Jul 19, 2021 · 33m · 20vc
20VC: a16z's David George on Leading a16z's Growth Fund Today, The Biggest Misconceptions of Growth Investing, How a16z Think Through Portfolio Construction, Investment Decision-Making and Scenario Planning & How The Entrance of New Players Has Changed Th
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In this episode of The Twenty VC, host Harry Stebbings interviews David George, General Partner at Andreessen Horowitz (a16z), exploring late-stage growth investing frameworks, portfolio construction, unit economics, and a16z's investment decision-making model.
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 37% of the talking time here. How this is scored →
Harry as informed peer 4.8 Guest teaching 4.5 Guest disagreement 1.6 Harry pushing back 3.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 4:29 Dismissing conventional VC focus on business models
David pushes back on standard growth VC behavior, arguing that while 90% of growth investors spend 90% of their time on business models, business models are actually just table stakes rather than sources of edge.
Hardest push from Harry ▶ 24:14 Challenging single trigger-puller politicsHarry directly challenges David's claim that internal politics are minimal at a16z, questioning how the single trigger-puller dynamic actually impacts partner politics and deal alignment.
Biggest teaching moment ▶ 15:38 Explaining Glengarry Glen Ross market structuresDavid educates Harry on his 'Glengarry Glen Ross' framework for tech market cap distribution, explaining how winner-take-all dynamics drive category leader valuations after Harry admits he hasn't seen the movie.
Harry holds his own ▶ 17:46 Challenging temporal diversification dogmaHarry demonstrates deep venture knowledge by citing traditional temporal diversification doctrine and challenging whether rapid deployment schedules have made classic portfolio strategy obsolete.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Welcome and Opening Dialogue | 2 | 5 | 1 | 1 | Harry opens with warm hospitality and asks David about his journey and learnings from General Atlantic. David reframes standard VC thinking by explaining why business models are mere table stakes while non-consensus TAM views drive real growth returns. | |
| Unit Economics and Lessons from DoorDash | 5 | 4 | 2 | 4 | Harry probes how VCs evaluate evolving business models using DoorDash as an example. Harry challenges David on when unit economics actually become central relative to early customer acquisition costs. | |
| Navigating Unit Economic Discipline Amid Capital Proliferation | 6 | 5 | 1 | 4 | Harry brings up mega-raises like Celonis's billion-dollar round to ask how unit economic discipline is maintained amid capital proliferation. David breaks down a16z's 3-5x return target, portfolio sizing, and 10% expected loss rate. | |
| Re-Underwriting Winners and Reinvestment Strategy | 5 | 6 | 2 | 3 | Harry asks about re-underwriting winners and quotes CapitalG's Layla on entry prices doubling. David educates Harry on winner-take-all Glengarry Glen Ross market structures and why long-term horizons offset valuation risks. | |
| Missed Opportunities and Temporal Diversification | 6 | 5 | 2 | 5 | Harry invokes classic venture principles to question if temporal diversification still matters in rapid deployment cycles, and asks how a16z competes with aggressive crossover funds. David reframes temporal diversification through reserves and long-term value-add. | |
| a16z Decision-Making Model and Partnership Dynamics | 5 | 4 | 3 | 6 | Harry asks detailed questions about IC structure and pushes back on David's assertion that internal politics are absent at a16z. Harry dissects the mechanics of the single trigger-puller model to test whether it truly removes political friction. | |
| Evaluating the SPAC Landscape | 4 | 3 | 1 | 3 | Harry asks about SPAC market dynamics and delves into personal motivations, asking David how he manages fear and paranoia of failure. David shares how he channels anxiety directly into increased work volume and preparation. | |
| Quick Fire Round | 5 | 4 | 1 | 4 | During the quick-fire round, Harry asks a sharp follow-up on Loom regarding the transition from pull to push distribution models. David explains how conducting non-customer diligence helps evaluate product pull sustainability. |
Statements from this episode (22)
George: Front-end engineers doing design expands Figma's market by 10x
“Our view was that all front end engineers in the future will engage in design, and this is 10 X plus bigger in terms of market opportunity than just defining what they do in the design space.”
George missed DoorDash by underestimating unit economics and localized network effects
“I missed a lot in DoorDash, not just the unit economics, you know, the power of the market size, the localized network effects, and probably most importantly, the best founder in the space building in that area.”
