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The rise of the A16Z is mirrored by Hollywood

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After a golden decade for Internet companies, a16Z is once again facing the crypto hurricane

A16z: A Hollywood Triumph

Original source: Overseas unicorn

"They act like maniacs, having a hand in every deal."

This is from a Senior Google executive describing one of the world's most high-profile venture capital firms, A16Z.

Founded in 2009 by Marc Andreessen and Ben Horowitz, A16Z -- Andreessen Horowitz -- manages a total of $19.2 billion and has rapidly expanded its investment portfolio with a rambunctious style. Known as software catchers, almost all of the Internet's brightest names were caught: Facebook, Twitter, Airbnb, Okta, Github, Stripe, etc., and an investment strategy that combined early-stage sensibilities with growth-stage decisiveness -- a seed round on Instagram, Snagged Github in The Series A competition, which Microsoft acquired for $1 billion +, or led A $150 million round of Roblox in series G.

The company's forward-thinking and aggressive investment style is especially evident in the crypto space, where it went public in 2013 with a market cap of $85.8 billion, making it one of the largest public companies in tech history (A16Z still owns 7% of the company after casheing out $4.4 billion). OpenSea, Dapper Labs, Uniswap, dYdX and other well-known encryption projects are also representative works of A16Z Crypto Fund.

Founded in 2009, A16Z is young compared to Sequoia, KLEiner Perkins Perkins, Accel Partners in 1972, and even Benchmark in 1995, but it is undoubtedly one of silicon Valley's top vc firms.

As impressive as the investment performance is, A16Z has created a whole new way of doing business, rewriting the criteria for startups to choose a venture capital firm. A16z draws on the operation mode of the Hollywood's top brokerage firm CAA, set up a large and professional talent system, provide founders, lobby, technical support, such as marketing, law, doing so makes a16z a powerful network platform, increase the attractiveness of the project, also the cost of a new framework on competitors, Improved the startup friendliness of the entire venture capital industry.

A16z is also a "media company that makes profits through investment". Almost all of its staff have amazing output ability, and vigorously promote investment ideas through self-built media channels to promote industry information circulation and cognitive education.

It's all to do with the experience of the founders, and also a16z's age change - they two start-up in the Internet bubble, along with the Internet company after founding a16z's golden decade, witness traditional institutions is broken down by social media, media and encryption several fluctuations in the market, and with encryption application.

The following is the table of contents, and it is suggested to read it according to the main points.

The star-making machine: "Hollywood style" triumph

Talent network construction and post-investment service

Media volume

Competitive advantage and industry innovation

02 Founding: Ignition man of the Internet

Road to Rise: The leader of the next Generation network

Mobile Internet era: "Software eats the world"

Web3 age: Crypto Hurricane

04 epilogue

The Star-making machine: A Hollywood triumph

Sand Hill Road in Palo Alto, Calif., is the highest-rent office space in the country, a two-mile stretch shaded by oak and eucalyptus trees that winds into the heart of Stanford University.

Every day, countless entrepreneurs with business plans drop in and knock on the doors of the venture capital firms that line the streets. Among them, A16Z is one of the most coveted vc firms for these dreamers.

The lobby of the A16Z is like a library, with bookshelves stretching almost from floor to ceiling. Founder Andreessen spent three nights sorting through the books: programming books, business books, and Hollywood books. Yes, there are quite a few books that explore the early days of Hollywood, starting with the founding of A16Z.

Venture capital firms tend to tout their past investments and returns to attract more investment opportunities, but in 2009, when A16Z launched, they had no track record to tout. Andreessen knows this: "The top 15 companies account for 98 percent of the market capitalization of public companies. If you're at a second-tier institution, you'll never get access to top-tier companies." To break the ice, they argue, companies must change the criteria by which they choose venture capital firms.

He and Horowitz turned to an old friend, Michael Ovitz, co-founder of Creative Artists Agency, one of Hollywood's top talent agencies. Ovitz's advice: "Treat entrepreneurs like customers, take a long-term view of your platform, not a transactional one. Treat everyone as a partner, offering services that others don't, and differentiate by becoming a dream execution machine."

