How Andreessen Horowitz Is Disrupting Silicon Valley • Hacker News Board

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#41

Post by michaelochurch » Sat, Sep 06, 2014, 12:04 PM UTC

Andreessen Horowitz has generated a positive reputation (in a field where most of its counterparts are ridiculous, incompetent assholes, so seeming strongly competent provides prominence) but here's a stark indicator for "wolf in sheep's clothing": http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engin... . Read it.

If you don't have a nose for rot, I'll point your way to it:

    Today, if you have a great idea for a software product, you need to either 
    be an engineer or find one. Tomorrow, that billion-dollar startup acquisition 
    might not need an engineer at all.

I have no direct knowledge of A16Z, but admitting a desire to make software "a low-skill trade" is chewing our food for us. The moral conclusion is right there. They've actually admitted to being the bad guys, to wanting to commoditize top talent in favor of our MBA-culture colonizers.

Most of the time, the bad guys don't say, "We're the bad guys". You actually have to do some research. You have to poke around the countryside and find the emaciated political prisoners and the mass graves to figure out who the bad guys are. Not here. The good news is that the Silicon Valley elite have such unprecedented arrogance that, often times, they'll actually admit what they are. They'll flat out say, "fuck you programmers, you had your turn."

For those who aren't educated on the matter, the evil of Silicon Valley's last 20 years is that it has become an economy of resource extraction (like Saudi Arabia) instead of one that genuinely creates wealth. The difference is that, instead of said resource being oil or natural gas, it's the intelligence and energy of each generation of young people that hasn't figured out, yet, that the only people with a decent chance of getting rich in this Valley game are VCs and landlords (i.e. not them, the people doing the actual work).

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#42

Post by taksintik » Sat, Sep 06, 2014, 1:13 PM UTC

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 very nature of the S&P 500 would exclude it from such a comparison. VC funds are targeting startups not established entities. To make the S&P 500 list you have already achieved a significant balance sheet through years of tweaking /improving.

The return comparison is unequal.

A better barometer would be cash on cash returns but with vc funds that may be difficult to track.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#43

Post by jgalt212 » Sat, Sep 06, 2014, 1:55 PM UTC

pbreit wrote: post #34

jeffreyrogers wrote: post #13

Earlier quoted context omitted.

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.

I don't know about that. Over that time period, post 2008 crisis, many funds (PE, fixed income focused HF's and equity funds) did very high returns as most asset classes bounced back from the crisis depths. Helped along, of course, by unprecedented money printing and credit expansion by the Fed.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#44

Post by Havoc » Sat, Sep 06, 2014, 2:21 PM UTC

It strikes me as ironic that he would pick Twitter to convey >140 char essays.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#45

Post by david927 » Sat, Sep 06, 2014, 2:45 PM UTC

michaelochurch wrote: post #41

Andreessen Horowitz has generated a positive reputation (in a field where most of its counterparts are ridiculous, incompetent assholes, so seeming strongly competent provides prominence) but here's a stark indicator for "wolf in sheep's clothing": http://a16z.com/2014/07/30/the-happy-demise-of-the-10x-engin... . Read it. If you don't have a nose for rot, I'll point your way to it: Today, if you have a great idea for…

You're right, of course. Developers still hold a lot more of the cards, and power, than investors would like.

But you're also missing the irony here: when software foundations consolidate, so will everything else in software. Instead of a thousand crazy 'apps' like SnapChat, you'll have user-derived variations, fulfilling the long tail, leaving little need for VC and the silly valuations they inspire.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#46

Post by jeremyt » Sat, Sep 06, 2014, 2:48 PM UTC

easytiger wrote: post #36

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?

Or maybe he just happens to believe what he says? Maybe he believes that the sensitive information that Snowden released is damaging the security of the US?

I personally think Snowden was a traitor. He released way more information than was necessary to accomplish his goal; The information he released has almost certainly put lives in jeopardy; AND he fled to Russia which is essentially a totalitarian state where his presence, if not aiding in a material way, is aiding Russia in a PR capacity. If you haven't noticed, Russia is turning out to be, if not a geopolitical foe, and outright enemy of the United States.

Why have we got to jump to questioning people's motivations every time they stray from the party line? ...As if there is only one acceptable opinion to hold on everything.

Sheesh

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#47

Post by jonnathanson » Sat, Sep 06, 2014, 3:08 PM UTC

pbreit wrote: post #34

jeffreyrogers wrote: post #13

Earlier quoted context omitted.

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.

Three years is a very short timespan from which to make claims about asset classes. In most cases, seven years is considered the minimum for a true sampling of baseline performance; ten years is better, and more than ten is better still. Obviously a16z hasn't been around for ten years, so metrics like three-year IRR are the best we have. That said, it's silly to take a three-year IRR and benchmark that confidently against something like the S&P 500.

On the other hand, I would strongly suspect that the top VC firms massively outperform the VC industry as a whole, due to any number of factors, including deal access, ability to secure favorable terms, ability to make new rounds or exits happen, etc. In time, a16z's longitudinal performance may well beat the market. But it's way too early to call the ball.

I agree that you can't really look at the aggregate performance of the entire VC industry. It's probably a highly skewed distribution, with almost all the big returns going to a handful of funds.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#48

Post by foobarqux » Sat, Sep 06, 2014, 3:14 PM UTC

pbreit wrote: post #33

foobarqux wrote: post #22

Earlier quoted context omitted.

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.

The point is a Skype-type no-shop deal is unlikely to be replicated.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#49

Post by foobarqux » Sat, Sep 06, 2014, 3:16 PM UTC

chetanahuja wrote: post #27

foobarqux wrote: post #20

Earlier quoted context omitted.

That's a great paper but most people are interested in the performance of the top 10 firms, not the average of the top 100. If I invest only in Sequoia/KPCB/AZ/Accel how well am I doing?

Like this ? "Only four of thirty venture capital funds with committed capital of more than $400 million delivered returns better than those available from a publicly traded small cap common stock index"

That's helpful but the argument will always be that you just need to pick one of those four or that Kauffman are bad pickers of funds and therefore exclude many of the best from their allocation.

Re: How Andreessen Horowitz Is Disrupting Silicon Valley

#50

Post by foobarqux » Sat, Sep 06, 2014, 3:18 PM UTC

akg_67 wrote: post #28

foobarqux wrote: post #20

Earlier quoted context omitted.

That's a great paper but most people are interested in the performance of the top 10 firms, not the average of the top 100. If I invest only in Sequoia/KPCB/AZ/Accel how well am I doing?

You should be able to get return information from State Pension Funds that invest in private equity/venture capital. For example, the Washington State Investment Board Private Equity IRR report can be access at http://www.sib.wa.gov/financial/invrep_ir.asp . From December 2013 IRR Report [PDF] at http://www.sib.wa.gov/financial/pdfs/quarterly/ir123113.pdf , U.S. Venture Partners VIII, L.P. 6/4/2001 3.23% New Enterpri…

That's great, thanks. Unfortunately it doesn't have much post 2001 data on many big name VC funds like Sequoia/Accel/KPCB.

Reuters couldn't get these via Calpers after suing.

http://www.reuters.com/article/2013/12/20/us-funds-californi...