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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

#91

Post by xsenna »

pmarca wrote: post #80
amirmc wrote: post #69

Earlier quoted context omitted.

Now that's what I call a pivot :) More seriously, I was just trying to point out a source of confusion. In any case, I'd love to hear more about the enterprise space as it's something I'm interested in but have little visibility into. Elsewhere you mention 1200 execs (annually) tell you what they think of new ideas. Can you share any of the insights or problems? I bet there are lots of nascent startups/ideas that may…

Here are a bunch of general observations: * Enterprises have a continuous ongoing need for new technology. Some they build in-house but like anyone else they are mostly busy running their current business and so they tend to buy important new technology from technology companies. I bring this up because it was in doubt a while ago -- and enterprises really slowed down buying new technology between ~2000 and ~2008 --…

Having worked in enterprise field for quite some time, I feel that all consumer-startup driven innovation in terms of ease of use, UX, drastic decrease in cost, etc. only recently has been trickling down to enterprise, which has a much higher inertia and barriers to entry.

The CIOs are now much more open to new products than before even in very traditional and conservative industries, while the leading existing technology providers are not in a much better position to offer a new product, as they would be starting from scratch because of huge technological advances and a shift in development practices, all thanks to consumer startups.

Given a backing from an A-list player provides the needed boost in initial traction for enterprise startups, basically a "rolodex" of previous acquisitions and a network of CIOs, if an idea has a market, the failure rate can be kept at a minimum.

The only thing I don't understand is how an exit strategy looks like, as it seems only logical that there should be a monster or two on the enterprise market (Microsoft and Oracle of the 21 century), who should either acquire those products that succeeded or develop their own alternatives. So I'm pretty sure that in 5 years time the great consolidation is coming and it will become more difficult to develop a business out of a product idea.

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

#92

Post by xsenna »

sfjailbird wrote: post #68

I will go on record to say that Rap Genius is the most ridiculous investment ever, and that it will tank with not a dollar in sight within ten years. If this is the type of startup Andreesen Horowitz are backing away from in B2C I would understand, but this is one of the consumer plays they did invest in. And now the message is that they want to invest in solid consumer startups only. Makes no sense to me.

Maybe it's a promo investment, this is something journos can get excited to write about, more so than another ERP or middleware solution.

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

#93

Post by pmarca »

xsenna wrote: post #91
pmarca wrote: post #80

Earlier quoted context omitted.

Here are a bunch of general observations: * Enterprises have a continuous ongoing need for new technology. Some they build in-house but like anyone else they are mostly busy running their current business and so they tend to buy important new technology from technology companies. I bring this up because it was in doubt a while ago -- and enterprises really slowed down buying new technology between ~2000 and ~2008 --…

Having worked in enterprise field for quite some time, I feel that all consumer-startup driven innovation in terms of ease of use, UX, drastic decrease in cost, etc. only recently has been trickling down to enterprise, which has a much higher inertia and barriers to entry. The CIOs are now much more open to new products than before even in very traditional and conservative industries, while the leading existing techn…

I agree with your first three paragraphs.

On your final point, I think that's certainly possible. At least that's the historical cycle. There are actually a bunch of plausible acquirers at scale -- of the new companies Salesforce and Workday are certainly candidates, and a bunch of the older companies as well -- it will be interesting to see if a new CEO of Microsoft embarks on a major acquisition binge of enterprise cloud companies (perhaps in conjunction with spinning off or killing some of their less-successful consumer efforts).

However, it's also possible this cycle plays out differently, or at least at much larger scale and over much longer. The three big arguments in favor of this are:

* New enterprise cloud/SAAS vendors may be able to sell into much bigger markets than traditional enterprise software -- since there are many more companies that can use online services than could ever install and use enterprise software on premise. In particular, going downmarket is far easier with the new model. Plus, globalization and the developing world could dramatically increase market size. So new entrants may be able to get much larger as independent companies than the last generation.

* New enterprise/SAAS vendors may exist in many more categories than traditional enterprise software. New development/adoption/business models make it reasonable to think about a lot more horizontal and vertical applications and services than old enterprise software was capable of addressing. So maybe new vendors get much larger than anticipated since they can cover a lot more functions and verticals, or alternately maybe there are many more new vendors than we can conceive of now. We are already seeing a trend towards enterprise use of a lot more cloud apps per customer at this point in the cycle than a lot of people expected.

