Unravelling A16Z: The Growth Story of Alternative VC

Original title: "Deep Dismantling A16Z, Media Doesn't Want to Be a Broker Is Not Good Venture Capital"

Originally written by Deep Tide Techflow

Known as one of Silicon Valley's bad boys, A16Z made headlines again on June 24 with the announcement of Andreessen Horowitz's third Crypto Fund, Crypto Fund III, worth more than $2.2 billion.

Eight bets against Coinbase, which sold off shares in the secondary market, earned more than $4.3 billion; Raised over $3 billion in heavy cryptocurrency holdings... A16z has become the capital beacon of the crypto world, but compared to these tags, A16z has an essential core --A media company that makes money through venture capital.

Alternative VC, the king after the vote

A16Z has had its own topic since its inception.

It is like a group of tough dark horses, with a bold style, eclectic investment philosophy and investment history of brilliant results, in the past decade successfully rose to become the legend of the Silicon Valley venture capital industry.

Andreessen Horowitz, or A16Z, was co-founded in 2009 by Marc Andreessen and Ben Horowitz. It's named after Andreessen's A and Horowitz's Z, and the 16 letters in the middle.

Before starting A16Z, the two founders were already successful entrepreneurs who had made their names in Silicon Valley.

Marc Andreessen, the golden boy of Silicon Valley, learned computers at the age of nine and taught himself BACIC language in the town library. He began developing browser software before graduating from college.

In March 1994, Mr. Anderson, a recent graduate, teamed up with Jim Clark, a veteran venture capitalist, to start Mosaic, the communications company that would later become Netscape, before Microsoft crushed it.

The perfect match for Andreessen, Horowitz is also a tech entrepreneur by training. Loudcloud was founded in 1999 by Marc Andreessen and Ben Horowitz, a former Netscape employee.

It was the first cloud computing company to automate data centers. In today's eyes, it was a race track on the edge of The Times, but back in 2000, "cloud computing" was still a vague concept, and with the dotcom bubble burst, Loudcloud lost 90% of its customers.

Loudcloud had to break up its business, selling part of the company to EDS, and part of it to Opsware, a software-only company, until it was sold to HP for $1.65 billion in 2007. After eight years of hard work, the two finally made a profit.

In 2009, Horowitz teamed up with Andreessen Andreessen to start Andreessen Horowitz (A16Z), a partnership that helped change the investment landscape in Silicon Valley.

Compared with Sequoia Capital and other traditional investment institutions in Silicon Valley, A16Z is an alternative VC, mainly reflected in the following aspects:

A firm belief: software is eating the world.

Marc Andreessen wrote his famous Wall Street Journal article "Software is Eating the World" in 2011. "Software is everywhere and eating the world. This is a great opportunity, and I know where to put my money."

At this point, the investment of A16Z has a programmatic guidance. Since then, the investment of A16Z is almost all centered on software, especially stepping on the tuyeres of mobile Internet, and capturing star enterprises such as Skype, Facebook, Twitter and Airbnb.

II. Imitate Hollywood agency and build super after casting.

If you were to vote for the king of Silicon Valley after the vote, A16Z would definitely be on the list.

What's really game-changing about A16Z in Silicon Valley is that they've gone from investing in companies to working for startups.

"They tried to impress us by saying they understood venture capital differently," recalls Wiklund, Skout's founder. "It's not just about money, it's about value added services."

More than 70% of the 358 people in A16Z are engaged in post-investment management and empowerment, providing consulting, recruiting and coaching teams, business expansion, people management, external relationships and resource alignment to help startups grow rapidly.

A16Z's investment service concept is based on Hollywood tycoon Michael Ovitz.

In the 1980s and 1990s, his Creative Artists Agency (CAA) became the most powerful talent Agency in Hollywood and the world, largely because it changed the model of a single agent handling a client's entire business, with a team of experts each doing what they could.

In A16Z, there is no such thing as a pit for partners to serve a project independently, but in the form of resource sharing, each partner can serve for the same startup company.

A16Z can be likened to a Silicon Valley brokerage firm, dedicated to packaging and promoting its artists (startups). A16Z will come to the rescue when an artist is facing a negative crisis or needs external cooperation.