That is how CAA, in less than 15 years, has represented 90 per cent of Hollywood's top stars and rewritten the rules of the game.

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

Before CAA, the agency was a loose organization composed of various agents, who worked for the same company but were only responsible for single-line contact with their artists. He was also passive in his way of working, sending notices to clients and charging 10% of the agency fee if they accepted.

CAA hopes to break this pattern by bringing together brokers' separate businesses so that they can find as many opportunities as possible for their clients in their network of relationships. By putting people in charge of clients and resources in specific areas, such as music, publishing, and international collaborations, the company as a whole can do 100 times more business than an individual broker through this network effect. CAA It creates jobs for clients, not just announcements.

In this way, CAA has signed up enough good directors, writers and actors to create a monopoly on top talent and increase its bargaining chip against the studios.

They charge 10 percent to each client, who is also a big star and usually gets 20 to 30 percent for a film, so CAA ends up getting 2 to 3 percent of the total. Jurassic Park, for example, grossed close to $1 billion, and CAA got 3% of that, which is a lot of money.

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

- Technology and Recruitment (you need to hire good engineers)

- Sales and Marketing (you need good distribution)

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

To maximize the above factors, as a VC, you need to get to know the best engineers, sales people, and marketing people and introduce them to the company; You need to build a network of talent and funnel it to the company; You also mentor founders, teach them to be CEOS. That's exactly how the A16Z works. Just as CAA is committed to maximizing client success, A16Z invests heavily in post-investment teams.

In particular, when it comes to helping ceos grow, most VCS solve problems by replacing ceos rather than supporting them, but the core idea of A16Z is based on two things:

1. A tech founder is the best person to run a tech company. Admirable old tech companies -- HP, Intel, Amazon, Apple, Google, Facebook -- were once run by their founders. More accurately, the company is run by the man who created the world.

2. But the process for tech founders to become CEOS is hard. The founders of A16Z knew this from their own experience, which we'll discuss in more detail later.

Talent network construction and post-investment service

In order to provide the most professional and high-quality service to the investee company, A16Z gathers the world's best professionals. When Andreessen and Ben started A16Z, they wanted to give founders better guidance and speed up their learning process, so the criteria for choosing an investment partner was having started a company, or been a CEO:

Alex Rampell, co-founder of several companies, They include Affirm ($AFRM), FraudEliminator (acquired by McAfee in 2006), Point, TrialPay (acquired by Visa in 2015), TXN (acquired by Envestnest in 2019), and Yub (2013) Acquired by Coupons.com in 1999). After joining A16Z, Alex led investments in OpenDoor ($OPEN), Plaid, Quantopian (acquired by Robinhood), and Rival (acquired by LiveNation).

Bob Swan prior to joining A16Z, Bob was the CEO of Intel. During his tenure, He managed 110,000 employees and $78 billion in sales, increasing annual sales by more than $20 billion.

David Ulevitch is the founder and CEO of OpenDNS, a cloud delivery security service that was acquired by Cisco in 2015 and today serves more than 85 million protected enterprise customers in more than 10,000 countries.

Vijay Pande, professor of chemistry and professor of structural biology and computer Science at Stanford University, has pioneered computational methods used in medicine and biology (more than 300 publications, two patents, and two novel drug candidates). While at Stanford, Vijay founded Globavir Biosciences, turning his research advances into a successful startup aimed at discovering cures for dengue fever and Ebola.

Chris Dixon, co-founder and CEO of SiteAdvisor and Hunch. SiteAdvisor is an Internet security company that was acquired by McAfee in 2006. Hunch, a recommendation technology company, was acquired by eBay in 2011. After Joining A16Z in 2013, Chris Dixon led one of crypto's most amazing investments, Coinbase, in eight consecutive rounds.

After joining encryption in 2013, A16Z persuaded several heavyweight capital market executives and government officials to join the team in order to improve its vision and competitiveness and deal with regulatory issues at the same time when the encryption market was in its early stage and the policy was unclear:

Katie Haun, founder of the Department of Justice's first federal Cryptocurrency Working Group, serves as a partner; Anthony Albanese, former head of the New York Stock Exchange regulatory division and former head of the New York State Department of Financial Services, serves as chief regulatory officer for crypto investments; Bill Hinman, former head of the SEC's Treasury division, Tomicah Tillemann, former senior adviser to President Joe Biden, Brent McIntosh, deputy secretary of the Treasury, and Rachael Horwitz, Coinbase's first vice president of communications, were among those named by A16Z Take it under your wing.

