The Exchanges

Q to dive a little bit deeper, though, into our discussion on the pitches themselves. In terms of the pitch itself, one thing I'm concerned by is really the compression of round timelines. With the increasing supply of capital in market, founders obviously have more and more choice when it comes to who they take money from. Do you think I'm right to be concerned by the compression of fundraising timelines?

A Yeah, I think it's a real issue because these are inherently relationship businesses, right? And so in the US, at least it's interesting that the likely life of a board member on a company in the tenure, I should say, which is probably about 10 years in many cases, probably exceeds the average of marriages in the US, which actually is only eight years. So it's pretty interesting when you think about the length of time that we're talking about and therefore the extent of relationship development. So I think it's a real issue. I think that what that means is the onus is really on us as venture capitalists to get to know entrepreneurs way earlier in the cycle. And so I think the biggest thing that we've got to do to kind of try and address that problem is we need to be talking to entrepreneurs, 1218 months ahead of around having meaningful interactions with them so that we aren't kind of meeting them for the first time. And to your point, you know, really kind of shortening the opportunity to understand the relationship.

AI assessment note: “Yeah, I think it's a real issue because these are inherently relationship businesses”

Q and I'm going to ask you the worst question now, Gordon, so I apologize in the But when you look around you today in terms of the macro, a lot of people suggest we're in a boom in terms of capital supply and also suggest the impending bust. Having seen a number of cycles before, how do you feel about today's situation and where we stand as an ecosystem today?

A Yeah, we've been pretty public about talking about this. You know, the answer is we don't think that comparisons, particularly to 99, 2000 are that relevant for today. And maybe I can give you a couple of numbers just to give you a perspective of how we think about it. If you looked at IPOs, for example, and I'm sure you know this data, but, you know, we did 700 IPOs in 1999 and 2000. And in the decade from kind of 2009 to 18, we did about 450. So kind of in a 10 year span, you're still roughly kind of two thirds the volume of IPOs we had in the bubble. And not surprisingly, one of the biggest trends, of course, we've seen in the industry is companies staying private longer. And so you see this in a level of maturity at IPO in that 1999 2000 class. The average revenue for those companies was about seventeen million dollars on an annual basis when they went public. Today, those numbers are roughly about a 170, so almost 10 X scale from a, uh, you know, size perspective. And so I think that's kind of thing. Number one is if you just think about kind of the, the nature of the capital markets and the relative maturity of these companies. The second thing is just pure market sizing, which is obvious, but you know, you've probably heard the story from Mark, but when they sold Netscape to AOL in 2008, I think the total size of the internet population was under a hundred million meetin…

AI assessment note: “we don't think that comparisons, particularly to 99, 2000 are that relevant for today.”

Q Because actually, no longer can even kind of small markets with monopoly winners. Say it's a hundred million market, and you can actually reasonably see a pathway to sixty million in the bottom line, scaling to a hundred with a billion IPO. It doesn't move the needle for a fund like Andreessen's. So I'm super intrigued. How does market size change in your perception with the fund sizes that scaled?

A Well, it does have some impact. There's no question about that. So you're right. If you think about, okay, we invest in a company, And let's say we own 25, 30% of the company at the beginning, when you think about over time what that investment might look like at an IPO, if you could stay north of 15% ownership at an IPO, I think that's a pretty, that's pretty good, depending on how many rounds of financing the company's gone through. So I think you're right, which is you gotta have to do the backward math, which is, okay, if you've got, call it a, we have a seven hundred and fifty million dollar early stage fund that we just raised in the, for consumer enterprise, and so for something to kind of return the fund or be meaningful, let's just say it can return half the fund, then you need to be able to generate Three fifty, four hundred million dollars in returns, which means that probably implies winners need to be multi-billion dollar companies, not just kind of billion dollar opportunities to really move the needle.

AI assessment note: “winners need to be multi-billion dollar companies, not just kind of billion dollar opportunities”

Q and I'm going to ask you the worst question now, Gordon, so I apologize in the But when you look around you today in terms of the macro, a lot of people suggest we're in a boom in terms of capital supply and also suggest the impending bust. Having seen a number of cycles before, how do you feel about today's situation and where we stand as an ecosystem today?

