Marc Andreessen has emerged as one of the greatest entrepreneurs and financiers of his generation and considers himself another J. Pierpont Morgan. Andreessen launched the growth of the Internet as a technical expert and co-founder of Netscape which was sold to AOL for billions. He has since grown his venture capital firm, named a16z, into one of Silicon Valley’s top funds and seeks to become a leader in other areas of finance with $55 billion in assets under management. and with tentacles in other areas of finance. Here are 9 lessons from Marc Andreessen:
#1. Focus on emerging trends. Andreessen was a pioneer in the emergence of the Internet, and Netscape, his flagship company, kickstarted the Internet. Almost every entrepreneur, from Sam Walton (Walmart) and Dick Schulze (Best Buy) to Joe Martin of Boxycharm and Brian Chesky (Airbnb) have jumped on an emerging trend.
#2. Finance after the Aha strategy, the third Aha! There are 4 Ahas and the top 20 VCs, which are in Silicon Valley, mostly in finance after Strategy Aha. to gain an advantage over other VCs, to replace the entrepreneur with a seasoned CEO, and to promote and build the business for an attractive exit. However, if you are an entrepreneur, expect Leadership Aha!
#3. Respect your growth engines. Andreessen and Horowitz, his partner in a16z, have a policy of respecting entrepreneurs and their time. Their company’s VCs are fined if they make contractors wait. They recognize that entrepreneurs are key to bringing ideas to Aha.
#4. Go back quickly if valuations explode. Timing is crucial in VC to secure a high-value exit through strategic selling to gullible companies that recognize the potential but not the risks. This may be one of the reasons why almost 70-90% of business acquisitions fail.
#5. Grow in “easy” directions from a solid foundation. Companies expand in “easy” directions with proven products in new markets or new products in established markets. While most venture capital firms have stuck to their venture capital knitwear, a16z is branching out into money management and investment banking – to combine grassroots circuits and successes for returns and higher synergies.
#6. Keep your partners on a smart leash. Not too tight. Not too loose. a16z enables its partners to look for new directions, but also monitors their businesses to reduce losses. This means allowing partners to test new ideas with limited capital, investing more if successful and cutting if not.
#7. Learn to invest by proving hypotheses. Players trust their instincts. Smart investors do their homework. a16z questions the assumptions of its partners and asks them to test to minimize the risks. Except for senior partners, who have more leeway.
#8. No borders. Others may shy away from entrepreneurs with dodgy pasts, but 16z seems to have no such qualms, including funding Flow, the new venture of Adam Neumann of WeWork infamy.
#9. Constantly promote. a16z is no stranger to public relations, which helps companies such as Coinbase. Airbnb, Affirm, Instacart, Netscape and Skype are relentlessly promoted and allow VCs to exit at exorbitant valuations. After their release, watch out below as valuations often drop.
MY OPINION: Andreessen and his company seem to have found the right combination of positioning on emerging trends, testing new directions and relentlessly pushing for high valuations. But Andreessen is human — after being an early investor in Instagram, his company invested in a competitor and avoided a subsequent round of Instagram funding. The contestant has gone to bed. Instagram has become a unicorn.
The above also suggests advice for the investing public: be careful when investing when the company is going through its hype cycle before, during, or immediately after an IPO when the company, VCs and investment bankers are in full promotional mode. Let the hype die down before you consider an investment.