Original Source: Overseas Unicorns

Original Author: jessie

"They're like lunatics, aggressively putting their foot in every deal."

That quote, from a Google executive, describes a16z, one of the most high-profile venture capital firms in the world.

The full name of a16z is Andreessen Horowitz, taken from the surnames of the two founders, founded in 2009 by Marc Andreessen and Ben Horowitz,Managed a total of 19.2 billion U.S. dollars in funds, and rapidly expanded the investment territory with a rampant style. As a well-known software catcher, almost all the most dazzling companies in the Internet field have been bet:Facebook, Twitter, Airbnb, Okta, Github, Stripe, etc., and the investment strategy is both sensitive in the early stage and decisive in the growth stage. It can not only invest in Instagram in the seed round, but also grab Github in the A round of competition (brought by Microsoft when it was acquired) return of more than US$1 billion), and can also lead Roblox’s US$150 million investment in the G round.

Its keen forward-looking and aggressive and bold investment style are fully reflected in the layout of the encryption field, Coinbase, which was invested in 2013, had a market value of up to 85.8 billion US dollars when it went public, making it one of the largest listed companies in the history of technology (a16z still holds 7% of the company's shares after cashing out 4.4 billion US dollars). Well-known encryption projects such as OpenSea, Dapper Labs, Uniswap, and dYdX are also representative works of a16z crypto fund.

Compared with Sequoia and KPCB established in 1972, Accel Partner established in 1983, and even Benchmark established in 1995, a16z established in 2009 is quite young, but it is undoubtedly the top venture capital institution in Silicon Valley.

As impressive as investment performance is,All of this is related to the experience of the two founders, and also to the changes of the era in which a16z lives—they started businesses twice during the Internet bubble. The breakdown of social media, as well as several fluctuations in the encryption market, ushered in a full-scale explosion of encryption applications.

a16z is also a "media company making profits through investment", almost all of its employees have amazing output capabilities, and vigorously promote investment concepts through self-built media channels to promote industry information circulation and cognitive education.

All of this is related to the experience of the two founders, and also to the changes of the era in which a16z lives—they started businesses twice during the Internet bubble. The breakdown of social media, as well as several fluctuations in the encryption market, ushered in a full-scale explosion of encryption applications.

This article is long, the following is the table of contents of this article, it is recommended to combine the main points for targeted reading

01. Star-making machine: "Hollywood style" victory

• Talent network construction and post-investment services

• media volume

• Competitive Advantage and Industry Innovation

02 Founder: The igniter of the Internet

03 Rise of the road: the leader of the next generation network

• Mobile Internet Era: "Software Eats the World"

• The Web3 Era: The Crypto Hurricane

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01. Star-making machine: a "Hollywood-style" victory

Shades of oak and eucalyptus surround Sand Hill Road in Palo Alto, Calif., the nation's most expensive office space, a two-mile stretch that winds its way into the heart of Stanford University.

Every day, countless entrepreneurs visit this place with their business plans in their arms, knocking on the doors of the major venture capital companies among them. Among them, a16z is one of the venture capital firms that these dreamers are most eager to win.

a16z's lobby resembles a library, with shelves stretching almost floor to ceiling. Founder Andreessen spent three nights sorting the books: one for programming, one for business, and one for Hollywood.Yes, there are quite a few books that explore the early development of Hollywood, and the reason for it starts with the founding of a16z.

In order to attract more investment opportunities, venture capital institutions often publicize their past investment cases and returns. However, in 2009, when a16z was just established, they did not have any investment records to promote themselves. Andreessen is very clear in his heart: "The top 15 companies account for 98% of the market value of listed companies. If you are in a second-tier institution, you will never have access to first-class companies."In order to break this ice, they believe that the criteria by which companies choose venture capital firms must be changed.

He and Horowitz turned to their old friend Michael Ovitz, co-founder of Hollywood's top talent agency CAA (Creative Artists Agency), for advice.Ovitz’s advice: “Treat entrepreneurs like customers, and take a long-term view of your platform, not a transaction. Think of everyone as a partner, providing services that others don’t, by becoming A "Dream Execution Machine" to differentiate. "

This is also the reason why CAA has represented 90% of Hollywood's top stars in less than 15 years and successfully rewritten the rules of the industry.

Ovitz's biggest innovation at CAA is the investment in the client's career (time, money, labor) and the ability to influence the outcome of that investment. "If you're going to make a living off of taking 10% of someone's income, you should make sure you're maximizing their income," Ovitz said.

Before CAA, the brokerage company was a loose organization composed of various brokers. Although the brokers worked for the same company, they were only responsible for single-line contact with their artists. It is also very passive in the way of work. It sends a notice to the customer, and if the customer accepts it, it will charge 10% of the agency fee.