In the 1990s, Hollywood agencies were largely a loose amalgamation of agents affiliated with companies. These agents work for the same company, but each is responsible for only a subset of the artists they are singlehandedly associated with. The traditional model is similar to that of venture capital, where investors work for the same firm but have their own networks and client profiles.

Michael Ovitz pieced together brokers' separate businesses to find as many opportunities as possible for clients in this web of relationships. He put people in charge of the network of relationships and customer profiles in every field, such as publishing, film, Chinese music, and international communication. In this way, the business capacity of the company will be 100 times that of a single agent, and the artist will also get more options 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 areas:

- Large companies. Every startup has to do business with a large company, either as a buyer or a partner.

- Management. To be successful, management talent is essential.

- Technical staff. In the high-tech industry, the more excellent technical personnel, the better.

- Media personnel and analysts. A16z has an internal mantra: "Show it, sell it; hide it, keep it."

- Investors and acquirers. A venture capitalist's job is to invest and raise money.

The "entrepreneurial idea" behind A16Z is that rather than spending most of the fund's fees on partner salaries, it should be spent on operations to help entrepreneurs. There is a marketing team (= to help you get noticed), a talent team (= to help you recruit), a market development team (= to help you get customers), and a research team (= to help you solve problems).

So it introduced a new compensation model: its general partners earn about $300, 000 a year, well below the industry standard of at least $1 million, and the savings pay hundreds of specialists, 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 a full partnership system without hierarchy. On the one hand, the management can be flat; On the other hand, Andreessen argues that employees expect to be rewarded for their service in salary, bonuses, shares, rights, and titles. Titles have the lowest cost and can therefore be set as high as possible to make the company more attractive to hire. At A16Z, in addition to senior partners, a hierarchy of "full partners" makes up for its low pay.

More than 70% of A16Z's team of 326 people are engaged in post-investment management and empowerment, providing consulting, talent acquisition, business expansion, people management, external relationships and resource matching services to help startups grow quickly. "We use a huge network of resources for entrepreneurs to turn founders into ceos as quickly as possible," Andreessen says. They regard entrepreneurs as god and follow the principle that entrepreneurs are the center of everything. In order to alarm employees, they even set a fine of $10 for meeting entrepreneurs if they are late for one minute.

Data source: a16Z official website

It is such a large, dedicated team that can help solve problems throughout the chain of the company that meets the needs of every aspect of the growth of the startup. GitHub raised $100 million in Series A funding for A16Z in what was billed at the time as "the most competitive Silicon Valley deal in five years." GitHub co-founder and CEO Chris Wanstrath says a16z's service is a major draw. "It's like a buffet -- they're offering a bunch of good dishes and we want to try them all."

Media volume

In their early days, Andreessen and Horowitz turned to Outcast, a marketing firm led by Margit Wennmachers, to generate buzz for the company. Wennmachers, known as the "home run king" of PR, is nimble and thoughtful enough to mobilize her network and put Marc Andreessen on the cover of Fortune magazine in 2009 as Uncle Sam. Andreessen Horowitz, a venture-capital firm that at the time had only two heads, became famous.

Later, Wennmachers was taken under a16Z's wing to build the marketing network. Wennmachers made PR a priority for A16Z and its portfolio companies. She hosts exclusive parties at her home, where tech journalists mingle with startup founders and executives over cocktails. Traditionally, venture capitalists avoid publicity (a legacy of the war in which VCS support warring parties), while Wennmachers actively invite media attention to A16Z.

While using the media for their own publicity, A16Z gradually showed the tendency of "anti-agency media, their own media".

After spending more than a decade cultivating relationships with journalists, A16Z reportedly decided it no longer needed them. It has built a large editorial staff of its own to cover encryption, fintech and other topics with a more positive tone.

The rift between A16Z and the institutional media began with the "Theranos hoax" controversy in 2015.

