Sep 2, 2019 · 1h 6m · capital-allocators
Scott Kupor - Andreessen Horowitz (First Meeting EP.07)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Scott Kupor, Managing Partner of Andreessen Horowitz, exploring the firm's pioneering founder-centric operational model, high-conviction investment decision framework, and the macroeconomic shifts reshaping modern venture capital.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 20.6% of the talking time here. How this is scored →
Ted as informed peer 5.1 Guest teaching 5.4 Guest disagreement 0.4 Ted pushing back 0.6
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 53:05 Scott defending the two distinct categories of omission errors
Scott pushes back against the premise that omission is purely an access problem, distinguishing between unforced evaluation errors and access failures.
Hardest push from Ted ▶ 52:42 Ted challenging Scott on venture error types and return persistenceTed counters Scott's omission framework by arguing that serial correlation among top venture firms implies errors stem from failing to win deals rather than missing out on scouting.
Biggest teaching moment ▶ 43:04 Scott explaining grade inflation in funding rounds and valuation shiftScott educates listeners on how Series A rounds functionally became modern seed rounds and explains why nominal valuation growth reflects market expansion rather than irrational exuberance.
Ted holds their own ▶ 52:42 Ted framing venture returns around allocator market efficiencyTed demonstrates deep allocator domain expertise, challenging Kupor by synthesizing market efficiency and persistent returns among top-tier VC franchises.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Scott Kupor's Career from Stanford to LoudCloud | 4 | 3 | 0 | 0 | Ted prompts Scott to detail his background transitioning from Stanford Law to investment banking and early LoudCloud. Scott candidly shares his trajectory and early management learning curve without any friction. | |
| Transitioning from Individual Contributor to Manager | 4 | 4 | 0 | 0 | Ted asks about moving from individual contributor to managing engineering teams and the formation of a16z. Scott details Ben Horowitz's mentorship advice and the core founding premise of supporting founder-CEOs. | |
| Scaling the a16z Operational Services Platform | 4 | 5 | 0 | 0 | Ted explores how a16z scaled its operational platform to over 150 employees. Scott lays out the five dedicated operational networks and how early fund liquidity supported rapid internal reinvestment. | |
| Crisis-Era Launch and Disrupting VC Marketing | 5 | 5 | 1 | 1 | Ted brings up the industry pushback and ruffled feathers when a16z launched. Scott embraces the contrarian posture, highlighting how launching post-Lehman allowed them to invest while legacy firms panicked. | |
| Software Thesis and Sourcing Emerging Opportunities | 4 | 5 | 0 | 0 | Ted asks how a16z sources deals at a ten billion dollar scale. Scott elaborates on their overarching thesis of software eating the world and tracking what hobbyist engineers explore on weekends. | |
| Due Diligence, Founder Evaluation, and Founder Velocity | 5 | 6 | 0 | 1 | Ted asks whether a16z prioritizes the product or the entrepreneur. Scott details why early-stage investing prioritizes founder velocity and navigates fast 48-hour term-sheet turnarounds. | |
| Non-Consensus Decision-Making at a16z | 4 | 6 | 1 | 0 | Ted inquires into how investment decisions are made at the partnership level. Scott explains why consensus voting leads to mean reversion and how a16z relies on single table-pounding advocates. | |
| Venture Capital Deal Dynamics and the a16z Pitch | 6 | 5 | 0 | 1 | Ted probes competitive dynamics in deal making and pitches against rival VC firms. Scott outlines how the pitch centers on operational services rather than capital, highlighting zero-sum Series A rounds. | |
| Board Roles, Governance, and Evaluating Founder-CEOs | 6 | 6 | 1 | 2 | Ted challenges Scott on the viability of keeping product founders as long-term CEOs versus hiring seasoned operators. Scott argues VC board members frequently overstep by playing amateur product managers. | |
| Venture Market Evolution: Elongated Timelines and Seed Proliferation | 5 | 7 | 0 | 0 | Ted asks about macro structural shifts in venture capital over the past decade. Scott delivers an educational breakdown on time-to-IPO doubling from 6 to 12 years and grade inflation across seed and Series A rounds. | |
| Mega-Funds, SoftBank, and the Public-to-Private Capital Shift | 6 | 7 | 1 | 1 | Ted asks about SoftBank's mega-funds and whether private valuations indicate a bubble. Scott explains how crossover funds like Fidelity operate with lower cost-of-capital hurdles, transferring public appreciation to late-stage private rounds. | |