George: Outsized growth returns come from unexpected volume, not unit economics
“The unit economics end up being sort of table stakes, right? Like you could get it wrong to the downside. It's very rare that the company ends up with, you know, unit economics that are much greater than what you expected. It's much more common that, Hey, the …”
George: Hyper-competitive, sticky markets justify sacrificing unit economics for growth
“There are instances where I'll tell founders that it would make sense to relax their criteria and maybe spend a little bit more in the name of growth. If it's a hyper competitive market and it ends up being a super sticky customer base over time,”
George: Celonis will deliver sustained high growth without aggressive cash burn
“I think their business model is fantastic. I would view their future as very elevated levels of high growth with high returns on capital, and, you know, there's not some looming intense competitive threat that makes them think that they should aggressively go …”
a16z Growth operates a $3.2B fund across five core sectors
“We have a 3.2 billion dollar current fund in growth, and then the first one that we had was 2.2 billion dollars, and we invest across five major sectors, so B to B, FinTech, consumer internet, bio slash healthcare, and crypto, and we invest both inside and out…”
a16z Growth targets 30 portfolio companies with $50M to $300M checks
“For our current fund, we'll target about 30 companies, so investment size average around a hundred million dollars. Again, that's a function of the market opportunity, and when is the right fit for You know, the range is a little wider than that. It's anywhere…”
a16z Growth targets 3x to 5x returns with a 10% loss rate
“We target three to five X returns over five years in aggregate, but we place So we're constantly asking, how could this investment be worth 10 X plus? And we focus probably more of our effort on that than around the downside. You know, I always ask my team whe…”
a16z Growth allocates reserves centrally rather than on a per-deal basis
“We don't explicitly reserve per deal, but we do keep a pool of capital in reserve for the best performing companies when we want to double or triple down.”
a16z made up to four follow-on investments in Stripe and TripActions
“We've invested multiple times in many of our companies. So Coinbase, we invested three times. Roblox, twice. Databricks, three times. Stripe, four times. TripActions, four times.”
George: Market leaders capture the vast majority of tech sector market cap
“And so we actually think most many or most tech markets play out in market cap in a similar way where the leader captures the vast majority of the market cap creation.”
a16z Growth uses 5-7 year horizons to absorb entry valuation errors
“So we think in five to seven year terms and try not to worry if we're off by a year or two on the valuation, like that's a risk that I'm willing to take.”
George: Passing on Qualtrics over price was my most painful miss
“The most painful one is probably Qualtrics. Which, I mean, look, it's killer founders, and yeah, I remain friends with the guys. We turned it down based on price when I was at GA.”
George: Holding larger fund reserves naturally achieves temporal diversification
“Reserves are one way that you achieve temporal diversification. If you have more of your fund in reserves, you know, that stretches the deployment cycle of your fund over, you know, five years instead of two years, or whatever the number is, that naturally pro…”
George: Aggressive crossover venture funds actually generate good returns
“First, I think there's a little bit of a misperception in the market about some of those firms who have been more aggressive recently. Their returns are pretty good. They've done a good job.”
George: Shorter VC diligence cycles are more efficient and benefit the market
“It used to, I remember when I started at GA, it would be like, okay, a company's raising money and you know, let's take two months and you turn over every single piece of minutia for a company. Like that's, it's probably more efficient and better overall for t…”
a16z Growth Fund's investment committee consists of just three partners
“We have a three-person investment committee. It's Mark, Scott Cooper, and me for the growth fund.”
a16z gives sponsoring GPs final authority via single trigger-puller model
“Just like we do at the venture fund, we have a single trigger-puller model, though. We have discussions and deep, robust discussions about investment decisions, but it's ultimately the call of the GP who's sponsoring the investment.”
George: SPACs only work if founders are genuinely ready to operate publicly
“The thing that I say to them always is it's a totally fine path to go down as long as it's not seen as a milestone and you're just ready to be a public company, you know, after you're done with it.”
George: Wealthy people overemphasize personal effort and underplay the role of luck
“I think it's overemphasizing their own work and underplaying the role of luck and some circumstances and other people who contribute to their success.”
George: Growth investors should focus on upside potential over modeling downside risk
“I wish I had known earlier in my career and growth to spend more time thinking about what can go right as opposed to modeling or trying to predict what may go wrong.”
George: Loom was growing 10x year-over-year at scale when a16z invested
“So it was Loom. So the frameworks that I love is I try and invest in companies that are pull companies, not push companies. What that means is the market is pulling their product from them as opposed to they're trying to push their product out to the market. S…”