealing to the world the types of dangers inherent to an open Internet, but that very same set of revelations is a large part of what's harming the U.S. tech sector. You're right that people may have figured it out eventually, but nations and companies around the world tended to agree not to make too big an issue of it since the benefits of an open Internet were thought to outweigh the risks. But Snowden forced the issue. The only true solution to the issues he raised, if you're a European citizen, cannot be left to voluntary compliance by the other nations of the world, especially since you can never certify compliance with that. You'd have to instead build out your own Facebook, your own Google, your own tech sector, just like Russia and China have done. So credit Snowden with opening the eyes of Europe to that reality, but you can't eat your cake and have it too. We've seen region locking spread too far with just with RIAA/MPAA to want to see it infect the rest of the Internet, but that is the message Snowden is responsible for (even if it wasn't the message he meant to send).
mathattack 12y ago
I'm a fan of MA, but I think people equate him with sainthood. He's not a saint. He's a pioneer that pushed the internet forward, made some mistakes, and now has some wisdom (and money) to dispense. I give his writing some credence, but nobody is perfect. I like that he has made post-browser mistakes. That gives credibility to his writing.
graycat 12y ago
It is both possible and, really, with just a little inspection, really easy, just a wave of a hand, to see how to do much better at investing in information technology than described in the OP. Below I outline how. The crucial supporting background is just rock solid, so far essentially missed by VC but among the most solid in all of civilization -- no joke. That VC is missing out is just absurd. The OP is yet another effort at 'understanding' venture capital investing. There's something strange here: At http://avc.com/2013/02/venture-capital-returns/#disqus_thread http://avc.com/2013/02/venture-capital-returns/#disqus_threa... that is, VC Fred Wilson's blog, is some data that shows that on average in the US, information technology venture capital returns in one word suck, that is, are really poor, bad, low, etc. So, in trying to understand how venture capital investing works, at least on average we are trying to understand something that works poorly. Below I explain how to do much better, but broadly that VCs struggle so much, as is clear in the OP, is from incongruous to absurd. The OP is awash in some really bad news that shows that the VCs admit that, really, they don't much know what the heck they are doing and, instead, are reading tea leaves and then shooting in the dark; such nonsense is unnecessary. Let's consider some quotes from the OP: "even the top VCs write off half their deals." Dumb. Each year a VC gets 3000 deals, looks carefully at maybe 200, invests in maybe 20, and 10 flop. Clearly something's seriously wrong here. "And of course, you make all your money on successful and non-consensus." That the good deals should be so difficult to evaluate that there should be no "consensus" is absurd. Sure, detecting the next SnapChat is difficult, but largely we should set aside such deals -- based on, what, starting a fad of teenage girls having fun being 'improper'. Instead it is possible to have plenty of deals that are fairly easy to evaluate. "And let me translate ‘non-consensus’: in sort of practical terms, it translates to crazy. You are investing in things that look like they are just nuts.” E.g., another SnapChat is that way, and that's why a VC should not take seriously such deals. E.g., someone comes out with a better version of the same basic idea, but maybe SnapChat is hurt by their installed base that becomes dragging a big anchor to responding. But there are much better deals than SnapChat where nothing looks "crazy" or "nuts". Putting up with deals that are crazy or nuts is, well, crazy and nuts. “The entire art of venture capital in our view is the big breakthrough for ideas. The nature of the big idea is that they are not that predictable.” Yes, “The entire art ... is the big breakthrough for ideas"; the problem is that, flatly, VC (1) is working with "ideas", e.g., SnapChat, that are based on fads, etc. and, thus, are essentially impossible to evaluate and (2) VC doesn't understand what really good, "big breakthrough ... ideas" are, where to find them, and how to evaluate them. For the good, big breakthrough ideas, accurate evaluation is quite doable, and there is little that is' not "predictable”. VC doesn't understand (1) and (2), and I explain below. “Most of the big breakthrough technologies/companies seem crazy at first: PCs, the internet, Bitcoin, Airbnb, Uber, 140 characters.. It has to be a radical product. It has to be something where, when people look at it, at first they say, ‘I don’t get it, I don’t understand it. I think it’s too weird, I think it’s too unusual.’” “Most of the big breakthrough technologies/companies seem crazy at first" is only true because VC has been, to borrow from a movie, "digging in the wrong place". “You want to have as much ‘prepared mind’ as you possibly can. And learn as much as you can about as many things, as much as you can. You want to enter as close as you can to a zen-like blank slate of perfect humility at the beginning of the meeting saying ‘teach me’…. We try really hard to be educated by the best entrepreneurs.” Sorry, I have a serious background in how to "learn", and my experience is that VCs are quite poor at it and need to 'put on their game faces' and 'up their game' several notches from some very good sources, and some popular Silicon Valley coffee or sandwich shop is NOT such a source. “You want to tilt into the really radical ideas… but by their nature you can’t predict what they will be.” “There will be certain points of time when everything collides together and reaches critical mass around a new concept or a new thing that ends up being hugely relevant to a high percentage of people or businesses. But it’s really really hard to predict those. I don’t believe anyone can.” "Really radical" is fine, maybe often necessary, but, of course, not nearly sufficient; but it is just crucial to have ideas that can be evaluated accurately and to do the evaluations. For "really really hard to predict those", VCs are "digging in the wrong place". Instead, with good "breakthrough ideas", "really radical", provocative, shocking, "crazy", "nuts" that can be evaluated and that have a good evaluation, being able to "predict" is really, really easy. “We are looking for a magic combination of courage and genius" Looking for "magic"? Looking for magic went out of style back in the "Age of the Reason". Looking for magic is wandering and shooting in the dark. As I explain below, there is a way to find the light switch, turn it on, and see what's happening (thank you A. Wiles). “The thing all the venture firms have in common is they did not invest in most of the great successful technology companies.” There is a reason: VC has concentrated on deals, "digging in the wrong place", that are essentially impossible to evaluate. Instead, concentrate on deals that can be evaluated and, then, evaluate them. What deals are those? I explain below. "The challenge in the field is all of the great VCs over the last 50 years, the thing that they all have in common, is they all failed to invest in most of the big winners." Again, the VCs were "digging in the wrong place". Yes, even in that place sometimes there is some gold there, but that doesn't much help because the gold is in a form essentially impossible to recognize, that is, evaluate. So, dig in the right place where can recognize, evaluate, the gold that is there. The right place? I explain below. The theme of the Andreessen remarks is wandering and shooting in the dark. But that is unnecessary.