CAA hopes to break this pattern and integrate the independent businesses of brokers, so that everyone can find as many opportunities as possible for customers on the criss-cross network. Special personnel are responsible for customers and resources in specific fields, such as music, publishing, international cooperation, etc.,Through this network effect, the overall business capacity of the company will be 100 times that of a single broker. CAA is thus able to create jobs for clients rather than just issuing notices.

In this way, CAA signed enough good directors, screenwriters and actors to form a monopoly on top talent and increase its bargaining chip against film companies.

They charge 10% to each client, who are also big stars themselves, and usually get 20%~30% of the film salary, so in the end CAA can get 2%~3% of the total revenue. For example, the total revenue of "Jurassic Park" is close to 1 billion US dollars, and CAA gets 3% of it, which is quite a large number.

What would Michael Ovitz do if he ran a venture capital firm?He will maximize the results of all invested resources.Suppose a tech startup's success is driven by several factors:

• Technology and recruiting (you need to hire good engineers)

• Sales and Marketing (you need good distribution)

• Effective leadership and capital allocation (you need a good CEO)

In order to maximize the above factors, as a venture capitalist, you need to know the best engineers, sales people and marketers, and introduce them to the invested companies; The company; you also mentor the founders and teach them to be CEOs. This is exactly how a16z works.Just like CAA is committed to maximizing the success of its clients, a16z has invested heavily in its post-money team.

Especially when it comes to helping CEOs grow, most venture capital firms used to solve problems by replacing CEOs instead of providing support, but the core idea of ​​a16z is based on the following two points:

• Tech founders are the best people to run tech companies. Those admirably long-established technology companies—HP, Intel, Amazon, Apple, Google, Facebook—have all been run by their founders.More precisely, the company is run by the man who created it.

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Talent network construction and post-investment services

In order to provide the most professional and high-quality services to the invested companies, a16z recruits the world's top professionals. When Andreessen and Ben founded a16z, they wanted to give founders better guidance to accelerate their learning process. Therefore, the criteria for selecting investment partners is that they must have experience in starting a company or being a CEO:

Alex Rampell, co-founded companies including Affirm ($AFRM), FraudEliminator (acquired by McAfee in 2006), Point, TrialPay (acquired by Visa in 2015), TXN (acquired by Envestnest in 2019) and Yub (acquired by Coupons in 2013 .com acquisition). After joining a16z, Alex led investments in OpenDoor ($OPEN), Plaid, Quantopian (acquired by Robinhood), and Rival (acquired by LiveNation).

Bob Swan, Before joining a16z, Bob was the CEO of Intel. During his tenure, he managed 110,000 employees, with sales of $78 billion, and annual sales increased by more than $20 billion.

David Ulevitch, founder and CEO of OpenDNS, a cloud-delivered security service that was acquired by Cisco in 2015 and today protects more than 85 million enterprise customers in more than 10,000 countries around the world.

Vijay Pande, Professor of Chemistry and Professor of Structural Biology and Computer Science at Stanford University, pioneered computational methods applied to medicine and biology (more than 300 publications, two patents, and two novel drug candidates). While at Stanford, Vijay founded Globavir Biosciences, turning his research progress into a successful start-up company aimed at discovering treatments for dengue and Ebola.

Chris Dixon, co-founder and CEO of two startups, SiteAdvisor and Hunch. SiteAdvisor is an Internet security company that was acquired by McAfee in 2006. Hunch is a recommendation technology company that was acquired by eBay in 2011. After Chris Dixon joined a16z in 2013, he led Coinbase, the most amazing investment case in encryption, and invested in eight rounds in a row.

After dedicating himself to encryption in 2013, in order to enhance vision and competitiveness, and handle regulatory issues well, a16zWhen the encryption market was in its early stages and policies were not clear, it persuaded many heavyweight capital market executives and senior government officials to join the team:

Katie Haun, creator of the U.S. Department of Justice’s first federal cryptocurrency task force, as a partner; Anthony Albanese, former head of the New York Stock Exchange’s regulatory division and former head of the New York State Department of Financial Services, as chief regulatory officer for crypto investments; Bill Hinman, the former head of the SEC Finance Department, Tomicah Tillemann, the former senior adviser to President Biden, Brent McIntosh, the deputy secretary of the US Treasury, and Rachael Horwitz, the first vice president of communications at Coinbase, were all included in a16z's income.