Elizabeth Holmes was 19 when she founded Theranos, a blood-testing company valued at $10 billion before being accused of a fraud

At the time, Theranos, a blood-testing company championed by Andreessen and others, was exposed by the institutional press as a fraud, and the silicon Valley tech community was in an uproar. Since then, the media's attitude toward startups has changed from "praise" to "judgment and doubt."

The A16Z has been under constant media scrutiny ever since. For example, when its investment in HR software company Zenefits was questioned in the press about its huge losses, A16Z had to explain that burning cash for growth was a proven business model. However, this explanation did not go down well with the media, and doubts continued to flood in.

In the eyes of a16Z executives, the institutional media have little knowledge of the truth and are often biased. In order to attract attention, journalists report negative news at will, and sometimes even write fabricated articles.

Therefore, A16Z decided to do their own media, to master the voice channel, to fight against the institutional media.

Institutional media like The New York Times and Fortune once monopolized the news channel, and Silicon Valley tech companies relied on them to project their image to the outside world. However, with the rise of the Internet and the rise of new social media such as Twitter and Facebook, this traditional model has been broken, and companies have more channels to communicate directly with users and publish their views.

A16z is in a stronger position to break institutional media monopolies by investing early in social media such as Twitter and Facebook. In addition, it also makes frequent efforts in the layout of we-media, and almost all of its staff are highly popular we-media writers. Today, A16Z has formed a very large we-media matrix, among which Marc Andreessen has nearly 870,000 Twitter followers, Ben Horowitz is a bestselling author on entrepreneurship, Chris Dixon has 740,000 Twitter followers, Is cryptographic's most influential opinion leader.

In June this year, A16Z's self-built media website Future was officially launched, including articles, videos, podcasts and other forms of content, in addition to a16Z internal writers, there are industry veteran experts and emerging stars and other external writers for joint creation.

Competitive advantage and industry innovation

A16z recruits a large number of new partners, government officials, editors and more to support its portfolio companies with marketing, legal, lobbying and technical resources through a strong and extensive functional talent network. As a result, the A16Z will become more attractive to startups and have a better chance of investing in the "biggest winners".

The only problem is, it all costs a lot of money. Providing these services and staffing them is expensive. Does this mean the A16Z will soon go bankrupt?

Not at all. Dror Poleg, an economic historian, gives a novel interpretation of A16Z's business model in his article Andreessen Stealing From Bezos. He believes that A16Z's business model is similar to Amazon's successful experience.

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

This suggests a willingness to minimize short - and medium-term profits for the sake of huge long-term profits. Amazon has been operating at or near a loss for years, investing in infrastructure, new business lines and all sorts of other things that don't seem focused on being a "website that sells things." But in the long run, these investments will not only make Amazon 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, it completely changed the economics of e-commerce, forcing its competitors to bear new costs. Other retailers are now forced to play catch-up with Amazon's campaigns or rely on partnerships with Shopify, Facebook, Stripe and others.

Poleg thinks A16Z is doing the same for the venture capital industry. It is not simply making strategic moves to gain an edge. It is imposing an entirely new cost structure on its competitors. As a result, a few other companies will try to catch up and become the same giants. The various "boutique" angel investment teams have had to rely on small investments to survive, while many big, weak funds have faded away.

Sequoia Capital's Doug Leone said, "A16Z has upped our marketing game. The young founders are media-focused, and we don't want to be out of their sight." "Every organization that talks to us now says, 'Hey, we can help you recruit, we can bring you big clients,'" Okta CEO Todd McKinnon said at the time of the fundraising. Value-added services have become essential chips."

It can be said that the innovation of A16Z is a subversive improvement of the venture capital industry, bringing better services to more outstanding founders and enterprises and improving the industry ecology.

02 Founding: Ignition man of the Internet

Why is such a model designed to operate VC? 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 of the American Midwest, and seemed to have nothing to do with computers. The locals were passionate about football, and Andreessen was an outlier. He started using computers at the age of nine and taught himself Basic in a library.

After graduating from the University of Illinois, Andreessen led the development of Mosaic, the first Internet browser, at the National Center for Supercomputing Applications. In February 1994 Jim Clark, a veteran venture capitalist, approached the brilliant teenager with $4m and the two co-founded Mosaic Communications, a precursor to Netscape.

