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Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

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Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

#21

Post by devindotcom »

aaronbrethorst wrote: post #13
3pt14159 wrote: post #3

To me this is essentially admitting that Andreesen Horowitz is loosing the ability to identify impactful startups. That is fine, its harder to do at scale, but nothing is different now than 5 years ago. We have lots of people doing experiments, some hit early success, some pivot. Once you get product market fit, you raise that B/C/IPO on the back of the growth you've been able to afford thanks to your raises and reve…

Andreesen Horowitz is loosing the ability to identify impactful startups Pet peeve: it's losing, not "loosing". I don't know if anyone can properly guess if a consumer startup is going to get traction until it does, especially in the mobile space. That said, they did manage to get a 312x return on their seed investment in Instagram (which they declined to invest in a second time as explained here: http://bhorowitz.co…

Or maybe they are actually loosing the ability, like loosing the hounds of war! But I doubt it.

Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

#22

Post by Cookingboy »

derefr wrote: post #11
gfodor wrote: post #4

I know it's been true for a while, but "pivot" is really gone from "alter part of the business while retaining certain aspects of it and the company's core strengths" to "pitch an idea in the trash and start over." Properly pivoting an idea probably should not be too disruptive to investors' investment thesis, since the pivot is happening because a new, clearly better route has been uncovered in the process of the fi…

If the value in most startups -- as evidenced by the practice of acquihiring -- is really just the team, then a pivot would be anything which changes the business while keeping said team.

The value of most FAILED startup can be salvaged from the team, you will never see a startup with a valuable/popular product gets acquit-hired. Sure, the team has value as engineers, but a company that keeps failing with their products and keeps "pivoting" puts doubt on the value of their founders as entrepreneurs (they may still be brilliant engineers). VCs like to invest in entrepreneurs (especially entrepreneurs who are also engineers). So the quality a VC looks for from a team is drastically different than the quality a bigger company looks for when they acquihire a team.

Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

#23

Post by pedalpete »

I suspect this is more of a PR move about their focus than anything else. We'll have to see how it plays out, but as a16z grows, I'm sure a ton of Series A deals are trying to get an intro, this leads to overhead and a mass of companies that a16z doesn't feel are a good fit for the exponential returns they are looking to get. Get rid of those companies by saying we don't do series A. But they'll still get deal flow through their contacts, and I'm sure if an amazing Series A opportunity comes through, they'll jump on it. Nothing here is stopping them from investing, they're just saying "if you're looking for Series A, don't come to us".

My question is how does investing in YC companies at seed stage, but then blanket refusing to invest in those companies Series A deals reflect on those companies? Or is this another reason to state loudly that they don't do Series A deals? That way it doesn't reflect badly on the early stage companies that existing investors aren't re-investing. Then, if they do decide to invest in a YC company series A, it's a positive response, rather than the expected.

Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

#26

Post by npalli »

not_that_noob wrote: post #20
npalli wrote: post #17

It is interesting that a16z is making a public announcement following the angelist syndicates announcement a few days back. The initial sentiment with the angellist event was that it will drive down VC fees, angels and founders will be king and take more control etc. However, a16z and by proxy (I suppose) silicon valley VC community is making a public announcement that they will not be funding series A anymore. It co…

If you haven't found market fit on $5M, which you can raise on AL, you need to fold, not try to raise $10-$20M. No one will give you that kind of money without mega traction.

I don't think your numbers will work out. It is going to be very difficult to raise $5M on AL. Here is an example of someone who raised $250K. He needed 35 backers[1]. This is during the heady starting days. At an average investment of $10K to $20K you will need 500 investors to get to $5M. How will this work with so many investors? My guess is you will get to $1Million, tops and stop. I doubt you can show market fit with $1Million.

[1]http://blogs.wsj.com/digits/2013/10/09/how-one-angellist-syn...

Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

#27

Post by dools »

Cookingboy wrote: post #22
derefr wrote: post #11

Earlier quoted context omitted.

If the value in most startups -- as evidenced by the practice of acquihiring -- is really just the team, then a pivot would be anything which changes the business while keeping said team.

The value of most FAILED startup can be salvaged from the team, you will never see a startup with a valuable/popular product gets acquit-hired. Sure, the team has value as engineers, but a company that keeps failing with their products and keeps "pivoting" puts doubt on the value of their founders as entrepreneurs (they may still be brilliant engineers). VCs like to invest in entrepreneurs (especially entrepreneurs w…

Since most startups fail wouldn't this make the parent's comment true?

Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar

#28

Post by briantakita »

wmf wrote: post #18
rflrob wrote: post #16

Speaking as a practicing fruit fly geneticist, the metaphor of a "fruit fly experiment" is lost on me... anyone care to enlighten me?

Fruit flies grow very quickly and don't live very long.

The corollary is Fruit fly populations mutate at a fast rate.
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