In the 1990s, Hollywood agencies were basically a loose organization of various agents who were affiliated with the company. These managers work for the same company, but each only handles a subset of the artists they have a one-way relationship with.This traditional mode of operation is very similar to the previous venture capital industry. Investors serve the same company, but they have their own relationship networks and customer information.

Michael Ovitz brings brokers' disparate businesses together so that they can find as many opportunities for clients as possible across this criss-crossing web of relationships.He assigns special personnel to be responsible for the relationship network and customer information in each field, such as the publishing industry, the film industry, the field of Chinese music, and the field of international exchanges. In this way, the business capacity of the company will be 100 times that of a single agent, and artists will have more choices and greater economic benefits when looking for development opportunities.

With the support of Ovitz, a16z has built a network of nearly 20,000 people around the following aspects, through which professionals in various fields can meet the various needs of start-ups:

• big company. Every start-up company has to do business with big companies, either as buyers or sellers or partnerships.

• manager. To be successful, management talent is essential.

• Technical staff. In the high-tech industry, the more outstanding technical talents, the better.

• Media staff and analysts. There is a mantra inside a16z: "Show it, sell it; hide it, keep it".

• Investors and acquirers. The job of a venture capitalist is to invest and raise money.

The "entrepreneurship idea" behind a16z is: instead of spending most of the fund's expenses on partner salaries, it is better to spend on operations and help entrepreneurs. There is a marketing team (=helps you get noticed), a talent team (=helps you recruit), a market development team (=helps you get customers) and a research team (=helps you solve problems).

So it introduced a new compensation model: Its general partners make roughly $300,000 a year, well below the industry standard of at least $1 million, and the savings go to pay hundreds of specialists costs, including executive talent, technical talent, market development, corporate development, and marketing.

So, why are these people willing to join a16z for a relatively low salary?

It should be noted that the a16z investment team is an all-member partnership system without a hierarchical system. On the one hand, it can flatten management; on the other hand,Andreessen believes that employees always hope to obtain corresponding rewards when they work for the company, such as salary, bonus, shares, rights and titles, etc. Among them, the cost of the title is the lowest, so it can be set as high as possible, so that the company can recruit more talents. attractive.In a16z, in addition to senior partners, the hierarchical design of "full partners" also makes up for its disadvantage of low salary.

Among a16z's 326-person team, more than 70% are engaged in post-investment management and empowerment, providing services such as consulting, talent recruitment, business expansion, personnel management, external relations, and resource docking to help startups grow rapidly.Andreessen said: "We serve entrepreneurs with a huge network of resources, and turn founders into qualified CEOs as quickly as possible.image description

Data source: a16z official website

It is such a large, dedicated team that can help the entire chain of the enterprise to solve problems, which meets the needs of all aspects of the growth process of start-up companies. GitHub has received $100 million in Series A financing from a16z.The round was billed at the time as "the most competitive deal in Silicon Valley in five years.". According to Chris Wanstrath, co-founder and CEO of GitHub,secondary title"

media volume

Initially, Andreessen and Horowitz turned to Outcast, a marketing firm led by Margit Wennmachers, to help build momentum for the company.Known as the "home run king" of PR, Wennmachers is quick-witted and thoughtful, mobilizing her network to help Marc Andreessen land his Uncle Sam-like image on the cover of Fortune magazine in 2009.The reputation of the venture capital firm Andreessen Horowitz was shot like this, and at that time, there were only two elite commanders in the company.

Later, Wennmachers was taken over by a16z and was responsible for building a marketing network. Wennmachers has made PR a priority for a16z and its portfolio companies. She hosts exclusive parties at her home where tech journalists can mingle with startup founders and executives over cocktails. According to tradition,Venture capitalists avoid publicity (a tradition in times of war when VCs support both sides), while Wennmachers proactively invites media attention to a16z.

While using the media to build momentum for itself, a16z has gradually emerged"Anti-institutional media, build your own media"Propensity.

Reports suggest that a16z, after spending more than a decade cultivating relationships with journalists, decided it no longer needed the group. It built a large editorial team of its own to cover crypto, fintech and other topics with a more positive tone.

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Once reached a valuation of tens of billions of dollars, it was later accused of being a scam

At that time, Theranos, a blood testing company supported by Andreessen and others, was exposed by the institutional media as a scam, and the entire Silicon Valley technology circle was in an uproar. This turmoil has had a far-reaching impact. Since then, the media's attitude towards startups has changed from "praising" to "judging and questioning".

Since then a16z has been constantly targeted by the media. For example, the HR software company Zenefits it invested in was questioned by the media due to its huge losses. a16z had to come forward to explain that burning money for growth is a proven business model. However, this explanation was not accepted by the media, and doubts still flooded in.