A Yeah, we've been pretty public about talking about this. You know, the answer is we don't think that comparisons, particularly to 99, 2000 are that relevant for today. And maybe I can give you a couple of numbers just to give you a perspective of how we think about it. If you looked at IPOs, for example, and I'm sure you know this data, but, you know, we did 700 IPOs in 1999 and 2000. And in the decade from kind of 2009 to 18, we did about 450. So kind of in a 10 year span, you're still roughly kind of two thirds the volume of IPOs we had in the bubble. And not surprisingly, one of the biggest trends, of course, we've seen in the industry is companies staying private longer. And so you see this in a level of maturity at IPO in that 1999 2000 class. The average revenue for those companies was about seventeen million dollars on an annual basis when they went public. Today, those numbers are roughly about a 170, so almost 10 X scale from a, uh, you know, size perspective. And so I think that's kind of thing. Number one is if you just think about kind of the, the nature of the capital markets and the relative maturity of these companies. The second thing is just pure market sizing, which is obvious, but you know, you've probably heard the story from Mark, but when they sold Netscape to AOL in 2008, I think the total size of the internet population was under a hundred million meetin…

AI assessment note: “we don't think that comparisons, particularly to 99, 2000 are that relevant for today.”

Q Because actually, no longer can even kind of small markets with monopoly winners. Say it's a hundred million market, and you can actually reasonably see a pathway to sixty million in the bottom line, scaling to a hundred with a billion IPO. It doesn't move the needle for a fund like Andreessen's. So I'm super intrigued. How does market size change in your perception with the fund sizes that scaled?

A Well, it does have some impact. There's no question about that. So you're right. If you think about, okay, we invest in a company, And let's say we own 25, 30% of the company at the beginning, when you think about over time what that investment might look like at an IPO, if you could stay north of 15% ownership at an IPO, I think that's a pretty, that's pretty good, depending on how many rounds of financing the company's gone through. So I think you're right, which is you gotta have to do the backward math, which is, okay, if you've got, call it a, we have a seven hundred and fifty million dollar early stage fund that we just raised in the, for consumer enterprise, and so for something to kind of return the fund or be meaningful, let's just say it can return half the fund, then you need to be able to generate Three fifty, four hundred million dollars in returns, which means that probably implies winners need to be multi-billion dollar companies, not just kind of billion dollar opportunities to really move the needle.

AI assessment note: “probably implies winners need to be multi-billion dollar companies, not just kind of billion dollar”

Q Well, that is very kind of you, but I want to kick off today with a little bit on you. So tell me, Scott, how did you make your way from the world of operations today, managing partner, likely one of the most kind of innovative and forward-thinking venture firms of our time with Andreessen?

A Yeah, so my background is I was actually initially an investment banker. Way back in the bubble, and I know, I'm sure we'll talk a little bit about the bubble today. And just by happenstance, I had taken a company public, and the person who was running marketing there gave me a call the very next day and said, hey, it's been great getting to know you. By the way, I just quit the company, and I'm joining this company called LoudCloud. Have you ever heard of it? And of course, I had not at the time. This was kind of September of 99, and Mark and Ben were just starting this company. But anyways, he said, look, you ought to meet these guys. They're great guys. They're building something that's going to change the future. And I was, you know, at least smart enough to be willing to take that introduction. And, uh, and ended up meeting the two of them, and, uh, joining the company, you know, in the very early part of 2000, and that was 19 years ago, and kind of Whaley's underway, and that really is what brought me here to this opportunity today.

AI assessment note: “that really is what brought me here to this opportunity today.”

Q to dive a little bit deeper, though, into our discussion on the pitches themselves. In terms of the pitch itself, one thing I'm concerned by is really the compression of round timelines. With the increasing supply of capital in market, founders obviously have more and more choice when it comes to who they take money from. Do you think I'm right to be concerned by the compression of fundraising timelines?

A Yeah, I think it's a real issue because these are inherently relationship businesses, right? And so in the US, at least it's interesting that the likely life of a board member on a company in the tenure, I should say, which is probably about 10 years in many cases, probably exceeds the average of marriages in the US, which actually is only eight years. So it's pretty interesting when you think about the length of time that we're talking about and therefore the extent of relationship development. So I think it's a real issue. I think that what that means is the onus is really on us as venture capitalists to get to know entrepreneurs way earlier in the cycle. And so I think the biggest thing that we've got to do to kind of try and address that problem is we need to be talking to entrepreneurs, 1218 months ahead of around having meaningful interactions with them so that we aren't kind of meeting them for the first time. And to your point, you know, really kind of shortening the opportunity to understand the relationship.

