Chapter 1: How has venture capital evolved over the years?
If you share control, it becomes very, very difficult to change the organization because everybody's got to agree. I quoted Lil Wayne, I said, when I see another VC coming at me with the peace sign, all I see is the trigger and the middle finger. And everybody hated me for that. There would only be 15 technology companies that would ever get to $100 million in revenue.
And we really thought that was going to change because, look, at that time, we thought software was going to eat the world. And every new company was going to be a technology company. And therefore, there were going to be more like 200 companies a year that would hit that bar, not 15.
If you have a network with a billion people on it, it's going to be very valuable, but, like, how did Alexander Graham Bell sell the first telephone when there was nobody to talk to? Like, that part is actually really hard.
Thank you. Please join me in welcoming Ben Horowitz. Thank you.
So how many of you heard the song that was playing right before? Does anyone know the name of that song? We Are the World. Yes, that's correct. We Are the World is a 1985 single by a super group of musicians that all came together to raise. It was a charity single that was produced to help raise funds for the famine in Ethiopia, I believe, in 1985.
Yeah, Lionel Richie made a good documentary on it if you're interested. Correct. The reason I'm bringing it up is because Ben is known for many things. He's the co-founder of Andreessen Horowitz. I'm very lucky to have called him my boss for a few years. Yeah. He's also been a founder or CEO. He's built several technology companies.
He's behind one of the reasons venture capital still exists today after many moments when it, there were times when it got threatened, including the SVB financial crisis. But the thing I've learned most recently about Ben is from a documentary that Ben told me to watch about a year and a half ago. Yeah, yeah, yeah. Triple OG. It's called The Greatest Night in Pop.
And I would really recommend folks who haven't watched it to go watch it. We're going to put it in the reading assignment for this class. It's on Netflix. Anyone can go watch it. But it is the documentary about the making of that song you just heard, We Are the World. And there's somebody in the documentary that you'll observe if you watch it by the name of Quincy Jones.
How many people have heard of Quincy Jones? Okay, about 30%.
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Chapter 2: What role do network effects play in technology companies?
So we need to school the kids a little bit on it. Yeah, he was the greatest.
Great, great human being.
Great human being.
And more importantly, great leader. Yeah, well, that was the thing he could do. He was the best at handling super talented, difficult-to-handle people of all times, no question. And you can see it in the doc.
There's a moment in the documentary where the camera is following Quincy around, and he's walking into the studio where the musicians all are, and he points to the top of the door, and he says, read that. And there's a sign above the door that he's scrawled, on a piece of paper and he's stuck up there. This is at like around midnight before the recording session is supposed to start.
And it says, check your ego at the door. I think it says, leave your ego at the door. Leave your ego at the door, sorry. And if I had to summarize Ben Horowitz in sort of one line, I would say he's the Quincy Jones of technology.
That's a lot.
High bar.
Yeah, that's hard to take that credit. He is amazing.
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Chapter 3: How did Ben Horowitz and a16z innovate in venture capital?
And the problem with that idea, and you experienced this in your career at other venture capital firms, is If you share control, then it becomes very, very difficult to change the organization because everybody's got to agree. And if you know anything about running an organization, the one thing about a reorg is some people are going to hate it because it's a redistribution of power.
And it's not necessarily the people who aren't good. It's just like some people are just going to hate it because nobody likes to lose power. And if people get a vote, then there's no way to effectively reorg a business. And so our idea was like, you can't share control. We'll share economics, but we'll centralize control.
And that ended up enabling us to reorganize and enabling us to get into many more kind of categories like American dynamism or crypto or bio or these kinds of things because we could change the organization and scale it and so forth. And that ended up being an important kind of systems idea. And then because...
investing is always a conversation and you need a very, very high fidelity conversation to get to the truth. You never want more people in the room than can have a conversation. And so you can't have a conversation with 30 people. It's not possible. That's a presentation.
Over the years, what do you think is the optimal construct of a truth-seeking conversation when you're trying to understand the future of a technology that's super complex?
Yeah, I think that like if you have really good chemistry and rapport, it can be like seven. But if you don't, then even that gets problematic. But yeah, you just can't do it with a large group. And so what we ended up doing is we just kept kind of splitting the firm into smaller and smaller groups over time. And each group would address a certain part of the market.
And that, you know, that ended up being very effective.
And to contextualize for folks, when you started the firm, the first fund was about 300 something million, 320? 300 million. 300 million. And you had all these sort of institutional folks like David Swenson and so on who had these like sort of long held, for whatever reason, priors and assumptions. Yeah.
