Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

blogs.wsj.com

Post reply on HN
Print view View original

11–20 of 97 posts

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

#11

Post by derefr »

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.

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

#13

Post by aaronbrethorst »

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.com/2012/04/22/instagram/)

A-H offers seed investments to YC companies in order to get a foot in the door with the small fraction who will succeed. Offering blanket seed investments confirms that they really don't have any idea at first either. There's nothing wrong with that, it's just the nature of the beast. (http://venturebeat.com/2011/10/14/andreessen-horowitz-to-giv...)

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

#14

Post by gfodor »

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.

This is obviously not the case, otherwise VC's would not analyze the business model or product at all when making investments. On the contrary, the particular idea and plan take on a large part of the investment thesis. In fact, the pairing of the team and the idea (can this idea be executed on by this team? do they have some unfair advantage in this area?) is an important factor as well.

In other words, what you're doing here is basically redefining pivot so as to be meaningless.

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

#15

Post by adwf »

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…

Losing the ability to identify or losing the desire?

When you get down to it, if you have a $50m fund, you might want to invest in ~10 A-rounds at ~$5m each. If you have a $1.5bn fund however, do you really want to invest in 300 A-rounds?

Nope. The best way to spend your time is looking at the bigger, later investments. You probably still only want to have roughly the same number of total investments to oversee. So if an A-round company is gonna take the same amount of attention as a B-round or later, you shouldn't waste even a second of your time considering them.

It's nothing to do with ability to identify, just correctly prioritising the time the VC's have available to them.

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

#17

Post by npalli »

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 could be lead to some interesting outcomes.

1. Via Angellist syndicates it will be easier to raise up to $1 Million (maybe half). So you will have a bunch of companies that get funded via this super series/seed/angel model.

2. Then they will hit a roadblock, they will not get any $10-$20 Million to fund growth or get a true product/market fit.

3. The vast majority of the companies from step 1. will be wiped out because even if they have a hint of product/market fit, they will not get funding.

4. The tiny minority from step 1. that can get funding for Series B. in the range of $50Million or more will wipe out all other startup in the category and capture all the gains. This in turn means a16z and the likes will be able to extract a lot more stake out of the angels and the founders.

Net net, won’t be surprising if angellist and other crowd funders end up losers in the process and returns go to a16z and their compatriot VC’s.

Love VC double speak in the article. You know how politicians talk, when they have to pass some unpopular law they invoke the common man and the small business owner. Scott Weiss from a16z is a standup guy. Always fighting for the engineer founder. Fucking those MBA types since the beginning. Please elect him to be your VC. If AirBnB showed up at a16z do you think he would turn them down (non-engineering, MBA type company). Yeah, didn’t think so :-)

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

#19

Post by not_that_noob »

Basically, they can't compete at the A level now against Angelist. If you're a fundable startup, would you take $5M from any VC (even someone as stand-up as AH) with control strings attached or would you rather raise on Angelist and stay in control?

So the real funding opportunity for AH is at the B round, where as Scott says, they will go in hard.

Makes total sense.

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

#20

Post by not_that_noob »

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.
Post reply on HN