| Corporate Venture Capital and LP Direct Investing Trends | 6 | 6 | 0 | 0 | Ted discusses corporate venture capital and strategic tie-ins like Microsoft and SoftBank. Scott breaks down the internal structural frictions inside corporate VC and the trend of LPs shifting toward direct investing. | |
| Venture Mistakes: Sins of Omission and the Square Case Study | 7 | 6 | 2 | 3 | Ted pushes back on VC mistakes, arguing persistence in venture returns means omission errors are usually failures of access rather than judgment. Scott delineates the difference using a16z's passes on Square and Airbnb. | |
| Future Horizons: Convergence of Biology, Tech, and a16z Strategy | 5 | 5 | 0 | 0 | Ted asks about emerging frontiers in tech investing. Scott points to the intersection of computer science and biology, drawing an analogy between current biology tech and 1970s computing. | |
| Capital Allocation, Wealth Management, and Institutional LP Trends | 7 | 6 | 0 | 1 | Ted asks how VC partners manage personal wealth and explores LP investment committee perspectives. Scott details LP rotations from public to private markets and identifies market capacity limits around 50 billion dollars. | |
| Demystifying Venture Capital in 'Secrets of Sand Hill Road' | 4 | 5 | 0 | 0 | Ted inquires into Scott's motivations for writing Secrets of Sand Hill Road and closes with rapid-fire questions. Scott explains his goal of reducing information asymmetry between founders and VCs. |
Statements from this episode (31)
As Capital Democratizes, VCs Must Differentiate Beyond Money
“It's likely to be the case that entrepreneurs will now have more choices of which VCs to work with because there will be capital in lots of different places, and therefore something other than capital will have to be what differentiates one VC from another.”
Product Visionaries Should Be CEOs to Control Resource Allocation
“And so we said, look, because these are product companies, we love the idea that the person who is the product visionary also is the CEO and therefore controls resource allocation and strategy and all this other stuff.”
a16z Hosts Over 1,000 Corporate Executive Briefings Annually
“We do something here called an executive briefing where probably at least a thousand times a year we have executives from those companies come in, they spend a half a day or a day with us, and the point is for them to kind of get educated on the areas of Techn…”
Sequoia's 2008 'Rest in Peace' Doomsday Presentation Was Incorrect
“If you were around here in the valley at the end of oh eight, Sequoia, who's a very well-regarded and has been a very successful firm, Put out this presentation called Rest in Peace, and it had a skull and crossbones and a tombstone on the front of it, and the…”
'Software is Eating the World' Remains a16z's Core Investment Thesis
“So Mark Andreessen wrote this editorial many years ago called Software is Eating the World, and that's basically been our investment thesis for the last 10 years, and I think it will be our investment thesis at least for the next 10 unless the world changes, a…”
Engineer Hobbyist Activities Evolve Into Mainstream Industries
“Often there's a reasonable correlation between stuff that starts as a engineer hobbyist activity that can evolve into a mainstream area, and that's part of how we think about it.”
a16z Evaluates Founders Above Products Because Early Products Unavoidably Change
“At the early stage, it's really much more heavily geared towards entrepreneur. The reason for that, I think, is that we know that the product's gonna change, right?”
Founder Velocity and Execution Pace Best Predict Startup Success
“The best predictor of future success is do you actually meet the milestones and deliver on the things that you said you were going to do, and obviously there are some people who are very successful who struggle at the outset, but having that relationship over …”
a16z Rejects Consensus Voting to Avoid Reversion to the Mean
“We are decidedly not a consensus organization, so When we started, and Mark and Ben have been very true to this over time, is we said, look, we worry that if you go around the table and you ask people to vote, you end up with reversion to the mean type thinkin…”
a16z's Post-Investment Platform Team Dwarfs Its Closest Competitor
“Nobody's certainly done it at the scale that we're doing it at, so a big change in the industry over the last 10 years has been that there are more firms that are adding to their post-investment teams, which for a long time was really never part of the makeup …”
Andreessen Horowitz Manages Approximately 150 Active Portfolio Companies
“On the active companies, about a 150 today, and We've either got a board seat or we've got some substantive investment. We have some seed investments that are smaller where we don't take board seats, but about a 150 active is what we're managing today.”
