Nov 13, 2017 · 41m · 20vc
20VC: a16z's Alex Rampell on The Struggle Between Innovation vs Distribution, When How To Determine Whether An Application is Optimised Through Centralised or Decentralised Networks & Why Most ICOs Today Are Ridiculous
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In this episode of The 20 Minute VC, host Harry Stebbings interviews Andreessen Horowitz General Partner Alex Rampell on startup go-to-market strategies, data network effects, and crypto tokenomics. Rampell shares insights from his entrepreneurial journey, evaluating how startups can successfully navigate distribution battles against entrenched industry incumbents.
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 20.2% of the talking time here. How this is scored →
Harry as informed peer 2.2 Guest teaching 4.5 Guest disagreement 2.3 Harry pushing back 1.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 22:52 Calling enterprise blockchain hype absurd
Alex forcefully ridicules corporate blockchain marketing, calling an IBM advertisement the most absurd sentence he has ever heard and telling a bank CEO that a private internal blockchain is simply an Oracle database.
Hardest push from Harry ▶ 10:38 Challenging guest on consumer fallow periods using competitor thesesHarry pushes back on potential market optimism by bringing up specific thesis counterarguments from Bessemer's Jeremy Levine and Eric Feng regarding incumbent distribution dominance.
Biggest teaching moment ▶ 28:01 Explaining protocol monetization through internet domain analogiesAlex educates the host and audience on how tokens solve a fundamental computer science business model problem by comparing ICO protocol incentives to monetizing early internet protocols like TCP/IP via domain names.
Harry holds his own ▶ 10:38 Citing specific VC peers to counter distribution dynamicsHarry demonstrates high domain awareness and research by citing specific top-tier venture capitalists and their detailed arguments to steer the conversation into high-level strategic debate.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Alex Rampell's Background and Journey to VC | 1 | 3 | 1 | 0 | Harry asks standard biographical questions regarding Alex's early entrepreneurial history and transition to venture capital. Alex elaborates on writing shareware as a child and his operating experience leading up to Andreessen Horowitz without any friction or pushback. | |
| The Dynamics of Innovation vs. Distribution | 2 | 4 | 2 | 2 | Harry relays a question from Chris Dixon about operational learnings, prompting Alex to explain his core innovation versus distribution framework. Harry offers a brief clarifying query on whether startups should prioritize distribution pre-product, which Alex addresses constructively. | |
| Navigating Consumer Startup Fallow Periods and Dominant Platforms | 3 | 5 | 2 | 2 | Harry demonstrates preparation by citing specific consumer startup thesis points from Jeremy Levine and Eric Feng. Alex nuances the fallow period claim and educates on data network effects using database read/write mechanics and Google's open-source AI strategy. | |
| Identifying Growth Inflection Points and Transactional Distribution | 2 | 5 | 1 | 1 | Harry asks broad questions about inflection points and their long-term sustainability. Alex delivers an extensive breakdown using SoFi's student loan pricing and point-of-sale transactional distribution analogies like selling ketchup alongside french fries. | |
| Blockchain Realities, Enterprise Uses, and the ICO Landscape | 3 | 6 | 5 | 2 | Harry introduces community questions on ICOs and references Charlie Lee's concerns. Alex exhibits strong contrarian combativeness toward corporate blockchain hype, calling IBM's ads absurd and comparing private bank blockchains to standard Oracle databases, while explaining true protocol monetization. | |
| Corporate M&A Perspectives on Tokenized Business Models | 2 | 4 | 3 | 1 | Harry guides the episode through corporate M&A on tokens and a fast-paced quickfire round. Alex offers sharp opinions on startup valuation traps, parodying founders who dismiss pricing discipline, and explains his thesis for investing in Propel. |
Statements from this episode (15)
Startups Must Get Distribution Before Incumbents Get Innovation
“The battle between every startup and incumbent comes down to whether the startup can get the distribution before the incumbent can build the innovation.”
Modern Tech Incumbents Aggressively Acquire Disruptive Threats Early
“The newer companies are being much, much more aggressive about finding the potential disruptive threat and taking them out early.”
New Tech Platforms Will Emerge or Displace Incumbents Within Years
“I'd be surprised if we only have the large five incumbent technology platforms and there's not a sixth or a seventh or maybe there are only five because one of those gets displaced. Within a couple of years.”
Data Network Effects Function Like Database Writes and Reads
“Think of it as a database with writes and reads. Those are the two actions that you typically perform in a database. As the number of writes goes up, the value of each read goes up as well, because the value of a read initially is close to nil, but as the numb…”
Proprietary Data Gives Big Tech an Unbeatable AI Recruiting Advantage
“It's also an HR advantage, because if you are the smartest person from your PhD program at Stanford, and you like machine learning and AI, where do you want to work? Well, you could go work for some startup, where they also downloaded TensorFlow, but they have…”
Google Search Ad Clicks for Life Insurance Cost $50 to $100
“If you go to Google and you search life insurance, the click is 50 dollars or a hundred dollars.”
Point-of-Transaction Ads Outperform Facebook and Google Advertising
“What's the best place to advertise in the world? It's actually not when somebody's driving on the freeway and sees a big ad. It's not on Facebook. It's not on Google. It's often when people are in, they're actually buying something because, you know, the best …”
Enterprise Blockchain Is a Meaningless Buzzword Compared to Centralized Databases
“A lot of people that say, I want a blockchain, the same people that a few years ago were saying, we want big data, which in a couple years were saying, like, oh, AI is very important to us. I think it's become a buzzword that almost means nothing. They mean so…”
Bitcoin Failed as a Currency but Works as a Store of Value
“Bitcoin has not worked as a currency, but I believe it has worked and will continue to work as a store of value.”
Inexperienced Teams Raising $100M Through ICOs Will Mostly Fail
“I'm just going to go tap into an ICO, and then they raise a hundred million dollars, and they don't know what to do with it, and they have no experience whatsoever. Like, sometimes that's not, I mean, maybe those will end well, but I would take the other side …”
Most ICOs Are Ridiculous, but Protocol Tokenization Is a Real Innovation
“The vast majority of ICOs are kind of ridiculous right now, But there are a few that are very, very interesting and represent a true innovation in a inherently kind of business model and computer science problem of the last 30 years, which is how do you moneti…”
Corporate Incumbents Counter-Strike Startups More Effectively Than Silicon Valley Admits
“I actually do think that the ability of large incumbents to go mount a counter-revolutionary strike is Is actually not as atypical as a lot of people in Silicon Valley mock them for.”
Overpricing TrialPay's Funding Round Impaired Subsequent Fundraising and M&A
“One of the things that I learned at trial pay was that we raised one of our rounds of funding at way too high of a price, and I paid for that because then, guess what, I couldn't, it was hard to sell the company. It was hard to raise money after that”
a16z Optimizes for Ownership Percentage Rather Than Entry Valuation
“For us, it doesn't matter if we invest at twelve million pre or fifteen million pre or eighteen million pre. Like, there's really no difference. Like, we're optimizing for ownership, and that's what we really care about.”
Alex Rampell Passes on Great Founders Solely Due to Overvaluation
“I've turned down a number of companies on valuation, not because I didn't believe in the team, not because I didn't believe in the founder, but I just didn't think that there was going to be a sucker that would pay an even higher price next time”