Mar 27, 2024 · 1h 6m · news
Chris Dixon: Who Will Win the Next Generation of Venture? | E1132 · 20VC with Harry Stebbings
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In this interview, a16z Crypto general partner Chris Dixon discusses his journey into venture capital, the strategic 'barbelling' of the VC landscape, and the architectural shift from centralized corporate monopolies to decentralized Web3 networks. He addresses regulatory challenges, debunks market speculation myths, and shares insights from his book, 'Read Write Own'.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 11.5% of the talking time here. How this is scored →
Harry as informed peer 3.1 Guest teaching 4.0 Guest disagreement 2.1 Harry pushing back 2.2
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:43 Forceful rejection of pump-and-dump claims
Dixon directly and forcefully dismisses Stebbings' question about pump-and-dump accusations, labeling the critics' premises as factually incorrect and outright misinformation.
Hardest push from Harry ▶ 39:57 Blunt confrontational query on fund ethicsStebbings asks an unvarnished, provocative question directly confronting Dixon about widespread industry accusations that a16z crypto engages in pump-and-dump schemes.
Biggest teaching moment ▶ 31:56 Historical lesson on Cathedral vs BazaarDixon reframes Stebbings' argument about Big Tech cash flows by delivering a detailed history of how open-source Linux systematically commoditized Microsoft's high-margin proprietary software monopoly.
Harry holds his own ▶ 50:34 Demonstrating deep mechanics of boutique seed survivalStebbings demonstrates sharp industry knowledge by explaining the stark mathematical reality boutique seed funds face when competing against mega-funds writing massive $5M on $25M checks without traction.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Early Life, Philosophy, and Discovering Startups | 1 | 2 | 1 | 0 | Stebbings introduces Dixon by asking about his childhood and philosophy studies, referencing Alex Rampell. Dixon politely explains his early interest in programming and cognitive science, framing philosophy as a natural path to technology. | |
| Entry into Venture Capital and Co-Founding Founder Collective | 1 | 2 | 1 | 0 | Stebbings asks when Dixon realized investing was his calling. Dixon details his brief stint at Bessemer, founding a company, and starting Founder Collective during the 2008 financial crisis when seed funding was neglected. | |
| The Psychology of VC Investing and the Principal-Agent Problem | 3 | 4 | 2 | 2 | Stebbings puts forward hypotheses regarding wealthy investors being better and advocating for a no-reserves model. Dixon reframes the premise around principal-agent problems and explains why pro-rata follow-on rights in outliers make financial sense. | |
| The Barbelling of Venture: Heat Seeking vs. Truffle Hunting | 4 | 5 | 1 | 2 | Stebbings cites Doug Leoni's perspective on venture commoditization. Dixon responds with a detailed barbell industry model comparing VC strategy to retail giants versus boutique brands, outlining heat-seeking versus truffle-hunting approaches. | |
| Founder NPS, Partnerships, and Corporate Governance | 4 | 4 | 3 | 4 | Stebbings challenges Dixon on whether VCs over-indexed on founder NPS at the expense of corporate governance. Dixon pushes back on the Founders Fund view, distinguishing between being a founder's friend and being a responsible fiduciary partner. | |
| Conviction, Predicting the Future, and Staying the Course | 3 | 4 | 2 | 2 | Stebbings quotes Ron Conway praising Dixon's unwavering conviction during downturns. Dixon explains his approach to predicting the deterministic future rather than merely reacting to current metrics. | |
| Strong Opinions Loosely Held: Fox vs. Hedgehog and Technology Timing | 3 | 4 | 2 | 2 | Stebbings quotes Alex Rampell regarding Dixon's strong opinions loosely held. Dixon uses Isaiah Berlin's Fox versus Hedgehog framework to explain how he tunes his models while remaining firm on macro tech movements. | |
| How Corporate Networks Strangled the Internet (and the Farcaster Example) | 2 | 5 | 1 | 1 | Stebbings asks why Big Tech is stifling internet innovation. Dixon explains the historical transition from open 1990s protocol networks to centralized corporate silos, offering Farcaster as an open alternative. | |
| The Cathedral vs. The Bazaar: How Open Source and Blockchain Disrupt Incumbents | 4 | 6 | 3 | 4 | Stebbings challenges whether crypto networks can actually disrupt mega-cap tech incumbents with massive cash flows. Dixon cites Eric Raymond's Cathedral and the Bazaar framework, showing how open-source Linux previously defeated proprietary software incumbents. | |
| The Computer and the Casino: Web3's Dual Identity and Regulatory Challenges | 3 | 5 | 3 | 1 | Stebbings asks about the main structural barriers facing next-generation community networks. Dixon introduces his Computer versus Casino taxonomy, criticizing regulatory policies that inadvertently punish useful builders while permitting speculative meme coins. | |