On August 9, 1995, Netscape had a highly successful IPO just 16 months after it was founded. The stock was set to be offered at $14 a share, but a last-minute decision doubled the initial offering price to $28 a share. The stock surged to $75 on its first day of trading, a record first-day gain. The shares closed at $58.25, valuing Netscape at $2.9bn. While it's a little unusual for a company to go public before it's profitable, netscape's revenue actually doubled every quarter in 1995. The success of the IPO subsequently inspired the use of the term "Netscape moment" to describe a high-profile IPO that marks the dawn of a new industry. The founder, Marc Andreessen, made the cover of Time magazine.

Until late 1998, when Microsoft took full advantage of its operating system monopoly to subsidize all kinds of free products in which Netscape competed, Netscape was sold to AOL. In the short term, this is a big win for Microsoft, as its biggest threat has been driven away into the arms of a rival that is far from being able to compete with it. In the long run, however, Netscape allowed developers writing new features for computers to stop working on Microsoft's proprietary platforms and start writing them according to the standard interfaces of the Internet and the World Wide Web. Over the years, Netscape invented many of the technologies that underlie the modern Internet, including JavaScript (a programming language), SSL, and cookies (message recorders).

Ben Horowitz, another co-founder of A16Z, was born in London and grew up in California. He received a degree in computer science from Columbia University in 1988. He received a master's degree in computer science 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, they co-founded Loudcloud, a cloud computing and storage service. However, bad luck coincided with the bursting of the dotcom bubble in 2000, making financing difficult.

They decided to spin off parts of Loudcloud into a new company called Opsware, which focused on data management and storage for businesses. Opsware was acquired by HP for $1.65 billion in 2017.

Today, people think Marc Andreessen and Ben Horowitz make the perfect startup partner: Andreessen is a visionary and strategic planner; Ben Horowitz has strong management skills that complement Andreessen's weaknesses as a tech guy. But they work together for more than 20 years is far more difficult than we imagine, behind the brilliant road is full of countless stumbling scars and pain.

Horowitz's book, "The Hard Way" (now a must-read startup bestseller) recounts how he and Andreessen were frustrated when they worked at Netscape in the face of Microsoft's onslaught and eventually had to sell the company. Netscape became a shining but short-lived star in business history. After building Loudcloud and jumping into the trend that was too early, they worked hard for eight years when the dotcom bubble burst and the tech stock market crashed, and then went back to the beginning and was acquired by HP at a very low price.

Andreessen sees the future each time, but either the opponent is too strong or the timing is wrong..... Both ventures failed to achieve the kind of success he had hoped for, which made him reflect that he might not be a qualified manager or an outstanding entrepreneur.

Horowitz, too, was left wondering after his ordeal and helplessness: Why is the art of entrepreneurship so profound? Does every CEO have the same problem? If so, why isn't anyone writing these questions down? Why do startup consultants and venture capitalists rarely have hands-on experience?

He still remembers when, as CEO of Loudcloud after its first round of funding, he went to his investors and David Beirne, a senior partner at Benchmark, asked him in front of everyone: "When are you going to hire a real CEO? Look for someone who has done organizational design for a big company, who has a strong network and a ready pool of clients." Horowitz struggled with the question -- he had none of these skills, and as a self-made CEO rather than a professional one -- he asked himself: What exactly does it take to be a CEO?

So Horowitz sent Andreessen a message: "We should start a venture capital firm. Partner selection is all about 'experience first,' consulting with people who want to start companies, and helping founders become great ceos." Andreessen replied, "I feel the same way."

The a16Z design, they believe, will correct the mistakes Andreessen and Horowitz made as entrepreneurs. In their view, some of those mistakes came from Benchmark, a boutique investment house with just five people and no backroom expertise to provide the services it craves.

"We've always been the anti-benchmark," Horowitz once said. "We don't design to do what they do."

Road to Rise: The leader of the next Generation network

According to Pitchbook, a16Z invested 1,218 times, resulting in 299 exits. According to the official website of A16Z, 18 projects are exiting through IPO and 4 projects are exiting through DPO.