In the eyes of a16z executives, the institutional media knows little about the truth and is always biased. In order to gain attention, journalists report negative news at will, and sometimes even write some fabricated articles.

Therefore, a16z decided to make its own media, master the voice channel, and fight against the institutional media.

Institutional media such as the "New York Times" and "Fortune" once monopolized news dissemination channels, and technology companies in Silicon Valley need to rely on them to present their image to the outside world. However, with the rise of the Internet and emerging social media such as Twitter and Facebook, this traditional model has been broken, and companies have more channels to directly communicate with users and publish their opinions.

a16z invested in social media such as Twitter and Facebook very early, and naturally has a stronger confidence in "breaking the monopoly of institutional media". In addition, it is also making frequent efforts in the layout of self-media, and almost all of its employees are highly popular self-media writers. Today, a16z has formed a very large self-media matrix, among which,Marc Andreessen has nearly 870,000 twitter fans, Ben Horowitz is a best-selling entrepreneurial author, and Chris Dixon has 740,000 twitter fans, making him an extremely influential top opinion leader in encryption.

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Competitive Advantage and Industry Innovation

a16z recruits a host of new partners, government officials, editors, and more to support its portfolio companies with marketing, legal, lobbying, and technical resources through a strong and broad network of functional talent. In this way, a16z’s attractiveness to start-up companies has greatly increased, and it has a better chance to vote for the “biggest winner”.

The only problem is, it all costs a lot of money. Providing these services and staffing them is expensive. Does this mean that a16z will go out of business soon?

Not at all. Economic historian Dror Poleg gave a novel interpretation of a16z's operating model in the article "Andreessen Steals from Bezos".He believes that a16z's operating model is similar to Amazon's successful experience.

Jeff Bezos famously said:"Your profit is my opportunity."

This shows that he is willing to minimize short- and medium-term profits for the sake of huge long-term profits. For years, Amazon has operated at or near a loss, investing in infrastructure, new lines of business and various other seemingly unfocused"website for selling"things. But in the long run, these investments not only make Amazon finally profitable, but also make Amazon the biggest winner in the market competition of e-commerce, cloud computing, and third-party logistics.

What's more, Amazon not only won the competition, but also completely changed the economics of e-commerce, forcing its competitors to bear new costs. Other retailers are now forced to play catch-up to Amazon's various activities, or rely on partnerships with Shopify, Facebook, Stripe, and others.

Poleg believes a16z is doing the same to the venture capital industry. It's not just strategic moves to gain an advantage. It is imposing an entirely new cost structure on competitors.The result is that a handful of other companies will try to catch up and become the same giants. All kinds of "boutique" angel investment teams can only rely on small investment projects to survive, while many large but not strong funds are gradually disappearing.

Doug Leone of Sequoia Capital said:"a16z has upped our marketing game, young founders pay attention to the media and we don't want to be out of their sights."Okta CEO Todd McKinnon once said at the time of financing:"Now when every agency talks to us, they will say, "Hey, we can help you with recruitment and introduce you to big clients." Value-added services have become a must-have bargaining chip."

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02. Founder: The igniter of the Internet

Why is such a set of mode of operation VC designed? This is inseparable from the experience of the two founders.

Andreessen, one of the founders, is known as"The Ignition Man of the Internet"。He was born in New Lisbon, a typical small town on the prairies in the Midwest of the United States. It seems that he has nothing to do with computers. The locals are keen on rugby, and Andreessen seems to be an outlier. Self-taught Basic language.

After graduating from the University of Illinois, Andreessen led the development of Mosaic, one of the earliest Internet browsers, at the National Center for Supercomputing Applications.In February 1994, veteran venture capitalist Jim Clark found this talented teenager with $4 million, and the two co-founded Mosaic Communications (the predecessor of Netscape).

On August 9, 1995, 16 months after its founding, Netscape staged a wildly successful IPO when the stock was supposed to sell at $14 a share, but a last-minute decision doubled the initial offering price Double, to $28 per share. The stock soared to $75 in its first day of trading, a record first-day gain. The stock closed at $58.25, giving Netscape a market capitalization of $2.9 billion.While it's somewhat unusual for a company to go public before it's profitable, Netscape's revenue doubled every quarter in 1995, in fact. The IPO's success then inspired the use of the term "Netscape moment" to describe a high-profile IPO that signaled the dawn of a new industry. As the founder, Marc Andreessen also appeared on the cover of "Time" magazine, and the scenery was the same for a while.

