The Exchanges

Q Final one before we do a quick fire, which is as part of that partnership, often it comes with a board seat. What are your biggest lessons on what it takes to be a great board member, and how has your style of board membership changed over time as an investor?

A Yeah, look, I think a lot of, a lot of it is, um, Is just being a good, you know, is, is good governance. And, you know, it's, 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 drops. Um, and I'm not just talking about crypto here, I'm talking about regular venture, you know, when the downturn happens, because you just have individuals, you have somebody who's early in their career adventure, they made three investments, they told their partners, this is their hot company, and now it's struggling. Um, you know, they're, they're worried, um, this happens a lot, um, or maybe the fund isn't doing well and they need to recover money. Maybe they have a different, I just had a situation where, you know, the investors came in at a high valuation and they have a high preference stack. And so, like, they would financially be better off if the company sold themselves right now versus the early stage investors because of the way preferences work. You have different incentives. You know, you have, People who micromanage, um, and try to, you know, board members who don't really have the expertise trying to give granular product advice you have. So I think a lot, I don't mean to sound ne…

AI assessment note: “a lot of it is just not, not being bad... caring, being there for downturns”

Q I've never been more worried about the size of incumbents. As we mentioned, the size of their data is enormous. The free cash flows of their businesses is enormous. Have incumbents ever been this Dangerously large. And is it not too big to usurp them with a far caster where, or a hive mapper, or you name any of your innovations given the free cashflow machines that these businesses have?

A So, okay, so I have a chapter for those interested in the book on it's called software. It's called community created software where I kind of walk through this, but if you look at the history of the technology industry, it's basically moved to different layers of the competition has moved to different layers of the stack. So You know, prior to Microsoft, the people sold the business of computing was to sell hardware. Companies like IBM would sell mainframe computers. They'd bundle it with software and services, but the business was hardware. The, the contrarian innovative idea of Bill Gates was that software would be the next layer of value, right? And that was the idea behind Microsoft, and it turned out to be correct. And so, you know, they made, they, they had very high cash flows, very high margins, um, and, and essentially began to commoditize the hardware layer. You didn't care if you got Compaq or Dell as long as you had Windows and Office, right? And then the, the, what happened was open source software came along, and particularly like Linux, which is, you know, fast forward today, By far the dominant operating system in the world. And it turned out that that sort of a ragtag group of people could create a better operating system than this giant high cash flow company. Right. And that, and that, that I think is, uh, uh, uh, I think the, the rise of open source softwar…

AI assessment note: “a ragtag group of people could create a better operating system”

Q show because I just get to ask the smartest people in the world questions that I have naturally, and I just remove the schedule. You said that about the trough of sorrow. I'm totally with you, uh, which leads to my no reserves model. I don't think that you can accurately pick your winners early. If you acknowledge the trough of sorrow, how do you think about effective reserves deployment?

A It's funny you bring it up because like with founder collective, this was always a question and like early seed fund, like, I, I guess I would, so you're talking about follow-on investing specifically, like how do you do follow-on investing? You know, I, I would say, honestly, I started off like back when we started Founder Collective, one of our tenants was to not do reserves and follow-ons. And, and the argument was that we would be fully aligned with the entrepreneurs, right? We weren't trying to like, like we do the first investment and we want to see the next valuation be higher. And so we're fully aligned. And then the other argument was, Your argument, I think, essentially, that like, it's, you know, markets are efficient, and You know, like this, it will, it will drag down our returns because we're going to be averaging up our cost basis and, you know, the real alpha comes from being early in seed investing. You know, I tend to, I, I kind of don't think, I, I just think that there's more being involved w you know, with a company there's just, you know, just seeing like the ability to see an entrepreneur over multi-year process and how they handle things. Um, I don't know. 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 …

AI assessment note: “I do think I probably lean more toward the reserves and the prorata kind”

Q Chris, do you think brand is more important than ever in venture?

A Gosh, I don't know. I haven't, I, I don't think about, I, to be honest, I, I don't think about venture as a category. I mean, I'm thinking about my day job. Um, I think that the internet changed the way that information flowed for sure. And I think probably unbundled a lot of brand and venture. So it used to be like, when I started off, there were just these kind of like, it was just these black boxes. It was like Sequoia and Kleiner and, uh, Benchmark and Excel. And you'd hear rumors about who the people are. You'd hear rumor, literally like rumors about how term sheets work. Cause there was no blogging about it. There, there weren't really books on it. And so it was just sort of like this mysterious, you know, like, like the thing that you, uh, didn't really understand. But you, but the firms carried a lot of weight, right? Like the firm name was the thing, like it was a big deal. And you saw it, you read about the history and the companies they'd funded. And I think that's how fundraising worked too, right? With LPs, they were like, this is why, and this is a lot of what's happened with the unbundling I was talking about before, where you have the barbell and the, like the rise of seed funds, right? Is if you're someone like you, like the calculus has changed versus 20 years ago, where then you had to join a big firm To raise money. And now you don't because you're, you have…

AI assessment note: “I think probably unbundled a lot of brand and venture.”