104 points by shazad 12y ago

bergerjac 12y ago

black text on dark red at 13px - not too reader-friendly

apu 12y ago
It's black-on-white for me.

deleted 12y ago

[deleted]

inaworld 12y ago

"be the market" is the advice that comes out of portfolio theory. To say that it applies to one type of investor but not to venture investors is to basically announce that you have absolutely no understanding of portfolio theory.

Punoxysm 12y ago
VCs deal in illiquid, information-asymmetric markets where prices are directly negotiated, capital is locked up for an extended period, and deals are large enough that investment is forced to be "lumpy". If you could somehow invest in a startup "index", it would be great, but there really is no such thing (especially not for the VCs).
- etjossem 12y ago
  If you read section #1 in the article, you'll note that there are a lot of bad picks out there. To review: - 4,000 startups a year. - 3,000 seen by a16z. - 200 are "fundable." - 15 of those generate 95% of returns. If a single VC firm were to fund all 4,000 startups (or even a representative sample of them), they'd be out of business in a few years. A "startup index" unbiased by due diligence is a pretty bad idea from an investor perspective. That said, if you want an example of a seed fund with a pretty broad approach, take a look at the aptly-named 500 Startups.
  - cklaus 12y ago
    How has the 500 Startup Fund done?
hglaser 12y ago
This is an odd comment. Do you think that Marc Andreessen, who manages one of the most successful portfolios of startups in the history of startups, has "absolutely no understanding of portfolio theory"? Or do you think an alternate explanation might be more likely? Is it possible that you misunderstood something? Or is it possible that, if Marc is challenging this thesis of portfolio theory, he might be doing so from a place of great experience and be worth listening to?
- lazyjones 12y ago
  > Marc Andreessen, who manages one of the most successful portfolios of startups in the history of startups, has "absolutely no understanding of portfolio theory"? He doesn't need to be above average there. Just like PG, he (mostly) invests in technology he actually comprehends, unlike some other delusionary VC from the investment banking world.