What did you find was the most effective way to realign them or get them to revisit those assumptions or update those priors in a way that was aligned with your mission?
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Chapter 4: What challenges do startups face in the current market?
How did you boot? What were the moments where that may not be legible to folks here that you used something that was asymmetric that allowed you to bootstrap the network at all?
Well, the really simple idea was we knew like venture capitalists made a lot of money, right? So they would take the fee money and then they pay themselves big salaries. And so we were like, well, what if we didn't pay ourselves anything? And we just took all the money and we basically spent it on building this network. So we would hire people to like bring people in.
We, you know, with our kind of How do you get relationships with every big corporation, FedEx and this and that and the other? And the trick that we had there was we had sold the previous company to Hewlett Packard. And so we knew the people in their enterprise briefing center. And so we would call them every week and say, who's coming to the briefing center this week?
And can we get their numbers? And we would call those companies and we would have them come to our briefing center. And we'd just show them all the startups. So it would be like, you know, and we'd have everything they like, all the donuts and all that stuff, you know. So it was like very un-venture capital-like. But, you know, the corporations loved it.
So all of a sudden, we knew more big companies than VCs who had been around 50 years because we had this hack. through the HP Enterprise Briefing Center.
I think it's very poetic that we're sitting at Hewlett 200, by the way. This is the name of the auditorium. It all comes back full circle. So, you know, when you started doing that, usually when somebody new shows up on the block with an insight like that, from a systems perspective, what we've observed is often the antibodies come out. Yeah. Right?
The immune response of the existing incumbent system comes out. Yeah. At the time, I was across the street with Mike, actually, at Kleiner. And I remember, you know, there was a, you know, A16Z was in the headlines all the time. And, like, our CMO at the time, great lady, but, you know, I remember taking one of the headlines to her and saying, like, you know, we should do this too.
And she said, on this executive briefing, oh, that's just marketing. And I said, yeah, that's your job. This is working. And I've been consistently shocked by the number of times A16Z has done something from a product insight, delivered that to the entrepreneur, and then everybody else just says, oh, that's just marketing. Am I being overly facetious or is that true?
And what were the immune responses like that that you were experiencing and how did you deal with them?
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Chapter 5: How is AI changing the landscape of venture capital?
But, you know, like if you're paying whatever, it's going to be at least several hundred thousand dollars a year. That's a hell of a return.
Right. So that creates this... So, you know, the final project for the class, for the students, is the one-person frontier lab. Because what we're trying to get everybody to realize is there's actually an extraordinary amount they can accomplish with the right tools.
Yeah.
Right?
And we have an entrepreneur like that right now building a global VPN by himself. Yeah.
And this started to become more common, I would say, when we were seeing pitches, I mean, almost a year and a half, two years ago now, right?
Yeah.
What does that mean for folks here who don't have necessarily access to the most capital, may not have access to a ton of compute either? What would you say is... But want to make a difference to the frontier, right?
Well, I mean, I think saying... I just be careful, a little careful with, like, people don't have access. Okay. Like, anybody... with a great idea these days has, like, trust me, you have access in that there's, like, unlimited money for good ideas currently. You know, maybe that changes over time, but, like, it's definitely there. And I would just say this.
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Chapter 6: What leadership lessons can be learned from Ben Horowitz?
So I think the best way to come on a good, a really important idea is to go try and solve something. Not necessarily build a company, just try and solve a problem. And then in that problem, if it's like a problem that you have, then that means it's probably real. And then in solving it, you'll probably or you'll likely find something much bigger.
And then that may like kind of force you to build a company. And those are the things that work the best that we've seen are solutions. are these big things. I mean, it's really hard to, and even like Elon Musk didn't start his career trying to build Tesla, right? Like he was solving a much smaller problem. And, you know, that's generally how you build up to that.
I think trying to swallow the earth from the beginning with no experience doesn't usually work. It's good for your pitch deck, but it's not good for your company.
I think Elon's first attempt was like a class of Yellow Pages competitors.
Yeah, yeah, yeah, yeah, exactly. A little bit more mundane than satellites. Yeah, Yellow Pages and then PayPal and then, you know, Tesla and SpaceX.
Well, so on that point, you know, the time horizon on which sometimes you find entrepreneurs sort of may have an impact on humanity is quite long, right? They bootstrap sort of the impact.
