Aug 23, 2022 · 30m · another-podcast
A new wave of company creation
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Tech analysts Benedict Evans and Tony Cameron Brown examine Andreessen Horowitz's massive investment in Adam Neumann's startup Flow to explore the shifting boundaries of modern venture capital. They evaluate the fundamental economic differences between high-margin software platforms and operationally intensive, asset-heavy businesses.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 83.7% of the talking time here. How this is scored →
The hosts as informed peer 7.9 Guest teaching 0.3 Guest disagreement 0.7 The hosts pushing back 1.1
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 24:12 Brown rejecting the premise of funding Neumann
Brown forcefully pushes back on the rationality of the deal, arguing that both the founder's track record and the core idea appear fundamentally insane.
Hardest push from the hosts ▶ 16:20 Evans refusing to equate real estate pitches with software startupsEvans firmly challenges Brown's suggestion that any bold vision on a PowerPoint constitutes venture-scale tech, insisting property models lack software defensibility.
Biggest teaching moment ▶ 17:31 Brown raising creator-led venture roundsBrown brings up Emma Chamberlain's Series A coffee financing to reframe the discussion around non-tech consumer businesses taking venture capital.
The host holds their own ▶ 26:25 Evans explaining tractor businesses and Dickensian marginsEvans demonstrates deep financial expertise by applying his tractor vs rocket ship model and unit economics to explain why WeWork collapsed upon public market scrutiny.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| WeWork's Illusion: Real Estate Model vs. Tech Multiples | 8 | 0 | 1 | 1 | Evans lays out a structured analytical framework comparing Netflix, Tesla, and WeWork to dissect tech versus real estate multiples. Brown actively supports the premise with an anecdote about working out of a WeWork office. | |
| Venture Investment Philosophy: The Value of 'Crazy' Deals | 8 | 0 | 0 | 1 | Evans articulates classic VC power-law dynamics and suspension of disbelief while questioning Marc Andreessen's claims about rental housing. Brown acts as an engaged conversational partner prompting further explanation. | |
| The Changing Nature of Venture Capital and Mega-Funds | 9 | 0 | 0 | 0 | Evans gives an extensive tutorial on how regulatory shifts like Sarbanes-Oxley and market size expansion transformed boutique VC firms into multi-billion-dollar registered investment advisors. Brown asks clarifying questions. | |
| Software as a Crowbar vs. Real Estate Fundamentals | 7 | 0 | 1 | 2 | Evans explores whether software is truly a market-entry crowbar for real estate like it was for streaming media. Brown suggests bold PowerPoint pitches fit VC regardless, but Evans insists on distinguishing tech leverage from physical property fundamentals. | |
| DTC Brands, Creator Ventures, and Consumer Startups | 6 | 2 | 1 | 1 | Brown introduces the trend of creator-led venture rounds like Emma Chamberlain's coffee brand, prompting Evans to discuss the repeated margin collapse of DTC businesses. Evans also catches his own mix-up between Allbirds and Atoms. | |
| The Great Unbundling and Non-Software Company Creation | 8 | 0 | 2 | 2 | Evans cites his 'Great Unbundling' thesis to explain how digital channels create valuable 3x return businesses outside traditional high-margin software. Brown pushes back on backing controversial founders like Neumann, while Evans urges evaluating the underlying business proposition. | |
| Evaluating Business Models: Tractors vs. Rocket Ships | 9 | 0 | 0 | 1 | Evans introduces his 'tractors vs rocket ships' mental model to explain why operationally heavy models like WeWork and delivery require strict unit economics scrutiny rather than hand-waving growth. Brown embraces the framing. |
Statements from this episode (16)
Evans: a16z invested $300M-$400M in Adam Neumann, its largest check ever
“And Andreessen Horowitz has given him, I think, the largest check they've ever written at a So three or four hundred million dollars to back this.”
Evans: All questions that matter for Netflix are TV industry questions
“All questions that matter for Netflix are TV industry questions. What rights? What shows? What happens as the incumbents pull their shows off Netflix? What budget should they have? What stars? What kind of, they're all TV questions. There's no technology quest…”
Evans: WeWork had no software story or network effect
“And the first thesis turned out to be true, more or less, that you could make a bigger TAM. The second thesis was not true at all. There was no software story. There was no network effect. It's a service office company. It's a real estate business.”
Evans: No one at WeWork was charged or convicted of wrongdoing
“There's a whole bunch of argument about how the company was run, how what the ethics were, what's known as a whole bunch of accusations. Nobody's actually been convicted or even charged with anything.”
Evans: Outsized venture returns only come from contentious deals that look dumb
“If the deal was obvious and straightforward, and everyone agreed on it, everyone would be doing it, and it wouldn't make 50 times your money. And so the deal, all the deals that produce good returns for venture firms are the ones that people argue about, and t…”
Evans: Andreessen's take on renting sounds like someone who hasn't rented in 25 years
“I'm radically unimpressed by Marc Andreessen saying renting is a soulless experience and nobody would ever want to do that because I've spoken like a man who hasn't rented a home in 25 years.”
Evans: Modern tech company returns occur mostly in private markets pre-IPO
“Tech companies of the eighties and nineties, like 80 or 90% of the returns to investors came in after the IPO. Let's say IPO at a hundred million dollars, and then they end up being a fifty billion dollar company. Whereas for something like Google or Facebook …”
Evans: a16z and Sequoia are RIAs buying public equities like Block
“Andreessen Horowitz is now a registered advisor, so is Sequoia, which means they can own public stocks. They own public stocks. I've read that Andreessen Horowitz bought stocks in Square, which is now in, which is now called Block. They bought it in the stock …”
Evans: VCs must evaluate second acts of controversial founders
“You know, as a VC, if you didn't look at the crazy maniac who incinerated a bunch of money, but also built something really valuable, if you didn't look at his second thing, you're kind of not doing your job.”
Evans: Software cannot reinvent real estate business fundamentals
“Is software a crowbar that lets you build an entirely new kind of real estate business? I really don't think so.”
Evans: DTC brands lack software margins and network effects at scale
“What's happened repeatedly is that they scaled to a certain point and did not have software margins, did not have network effects, became very capital intensive, had all the economics of a new CPG business, or a new apparel business, or a new clothing business…”
Evans: A wave of non-software company creation is coming across retail
“Like, there is clearly going to be a wave of new company creation, right? Outside of software. So whether that's apparel, or retailing, or restaurants, all sorts of things, like the whole basis of how you buy stuff online changes.”
Evans: New non-software brands will likely yield 3x returns, not 30x
“Those companies are probably not 20 or 30 X returns. You know, they're not going to put, you're not going to go from a five million dollar check to a billion dollar exit, but they are somewhere further along that risk reward curve, and they might be, there's a…”
Evans: Operational businesses like delivery and rentals require exact unit economics upfront
“Like, it's all about a very, very small narrow margin, and that's also the story for Amazon, and it's a story for grocery delivery, it's a story for all these one-hour grocery things, it's a story for restaurant delivery, it's a story for dark kitchens it's a …”
Evans: WeWork failed to disclose core operational numbers in its IPO prospectus
“Which is, of course, what happened when we went out and IPO'd, and the real estate investors asked what the numbers were, and they didn't know what the numbers were. They weren't in the IPO perspectives because they just said it's a movement.”
Evans says he would not have invested in Adam Neumann's Flow
“Meanwhile, meanwhile, I still wouldn't have done the deal, but hey, that, that's why I'm, that's, maybe that's why I'm not taking this call on my goal stream between Santa Monica and Miami Beach, my Santa Monica and Miami Beach offices, as I run my venture fir…”