Note: A direct listing (DPO) is not like an initial public offering (IPO) to raise capital. Instead, a company's employees and investors convert their ownership rights 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 in at any time, rather than having a lock-up period like a traditional IPO (dpos don't have a lock-up period).

A16z's biggest listing is Coinbase, the largest US cryptocurrency exchange that adopted DPO this year. With A market cap of $85.8 billion when Coinbase went public, A16Z holds 25% of Class A shares and 14.8% of Class B shares, yielding A return of more than $7 billion. Lyft, Slack and Pinterest are among the other a16Z companies that have gone public with more than 5% of their shares. In addition, eight companies have been acquired for more than $1 billion, including:

GitHub (in Round A, acquired by Microsoft for $7.5 billion), Oculus (in Round B, acquired by Zuckberg for $2 billion), Instagram (in seed round, Bought by Zuckerberg for $1 billion), Dollar Shave Club (seed round entry, bought by Unilever for $1 billion), etc.

A16z currently has 58 other unicorns in the primary market, including Stripe, the most valued private tech company in the US ($95bn) in which A16Z invested in a seed round.

The first A16Z fund is estimated to have returned twice as much to investors, and the second and fourth funds are expected to return three times as much. All this counters a Wall Street Journal article that famously questioned a16Z's actual profitability.

Mobile Internet era: "Software eats the world"

"Software Catcher"

When a16Z was founded in 2009, it invested in a handful of projects, all in software, including project management product Asana (already public and now valued at $12.7 billion), online video calling software Skype (bought a stake from eBay for $50 million), And then there's Zynga (already public, with a market cap of $7 billion).

In May 2011, Skype was acquired by Microsoft for $8.5 billion, the largest acquisition in Microsoft's history at the time, a sensational case that put the two-year-old a16Z on the radar. Andreessen took the opportunity to publish his famous article "Why Software Was Eating the World" in the Wall Street Journal.

"We are in the midst of a dramatic and broad technological and economic transformation," he writes. "New software ideas will lead to the rise of new Silicon Valley-style start-ups that will invade existing industries with reckless abandon." Andreessen predicted that the next decade would see "an epic battle between incumbents and software-driven insurgents." The widely read column, which was both a prediction and an investment insight, greatly enhanced Andreessen's reputation as a Silicon Valley thought leader and established A16Z as a "software catcher."

In fact, a16Z established an investment path for reinvesting in software from the very beginning, as Scott Kupor, employee 1 at A16Z, explained on Quora why the company was named A16Z: "The real reason is that we're software people, and A16Z stands for 16 letters between the A in Andreessen and the Z in Horowitz. For those of you with A software background, internationalization is called I18N, and localization is called I10N."

In addition to software, it also has a wide distribution in other industries.

Source: Pitchbook

According to Pitchbook, a16Z has made 842 investments in software (including information technology and enterprise services) to date, accounting for 69.25% of total investments; Secondly, A16Z also has a lot of investment in medical and financial services. In early 2019, A16Z outlined five technology trends for its planned layout, including biomedicine, digital currency, blockchain, artificial intelligence, and fintech.

Unlimited "all-weather" funds

Annual investment trend line

A16z sets no limit on the investment stage, covering the whole cycle from seed to growth in the primary market. In its first year, A16Z made two deals, and the number of deals in its second and third years was 25 and 59 respectively, surging to 95 in 2012. According to PitchBook, a16Z has never made less than 60 deals in every year since 2011, and in 2020 it was the second most invested company in Silicon Valley. They also describe themselves as an "All weather" fund, with no "capital winter".

Source: Pitchbook

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

In general, the investment rounds of A16Z are mainly early-stage and mid-late stage investment, accounting for 45.57% in early-stage investment, 29.64% in mid-late stage investment, and 22.82% in seed round investment.

with

Source: Pitchbook

A16z has officially mentioned 221 withdrawal cases, mainly through listing or merger, among which Skype and GitHub mentioned above are well-known. Despite owning just 2% of Skype, A16Z played a key role in persuading Microsoft to buy the company for $8.5 billion, three times Skype's market value. The sale netted the A16Z $100 million. In 2015, A16Z invested $100 million in GitHub, a code-sharing community for developers. The fund netted $1 billion when Microsoft bought GitHub for $7.5 billion in 2018.

