> Second, I would suggest that a cold email is probably the worst way to approach ANY VC.
Sorry they are having trouble handling e-mail. It's an
old technology and relatively easy to work with. E-mail
is just simple text, much like HN posts. Such simple
text works great at HN. Too bad the 'high tech' A16Z
can't work with simple text.
With all their efforts to find good investment opportunities,
they might just look at their incoming e-mail and then
read it. But your statement seems to indicate that they
want to ignore e-mail, and that does appear to be the
case. Ignoring e-mail is bizarre, but they are free to do
so.
For the rest of your post, you miss the big, huge point:
As is commonly asserted, one of the better parts of
a new project is new technology that is powerful and
valuable, intellectual property, 'secret sauce', with a high technological barrier to entry, for
solving a big, important problem. Such technology,
at least in my interest, is
definitely just in the service of making money, the green
kind.
If a project claims to be able to solve a huge problem
so far unsolved, that many others have tried unsuccessfully
to solve, then a crucial, early question for interest
in the project is what the heck is the crucial 'secret sauce' that enables the solution, that lets this
project do what prior projects could not?
Again, of course, the purpose of and interest in the
secret sauce is making money.
I can 100% absolutely, positively guarantee you that
one can write a very carefully written e-mail
with a project to solve what is clearly a huge
problem with overwhelming and obvious evidence
that a company solving this problem will be
worth $x billion for x high enough to be historic,
and outline some of the crucial secret sauce
and have A16Z totally ignore the contact. Call
them on the phone and tell them about the
e-mail, and they will refuse to dig it out of their
inbox and look at it. They will say, "send it
again", and someone might say, "I don't think
that we can do business along these lines.".
"Send it again" is just a manipulation to
insult entrepreneurs by a firm that
does not value contacts from entrepreneurs.
If I get rich, A16Z won't participate.
The importance of their abilities to
evaluate new, powerful, valuable
technology is just that such evaluation is just
crucial for any project where one of the main
features is such technology. As I made clear,
thankfully for US national security, the US DoD
has long been excellent at evaluating new technology.
If the DoD sees a significant problem and
someone comes up with some new, powerful technology
for the first or a much better solution,
then the DoD will listen and, really, in my experience,
for a good case, proceed. My experience is that
apparently mostly A16Z won't; they
won't even look at their e-mail or
listen on the phone. Heck, just finding their
phone number takes some effort.
Biomedical VCs will evaluate such technology.
Information technology (IT) VCs won't. Why?
The IT VCs just don't want to care about
such technology. Instead they want to make
money other ways. As posted by Fred Wilson
at his AVC.com some months ago, on average the
IT VCs are doing poorly. Still they insist
on not even evaluating new technology.
Their feet are locked solidly in concrete
with their eyes and ears closed, refusing
to pay attention to e-mail and phone calls.
Really the IT VCs believe that all there is
to the 'technology' in IT is little more than
routine software development. On average, this
attitude fits with the past. But so far, e.g.,
from A16Z there are only about 15 projects a
year that deserve a Series A. And it's easy to
see that there are only a few Googles or Facebooks
each decade. So, looking at the average projects
in the past is a hopelessly poor way to find the
15 Series A projects for this year or the next
Google this decade. Still, A16Z won't read their
e-mail to find such projects.
The situation is fairly clear: The IT VCs
want to see traction, up and to the right.
Then they want to invest for the big build out
and the rapid growth on the way to going public.
Sometimes they make money doing this;
on average essentially they don't.
For your
> - They're not looking for MD physicians as the portfolio companies have the technical expertise.
No. My remark was in the context of the project of their
OP and recruiting. For the goals of that project
mentioned in this thread, my analogy with an MD is
correct -- they will need one. But they are not
recruiting for one. Instead they are recruiting for
nurse practitioners. E.g., you mentioned cluster
analysis. So, as I explained in terms of the SR-71,
could not evaluate that project by cluster analysis
of the then history of military aviation and, instead,
need to look at the engineering details Kelly Johnson
was proposing. Similarly, cluster analysis stands to
be nearly hopeless for predicting the future of
IT projects and, instead, must look at the details of the
projects. It does appear that the project of the OP
missed this point.
> - Do you want a cookie?
It's really tough to communicate with someone who
works not to understand. Then even something
simple won't come across. The point was,
in really simple, baby talk terms, (1) the
goal if IT projects is to make money.
(2) One of the best possible parts of a new IT
project is new, powerful, valuable, technology
to provide the first good or a much better
solution with a high technological barrier to entry to a big problem where such a solution
will be very valuable. (3) To evaluate such
a project early on, it is just crucial to
evaluate the technology. (4) My background
shows that I am competent both to create
such technology and to evaluate it, and,
more generally understand the potential of
such technology in projects in business.
From that background, no, I don't want a cookie.
