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How Andreessen Horowitz Is Disrupting Silicon Valley

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Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#31

Post by taurath »

foobarqux wrote: post #9
jmduke wrote: post #6

I'll be honest -- my first impression after reading this piece was to research Peter Sims and figure out his connection to a16z, since my gut reaction was that blatant puff pieces usually have some sort of connection hidden below the surface. (I was unable to find anything.) Sims brings up the following point about VC returns: > The predominant old way of thinking about venture capital is that you: a) build up a grea…

I would love these figures too but VC is notoriously secretive about their returns. There was a court case where Reuters sued Sequoia to get them to disclose their returns based on the fact that a big public-sector pension fund was one of their investors. Reuters lost. http://www.reuters.com/article/2013/12/20/us-funds-californi...

Oh k. Surely there can't be any sort of bubble or fraud there. What happens to the startups if the VCs fall?

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#32

Post by pbreit »

jmduke wrote: post #6

I'll be honest -- my first impression after reading this piece was to research Peter Sims and figure out his connection to a16z, since my gut reaction was that blatant puff pieces usually have some sort of connection hidden below the surface. (I was unable to find anything.) Sims brings up the following point about VC returns: > The predominant old way of thinking about venture capital is that you: a) build up a grea…

The data is misleading because it's much easier to identify the good venture funds and they perform much better than pretty much any other investment class (ie, Sequoia, Andreesen, Accel, Benchmark, Founders, etc.). Also, venture, unlike pretty much every other investment category actually can influence its portfolio and in a variety of ways.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#33

Post by pbreit »

foobarqux wrote: post #22
ironchef wrote: post #18

Earlier quoted context omitted.

Don't have the most recent numbers but http://fortune.com/2012/07/24/nice-ira-andreessen-horowitz-r... It would seem they've done quite well.

Besides the fact that Skype was an exceptional insider deal these numbers can be misleading ("twice over" for a 10 year fund is about 7% a year and IRRs are distorted when money is returned early because you are not getting that return for the remaining period of investment).

But insider deals are a key part of venture.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#34

Post by pbreit »

jeffreyrogers wrote: post #13
nrao123 wrote: post #3

AH is doing some remarkable stuff. 1) Like any great knowledge based firm - which strives to differentiate over and above its people - they have invested in tools. While the inspiration maybe CAA, firms like Mckinsey (knowledge management system) and Goldman (SecDB / Slang on the trading side and a detailed CRM system for the banking side) used the software / infra layer to develop a sustainable advantage which did n…

Right, but the real question is: what are their returns? (And: how do they compare to VC as a whole?, how do they compare to long-term US treasury bonds?, how do they compare to the S&P 500?

As linked, AH's first fund had an IRR in the 30% range for 3 years which blows away pretty much every other asset class. I'm sure Accel, Founders, Sequoia, Benchmark, etc are doing even better.

You can't look at venture averages because the best firms are easy to identify and perform much better than average.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#35

Post by pbreit »

johan_larson wrote: post #5

What would be the (software) VC equivalent of contrarian investing? Let's see, we could invest in companies that - are tackling problems for which solutions already exist - are staffed by experienced people, not youth - use mature technology - have nothing to do with the web or even the internet - are run outside of the valley (bonus points for flyover country) Surely there must be other things that warm the heart of…

I don't think the geography is the best parameter. Think of it this way: if something was contrarian in all other aspects, would you prefer it in the Valley or outside? Can you say that about other parameters?

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#36

Post by easytiger »

cyphunk wrote: post #26

Just a reminder, Andreessen is the same person that says Snowden is a traitor.

And from reading some books discussing Andreessen & his past ventures I wouldn't have thought he'd have considered Snowden anything other than a +ve force in the information world.

Perhaps Andreessen has interests in companies that were hoping to help governments spy on their charges?

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#37

Post by jschulenklopper »

cpwright wrote: post #21
ghshephard wrote: post #15

It was an interesting Editorial Decision to not use the preferred A16Z, but instead go with the (exactly same length) A.H. everywhere.

A.H. requires no explanation for those not in the know, A16Z does.

Well, their website is at http://a16z.com/, so the explanation could have been short.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#39

Post by johan_larson »

pbreit wrote: post #35
johan_larson wrote: post #5

What would be the (software) VC equivalent of contrarian investing? Let's see, we could invest in companies that - are tackling problems for which solutions already exist - are staffed by experienced people, not youth - use mature technology - have nothing to do with the web or even the internet - are run outside of the valley (bonus points for flyover country) Surely there must be other things that warm the heart of…

I don't think the geography is the best parameter. Think of it this way: if something was contrarian in all other aspects, would you prefer it in the Valley or outside? Can you say that about other parameters?

Contrarian investors try to do what most investors don't. Don't most VCs invest primarily in companies that are nearby, meaning Silicon Valley proper and maybe the larger peninsula? Which means a contrarian would invest outside it. Maybe way outside it. Like Kansas.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#40

Post by IanCal »

foobarqux wrote: post #22
ironchef wrote: post #18

Earlier quoted context omitted.

Don't have the most recent numbers but http://fortune.com/2012/07/24/nice-ira-andreessen-horowitz-r... It would seem they've done quite well.

Besides the fact that Skype was an exceptional insider deal these numbers can be misleading ("twice over" for a 10 year fund is about 7% a year and IRRs are distorted when money is returned early because you are not getting that return for the remaining period of investment).

Also, if we're looking at the 2009 onwards, the S&P500 has returned an average of 18%, a 2.28x return.

(2009 - 2013 figures from here: http://en.wikipedia.org/wiki/S%26P_500#Total_annual_returns)

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