Q I've got to ask, should OpenAI be open sourced?

A I think everyone should choose their own strategy. That's fine. I just think that open source should be, frontier open source model should be legal. And if you look at the Biden executive order, it looks like you're going to have to register and there'll be export controls. So I just think every, every project should have choice and they can do whatever they want. Um, But, but Mr. Ohl and, you know, I don't know, all the other, like, Lama, Facebook, they, they should all be allowed to, to open their code, open their weights. I think there's just a lot of crazy panic right now about this, and it's, all it's gonna do is further entrench the, the big, the, the obvious thing that's gonna happen if they do put regulations around this is just further entrench the power of the big five companies.

AI assessment note: “I think everyone should choose their own strategy. That's fine.”

Q If you could make one change to the regulatory environment today, what would it be?

A I mean, we have a bunch of specific, you know, proposals. I think these, these, I think, look, I just think the main thing is that as an entrepreneur, and this, this ends up affecting our business because like, as an entrepreneur, you don't want gray area. Um, gray, if you're a, you know, top computer scientist, and you're choosing what sector to go into, and one sector, there's gray area, so there's some percent chance that no matter what you do, you get a subpoena or something. Um, a lot of people just won't do that. And on the flip side, with the gray area, if you're a bad actor, and You know, your other career choices are stealing money or something like creating a meme coin seems like a good idea, right? And so what happens with these gray areas is that it just took me a while to appreciate. I had to work in the space. Like I didn't understand how kind of policy worked and how policy interacted with entrepreneurship, but I will say that my chief learning there is that gray areas, um, discourage good entrepreneurs and encourage bad actors. And so my main thing is we talk about this a lot like clarity. Now, obviously we want a Not just like clarity, bright line rules. Here's what you do. Here's what you don't do. And of course a pathway, it could be a lot, it could be a owner's pathway, but a pathway to building these products. Um, and so there's very specific proposals that…

AI assessment note: “my main thing is we talk about this a lot like clarity. Now, obviously... bright line rules”

Q Chris, what's your biggest miss and how did that impact your mindset?

A I've had a lot. I mean, everyone, I think, I think it's important moment in your investing career to have like, to like high conviction pass and then have it become a big thing. And I, everyone I know has had that happen. Um, and then you're like, oh wow, I've got to go readjust my mental model. I mean, I had a lot, I started investing in, I guess it was 2006, seven when I sold my first company. Um, And I, well, I remember one thing that was funny was, um, I, so I, my company was security company. I sold to McAfee. And so one might think that I'm knowledgeable about internet security. And I remember like four years into it, noticing that my best investments were non-security and my worst investments were security. And I sort of thought about why that is. And I came to the conclusion it's because in the security ones, I was over, Waiting the idea because I had a whole bunch of ideas. I thought things should be built. And someone came in that had one that matched one of those ideas. And I was like, okay, here, here's some money. Whereas in the non-security areas, I was much more agnostic about the ideas and just sort of met the people and was like, wow, that person is really smart, right? And so my conclusion was, you know, I needed to significantly increase the kind of weighting I put on the, on the people. And I actually eventually developed kind of a methodology that I think a…

AI assessment note: “my conclusion was, you know, I needed to significantly increase the kind of weighting”

Q Final, final one for the quickfire. Do you enjoy the size and scale of Andreessen today? It's very different to the firm that you joined 11 years ago. Um, Do you prefer it today than you did when it was much smaller and more boutique-y and I'm sure less process-driven?

A I will say, first of all, we, you know, we're very verticalized now. So, uh, we're a big firm, but, you know, I run a vertical and, you know, it's pretty independent. Um, And that's important because I think we actually avoid a lot of the bureaucracy and other things. You know, we had a period where that, there was a transition period where we weren't like that always, but I think we're in a very good spot there. I think it like it's for, this is just a personal thing for me, and this is, I'm not saying this is right or wrong, but at some point, I, I think my interest kind of shifted from just investing in startups to sort of having impact. Um, I remember when I joined the firm in the beginning of, or I was considering joining in You know, I'd put some money into an investment, and they would either do well or not, and I would think to myself, did I actually have any impact? Um, or if I didn't do it, would somebody else have just put that money in? It was an over-subscribe round, like someone else would have invested. Yeah, maybe I gave some advice and this and that. Um, and so is this, is this how I want to, is this what I want to do? And so what really appealed to me, why I joined is when I talked to Mark and Ben, I was like, look, we just went through the, the three, the era of mobile social cloud. These are the three big computing trends. I think there will be, you know, in…

AI assessment note: “we're a big firm, but, you know, I run a vertical and, you know, it's pretty independent.”