Investment performance of the Third phase of the Fund

According to Pitchbook, the A16Z Iii portfolio has six companies that have returned more than 50 times, five that have returned 20-50 times, two that have returned 10-20 times, six that have returned 5-10 times, and 13 that have returned 1-5 times. Three companies returned zero to one time. The first fund is estimated to have returned twice as much to investors, and the second and fourth funds are expected to return three times as much. That's a remarkable performance for a 12-year-old institution, making A16Z one of silicon Valley's top investors.

Web3 age: Crypto Hurricane

In 2019, a16Z reached a turning point

The four most prominent companies in the portfolio -- Lyft, Pinterest, Slack, and PagerDuty -- have seen their shares crash since going public, and while the A16Z has made handsome returns, they are keenly aware that the era of the mobile Internet is over.

A16z began to transform itself to find new areas worth investing in for decades to come. They set their sights on encryption.

Encrypted networks are built on top of the Internet, the ultimate software-based network. A16z's emphasis on encryption is consistent with previous understanding of the software world.

In A16Z's view, software is the code of the human mind and therefore has almost unlimited design space. And encryption technology is a pure software movement, does not depend on the expansion of the hardware (the Internet requires the laying of cables and the building base station), represents the technology works and works of architecture transformation, the world has caused many untrusted network participants build consistency and the ability to trust, this is the most important positive significance encryption technology.

In 2013, Chris Dixon joined a16Z formally opened the curtain on the layout of crypto investment. He thought: "block chain on the Internet is a new and architectural design and adjustment, the adjustment will let all the people who take part in the Internet have the opportunity to occupy part of the Internet network. Encryption technology is not only a financial future, and with the early Internet, is expected to change every aspect of our lives, driven by a wave of computer innovation."

A16z Crypto made its first investment in Ripple, a cross-border payment solution, and also invested in cryptocurrency exchange Coinbase that same year. Today, Ripple is valued at $10 billion, and Coinbase went public on Nasdaq in April with a market cap of $85.8 billion, one of the largest ipos in tech history. When asked why he invested in Coinbase, Chris Dixon explained this: "Bitcoin solves a serious problem with existing payment systems that rely on centralized services to validate transactions, but to spread widely, Bitcoin needs a killer app, much like HTTP has a web browser and SMTP has an email client. That's Coinbase."

In June 2018, A16Z officially launched a $350 million crypto fund, which mainly mentioned five investment concepts:

- The first is long-term, investment can be held for more than 10 years;

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

- The third is to provide operation support for entrepreneurs. An 80-strong operation team will provide help in recruitment, marketing, management and other aspects.

- Fourth, flexibility in terms of phase, asset type and geography;

- Fifth, focus on non-speculative projects.

These investment philosophies ensure that A16Z is able to maximize the quality of projects based on the characteristics of the crypto industry and projects, and use its rich resources to help projects grow.

In April 2020, A16Z set up the second phase of the $515 million crypto fund. In June this year, the third phase of the crypto fund was set up with a scale of 2.2 billion, which is currently the second largest crypto fund in the world (Paradigm announced the establishment of a $2.6 billion crypto fund in November this year). A16z manages a total of $3 billion in crypto funds, and its future investments will revolve around five themes:

- The first is the next generation of payments, which can significantly reduce friction and provide a pleasant user experience;

- A store of value, where bitcoin is gaining acceptance and adoption around the world;

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

- The fourth is a new way for creators to realize their success. Creators can use token models to let fans directly participate in their success, instead of attracting audiences through centralized platforms that charge high rents;

- The fifth is Web3, a high-performance programmable blockchain that will make decentralized web development easier.

At present, these investment directions are quite in line with the trend of bitcoin price rising, the ecological rise of multiple public chains, the outbreak of DeFi and NFT markets, the rise of social token platforms and other trends, reflecting A16Z's keen understanding and grasp of market trends.