Until the end of 1998, Microsoft made full use of its monopoly position in the operating system field and implemented a subsidy policy for all types of free products that Netscape competed in. Netscape could not be sold to America Online (AOL).In the short term, it's a big win for Microsoft, as its biggest threat has been driven away and embraced by a far less powerful competitor. In the long run, however, Netscape enabled developers who wrote new features for computers to move away from Microsoft's proprietary platform and start writing against the standard interfaces of the Internet and the World Wide Web. Over the years, Netscape has invented many of the foundational technologies of the modern Internet, including JavaScript (a programming language), SSL, and cookies (cookies).

Ben Horowitz, the other founder of a16z, was born in London, England, and grew up in California, USA. He earned a degree in computing from Columbia University in 1988 and a master's degree in computing from the University of California, Los Angeles in 1990. In 1995, Ben Horowitz joined Netscape as a project manager.In 1999, after Netscape was acquired, the two co-founded Loudcloud, a cloud computing and cloud storage service company. However, bad luck caught up with the bursting of the Internet bubble in 2000, which led to difficulties in financing.

now,

now,People think that Marc Andreessen and Ben Horowitz are the perfect entrepreneurial partners: Andreessen is visionary and good at strategic planning; Ben Horowitz has super management skills, making up for the shortcomings of the technical man Andreessen. However, the more than 20 years of their joint ventures have been far more difficult than we imagined, and the road to glory is full of countless stumbling scars and pains.

In The Hard Way to Start a Business (now a must-read bestseller in the startup category), Horowitz details his and Andreessen's anxieties while working at Netscape in the face of Microsoft's onslaught and eventually having to sell the company Unwilling,Netscape became a shooting star in the history of business. Although brilliant, it was also short-lived.Later, they established Loudcloud and devoted themselves to the early trend. When the Internet bubble burst and technology stocks collapsed at that time, they went all out to fight for eight years, and then returned to the original point and were acquired by HP at a very low price. .

Andreessen sees the future trend every time, but either the opponent is too strong, or the timing is wrong...These two ventures have not achieved the kind of success he expected,This made him reflect that he may not be a qualified manager or an outstanding entrepreneur.

And Horowitz also pondered repeatedly after this period of entrepreneurial experience full of suffering and helplessness:Why is the art of entrepreneurship so profound? Doesn't every CEO have the same problem? If yes, why hasn't anyone documented these issues? Why do consultants and venture capitalists for startups rarely have experience building companies themselves?

He will never forget that after completing the first round of financing of Loudcloud, he went to visit his investors as CEO. At that time, David Beirne, a senior partner of Benchmark, asked him in front of everyone:"When are you going to hire a real CEO? You should find someone who has done organizational design for a large company, has a strong network, and has an existing customer base to be a CEO."Horowitz has been tortured by this question - he has none of these abilities, he is a self-made CEO rather than a professional CEO, and he always asks himself: What does it take to be a qualified CEO?

So Horowitz sent Andreessen a message:"We should start a venture capital firm. The purpose of choosing partners is to set "experience first", to provide advice to those who plan to start a company, and to help founders become good CEOs.。”Andreessen replied: "I feel the same way."

They believe that a16z's design will correct the mistakes Andreessen and Horowitz made as entrepreneurs. In their view, some of these mistakes came from Benchmark—the boutique investment firm had only five people at the time, and didn't have the back-end expert supporters to provide the service they craved.

Horowitz once said: "We have always been anti-Benchmark, our design is not to do what they do."first level title

03. The road to rise: the leader of the next generation network

According to Pitchbook data, a16z invested 1218 times, resulting in 299 exit projects. a16z official website shows,Among them, 18 projects were exited by IPO, and 4 projects were exited by DPO.

Note: A direct listing (DPO) is not like an initial public offering (IPO) where capital is raised externally, but instead the company's employees and investors convert their ownership into shares, which are then listed on a stock exchange. Once the stock is listed, the public can buy shares, and existing investors can cash out at any time, without the need for a lock-up period like traditional IPOs (DPO does not have a lock-up period).

The largest listed project of a16z is Coinbase, the largest cryptocurrency exchange in the United States, which adopted DPO to list this year. When Coinbase went public, its market value was as high as US$85.8 billion. a16z held 25% of Class A shares and 14.8% of Class B shares, with an investment return of more than US$7 billion.Other listed projects where a16z shares accounted for more than 5% include: Lyft, Slack and Pinterest, etc. In addition, a total of 8 invested companies were acquired at a price of more than 1 billion US dollars, including:

GitHub (entered in round A, acquired by Microsoft for $7.5 billion), Oculus (entered in round B, acquired by Zuckberg for $2 billion), Instagram (entered in seed round, acquired by Zuckerberg for $1 billion), Dollar Shave Club (entered during the seed round, acquired by Unilever for 1 billion US dollars) and so on.