AI assessment note: “Yeah, I think it's a real issue because these are inherently relationship businesses”

Q the boom of 2000. So that's astonishing. I do have to also, because I want to move into something that you discuss a lot in the book, and it's the element of the pitch and the engagement between founder and VC. And so specifically with regards to the pitch, Scott, you've seen thousands of pitches with Andreessen. So from your perspective, what do entrepreneurs get most wrong when pitching VCs?

A I think there's a couple of things. I'd say probably the most important is Understanding how we evaluate the deal, and therefore, how do they want to allocate and spend their time on the pitch, and probably the biggest piece there is team. Particularly, it kind of goes back to the discussion we've been having, which is at the early stage, there's not a whole lot of quantitative data for us to go after, so what we're really trying to figure out is, assume it's a big market. We know, therefore, that market's going to be very competitive, and so the real question is not, do I want to invest in this space? The question is, do I want to invest in this team? And what we're trying to figure out is, what are the elements that would make this Team, particularly better or worse in some cases than anyone else who might come out after and go after the same opportunity. And I think what happens a lot of times in pitches is people immediately want to kind of talk about product, which is wonderful. And of course we love product, but you know, the product we know is going to change. That's just the nature of this business. As you know, you know, we use this word pivot very euphemistically in the business, but essentially that means that the idea we thought was the right idea turned out to not be the right idea. And so we understand that. And so what we're more looking for is, What is it about …

AI assessment note: “people immediately want to kind of talk about product, which is wonderful”

Q Well, that is very kind of you, but I want to kick off today with a little bit on you. So tell me, Scott, how did you make your way from the world of operations today, managing partner, likely one of the most kind of innovative and forward-thinking venture firms of our time with Andreessen?

A Yeah, so my background is I was actually initially an investment banker. Way back in the bubble, and I know, I'm sure we'll talk a little bit about the bubble today. And just by happenstance, I had taken a company public, and the person who was running marketing there gave me a call the very next day and said, hey, it's been great getting to know you. By the way, I just quit the company, and I'm joining this company called LoudCloud. Have you ever heard of it? And of course, I had not at the time. This was kind of September of 99, and Mark and Ben were just starting this company. But anyways, he said, look, you ought to meet these guys. They're great guys. They're building something that's going to change the future. And I was, you know, at least smart enough to be willing to take that introduction. And, uh, and ended up meeting the two of them, and, uh, joining the company, you know, in the very early part of 2000, and that was 19 years ago, and kind of Whaley's underway, and that really is what brought me here to this opportunity today.

AI assessment note: “that really is what brought me here to this opportunity today.”

Q That is hilarious, but I do want to finish on the biggest, most important question, really, which is, what is the next five years for you and for Andreessen? What does that look like?

A Yeah, look, I think we're in a really good spot, so we feel great about the competitiveness that we have in the market. We feel great about the kind of value add that we can offer to entrepreneurs, so This may sound boring, but I think the next five years, quite frankly, is a lot of the same of what we've been doing. We're going to continue to do this verticalization of funds that you've seen we've done. So to make sure that we've got deep domain expertise in the early stage funds, we just recently introduced for the first time a later stage fund that we broke out separately from our early stage funds. So we definitely want to be a long lasting and continuous partner for lots of our companies. But ultimately, I think we're going to stick to our knitting of what we think we do well, which is identify great entrepreneurs who are going after fantastic opportunities and hope that we continue to execute on that.

AI assessment note: “the next five years, quite frankly, is a lot of the same”

Q Do you agree with me and my dislike of ranges when people say eight to 12?

A Yeah, it's funny. I think it's fine. I don't have a, I don't have a religious objection to it, I guess I would say. I think it's fine if the answer is there is a different set of objectives attached to the eight versus the 12. So I agree with you, which is every number you put out needs to go along with it, a set of kind of clear objectives that you believe will enable you to Me to exceed those expectations over time, So I think it's okay with ranges as long as you can articulate, if I have eight, this is what I'm going to do with that money, but if we're lucky enough to be able to raise 12, this is the incremental, you know, set of financials or, or company objectives we're going to achieve.

AI assessment note: “I think it's fine if the answer is there is a different set of objectives”

Q and predictable in the early days, and that makes sense. Sometimes you have to kind of project yourself out, and they don't make sense for quite a few years, and you have to have that mental plasticity to see what's coming in the future, and that they do make sense. How do you kind of distinguish between realistic versus unrealistic expectations of what could work in terms of unit economics?

