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
#2[deleted]
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#3To 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 revenue.
Just as Berkshire Hathaway had to change their investment strategy when they grew very large, it is fine for AH to do the same, but I don't believe for a second that things are hugely different in 2013.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#4I 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 first idea that the team can leverage their past efforts in executing on some tangible way. If you're really going to just try a completely new idea from scratch, it would make sense to refinance the business and give investors a chance to take their money out, but that's hard to legally structure obviously and would take too much time.
So I get the sense that AZ is saying a lot of startups aren't pivoting really but just pitching and starting over too often if they fail to get initial traction quickly enough. This combined with the illiquid nature of startup investments forces them to not really know what they are investing in and be stuck with it once it materializes.
People have started to forget that startups generally take a long time and a lot of work to build momentum. It's easier to just pitch what you have and jump into the next shiny thing. Particularly when you have ridiculously long runways due to low costs and absurd valuations. I blame the ridiculous liquidity in deals right now combined with the "fail fast" culture.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#5This is not something they are choosing - it is a market reality. Its now possible to start a company and essentially get to a B round without taking investment because cloud services make it so inexpensive that founders really don't need VCs any longer.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#6This shift is yesterday's news. Given their size, brand and PR, however, when Andreesen Horowitz does it, they get an article in the WSJ.
The reality is that tons of VCs have already migrated away from consumer startups.[1][2]
Data to support above
[1] 84% of 2013's largest exits in tech have been to enterprise companies - http://www.cbinsights.com/blog/trends/enterprise-tech-consum...
[2] 70% of 2013's largest tech financings have been to enterprise - http://www.cbinsights.com/blog/trends/venture-capital-enterp...
Disclaimer: I'm a co-founder of CB Insights - the firm that put out this research.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#7This shift is yesterday's news. Given their size, brand and PR, however, when Andreesen Horowitz does it, they get an article in the WSJ. The reality is that tons of VCs have already migrated away from consumer startups.[1][2] Data to support above [1] 84% of 2013's largest exits in tech have been to enterprise companies - http://www.cbinsights.com/blog/trends/enterprise-tech-consum... [2] 70% of 2013's largest tech…
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.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#8This shift is yesterday's news. Given their size, brand and PR, however, when Andreesen Horowitz does it, they get an article in the WSJ. The reality is that tons of VCs have already migrated away from consumer startups.[1][2] Data to support above [1] 84% of 2013's largest exits in tech have been to enterprise companies - http://www.cbinsights.com/blog/trends/enterprise-tech-consum... [2] 70% of 2013's largest tech…
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.
Sorry if my point was not clear. The article suggests a new insight into the venture landscape by A16Z given their shift away from consumer startups. Just trying to point out that the shift has already happened among VCs towards enterprise so this is not new.
Whether enterprise is a better area for VCs or not is a separate argument.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#9This shift is yesterday's news. Given their size, brand and PR, however, when Andreesen Horowitz does it, they get an article in the WSJ. The reality is that tons of VCs have already migrated away from consumer startups.[1][2] Data to support above [1] 84% of 2013's largest exits in tech have been to enterprise companies - http://www.cbinsights.com/blog/trends/enterprise-tech-consum... [2] 70% of 2013's largest tech…
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.
Re: Weary of ‘Fruit Fly’ Consumer Startups, Andreessen Horowitz Raises Series A Bar
#10This shift is yesterday's news. Given their size, brand and PR, however, when Andreesen Horowitz does it, they get an article in the WSJ. The reality is that tons of VCs have already migrated away from consumer startups.[1][2] Data to support above [1] 84% of 2013's largest exits in tech have been to enterprise companies - http://www.cbinsights.com/blog/trends/enterprise-tech-consum... [2] 70% of 2013's largest tech…
Can you list which enterprise companies had these large exits?