Currently, a16z still has 58 unicorn companies in the primary market, including Stripe (a16z invested in its seed round), the most valuable private technology company in the United States ($95 billion).

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Mobile Internet Era: "Software Eats the World"

"Software Catcher"

At the beginning of its establishment in 2009, a16z invested in only a few projects, all in the software field, including project management product Asana (listed, current market value of 12.7 billion US dollars), online video calling software Skype (acquired from eBay for 50 million US dollars) part stake), and social gaming company Zynga (which has gone public and is currently valued at $7 billion).

In May 2011, Skype was acquired by Microsoft for US$8.5 billion, which was the highest acquisition amount in Microsoft's history at that time. This case caused a sensation in the world and made a16z, which had just been established for two years, famous. Taking this opportunity, Andreessen published the famous "why software was eating the world" in the "Wall Street Journal"."

"We are in the midst of a dramatic, widespread technological and economic change. New software ideas will lead to the rise of new Silicon Valley-style startups that will invade existing industries with impunity," he wrote. Andreessen Prediction that the next decade will see "incumbents and software-driven insurgents"Epic battle between.The widely read column, part prophetic part, part investment insight, greatly enhanced Andreessen's reputation as a Silicon Valley thought leader and established a16z as a "software catcher."

In fact, a16z has established a software-focused investment route since its establishment. Scott Kupor, a16z's No. 1 employee, once explained on Quora why the company was named a16z:"The real reason we're software people is that a16z stands for the 16 letters between the A in Andreessen and the Z in Horowitz. For those of you with a software background, remember that internationalization is called i18n and localization is called for i10n."

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Data source: Pitchbook

According to Pitchbook data, as of now, a16z has invested 842 in the software field (including information technology and enterprise services), accounting for 69.25% of the overall investment; secondly, a16z has invested more in medical and financial services . This stems from the five major technological trends proposed by a16z in early 2019, including biomedical, digital currency, blockchain, artificial intelligence, and financial technology industries.

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Annual investment trend line

a16z has no restrictions on investment stages, covering the entire cycle from seed to growth in the primary market. In the first year of its establishment, a16z made two deals. In the second and third years, the number of investment deals was 25 and 59 respectively. In 2012, the number of investment deals surged to 95.According to PitchBook data, the number of its investment deals has never been less than 60 every year since 2011, and the number of investments by a16z in 2020 ranks second in Silicon Valley.image description

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Data source: Pitchbook

Note: Seed investment refers to investment before round A, early investment refers to round A and round B investment, mid-to-late stage investment refers to round C and subsequent pre-listing investment

Overall, a16z’s investment rounds are mainly early-stage and mid-to-late stage investments, accounting for 45.57% in the early stage, 29.64% in the mid-to-late stage, and 22.82% in the seed round.

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Data source: Pitchbook

There are 221 exit cases officially mentioned by a16z. The main exit methods are listing or mergers and acquisitions. Among them, Skype and GitHub mentioned above are well-known.image description

Investment Performance of Phase III Fund

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The Web3 Era: The Crypto Hurricane

In 2019, a16z ushered in a turning point——

The four most notable companies in the portfolio, Lyft, Pinterest, Slack, and PagerDuty, have seen their stock prices plummet after their listings. Although a16z has reaped huge returns, they are keenly aware that the era of the mobile Internet has passed.

a16z began to transform, to find new fields worth investing in in the next few decades. They set their sights on encryption.

The Internet is the ultimate software-based network, and encrypted networks are built on top of the Internet. a16z's emphasis on encryption is in line with its previous understanding of the software field.

In a16z's view,Software is the encoding of human thought and as such has an almost unlimited design space. Cryptography, on the other hand, is a pure software movement that does not rely on the expansion of hardware (the Internet requires laying cables and building base stations), and represents an architectural shift in the way technology works and the way the world works, making many untrusted participants in the network The ability to establish consistency and trust is the most important positive meaning of encryption technology.

In 2013, the joining of Chris Dixon officially opened the curtain of a16z's investment layout in encryption. he thinks:"Blockchain is a brand-new, structural redesign and adjustment of the Internet. This adjustment will allow all people participating in the Internet to have the opportunity to occupy a part of the Internet. Encryption technology is not only the future of finance, but also related to the early Like the Internet, it promises to change every aspect of our lives and drive the next wave of computing innovation."

a16z Crypto's first investment was Ripple, a cross-border payment solution, and it also invested in cryptocurrency exchange Coinbase in the same year.Today, Ripple is valued at $10 billion, and Coinbase listed on Nasdaq in April with a market capitalization of $85.8 billion, one of the largest listings in tech history.When asked why he invested in Coinbase, Chris Dixon explained:"Bitcoin solves a serious problem with existing payment systems that rely on centralized services to verify transaction validity, but to spread widely, Bitcoin needs a killer app, just like HTTP has web browsers and SMTP has email clients Same. This is Coinbase."