pud 12y ago

Marc said in an interview once, "being CEO is basically a constant stream of bad news." I love that.

bjelkeman-again 12y ago
That is the part I like the least of the job, or rather actually having to deal with the outcome of the bad news. But the good news are also a constant stream, which makes up for it all.
lazyjones 12y ago
> being CEO is basically a constant stream of bad news." Aw, poor CEOs (I'm one)... Perhaps ask an ER nurse how her job compares.
- spindritf 12y ago
  Most ER patients recover (I would hope). It also wasn't a plea for pity.

md2be 12y ago

Thanks for the work that went into this post.

tonetheman 12y ago

Things I have learned from Marc Andreessen: he thinks Snowden is a traitor. And blames Snowden for causing problems for US companies to sell overseas.

CamperBob2 12y ago
Yes, I never expected Marc Andreessen to flip his own bozo bit, but that quote did the trick. Andreessen took the concept of "shooting the messenger" to new depths of stupidity when he said that. Still, this link is well worth the few minutes it takes to read. His blog has a lot of "Things I've learned from" entries from various people.
- mpyne 12y ago
  > Andreessen took the concept of "shooting the messenger" to new depths of stupidity when he said that. And yet, not really. With the exception of RSA, American tech. companies are being hammered for the actions of NSA, not for their own "crimes". Even German companies obey German legal directives after all, and Vodafone made clear the other day the extent of government monitoring of networks around the world. To the extent that Snowden has made clear the reality that government (and not just criminals) can take advantage of the jurisdictional problems of an open Internet, that's not the fault of the U.S. tech sector either. After all, some of the most successful NSA programs are really liaisons with European security agencies that run the actual intake work, not conspiracies with Silicon Valley. The correct solution for Europe if they want to be free of the possibility of other nations (incl. the USA) doing targeted operations in their networks is to completely balkanize the Internet, which companies like Google and Facebook oppose for obvious reasons. You can credit Snowden with revealing to the world the types of dangers inherent to an open Internet, but that very same set of revelations is a large part of what's harming the U.S. tech sector. You're right that people may have figured it out eventually, but nations and companies around the world tended to agree not to make too big an issue of it since the benefits of an open Internet were thought to outweigh the risks. But Snowden forced the issue. The only true solution to the issues he raised, if you're a European citizen, cannot be left to voluntary compliance by the other nations of the world, especially since you can never certify compliance with that. You'd have to instead build out your own Facebook, your own Google, your own tech sector, just like Russia and China have done. So credit Snowden with opening the eyes of Europe to that reality, but you can't eat your cake and have it too. We've seen region locking spread too far with just with RIAA/MPAA to want to see it infect the rest of the Internet, but that is the message Snowden is responsible for (even if it wasn't the message he meant to send).

mathattack 12y ago

I'm a fan of MA, but I think people equate him with sainthood. He's not a saint. He's a pioneer that pushed the internet forward, made some mistakes, and now has some wisdom (and money) to dispense. I give his writing some credence, but nobody is perfect. I like that he has made post-browser mistakes. That gives credibility to his writing.