A Yeah, no, look, you're absolutely right, which is we've got very little data to work with at the early stage here, but I think what you're trying to do is kind of what indicia, at least, are out there that helped me convince that I think this business can work, and so For example, if you're in a consumer business, what do we know about customer cost of acquisition of customers, excuse me, today? And what do we think is going to happen over time? So if this is a heavy paid marketing business, it's probably the case that those economists are going to degrade over time because, you know, your cost of acquisition, you know, through Google and Facebook and other paid channels may be difficult. So you're trying to understand, is there some element of kind of organic growth that may over time overcome the need to bootstrap the business with paid marketing? And then on the enterprise side, it's a similar question, which is, okay, what are my initial Costs look like? What are my initial deal sizes look like? Do I think I can grow those over time? And you're right that there's very little data ultimately to do that, but I think those are the questions at least you have to ask yourself, and most of what we're doing at that early stage is saying, okay, let's at least lay out those assumptions and pressure test them. Do they pass the red face test? And if so, we should move forward, but at …

AI assessment note: “lay out those assumptions and pressure test them. Do they pass the red face test?”

Q there when pitching from the founder side. I'm always super interested because a lot of founders that I see present this range that they look for in their raise. Eight to twelve million is vastly different set of numbers. Can I ask, in terms of getting the right number, how do you advise founders on how to determine the right amount to raise when they go out for that fundraise?

A Yeah. We think the right amount of money to raise is it's the amount you need to either meet or exceed the kind of hurdles or the objectives you set up so that when you go to the next round of financing, you can have this kind of monotonically increasing stock price. So the best advice we always give is when you're raising your A round of financing, what's the pitch that you're going to give at the B round and work backwards and say, okay, based on that, if I'm raising A today and I'm targeting 18 to 24 months to raise my B, what is that pitch going to look like? And therefore, what's the margin of error that I need in order to be able to achieve those milestones? And I think where you make mistakes sometimes is if you're going to raise a lot more than you anticipated, you better be able to deliver on a higher set of objectives so that you actually don't find that you've got to stall out of the second round of financing. It's incredibly painful, as you know, for these companies to have to go through certainly down rounds, but even not having material up rounds, it's got all kinds of emotional challenges just from an employee retention and recruitment perspective. So better to set the expectations appropriately, give yourself the appropriate margin for error, But don't over-raise, and certainly don't under-raise in a way that compromises your ability to achieve those objectives.

AI assessment note: “the right amount of money to raise is it's the amount you need to either meet”

Q being upfront about it. I do, though, want to move into a fascinating realm, which I'm calling Scott AMA. Basically, I've wanted to ask these questions for a long time, and so I couldn't forgive myself if I didn't not ask. So before the quickfire, you've been with the firm since the very beginning in 2009. What have been your biggest learnings from building the firm with Mark and Ben?

A Yeah, I think the biggest one has been that this is fundamentally a network effects business. If you do things right, if you respect the entrepreneurial process, if you, you know, handle yourself professionally, you get tremendous lift from that. And that's really kind of been part and parcel of how we built a firm. You know, the flip side of that, you know, is also true, which is, look, if you don't pay attention to day-to-day details of the business, your reputation can unravel probably as quickly as it rose. So to me, I think that's the biggest lesson that I've learned from this business is we talk about this with our team together. We don't build anything. We don't make any products. All we are, quite frankly, is a customer service business. And day-to-day, we've got to make sure that we deliver on that customer service.

AI assessment note: “the biggest one has been that this is fundamentally a network effects business”

Q Cass, what have been the biggest inflection points in the growth of AS-XZ? I mean, you know, Andreessen always seems like this incredible, innovative behemoth in market. What have been the biggest inflection points where you noticeably saw the stature of Andreessen really rise in market, do you think?

A Yeah, I think the most important thing we had was we were kind of lucky to have very good early success in our first fund, and that made a huge difference because what that enabled us to do was to actually raise our second fund, you know, earlier, quite frankly, than we had anticipated doing. And because we believe in the network effects side of this business, it really gave us the financial wherewithal to start to build out these post-investment teams that have become a really big part of our value proposition. And so I think that was a huge inflection point for us in the business because it just gave us, you know, a tremendous advantage in terms of differentiating the service to the market by having that financial flexibility. So I would say that was probably one of the most important things that we saw.