In June 2018, a16z officially established an encryption fund with a scale of 350 million US dollars, mainly mentioning five investment concepts:

• One is long-termism, which can be held for more than 10 years after investment;

• The second is "all-weather" investment, which will not be affected by the "cold winter" of the market;

• The third is to provide operational support for entrepreneurs. The operation team of more than 80 people will provide assistance in recruitment, marketing, management, etc.;

• The fourth is flexibility in terms of stage, asset type and geography;

• The fifth is to focus on non-speculative projects.

These investment concepts ensure that a16z can discover high-quality projects to the greatest extent according to the characteristics of the encryption industry and projects, and use its own rich resources to help projects grow.

In April 2020, a16z established the second encryption fund with a scale of 515 million US dollars. In June this year, the third encryption fund was established with a scale of 2.2 billion. It is currently the second largest encryption fund in the world (Paradigm announced in November this year Created a $2.6 billion crypto fund). a16z manages a total of $3 billion in crypto funds, and its future investment direction will revolve around the following five themes:

• One is a next-generation payment method, where encrypted payments can significantly reduce friction and provide a pleasant user experience;

• The second is a store of value, Bitcoin is gaining acceptance and adoption around the world;

• The third is DeFi, which opens the door to financial components with programmable trust, scarcity, and value as new building blocks;

• The fourth is a new way for creators to monetize. Creators can use the token model to allow fans to directly participate in their success, instead of attracting audiences through centralized platforms that charge high rents;

• Currently,

Currently,These investment directions are quite in line with trends such as the sharp rise in Bitcoin prices, the rise of multiple public chain ecosystems, the explosion of the DeFi and NFT markets, and the rise of social token platforms, reflecting a16z's keen understanding and grasp of market trends.

Leading position

So far, the project with the highest single investment income of a16z is Coinbase. In 2013, a16z led Coinbase’s B round of financing with US$20 million. Despite the turmoil in the encryption market, a16z still participated in each subsequent round of financing for Coinbase, with a total of 8 rounds of investment. Such continuous raising is extremely rare in the VC industry, which also reflects This shows a16z's firm optimism on Coinbase.

According to Coinbase's prospectus, a16z acquired 3.52 million shares from Union Square Ventures, the lead investor in Coinbase's A round, in 2019, becoming its second largest shareholder. After the listing of Coinbase this year, a16z reduced its holdings worth approximately US$4.375 billion,Still holding 7% of the shares, it is the biggest external winner of the Coinbase listing.

"We're excited to continue investing in it,Because Coinbase represents the best part of a very different world, bringing not only Silicon Valley acumen to product and design, but also taking regulations and compliance seriously.said a16z partner Katie Haun.

In addition, a16z also completed the layout of leading projects on the mainstream blockchain track earlier, invested in projects such as Filecoin in 2017, invested in projects such as Chia, Dfinity, and MakerDAO in 2018, and led investment in Compound and Dapper in 2019. Labs, Arweave and other projects, almost all of these projects have now become top blockchain projects, with rich returns.

Looking at the investment style of a16z comprehensively, it is especially fond of leading projects on the track, and most of them lead the investment.In August 2020, when DeFi just broke out, a16z quickly invested in Uniswap, a leading DEX project, and invested in Dapper Labs, a leading NFT company, and Optimism, a leading Layer2 project, at the end of the year. After the rapid explosion of the Solana ecology this year, a16z, who had missed it before, immediately led Solana Labs' $314 million financing.

industry construction

In addition to supporting the growth of high-quality projects in the industry through investment,a16z also pays special attention to exporting its industry concepts and popularizing industry knowledge in various ways, and contributes to the construction of the blockchain industry in terms of talents, resources, and supervision.

For example, a16z's official website is more like a learning website, not just an information display website like most other institutions.

Since 2014, a16z partners have written a large number of articles on the website to promote blockchain concepts and cryptocurrencies, and discuss topics such as encrypted economic systems and blockchain governance. Many industry classic articles have emerged, such as "Why Web3 It Matters", "Past, Present, Future: From Cooperatives to Encrypted Networks", etc.

At the same time, a16z is also inviting well-known people inside and outside the industry to discuss encryption technology and produce audio podcasts to enrich its own concept output to the outside world in the form of dialogue. In addition, a16z is accustomed to integrating high-quality reading resources in the industry, integrating links to high-quality articles in this field for readers to consult according to the theme, and making an industry glossary.