* As a consequence of the prior two, the independent market caps of the new cloud/SAAS vendors may end up being a lot higher than you might anticipate from history. This could really remove the incentive to sell hot new cloud/SAAS vendors as quickly.

I think these are live topics right now, and the answers will determine a lot of what happens in the enterprise startup ecosystem for years to come.

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

#94

Post by pmarca »

xsenna wrote: post #90
pmarca wrote: post #57

Earlier quoted context omitted.

Maybe you're right, but that's not what Scott was saying and that's not what I think. In my own words: consumer startups more and more have this very interesting "lightning in a bottle" effect where sometimes they take off like crazy and sometimes they just don't. I give full credit to the teams that figure out how to get the flywheel spun up, but it is also important to realize just how many highly capable founders…

The comparison of enterprise vs consumer is a very interesting topic. Why the consumer traction is so much more unpredictable?

My working theory is that consumer ideas are both art and engineering. The art component either takes in the mind of the consumer or it doesn't. Like movies or music, sort of. Lots of great engineering teams can't get the art to work with high probability, and even the great consumer internet artists swing and miss as often as they hit (eg odeo vs twitter). And if the art doesn't take, the engineering won't save you.

Whereas the enterprise ideas are mostly engineering - or rather the art lies in really understanding the customer and the domain, which is relatively straightforward for the great enterprise entrepreneurs, because they are already so deep in it and you can easily go talk to the customers one at a time and learn what you need to know to predict success or failure with pretty high confidence. Not easier but different.

These are all gross over generalizations of course. I think of this as a framework for thinking - one of many - not a literal description of the truth in all cases. One lens.

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

#95

Post by pmarca »

xsenna wrote: post #92
sfjailbird wrote: post #68

I will go on record to say that Rap Genius is the most ridiculous investment ever, and that it will tank with not a dollar in sight within ten years. If this is the type of startup Andreesen Horowitz are backing away from in B2C I would understand, but this is one of the consumer plays they did invest in. And now the message is that they want to invest in solid consumer startups only. Makes no sense to me.

Maybe it's a promo investment, this is something journos can get excited to write about, more so than another ERP or middleware solution.

Nope. We don't do those. It's the real deal. One of the fastest growing consumer properties of all time with huge market opportunity.

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

#96

Post by subdane »

pmarca wrote: post #94
xsenna wrote: post #90

Earlier quoted context omitted.

The comparison of enterprise vs consumer is a very interesting topic. Why the consumer traction is so much more unpredictable?

My working theory is that consumer ideas are both art and engineering. The art component either takes in the mind of the consumer or it doesn't. Like movies or music, sort of. Lots of great engineering teams can't get the art to work with high probability, and even the great consumer internet artists swing and miss as often as they hit (eg odeo vs twitter). And if the art doesn't take, the engineering won't save you.…

I love this quote about art and engineering, music and film. Spot on. So as a startup founder, filmmaker, musician - here's my question: how are you ever gonna get these blockbusters/chart toppers without taking a chance. The biggest film in the U.S. right now (Gravity) is by a Mexican filmmaker who made arty films like Y Tu Mama Tambien and Children of Men - not hollywood stuff. Really breakout, worldchanging, consumer, Apple-style stuff is made by weirdos, punks, poets and freaks. With all the capital A16 has to deploy - why not create a fund for some of the crazy ones?

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

#97

Post by graycat »

pmarca wrote: post #81
graycat wrote: post #76

Reading that article, I get the strong impression that A16Z really doesn't much know what the heck they are doing.

Yep, that's probably it.

Yes, it is.

Next to no one at A16Z is qualified to review new, correct, significant, powerful, valuable, useful technical material, review research papers in technical fields submitted to peer-reviewed journals of original research, be a problem sponsor at NSF, NIH, or DARPA, or be even an assistant professor at a research university in a technical field.

An entrepreneur with some new, correct, significant, powerful, valuable, useful technical material as the crucial, core technology of an information technology startup would face a serious threat with a partner at A16Z on their Board because that person would not be able to evaluate budgets and projects for new technical work for the company.

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