AI assessment note: “start to build out these post-investment teams that have become a really big part”

Q want to talk about these bridge rounds that we're seeing more and more. We had Mike Maples on the show, and he said to me that bridge rounds are most often actually a bridge to nowhere. I do actually agree with him, I have to say. So starting with a million dollar question, how do you determine between a legitimate bridge round versus an extended lifeline delaying the inevitable closing?

A Yeah, so I would agree with Mike that unfortunately a lot of them are bridges to nowhere. You know, most of the time, in my experience, it's pretty clear, though, whether that's the case or whether you are bridging to something. So the way we think about it is a couple of ways. One is, if you're bridging to a sale, if that's what you're proposing to do, then where are you in the market? Do you actually have term sheets or a set of conversations that really represent where you are in the process? I think some people forget that at the end of the day, companies are bought, not sold, meaning that if you don't have that inherent interest already from other companies, it's very hard when you're facing a bridge situation to assume you're going to go out and market yourself to somebody else. So I think that's one way to diligence the M&A piece, and then I think the other one is, look, if you're bridging to try to buy yourself time to get to a set of milestones, then I think the question you have to ask yourself is, number one, let's assume we get to those milestones. Is the company actually financeable at that point in time or not? And so, as an example, we're actually going through this with one of our companies today, where it's not clear that even with a bridge, it puts them in a demonstrably better situation to be able to raise capital, and I think those are the ones where you fee…

AI assessment note: “if you're bridging to try to buy yourself time to get to a set of milestones”

Q and predictable in the early days, and that makes sense. Sometimes you have to kind of project yourself out, and they don't make sense for quite a few years, and you have to have that mental plasticity to see what's coming in the future, and that they do make sense. How do you kind of distinguish between realistic versus unrealistic expectations of what could work in terms of unit economics?

A Yeah, no, look, you're absolutely right, which is we've got very little data to work with at the early stage here, but I think what you're trying to do is kind of what indicia, at least, are out there that helped me convince that I think this business can work, and so For example, if you're in a consumer business, what do we know about customer cost of acquisition of customers, excuse me, today? And what do we think is going to happen over time? So if this is a heavy paid marketing business, it's probably the case that those economists are going to degrade over time because, you know, your cost of acquisition, you know, through Google and Facebook and other paid channels may be difficult. So you're trying to understand, is there some element of kind of organic growth that may over time overcome the need to bootstrap the business with paid marketing? And then on the enterprise side, it's a similar question, which is, okay, what are my initial Costs look like? What are my initial deal sizes look like? Do I think I can grow those over time? And you're right that there's very little data ultimately to do that, but I think those are the questions at least you have to ask yourself, and most of what we're doing at that early stage is saying, okay, let's at least lay out those assumptions and pressure test them. Do they pass the red face test? And if so, we should move forward, but at …

AI assessment note: “let's at least lay out those assumptions and pressure test them.”

Q there when pitching from the founder side. I'm always super interested because a lot of founders that I see present this range that they look for in their raise. Eight to twelve million is vastly different set of numbers. Can I ask, in terms of getting the right number, how do you advise founders on how to determine the right amount to raise when they go out for that fundraise?

A Yeah. We think the right amount of money to raise is it's the amount you need to either meet or exceed the kind of hurdles or the objectives you set up so that when you go to the next round of financing, you can have this kind of monotonically increasing stock price. So the best advice we always give is when you're raising your A round of financing, what's the pitch that you're going to give at the B round and work backwards and say, okay, based on that, if I'm raising A today and I'm targeting 18 to 24 months to raise my B, what is that pitch going to look like? And therefore, what's the margin of error that I need in order to be able to achieve those milestones? And I think where you make mistakes sometimes is if you're going to raise a lot more than you anticipated, you better be able to deliver on a higher set of objectives so that you actually don't find that you've got to stall out of the second round of financing. It's incredibly painful, as you know, for these companies to have to go through certainly down rounds, but even not having material up rounds, it's got all kinds of emotional challenges just from an employee retention and recruitment perspective. So better to set the expectations appropriately, give yourself the appropriate margin for error, But don't over-raise, and certainly don't under-raise in a way that compromises your ability to achieve those objectives.

AI assessment note: “what's the pitch that you're going to give at the B round and work backwards”

Q being upfront about it. I do, though, want to move into a fascinating realm, which I'm calling Scott AMA. Basically, I've wanted to ask these questions for a long time, and so I couldn't forgive myself if I didn't not ask. So before the quickfire, you've been with the firm since the very beginning in 2009. What have been your biggest learnings from building the firm with Mark and Ben?