Q Final, final one for the quickfire. Do you enjoy the size and scale of Andreessen today? It's very different to the firm that you joined 11 years ago. Um, Do you prefer it today than you did when it was much smaller and more boutique-y and I'm sure less process-driven?

A I will say, first of all, we, you know, we're very verticalized now. So, uh, we're a big firm, but, you know, I run a vertical and, you know, it's pretty independent. Um, And that's important because I think we actually avoid a lot of the bureaucracy and other things. You know, we had a period where that, there was a transition period where we weren't like that always, but I think we're in a very good spot there. I think it like it's for, this is just a personal thing for me, and this is, I'm not saying this is right or wrong, but at some point, I, I think my interest kind of shifted from just investing in startups to sort of having impact. Um, I remember when I joined the firm in the beginning of, or I was considering joining in You know, I'd put some money into an investment, and they would either do well or not, and I would think to myself, did I actually have any impact? Um, or if I didn't do it, would somebody else have just put that money in? It was an over-subscribe round, like someone else would have invested. Yeah, maybe I gave some advice and this and that. Um, and so is this, is this how I want to, is this what I want to do? And so what really appealed to me, why I joined is when I talked to Mark and Ben, I was like, look, we just went through the, the three, the era of mobile social cloud. These are the three big computing trends. I think there will be, you know, in…

AI assessment note: “we're a big firm, but... my interest kind of shifted from just investing in startups”

Q We're going to get to the book. I just want to ask on this. Alex Rampell told me that you are the master of strong opinions loosely held. And so on this, there's a point when you do let them go. Can you talk to me about when you have enough data to realize that you need to change your mind?

A I mean, I changed my mind about little things all the time. I mean, I'm always, I think of, look, I think of venture as, you know, sort of this Fox and hedgehog, the Fox knows many things, a hedgehog, one thing like ventures, the Fox business. I think like, it's like, you're, you're constantly tuning your neural network. Um, what are all the different things that go into decision-making and, and it's very complex and there's many things. And that's one reason it's sort of a, It takes a long time, I think, to really get good at it, and it's very important to have mentorship and other things, because it's very hard to kind of get these neural networks strained. So I just want to be clear, I'm constantly, like, there's lots of little things that I think And specific, you know, this sector is not going to work. This one is that kind of thing. But on the big thing, look, I mean, I guess I've, if anything, I've been emboldened on the big thing. I mean, I just, every single thing, I mean, Mark and I talk about this a lot. Like he, I think his phrase is there's no bad ideas. There's only too early. Like I I've literally spent, you know, my entire internet, first of all, I've spent my entire internet career. I started my internet career when the internet was kind of a joke. People today cannot picture this. It was. And so you start your business, you start your career in a Highly contra…

AI assessment note: “if anything, I've been emboldened on the big thing”

Q I heard from a little birdie that you studied philosophy at university and then have continued to study philosophy. Uh, thanks, Alex Rampell. Um, how did studying philosophy impact how you think both just as a person as an, and as an investor?

A So I got into it from computers, um, a little bit like the current AI stuff. Um, I mean, it was a long time ago, but in the sense of there's sort of overlap between, for those who've read these kinds of books, there's like Daniel Dennett and Douglas Hofstetter, and there's sort of this, uh, overlap between I guess with these, or like maybe the so-called cognitive science and philosophy of mind and computer and AI and computer science. So that kind of got me into it. So it was on the more kind of analytic, they call it, um, scientific side of philosophy. And, um, I, you know, I just like a lot of people at that age had no idea what I wanted to do and it ultimately, and, um, I thought arrogantly that I knew had a program and didn't have any use for computer science. Um, In retrospect, you know, I think I could have taken some interesting theory classes and stuff. Um, the, uh, um, and then I stayed just kind of a through inertia. Uh, I got invited to stay, um, for the, for a PhD program, but I was in New York and in New York, you know, you just sort of have to work, you know, if you, you know, unless you have the money. Um, and so I was always doing, uh, freelance computer programming and then that kind of in New York, In the, like, around the, like, late nineties, 2000, um, if you were doing computer programming, you ended up at an internet startup. Um, and so I sort of discovere…

AI assessment note: “So I got into it from computers, um, a little bit like the current AI”