I would say, or let me put this, one of the old ways we've seen the generation of entrepreneurs that belong to Elon's generation is that they feel like they have to start, you know, somewhat with a narrow scope and then bootstrap like bigger and bigger scope with every successive project. But just a few minutes earlier, you said actually, you know, things are going through a lot of change.
You can have a lot of impact very quickly and relative to incumbents who may have had to be a little bit more measured in their approaches, right?
Yeah.
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Chapter 7: What advice does Ben give to aspiring entrepreneurs?
Like we never like said what that was. And then, you know, people stop liking each other. And then you hit the first hard issue. And it's like, you know, F it, I'm out. OpenAI is going to pay me a lot of money. Screw you guys. Screw you guys. I'm going home, as Cartman would say.
But what happens if you started by standardizing on some set of beliefs, set of actions, and then the world changes? And what you thought was going to be the right standard six months ago in a world where stuff changes so fast needs to be updated.
Yeah, yeah. Look, cultures can evolve. But, you know, you kind of have to evolve together. And you need a leader. You need like having, this is why I hate the idea of like co-CEOs or like we're all equal or like we're going to run a communist organization. It doesn't actually work in a company because you need somebody who's going to break the tie. okay, yeah, you want it to be that way.
You want it to be that way. We're going this way. If you don't like it, get the fuck out. Like that's how you have to run an organization in order for it to succeed. And I think people are, you know, we culturally got away from that idea in Silicon Valley a little bit, you know, in the end of the fat, happy network effect era, but like it's back now. So could you say more?
What do you mean by that? Well, you know, everybody wanted, like, a vote on what the company's values were and this and that. And, you know, and then, like, CEOs caved to that, and that ended up not working well for any of those. Right, right.
Companies are not democracies. They are cultures.
Yeah, well, I think a dictatorship always beats a democracy in a competitive battle. And so, because it takes a long time to decide things in a democracy. Now, look, for a country, it's different. Yeah.
You know, there are things when you have to last several hundred years that, you know, when no matter how good the monarch is, if they die and a worse monarch comes into play, that could be an issue.
Well, I'm going to push a little bit on this assumption that it's different for countries versus companies because something I've learned from you is the way you approach politics you know, the most exciting, the businesses I look up to the most, especially the ones in the A16 portfolio, are often leaders who are thinking so long-term. The way they talk about
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Chapter 8: What are the future trends in technology and venture capital?
What are the things that you've had to say no to because you're like, well, that could be an interesting opportunity. It might even help an entrepreneur out, but that's just not in our mission. That's not us.
Yeah, well, so I'll just give you one example. So the biggest one that got proposed to me like 18 times was Well, with AI, AI is very much like when the spreadsheet happened, that kind of launched private equity, right? Because all of a sudden, you could go in and make all these big companies much more efficient by having them adopt this new technology. And AI even more so, right?
You can go in and you can go into an old company and you can make it much more efficient with AI. And there's many VCs who are kind of going with that idea. And for me, like, there's, I would say, two big reasons I didn't want to do it. One is it's culturally the opposite of venture capital. You don't like leveraged buyouts, basically. Yeah, LBOs.
So, like, look, venture capital is about investing in entrepreneurs with new ideas and focusing on how they can grow fast. Leveraged buyouts are about, you know, entry price growth making it more efficient, firing people. And I don't really want to grow it. I just want to make more money out of what it is.
And so, like, if you're in the venture capital mindset, you're looking for the great entrepreneur to go build something amazing. If you're in the leveraged buyout market, you're caring about, like, okay, I'm going to bring in a professional. I'm going to have them run this more efficiently and so forth. So it's the opposite motion.
And so for me, I was like, well, I don't want to split the culture that way. Like, I think that's, you know, not going to be a good idea. And then the other thing is, like, I don't want to do that with my life. Like, I have the opportunity to fund, like, the greatest new ideas that are going to push humanity forward. I don't want to, like...
you know, leverage buyout, seize candy, and fire all the old ladies who work there. Like, I'm not doing that with my life. I'm like, fuck that. You know, like, go to another VC if you want to do that stupid shit. Or like that. Like, I mean, it's not stupid. I think it's a good business, but it's not a business for me.
So sometimes you're saying it's okay to impose bottlenecks on your own growth because that's just not what is fine.
Yeah, you don't have to be in every business just because there's money there. You know, look, I believe in, like, you build a company to kind of do something larger than yourself and make the world a better place. And then if you do that, you will make money. But if you are in business just for making money, like, that's not for me.
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