For example, shortly after leading Airbnb's Series B funding round, when the company was in the midst of bad press after a renter destroyed a San Francisco home, Andreessen went to founder Chesky's office in the middle of the night to give him a PR and follow-through.

A16Z's full-service approach was derided by Sequoia founder Roelof Botha, who suggested that they would only teach them fish rather than fish, but it turns out that this back-of-the-loop, deeply involved approach has helped many startups become unicorns in the industry.

When Accel Partners, Facebook's largest investor at the time, urged Mr. Zuckerberg to accept Yahoo's $1 billion offer for Facebook in 2006, the 22-year-old chose to listen to Mr. Andreessen's insistence that he not sell. Facebook is now valued at more than $1 trillion.

Third, dare to bet heavily, continue to follow the cast.

Traditional VCs are more like hunters, looking for targets in a wide range first, and investing independently after finding a good project.

40% of A16Z's projects are early-stage projects jointly invested with ecological partners. The first step is to cast a wide net and occupy a niche with a small investment. Once a project is found to have growth potential, A16Z will invest heavily in it, not only for investment, but also for deep incubation.

In general, 90% of startups fall on angel and A rounds, so how do you reduce the risk of "A round death"?

A16Z's answer is to use its strong capital reserves and post-investment team, deep service projects, and even use Series B money to directly invest in Series A. For example, when GitHub raised Series A funding, A16Z raised the valuation of GitHub to $750 million, making it the sole investor in Series A.

Then, A16Z uses a strong post-investment team to help the startup grow quickly and get out of the danger zone.

Don't underestimate A16Z's network and resources, which includes 1,000 Silicon Valley executives and 5,000 engineers, designers and product managers, to provide startups with everything they need.

Once A16Z is attracted to a certain project, it will continue to increase its stake, continue to bet, and support the optimistic project. In recent years, more than 50% of the investment cases are additional investment.

Previously, Clubhouse, a once-popular audio social platform, is a typical case of A16Z strong resource incubation and continuous betting. From angel round to round C, the founder personally endorsed the Clubhouse platform, a typical Da-type VC.

Media in venture capital guise

A16Z is more of a media empire than a Silicon Valley investment house.

When A16Z invested $80 million in Twitter in 2011, it became the first firm to own shares of Facebook, Groupon, Twitter and Zynga, the four most valuable social media companies at the time.

Since its inception, A16Z has attached great importance to marketing through media channels. In addition to accumulating and absorbing resources from traditional media and journalists, founder Anderson has made frequent appearances on social media and made comments on Twitter. While building fame through various marketing methods, it has also helped raise funds for it.

A16Z's original partner, Benedict Evans, joked in 2015:A16Z is a media company that makes money through venture capital.

However, with the rise of "We Media", A16Z began to gradually get rid of its dependence on traditional media resources. Instead, A16Z took the initiative to set up its own content team and media brand, and reported content in a more positive tone from the perspective of practitioners.

The rift between A16Z and the traditional institutional media has been a long time coming. In fact, Anderson and other A16Z executives have been complaining about the traditional media for a long time. They believe that they are ignorant and proud, lack in-depth understanding of the industry, and tend to write negative stories to attract attention, and lack positive guidance and really valuable statements.

In 2015, the "Theranos scam" storm became A16Z and institutional media fuse.

At that time, A16Z's support of the blood testing company Theranos was exposed by the Wall Street Journal is a hoax, the entire Silicon Valley technology circle in an uproar.

As a result, A16Z has had to come forward many times to explain, but they still have a lot of doubts, which makes them realize that they need to break the monopoly of traditional institutional media, create a channel to communicate directly with users and express their opinions, and give the power of reporting to people who really know what they are doing.

If you visit A16Z's official website, you may be mistaken for a page from a technology media outlet that says, "Know the future, now" at the top of the page. This is Future, the media platform built by A16Z.

At the bottom of the page, there are still content sections - news, Clubhouse live, podcasts.

In this process, A16Z opens the mode of "Everyone is a We Media" inside the company, and everyone from the CEO down to the ordinary employees is engaged in content output, aiming to build every member into an opinion leader in a certain field.