Instead it would be good if A16Z would
read their e-mail and evaluate projects
including any new, powerful, valuable technology.
It's not about cookies. It's about
evaluating projects.
I wrote
"If they are making money, then, fine."
and you responded
> - I'm pretty sure that's not the case with you. I'm pretty sure that even if it was shown they're beating even 80% of other VCs you would still be hyper critical of their technical evaluation skills.
Sure. However much money they are making, they
shouldn't pass up making much more.
The US DoD doesn't do this. Neither does
the NIH or the US pharmaceutical industry.
People in US national security,
biotechnology, and research in mathematics,
statistics, and most areas of engineering
would say that refusing to evaluate
technology must be playing with mice
and ignoring elephants.
Besides, US VC ROI is so bad that being
better than 80% of the US VC firms
might well still mean just losing money
for the LPs.
> It's nice that you want to brush how most VCs are judged as successes or not (by the performance of their portfolio) as secondary in comparison to what you want to judge them by.
No, I judge them by making money. Their business
they have chosen is IT VC. Then if they refuse to
evaluate technology, then they are at high risk of
missing out on the next big win of the next
decade. Why is this clear? Not really because
'secret sauce' played such a big role in most or
even any of the big wins in IT in the past 20 years
but because of the overwhelming power of
'secret sauce' demonstrated in US national
security and the biomedical industry.
The NSF funds research in the mathematical
sciences and more mathematical ares of
engineering for a very good reason;
but Silicon Valley (SV) believes that no business
value can come from that work. SV is wrong.
They may be very badly wrong, e.g., miss
a few new Googles.
I wrote
"Net, A16Z apparently is not competent to review or even to direct a competent review of technical material in information technology."
and you responded
> - They don't make a claim to. Next?
Let's see: At their Web site can see
> At a16z, we bet on entrepreneurs who use software to go after the big problems.
Hmm. Sorry, guys, considering just routine software
is a huge handicap in going "after the big problems".
> We believe this is an incredibly exciting time to be a technology investor.
Okay, here they say "technology" and not just routine
software. But do they want to evaluate technology?
Apparently not. Heck, they won't even read their
e-mail.
> smartphone users are expected to grow from 1.5 billion today to five billion in the coming years.
There they go thinking of sectors again. Maybe with all
those new users there will be new problems to solve
and valuable companies to solve them. Otherwise they
are talking a "rising tide raises all the boats"
growth of a factor of only a little over 3 in 5 years,
and that's not very impressive. Broadly, super tough
to get venture returns from growth of a sector and, instead,
need to get such returns from growth of individual projects,
maybe in a rapidly growing sector, maybe not. For such
projects, 'secret sauce' technology can be one of
the best advantages.
> These entrepreneurs care enough about all aspects of their product/service that they want (or need) to innovate in all the areas that touch it.
So, now they also want to "innovate". That's what I'm
talking about where you thought it was just a cookie. But
such innovation needs evaluation. Of course, if A16Z just
looks at the traction, they they can talk about software,
technology, and innovation, refuse to evaluate anything
technical, and just count monthly uniques, page views,
ComScore data, etc. But A16Z says that they are
in "multi-stage" investing, and waiting for traction
now risks being quite late, too late.
Too late? Just do a little of the arithmetic
all of use here at HN can easily do: Pick an
Internet connection with, say, 25 Mbps upload
bandwidth. Pick a server with, say, an 8 core
processor at 4.0 GHz and 64 bit addressing
with 32 GB of ECC main memory and an armload
of 4 GB disk drives. We're talking $1500 in
parts. Send Web pages for 400,000 bits per page.
Send 5 simple ads per page. Get enough
users to half fill that upload bandwidth 24 x 7.
Have the software fast enough and scalable
enough that just one or a few such servers
can handle the load. Assume $2 per 1000 ads
displayed. Okay, let's multiply it out:
So send
25 * 106 / ( 2 * 400,000 ) = 31.250
pages a second.
Then revenue of
31.250 * 2 * 5 * 3600 * 24 * 30 / 1000 = 810,000
dollars a month.
Now, just why does such
a project want to accept seed
or Series A funding?
Has any project successfully
thought this way?
Sure: Early on Plenty of Fish
was just one guy, two old Dell servers,
ads just from Google,
and $10 million a year in revenue.
> If we are right that software is in fact eating the world,
There is considerable question if just routine software
will yield venture returns. One reason is the low
barrier to entry. E.g., China had no trouble
doing something like Google. Neither did Microsoft.
A16Z seems to accept low technological barriers to entry;
that has to be a big mistake, even if they
are making money. Heck, my local pizza guy is
making money.
I'm failing to see why an entrepreneur
with a good project should waste time
with A16Z who hide their phone number,
refuse to read their e-mail,
and won't and even can't evaluate
crucial secret sauce technology.