At the beginning of 2020, a16z invited more than 20 industry celebrities to operate an online video course called "Encryption Entrepreneurship School", covering the basics of encryption technology and matters needing attention in establishing an encryption company such as governance, marketing, fundraising, and compliance. Entrepreneurs in the encryption industry provide a full range of information support.

In June 2020, a16z launched the "Talent x Opportunity Fund", which aims to invest in entrepreneurs who are talented and have ideas but lack educational background and resources. Each batch of entrepreneurs can participate in a 10-month training program and have experience Rich Entrepreneurs offers online coaching.

In the previous May 2019, a16z organized Washington regulators and its crypto portfolio companies to try to explain the potential of blockchain, a nascent technology, to these senior government agencies that have an important impact on the cryptocurrency industry. CFTC Chairman J. Christopher Giancarlo and many others participated.

Through the above measures, a16z has established itself as the most influential venture capital institution and industry builder in the encryption world, closely tied to the future of the encryption industry, At the same time, it also attracts high-quality projects and talents in the industry to its surroundings, laying a solid foundation for its long-term value capture.

structural transformation

In 2019, on April 2, local time in the United States, Forbes published a long article reporting that a16z, a well-known venture capital institution in Silicon Valley, submitted the registration documents for a registered investment advisor (RIA).

Crypto investment behavior is regulated by the Securities and Exchange Commission (SEC) on investment behavior. This is exactly the "shackle" that a16z gave up the name of a venture capital company in order to let go.

A16z, which is no longer a venture capital firm, is no longer under the regulatory control of a venture capital firm by the SEC, which means that it can bypass supervision and make more risky investments.The transformed a16z will get rid of the investment scale restrictions (no more than 20% of the fund size) that are considered by the SEC as high-risk investment fields such as cryptocurrencies and digital assets. Now it can invest 1 billion US dollars in cryptocurrencies, or it can invest unlimited Buy shares of listed companies or other investors.

This transformation also involved a lot of trouble. First, a16z had to hire professional compliance consultants to review the company's 150 employees at the time, including employees' partners, parents and even children, and review their asset allocation and investment behavior, in case the "investment consulting company" and potential customers had any conflicts. Stakes. It was a costly, time-consuming move, and the investment team was never able to talk publicly about portfolio or fund performance — including on a16z's famous podcast.

The second is the "confusion" of LPs. What is the purpose of the funds they entrusted to a16z for safekeeping? Which investment field does the transformed a16z belong to? I'm afraid a16z didn't think about it very clearly. In TechCrunch's report, the company refused to answer this question.

However, long-term prospects should be scaled up. For a16z, who values ​​trends and has long been optimistic about the cryptocurrency field, the cost of transformation may be far lower than the loss of non-transformation.

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04. Epilogue

From the firm pursuit of software in the mobile Internet era to the heavy bet on encryption today, it shows that a16z has always been keen and decisive in betting on new trends. The founder Andreessen has always maintained his pioneering attitude, whether it is bringing the Internet that was originally only available to the government and the military into thousands of households, or later investing in social networks, and today in SaaS, biotechnology, encryption and other fields excellent record.

Always bet on the next era, always looking for the next big opportunity to "swallow the world", Being the person who "sees the future" is the secret to be invincible.

A well-known LP in Silicon Valley commented on a16z: "I am optimistic about the advantages of a16z. The two founders are both willing to learn and good at adjustment."From the development of a16z, it is a very prominent characteristic to be good at learning and borrowing from others, especially cross-field fusion innovation. Drawing on the business model of CAA, a Hollywood talent agency, it not only achieved outstanding performance for itself, but also subverted the traditional model of venture capital, imposing a new cost structure on its opponents, and promoting the construction of the entire venture capital ecosystem.

As Andreessen famously said, "A great career is always different."

"The world has suffered from great institutions for a long time", from the era of institutional media to the era of self-media, the booming decentralized creator economy is also challenging the era of self-media controlled by platforms and algorithms, and the power to speak out is increasingly shifting from "others" to "self" hands.

a16z is the first venture capital to establish independent media channels on a large scale. It firmly holds the power of public relations, communication, and knowledge education in its own hands, as well as its influential assets.This powerful influence has been particularly prominent in Encryption in the past two years. Almost every outstanding talent in Encryption has more or less maintained a good relationship with a16z.

By accumulating influential assets for itself through self-built media, a16z has led the transformation of venture capital institutions around the world. It is also worth learning for every company. Mastering the initiative of narrative is an increasingly important topic for technology companies.