A Yeah, I think the biggest one has been that this is fundamentally a network effects business. If you do things right, if you respect the entrepreneurial process, if you, you know, handle yourself professionally, you get tremendous lift from that. And that's really kind of been part and parcel of how we built a firm. You know, the flip side of that, you know, is also true, which is, look, if you don't pay attention to day-to-day details of the business, your reputation can unravel probably as quickly as it rose. So to me, I think that's the biggest lesson that I've learned from this business is we talk about this with our team together. We don't build anything. We don't make any products. All we are, quite frankly, is a customer service business. And day-to-day, we've got to make sure that we deliver on that customer service.

AI assessment note: “I think the biggest one has been that this is fundamentally a network effects business.”

Q the boom of 2000. So that's astonishing. I do have to also, because I want to move into something that you discuss a lot in the book, and it's the element of the pitch and the engagement between founder and VC. And so specifically with regards to the pitch, Scott, you've seen thousands of pitches with Andreessen. So from your perspective, what do entrepreneurs get most wrong when pitching VCs?

A I think there's a couple of things. I'd say probably the most important is Understanding how we evaluate the deal, and therefore, how do they want to allocate and spend their time on the pitch, and probably the biggest piece there is team. Particularly, it kind of goes back to the discussion we've been having, which is at the early stage, there's not a whole lot of quantitative data for us to go after, so what we're really trying to figure out is, assume it's a big market. We know, therefore, that market's going to be very competitive, and so the real question is not, do I want to invest in this space? The question is, do I want to invest in this team? And what we're trying to figure out is, what are the elements that would make this Team, particularly better or worse in some cases than anyone else who might come out after and go after the same opportunity. And I think what happens a lot of times in pitches is people immediately want to kind of talk about product, which is wonderful. And of course we love product, but you know, the product we know is going to change. That's just the nature of this business. As you know, you know, we use this word pivot very euphemistically in the business, but essentially that means that the idea we thought was the right idea turned out to not be the right idea. And so we understand that. And so what we're more looking for is, What is it about …

AI assessment note: “most important is Understanding how we evaluate the deal... biggest piece there is team”

Q Do you agree with me and my dislike of ranges when people say eight to 12?

A Yeah, it's funny. I think it's fine. I don't have a, I don't have a religious objection to it, I guess I would say. I think it's fine if the answer is there is a different set of objectives attached to the eight versus the 12. So I agree with you, which is every number you put out needs to go along with it, a set of kind of clear objectives that you believe will enable you to Me to exceed those expectations over time, So I think it's okay with ranges as long as you can articulate, if I have eight, this is what I'm going to do with that money, but if we're lucky enough to be able to raise 12, this is the incremental, you know, set of financials or, or company objectives we're going to achieve.

AI assessment note: “I think it's fine. I don't have a religious objection to it”

Q Well, I'm super interested in that element, because we hear about kind of the bridge to nowhere, and then the conversation often dies off there. If it is a bridge to nowhere, as we said, what do we actually do, Scott? What's your thought process on literally the next best move?

A Yeah, look, I think the honest answer is being honest with yourself is the best action, so we know it's incredibly difficult to build these companies, and Having a company that doesn't work doesn't make you a bad person. It's just an incredibly hard thing to do, and maybe the market's not there. Maybe the company just can't execute, and I think sometimes there's nobility in recognizing this. It's very interesting that when I started this business, when we started, we thought these would be incredibly difficult conversations, and there's no doubt sometimes they are, but oftentimes we find actually exactly the opposite, which is sometimes the founders are relieved after those conversations because they tell us, I recognize the same things you recognize, but I felt like I was, I had to keep going because you as the venture capitalist experienced Respected me just to kind of go no matter what. And so in a strange way, I think there's actually a relief that kind of that honest conversation often can provide, which is, hey, we recognize that this is the nature of the business. Some things work and some things don't. And, you know, again, there's, there's nobility sometimes in recognizing that and realizing that the next best use of time for the next three or five years is probably to go find a way to kind of wind things down in a professional and respectful way, but not force people …

AI assessment note: “wind things down in a professional and respectful way”

Q weighting towards the people, and obviously I agree with you there totally, but we did have one of your founders on the show in the form of Frederick at Octa, who I believe was Andreessen's first ever check. Yeah, so he said to me, though, that it's 70% market, 20% team, and 10% product. Charles, would you then disagree with that weighting, and what would you say yours would be?