graycat 12y ago

It is both possible and, really, with just a little inspection, really easy, just a wave of a hand, to see how to do much better at investing in information technology than described in the OP. Below I outline how. The crucial supporting background is just rock solid, so far essentially missed by VC but among the most solid in all of civilization -- no joke. That VC is missing out is just absurd. The OP is yet another effort at 'understanding' venture capital investing. There's something strange here: At http://avc.com/2013/02/venture-capital-returns/#disqus_thread http://avc.com/2013/02/venture-capital-returns/#disqus_threa... that is, VC Fred Wilson's blog, is some data that shows that on average in the US, information technology venture capital returns in one word suck, that is, are really poor, bad, low, etc. So, in trying to understand how venture capital investing works, at least on average we are trying to understand something that works poorly. Below I explain how to do much better, but broadly that VCs struggle so much, as is clear in the OP, is from incongruous to absurd. The OP is awash in some really bad news that shows that the VCs admit that, really, they don't much know what the heck they are doing and, instead, are reading tea leaves and then shooting in the dark; such nonsense is unnecessary. Let's consider some quotes from the OP: "even the top VCs write off half their deals." Dumb. Each year a VC gets 3000 deals, looks carefully at maybe 200, invests in maybe 20, and 10 flop. Clearly something's seriously wrong here. "And of course, you make all your money on successful and non-consensus." That the good deals should be so difficult to evaluate that there should be no "consensus" is absurd. Sure, detecting the next SnapChat is difficult, but largely we should set aside such deals -- based on, what, starting a fad of teenage girls having fun being 'improper'. Instead it is possible to have plenty of deals that are fairly easy to evaluate. "And let me translate ‘non-consensus’: in sort of practical terms, it translates to crazy. You are investing in things that look like they are just nuts.” E.g., another SnapChat is that way, and that's why a VC should not take seriously such deals. E.g., someone comes out with a better version of the same basic idea, but maybe SnapChat is hurt by their installed base that becomes dragging a big anchor to responding. But there are much better deals than SnapChat where nothing looks "crazy" or "nuts". Putting up with deals that are crazy or nuts is, well, crazy and nuts. “The entire art of venture capital in our view is the big breakthrough for ideas. The nature of the big idea is that they are not that predictable.” Yes, “The entire art ... is the big breakthrough for ideas"; the problem is that, flatly, VC (1) is working with "ideas", e.g., SnapChat, that are based on fads, etc. and, thus, are essentially impossible to evaluate and (2) VC doesn't understand what really good, "big breakthrough ... ideas" are, where to find them, and how to evaluate them. For the good, big breakthrough ideas, accurate evaluation is quite doable, and there is little that is' not "predictable”. VC doesn't understand (1) and (2), and I explain below. “Most of the big breakthrough technologies/companies seem crazy at first: PCs, the internet, Bitcoin, Airbnb, Uber, 140 characters.. It has to be a radical product. It has to be something where, when people look at it, at first they say, ‘I don’t get it, I don’t understand it. I think it’s too weird, I think it’s too unusual.’” “Most of the big breakthrough technologies/companies seem crazy at first" is only true because VC has been, to borrow from a movie, "digging in the wrong place". “You want to have as much ‘prepared mind’ as you possibly can. And learn as much as you can about as many things, as much as you can. You want to enter as close as you can to a zen-like blank slate of perfect humility at the beginning of the meeting saying ‘teach me’…. We try really hard to be educated by the best entrepreneurs.” Sorry, I have a serious background in how to "learn", and my experience is that VCs are quite poor at it and need to 'put on their game faces' and 'up their game' several notches from some very good sources, and some popular Silicon Valley coffee or sandwich shop is NOT such a source. “You want to tilt into the really radical ideas… but by their nature you can’t predict what they will be.” “There will be certain points of time when everything collides together and reaches critical mass around a new concept or a new thing that ends up being hugely relevant to a high percentage of people or businesses. But it’s really really hard to predict those. I don’t believe anyone can.” "Really radical" is fine, maybe often necessary, but, of course, not nearly sufficient; but it is just crucial to have ideas that can be evaluated accurately and to do the evaluations. For "really really hard to predict those", VCs are "digging in the wrong place". Instead, with good "breakthrough ideas", "really radical", provocative, shocking, "crazy", "nuts" that can be evaluated and that have a good evaluation, being able to "predict" is really, really easy. “We are looking for a magic combination of courage and genius" Looking for "magic"? Looking for magic went out of style back in the "Age of the Reason". Looking for magic is wandering and shooting in the dark. As I explain below, there is a way to find the light switch, turn it on, and see what's happening (thank you A. Wiles). “The thing all the venture firms have in common is they did not invest in most of the great successful technology companies.” There is a reason: VC has concentrated on deals, "digging in the wrong place", that are essentially impossible to evaluate. Instead, concentrate on deals that can be evaluated and, then, evaluate them. What deals are those? I explain below. "The challenge in the field is all of the great VCs over the last 50 years, the thing that they all have in common, is they all failed to invest in most of the big winners." Again, the VCs were "digging in the wrong place". Yes, even in that place sometimes there is some gold there, but that doesn't much help because the gold is in a form essentially impossible to recognize, that is, evaluate. So, dig in the right place where can recognize, evaluate, the gold that is there. The right place? I explain below. The theme of the Andreessen remarks is wandering and shooting in the dark. But that is unnecessary.