In A16Z's view, this may be the most cost-effective way to attract entrepreneurs and new projects of our time.

Encryption pioneer

A16Z was also one of the first to invest in cryptocurrencies.

A16Z led a $25 million Series B funding round in 2013, when Coinbase was just eight people and most people on social platforms called its bitcoin a Ponzi scheme. The Wall Street Journal reported that it was probably the largest venture capital investment in Bitcoin at the time.

In January 2014, A16z had invested nearly $50 million in bitcoin-related startups. Bitcoin continued to fall, falling back to $860. Founder Andreessen wrote an article titled "Why Bitcoin Matters", which laid down A16z's belief in investing in cryptocurrencies for the long term:

Far from pure liberal fairy tale or simple Silicon Valley hype, Bitcoin offers a vast opportunity to reimagine how the financial system can and should work in the Internet age, while also providing a catalyst to reshape the system in ways that are more powerful for individuals and businesses.

Since then, from 2013 to 2020, A16Z has invested in Coinbase eight times, eventually becoming the biggest external winner after Coinbase went public. A16Z has reduced its stake in Coinbaseby 15.4596 million shares, valued at about $4.375 billion, according to Futu.

To date, A16Z has launched three crypto fund phases: the first was launched in June 2018 and was worth about $350 million; The second phase was launched in April 2020 with a size of approximately $515 million; A third fund, recently launched, is worth $2.2 billion.

Now, A16Z has invested in 34 blockchain projects, including Coinbase, Uniswap, Solana, Makerdao, Dfinity, Chia and other star projects, covering public chain, stablecoin, exchange, payment, DEFI, NFT and other tracks. Become a bellwether for cryptocurrency investments.

What is more precious is the five investment concepts that A16Z used to invest in the crypto field specially mentioned when the "Crypto Fund I" was founded:

Long-term investors, structured to hold investments for more than 10 years

"All weather" investing, even when the market is in a "cold winter" will continue to invest actively

For entrepreneurs to provide operational support, the 80-strong operation team will provide help in recruitment, marketing and other aspects

Flexibility in terms of phase, asset type, and geography

Focus on non-speculative projects

In terms of the selection of investment projects, A16Z was keen to invest in hard-core projects of technology flow in the early stage, such as public chain and exchange of infrastructure. After entering 2020, the investment was more and more inclined to the application end.

In response to the latest $2.2 billion crypto fund, manager Katie Haun said it will focus on projects in three areas:

Infrastructure to enable mainstream consumers to use cryptocurrency products and services

NFT is about games

Decentralized Finance (DEFI)

The revelation of

What does the rise of A16Z tell us?

No matter in China or overseas, organizations or individuals, everyone is "We Media". This is not an empty slogan, and content is still one of the most powerful levers in this era.

For VCs or startups, building their own content and channels without relying on traditional media may be becoming a "dividend of The Times", or a "rigid need".

Influence is wealth.

In late May, Coinbase founder Brian Armstrong wrote in a blog post that "every tech company should go directly to their audience and become a media company," adding that Coinbase was building a media division.

Launched at the end of 2019 by GGV Source Capital, the non-serious audio business interview podcast "Inside Startup" has become an important channel for VCs and entrepreneurs to learn about cutting-edge projects and has been selected as Apple's Best Podcasts.

In the cryptocurrency space, Multicoin Capital partner Mable has published an interview podcast called "Uncommon Core," while options platform DeribitInsights has published a podcast called "Uncommon Core."

Strong super individuals such as musk, lei jun also positively shape personal influence on social platforms, for ordinary people, from 0 to 1, one of the lowest cost shortcut is to be content web celebrity, stood trill, quickly, B content such as platform to views, brave show oneself is the beginning of success, business flow, never out of date.

Secondly, the strong post-investment service capability has gradually become the core competitiveness of the PE/VC industry. Especially for the high-risk Internet or blockchain early projects, it may be an important magic weapon to improve the right of speech and the winning rate of investment to use the powerful industry resources of the investment institutions to help the projects overcome the crisis and complete the transformation.

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