A Yeah, so I would agree with the basic concept, which is market matters importantly, for sure, so I think of market more as kind of a qualification metric, which is You're kind of in or out based upon whether you believe the market opportunity is big enough to be able to support a self-sustaining company. Now, as we know, it's often hard to get that right, and so if you think about, you know, a company like Lyft, for example, if you had just assumed the taxi market as the proxy for that market, you probably would have gotten it wrong and chosen not to invest. Somebody told me an anecdote the other day, by the way, on this one, which I heard. At the time, Lyft and Uber were raising kind of their first couple rounds of financing. I think the taxi market in the, in San Francisco was about a hundred million dollars annually. And I think today, the combined, the two of them do north of a billion and a half dollars in San Francisco alone. And not every market, of course, is going to grow 15 X, but I think, you know, it goes to the kind of challenge of market sizing. So I agree with Freddie, which is, you have to at least believe the market is big, but I would kind of flip his percentages, and I would say, once you get to market being attractive, then I think most of the evaluation shifts to team. So I don't know if it's 80% or 90%, but I would say it's something order of magnitude lik…

AI assessment note: “I would kind of flip his percentages, and I would say”

Q Well, I'm super interested in that element, because we hear about kind of the bridge to nowhere, and then the conversation often dies off there. If it is a bridge to nowhere, as we said, what do we actually do, Scott? What's your thought process on literally the next best move?

A Yeah, look, I think the honest answer is being honest with yourself is the best action, so we know it's incredibly difficult to build these companies, and Having a company that doesn't work doesn't make you a bad person. It's just an incredibly hard thing to do, and maybe the market's not there. Maybe the company just can't execute, and I think sometimes there's nobility in recognizing this. It's very interesting that when I started this business, when we started, we thought these would be incredibly difficult conversations, and there's no doubt sometimes they are, but oftentimes we find actually exactly the opposite, which is sometimes the founders are relieved after those conversations because they tell us, I recognize the same things you recognize, but I felt like I was, I had to keep going because you as the venture capitalist experienced Respected me just to kind of go no matter what. And so in a strange way, I think there's actually a relief that kind of that honest conversation often can provide, which is, hey, we recognize that this is the nature of the business. Some things work and some things don't. And, you know, again, there's, there's nobility sometimes in recognizing that and realizing that the next best use of time for the next three or five years is probably to go find a way to kind of wind things down in a professional and respectful way, but not force people …

AI assessment note: “go find a way to kind of wind things down in a professional and respectful way”

Q weighting towards the people, and obviously I agree with you there totally, but we did have one of your founders on the show in the form of Frederick at Octa, who I believe was Andreessen's first ever check. Yeah, so he said to me, though, that it's 70% market, 20% team, and 10% product. Charles, would you then disagree with that weighting, and what would you say yours would be?

A Yeah, so I would agree with the basic concept, which is market matters importantly, for sure, so I think of market more as kind of a qualification metric, which is You're kind of in or out based upon whether you believe the market opportunity is big enough to be able to support a self-sustaining company. Now, as we know, it's often hard to get that right, and so if you think about, you know, a company like Lyft, for example, if you had just assumed the taxi market as the proxy for that market, you probably would have gotten it wrong and chosen not to invest. Somebody told me an anecdote the other day, by the way, on this one, which I heard. At the time, Lyft and Uber were raising kind of their first couple rounds of financing. I think the taxi market in the, in San Francisco was about a hundred million dollars annually. And I think today, the combined, the two of them do north of a billion and a half dollars in San Francisco alone. And not every market, of course, is going to grow 15 X, but I think, you know, it goes to the kind of challenge of market sizing. So I agree with Freddie, which is, you have to at least believe the market is big, but I would kind of flip his percentages, and I would say, once you get to market being attractive, then I think most of the evaluation shifts to team. So I don't know if it's 80% or 90%, but I would say it's something order of magnitude lik…

AI assessment note: “I would kind of flip his percentages... I don't know if it's 80% or 90%”

Q I always get from Founder Squad, and I'm super interested to hear your thoughts, not in schedule, so very unfair of me, but how transparent should they be in the fundraise process? Some say, should I say the names that I'm actually speaking to and say I'm actually talking to X X, Y, and Z fund also? Or should I be completely dumb? How should I play the transparent card?