| Addressing 'Pump and Dump' Misconceptions and Fund Lifespans | 4 | 5 | 7 | 5 | Stebbings bluntly asks why critics accuse a16z crypto of running pump-and-dump schemes. Dixon forcefully rejects the premise as factually incorrect and misinformation, citing a16z's 10-year fund lifespans, 94% retention rate, and venture J-curve mechanics. | |
| The Need for Regulatory Clarity and Bright-Line Rules | 3 | 4 | 2 | 2 | Stebbings asks about ideal regulatory policy changes and potential political shifts under a second Trump administration. Dixon emphasizes that regulatory gray areas disproportionately deter legitimate entrepreneurs and benefit bad actors. | |
| Why Write 'Read Write Own'? Target Audience and 'Canon Events' | 2 | 3 | 1 | 1 | Stebbings inquires about the target audience for Dixon's book Read Write Own. Dixon outlines the concentric circles of readers and explains how books serve as life-altering canon events for founders. | |
| The Unbundling of Venture Brands and Content Creation | 5 | 4 | 2 | 4 | Stebbings argues that massive capital scale makes it difficult for boutique seed funds to compete against mega-funds. Dixon clarifies that a16z crypto focuses primarily on Series A to manage conflicts and collaborates with seed managers. | |
| Valuation vs. Long-Term Alignment: Choosing the Right Investors | 4 | 4 | 2 | 3 | Stebbings presses on whether founders should automatically take higher valuation offers. Dixon responds that long-term investor alignment and governance behavior matter far more over a ten-year company lifecycle. | |
| Scale, Systemic Impact, and a Philosophy on Money | 3 | 3 | 1 | 2 | Stebbings asks whether Dixon prefers running a massive vertical fund compared to his early boutique days. Dixon explains his transition toward seeking macro systemic impact and treating money purely as resource capital. |
Statements from this episode (34)
Chris Dixon: Software Movements Powered by Smart People Always Succeed
“I haven't seen a software movement where a bunch of very smart people were excited about it that hasn't eventually worked.”
Dixon: Two Main Venture Capital Strategies Work — Heat Seeking and Truffle Hunting
“I think there's sort of broadly two methods that work in venture, heat seeking and truffle hunting.”
Dixon: Big Tech Controls 95%+ of Traffic, AI Will Accelerate Consolidation
“The big five companies have 95% plus of the traffic and the money, and AI, as exciting as it is, will very likely accelerate that consolidation.”
Dixon: $10 million Series A was smallest check in mid-2000s VC
“In the time, 2000, you know, mid 2000, if you tried to raise money, essentially the product that venture capitalists offer was a ten million dollar series. A was sort of the smallest check.”
Dixon: Junior VC incentives align with job survival, not LP returns
“A lot of issues are so-called principal agent problems. Meaning the individual is not aligned with the kind of the, ultimately with the, you know, with the financial interests of the LPs, because like you're a junior person, you're afraid and you're, you know,…”
Dixon: VCs Should Maintain Reserves and Exercise Pro-Rata Rights for Winners
“I would say the data also that I've looked at, you know, from my own history doesn't, you know, because the winners can be just so if you're good at it, the winners can just be so big that you want to do prorata. So, you know, I it's like, it's a hard question…”
Dixon: Andreessen Horowitz explicitly classifies deals as heat seeking or truffle hunting
“I think we try to do both. And I, that's the way I think about it. And I think about it explicitly, like this is a heat seeking investment. This is a, Truffle hunting investment.”
Dixon: Twitter chose Fred Wilson's Series A bid because he used the product
“If you're Fred Wilson doing, you know, consumer internet in 2005, you'll hear, you know, you heard the reason that, that Twitter picked him, you know, when it was a competitive deal at the series A was that he was using the product.”
Dixon: I refrain from giving product feedback to portfolio startups
“I rarely in fact, I'm, I rarely get involved in, in those parts of the companies. And in fact, I, Probably judiciously tried to not comment on that because I think sometimes board members and investors opinions on like this button should be purple or something…”
Dixon: a16z Has Never Pivoted Strategy, Investing in AI Since 2013
“We are, we don't pivot at A-Six-Z, like we've never pivoted. We have all, you know, we've done AI for 10, since I've been at the firm, since 2013, we've done blockchain, crypto consistently, we've done bio, we've done SaaS, we've done video games.”
Dixon: FTX Collapse Set the Crypto Industry Back Two Years
“I think, you know, I'd like their setbacks, like in, in crypto, the stuff that happened two years ago with FTX and a bunch of scandals, I think, set back the space a couple, you know, maybe a couple of years.”