VC Failure Cases Stem From Board Members Overestimating Their Knowledge
“I think a lot of the failure cases in this business tend to be where I think venture capitalists overstep their bounds on the board and think they know more about the business than they actually do”
Median Time From Founding to IPO Has Doubled to 12 Years
“For the last 15 years, it's basically been 10 to 12 years, so we've almost doubled the time to stay private”
The US Has Over 800 Seed Venture Capital Firms
“The last number I saw was even more than I expected. Something like 800 Seed firms now in the U.S., which means funds that are probably a hundred million dollars in AUM or less”
Grade Inflation Shifted Historic Series A Rounds Into Seed Rounds
“What used to be an A round is now a seed round, and what used to be a B round is now an A, and so essentially the round sizes have gotten bigger. So an A round, and I'm using air quotes here, but in the old days, right, an A round was three to five million dol…”
Expanding Round Sizes Can Destroy VC Returns Without Market Size Growth
“The disaster case for this industry would be valuations and round sizes grow, but we don't get the commensurate increase in market size, and therefore you basically just have taken that out of your returns.”
Mega-Rounds Transfer Asset Appreciation From Public to Private Markets
“I think really most of this is really just a wealth transfer of appreciation from the public markets into the private markets, and many of these people have lower costs of capital, right?”
Companies Staying Private Longer Actively Hurts the United States
“I think it's a bad trend for our country. Selfishly, it's very good for people who are investors in or who have access to private capital because I think more and more of that appreciation will accrue there, but it's not a good thing for our country.”
US Public Companies Shrank by 50 Percent Over 20 Years
“It's a combination of the number of public companies shrinking by 50% over the last 20 years.”
Conflicting Incentives Severely Hinder Corporate Venture Capital Programs
“Institutionally it's hard from an incentives perspective to make these corporate venture capital firms work because you always have this tension between are we a strategic investor, are we a financial investor, and can we attract the right kinds of people inte…”
Half of Andreessen Horowitz's Venture Investments Result in Total Capital Loss
“Probably half of what we do is euphemistically what we call impaired capital, which basically means you lost all your money, right?”
a16z Missed Square After Anchoring to Early Funding Valuations
“Square is a company that we saw as early as the very, very first round, and for a variety of reasons just didn't make the decision to invest, and as often happens with these companies that are successful, every round always feels expensive after that”
a16z Initially Passed on Airbnb Before Investing at a Higher Valuation
“We did that at Airbnb. You know, we saw the very first round, and we just had lots of questions in our mind that didn't allow us to get there. We ultimately did the next round, but obviously, as you'd imagine, there's a substantial delta between the first roun…”
Biology Mirrors the State of Computer Science in the Late 1960s
“Biology is kind of where computer science was like late sixties, early seventies, which is we're about to see like this whole new set of technologies that will dramatically change the costs and the automation and the price curves for a lot of these things.”
VCs Should Let Compelling Founders Drag Them Into New Technology Trends
“It's our job to be in front of all the interesting people who think they know what it is, and then for us to meet with them and hopefully be smart enough to allow them to drag us into places that we might not have gone because they've got some really killer id…”
Silicon Valley Absorbs 75 Percent of Andreessen Horowitz's Investment Activity
“Geographic expansion is not a big focus for the firm right now, so we're still a very heavy US-centric firm. Probably 75% of what we do is around the Silicon Valley area.”
US Venture Capital Absorbs $50 Billion Annually in LP Commitments
“Right now, you know, the industry's taking in 40, fifty billion a year roughly in the U.S. In terms of new LP commitments.”
Venture Economics Breakdown at $100 Billion in Annual LP Commitments
“You know, if we go back to 60, 70, a hundred billion, which is where we got to at the peak of 2000, then I think you get to the point where the economics of the business unfortunately probably just can't support that little activity.”
Deal Experience Asymmetry Breeds Distrust Between Founders and VCs
“So what I find now having been in this business for 10 years and then in tech for another 15 is there's this unspoken asymmetric information between VCs and entrepreneurs. It's probably not surprising, obviously, because look, we do this thing hundreds of time…”
Founders Should Pitch 'Conquer-The-World' Ambition Over Downside Risk Mitigation
“The reality is, we achieve diversification through our portfolio. I don't need an individual entrepreneur to achieve diversification for us. It's great to know that there's somebody out there who might buy it, but, like, none of us is playing for that outcome,…”
Building Professional Relationships Yields More Career Success Than Perfect Individual Work
“I think we often think about individual achievement as the pinnacle of career success, and I think the reality is look like more career success comes from getting an A on your job, but maybe the difference between an A plus or an A plus plus is actually not wo…”