A Yeah, I think probably somewhere in between makes sense. So I think it's probably unfair for us as VCs to expect them to tell us, hey, these are the five firms I'm talking to, so you know exactly who your competitive set. We're generally trying to be pretty good at understanding the competitive dynamics, and hopefully sometimes, you know, we can figure that out just by talking to people in network. But I do think you want to be clear on what you're looking for, at least. I think sometimes entrepreneurs are May not be as clear as what it is they're looking for in for a partner. So look, if the answer is you're just looking for the person who's going to pay the highest price and that's sufficient, then there's nothing necessarily wrong with that. You should be transparent. Or if the answer is there's particular skills or areas of expertise you're looking for, I think you as the entrepreneur should basically essentially set the buying criteria and then allow the venture capitalists to determine whether or not they actually fit into that buying criteria.

AI assessment note: “Yeah, I think probably somewhere in between makes sense.”

Q I always get from Founder Squad, and I'm super interested to hear your thoughts, not in schedule, so very unfair of me, but how transparent should they be in the fundraise process? Some say, should I say the names that I'm actually speaking to and say I'm actually talking to X X, Y, and Z fund also? Or should I be completely dumb? How should I play the transparent card?

A Yeah, I think probably somewhere in between makes sense. So I think it's probably unfair for us as VCs to expect them to tell us, hey, these are the five firms I'm talking to, so you know exactly who your competitive set. We're generally trying to be pretty good at understanding the competitive dynamics, and hopefully sometimes, you know, we can figure that out just by talking to people in network. But I do think you want to be clear on what you're looking for, at least. I think sometimes entrepreneurs are May not be as clear as what it is they're looking for in for a partner. So look, if the answer is you're just looking for the person who's going to pay the highest price and that's sufficient, then there's nothing necessarily wrong with that. You should be transparent. Or if the answer is there's particular skills or areas of expertise you're looking for, I think you as the entrepreneur should basically essentially set the buying criteria and then allow the venture capitalists to determine whether or not they actually fit into that buying criteria.

AI assessment note: “somewhere in between makes sense. So I think it's probably unfair for us as VCs”

Q Can I ask, on the flip side, you know, everything always seems incredible from the outside, but there's always challenges in scaling a firm. What's been the biggest challenge for you in scaling Andreessen?

A I'd say a couple things. Number one is, look, we've made our set of mistakes on investments. There's no question about that. We try really hard to distinguish between kind of what I would call errors of process versus errors of outcome. So, you know, sometimes, look, it's a perfectly good venture thesis and venture bet, and it just doesn't work. And those are fine. You want to make sure you don't learn the wrong lessons quite frankly from those things. But probably I'd say the biggest challenge, which may sound surprising, but I think it goes back to the Conversation is it's always about people. As with any business, we're only as good as the people who carry the brand for the business, and that's always the biggest challenge, and, you know, I feel like we've done a fantastic job there, but it's a day-to-day job of making sure that you hire well, that you train people well, that you make sure that the culture and the values that you ascribe to as an organization are really part and parcel of what people do every day, so that's really both the greatest opportunity and, quite frankly, the greatest challenge in building a business like this.

AI assessment note: “probably I'd say the biggest challenge... it's always about people.”

Q Yeah, no, I totally agree. Can I ask, Scott, when you think about all the pitches you've seen, what's the one that sticks out most to you, and why?

A Yeah, so I have, uh, you may not know, I have three girls, actually, and, uh, of course, I love them all equally, and I, I feel the same way about our pitches and our portfolio companies, so I think picking favorites is probably a fool's game in this business, but maybe I can tell you a little bit about, I think, what the characteristics are that I think stick out the most that actually really provide compelling pitches, and we hinted at it a little bit, but I would use the idea of storytelling, and when I say storytelling, I mean, Good storytelling as opposed to kind of hoodwinking people or creating fantasies. But if you think about this, right, all these markets are intensely competitive. We know it's incredibly competitive to hire employees, to find partners, and all kinds of stuff. The most compelling pitches that we see are those individuals who can really create a vision and distill that vision and tell it in a way that will cause people, as I said, to do maybe even irrational things, right? So why would I quit my job at a Google or a Facebook or an Apple where I've got a great opportunity, I'm probably very comfortable financially, To go join somebody who basically is starting over from the very beginning.

AI assessment note: “picking favorites is probably a fool's game in this business”