Dixon: Most mainstream news coverage of crypto is factually incorrect
“I think, for example, on the crypto blockchain stuff, like most mainstream news coverage is just factually incorrect.”
Dixon: Crypto's success is inevitable; only timing remains uncertain
“I think the interesting question to me is not whether something like crypto blockchain will work. I don't think it's a question. I think it's a question of, the timing is a question as it is, as it was with AI and other things”
Dixon: Big Tech Monopoly Has Stifled Consumer Internet Startups for a Decade
“Look at consumer internet investing today. There's very few successful consumer internet companies the last 10 years. That's because you have this sort of chokehold with these five companies.”
Dixon: Only ~1,000 Google employees build cutting-edge products
“Google has 300,000 employees or something. The vast majority are doing customer service, product management. They're maintaining old products. They're doing bureaucratic, you know, PowerPoints, arguing over politics. I don't know what they do, but like, I bet …”
Dixon: Blockchains are to web services what open-source was to OSs
“So blockchains are to centralize services as open source software was to centralize operating systems, right? Like this is, that's what we're doing here. We're trying to open the services layer of the internet.”
Dixon: Big banks and big tech companies hate crypto
“The establishment banking, you know, the big banks hate crypto, the big tech companies hate crypto.”
Dixon: Meme coins are utterly stupid and have no purpose by design
“You know, meme coin is just an utterly stupid Token. It has no purpose by design.”
Dixon: US crypto regulation encourages speculation and penalizes productive uses
“So we have a system now that is, that, that literally encourages the casino behavior and discourages the productive use cases.”
Dixon: All a16z crypto funds are structured as 10-year venture funds
“First of all, all of our funds are Ten-year venture funds.”
Dixon: a16z Crypto currently holds 94% of all historical investments
“Throughout the lifetime of the crypto funds, we could, we today hold 94% of our investments.”
Chris Dixon: Selling winning investments early is the worst VC strategy
“Look at the history of venture capital, like selling your winners is the worst possible strategy, and the things that aren't winners don't move the needle on funds. Like, it's just not how venture capital works.”
Dixon: The primary point of blockchain is enabling digital ownership
“So, so to me, the point of a blockchain is to enable digital ownership.”
Dixon: Regulatory gray areas discourage good entrepreneurs and attract bad actors
“My chief learning there is that gray areas discourage good entrepreneurs and encourage bad actors.”
Dixon: Crypto hacks stem from lack of mandatory security audit requirements
“You have these hacks and it's because there's no requirements around security audits.”
Dixon: Crypto regulatory impact depends on agency appointments over political party
“I think that, like, generally Trump, I don't know, but like Republicans tend to skew more, you know, kind of pro-business, and so there's some, but it ultimately really comes down to the specific people they choose to run these agencies.”
Dixon: The internet unbundled traditional venture capital firm brands
“I think that the internet changed the way that information flowed for sure. And I think probably unbundled a lot of brand and venture.”
Dixon: a16z Crypto avoids seed deals, limiting investments to one company per category
“We very, we do very little seed investing. And the reason is we take conflicts very seriously, meaning we invest in one company per category. And if, you know, if we go too early, like that's sort of our bet in the category. And so I do very, you know, I, so w…”
Dixon: Achieving top-quartile board governance requires mostly care and support
“Unfortunately, I think it's relatively easy to be in the top quartile of that. If you care about it, if you're supportive in, in multiple in both up cycles and down cycles, like to your point earlier, there's just a lot of stuff that goes on when the market dr…”
Dixon: a16z's vertical structure prevents corporate bureaucracy from creeping in
“We, you know, we're very verticalized now. So we're a big firm, but, you know, I run a vertical and, you know, it's pretty independent. And that's important because I think we actually avoid a lot of the bureaucracy and other things.”
Dixon: Andreessen and Dixon Personally Funded California Forever Before a16z
“We do other kind of things like we, I don't know if you've seen this California forever. This was something we did. We, it's a new city in Northern California that, you know, at the time didn't fit into the venture Fun model. So we did that, you know, it was a…”
Dixon: Remote work does not work for venture capital investing
“I, I've come to think it's, especially in our business, just doesn't work.”
Shorts cut from this episode
▶ What good entrepreneurs need for success ✅ · 20VC with Harry (@44:06)
▶ 2 types of fund 💰 · 20VC with Harry Stebbings (@11:02)
▶ Google isn’t winning ❌ · 20VC with Harry Stebbings (@34:20)
▶ 2 ways to win in venture 💰 · 20VC with Harry Stebbings (@0:07)
▶ Why open source will win 🏆 · 20VC with Harry Stebbings (@0:00)