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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

#41

Post by aaronbrethorst »

3pt14159 wrote: post #40
aaronbrethorst wrote: post #13

Earlier quoted context omitted.

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…

This will probably come off as dickish, but that is not my intention. No where in your comment did you outline where my reasoning is wrong. Losing vs Loosing. Instagram doesn't address why they are dropping series A investments. 300x growth on nothing is still nothing. As for seed investments into YC companies, who cares? If they are getting out of the seed and series A game, I assume that that extends to everything…

I don't take it as being dickish. When did they ever have that golden touch you refer to?

None of the exits, except Instagram, listed on Wikipedia were invested in at a seed or A stage. http://en.m.wikipedia.org/wiki/Andreessen_Horowitz

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

#42

Post by mattschmulen »

aaronbrethorst wrote: post #41
3pt14159 wrote: post #40

Earlier quoted context omitted.

This will probably come off as dickish, but that is not my intention. No where in your comment did you outline where my reasoning is wrong. Losing vs Loosing. Instagram doesn't address why they are dropping series A investments. 300x growth on nothing is still nothing. As for seed investments into YC companies, who cares? If they are getting out of the seed and series A game, I assume that that extends to everything…

I don't take it as being dickish. When did they ever have that golden touch you refer to? None of the exits, except Instagram, listed on Wikipedia were invested in at a seed or A stage. http://en.m.wikipedia.org/wiki/Andreessen_Horowitz

alternative perspective VC SV startup is at a tipping point and "smart money" is being more cautious ( conservative ) as the market swings down .

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

#43

Post by prostoalex »

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…

Pivots can land a VC with a conflict of interest, where two non-competitors suddenly pivot into each other's space.

The classic example was PicPlz and Burbn (renamed Instagram after the pivot), the VC in question was a16z

http://thenextweb.com/insider/2012/04/23/ben-horowitz-on-why...

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

#44

Post by prostoalex »

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…

> and by proxy (I suppose) silicon valley VC community

I don't think it proxies that well. As the article points out, a16z raised a $1.5 billion fund, some top-tier firms might come close, but most of the mid- and bottom-tier VCs operate with the fund sizes in double-digit millions.

Also, for a highly contested B round, A round participants or brand-name VCs will get preference over a generic nondescript firm with a Sand Hill Road address.

Somebody from YC might correct me on this, but I think a16z's participation in automatic round upon admittance to YC comes with drag-along rights, which they can choose to exercise at either A or B rounds. So they don't have as much of a problem of missing on quality dealflow that others will miss on if they choose to skip A rounds.

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

#45

Post by ivv »

_lex wrote: post #9
sillysaurus2 wrote: post #7

Earlier quoted context omitted.

Looking at 2013 exits (or financings) is missing the mark. VC is a game of 1000x returns. And those returns have come from companies like FB, Google, etc. Most of the value of YC's portfolio come from Dropbox and Airbnb. All of these companies are decidedly consumer companies.

It's likely that Dropbox probably makes way, way more money from enterprise than from it's consumer business.

Google and FB, too, make most of their money from enterprise customers.

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

#46

Post by rwhitman »

I worked for a consumer startup that fit the profile. CEO would come up with an exciting business model, raise money with the dream, staff up, fail the execution and then 6 months later lay off half the company to go lean, pivot and repeat. They've squeaked by with 4+ years in business doing this, raised tens of millions from good investors. I could definitely see why any VC firm would want to steer clear of a business like that

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

#47

Post by CaveTech »

ivv wrote: post #45
_lex wrote: post #9

Earlier quoted context omitted.

It's likely that Dropbox probably makes way, way more money from enterprise than from it's consumer business.

Google and FB, too, make most of their money from enterprise customers.

This is only true if you blindly ignore the fact that enterprise customers are willing to give them money because of their consumer backing. If consumers backed away from FB and Google, their enterprise customers would be following them out the door. Clearly this makes them consumer oriented businesses.

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

#48

Post by pmarca »

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…

Just to be clear we didn't publicly announce that we are not doing Series A investments anymore. They remain the bread and butter of what we do. Scott was making a more nuanced point about a difference between how we look at consumer vs enterprise companies right now, and our relative preference for enterprise A's and consumer B's.

Re AirBNB, (a) we are an investor in AirBNB, and (b) the founders are extremely sharp product people and technically very deep. The CEO is a designer by background, like Ben Silbermann at Pinterest, another investment of ours. Both are hypercompetent product people with deep technical chops.

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

#49

Post by zacharycohn »

rwhitman wrote: post #46

I worked for a consumer startup that fit the profile. CEO would come up with an exciting business model, raise money with the dream, staff up, fail the execution and then 6 months later lay off half the company to go lean, pivot and repeat. They've squeaked by with 4+ years in business doing this, raised tens of millions from good investors. I could definitely see why any VC firm would want to steer clear of a busine…

Why do you work there? And I don't mean that in a snarky way, I'm curious what motivates you to stay.

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

#50

Post by pmarca »

prostoalex wrote: post #44
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…

> and by proxy (I suppose) silicon valley VC community I don't think it proxies that well. As the article points out, a16z raised a $1.5 billion fund, some top-tier firms might come close, but most of the mid- and bottom-tier VCs operate with the fund sizes in double-digit millions. Also, for a highly contested B round, A round participants or brand-name VCs will get preference over a generic nondescript firm with a…

I'm actually not even sure (without checking) if we have any drag-along rights from the YC Start Fund investments. If so, I don't think we have ever claimed them. We would never force a company to take our money if they didn't want to even if we had the legal right.
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