Leading role

So far, A16Z's single biggest gainer has been Coinbase. In 2013, A16Z led Coinbase's Series B round of funding with $20 million. Despite the turmoil in the crypto market, A16Z has participated in each of Coinbase's subsequent rounds, totaling eight rounds, a sequence of bets that is extremely rare in the VC industry. A16z also reflects the firm bullish on Coinbase.

A16z acquired 3.52 million shares from Coinbase's Series A lead investor Union Square Ventures in 2019, making it the second-largest shareholder, according to Coinbase's prospectus. A16z sold down about $4.375 billion worth of its shares after Coinbase went public this year and still holds 7% of the shares, making it the biggest outside winner in the listing.

"We are excited to continue to invest in it because Coinbase represents the best of a very different world, not only bringing Silicon Valley acumen to products and design, but also serious compliance with regulations and compliance." A16z partner Katie Haun said.

In addition, A16Z also completed the layout of mainstream blockchain track leading projects earlier. In 2017, IT invested in Filecoin and other projects, and in 2018, it invested in Chia, Dfinity and MakerDAO. In 19, he led the investment in Compound, Dapper Labs, Arweave and other projects. Now, almost all of these projects have become the head blockchain projects with rich returns.

A comprehensive look at the investment style of A16Z, especially on the track leading projects, and most of the lead investment. In August 2020, when DeFi first exploded, a16z quickly invested in Uniswap, the head DEX, followed by Dapper Labs, an NFT head company, and Optimism, Layer2 head. After the Solana ecosystem exploded this year, A16Z led a $314 million round for Solana Labs.

Construction industry

In addition to supporting the growth of high-quality projects in the industry through investment, A16Z also pays particular attention to exporting its industry ideas and popularizing industry knowledge in a variety of ways to contribute to the construction of the blockchain industry in terms of talent, resources and supervision.

For example, a16Z's website is more of a learning site than an information display site like most other organizations.

Since 2014, a16z partnership people write a lot of articles on the web site promotion block chain concept and encryption currency, discussing encryption system, block chain management topics, such as more than industry classic article emerge among them, such as "why is it important to have Web3", "in the past, present, and future: from cooperatives to encrypt network", etc.

At the same time, A16Z is also inviting industry insiders and outsiders to discuss encryption technology and make audio podcasts to enrich its conceptual 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 the field for readers to refer to according to the topic, and making industry vocabularies.

At the beginning of 2020, A16Z invited more than 20 industry celebrities to operate the online video course named "encryption entrepreneurship school", covering the basic knowledge of encryption technology and governance, marketing, fundraising, compliance and other matters needing attention to establish a encryption company, providing a full range of information support for entrepreneurs in the encryption industry.

In June 2020, A16Z launched the Talent X Opportunities Fund, which aims to invest in talented entrepreneurs with ideas but little educational background and resources. Each session of entrepreneurs can participate in a 10-month training program with online mentoring from experienced entrepreneurs.

Earlier in May 2019, A16Z brought together regulators in Washington and its crypto portfolio companies in an attempt to explain the potential of the nascent technology to these senior government agencies that have a significant impact on the cryptocurrency industry, Former CFTC chairman J. Christopher Giancarlo, among others.

Through the above measures, A16Z has established itself as the most influential venture capital institution and industry builder in the crypto world, closely tied to the future of the crypto industry, and also attracted high-quality projects and talents in the industry around itself, laying a solid foundation for its long-term value capture.

Structural transformation

On April 2, 2019, Forbes reported that A16Z, a leading Silicon Valley venture capital firm, filed its registration as a Registered Investment Advisor (RIA).

Crypto is regulated by the Securities and Exchange Commission (SEC) in terms of investment behavior, which is exactly the "shackles" that A16Z abandoned as a venture capital firm to lay down.

No longer a venture capital firm, a16Z is no longer subject to the SEC's regulatory control over a venture capital firm, meaning it can bypass regulations and make riskier investments. The new A16Z will be free of limits on investments in cryptocurrencies, digital assets and other areas deemed risky by the SEC (no more than 20% of the fund's size) and will now be able to invest up to $1 billion in cryptocurrencies and buy unlimited shares in public companies or other investors.

The transition is fraught with complications. First, A16Z hired professional compliance consultants to examine the company's 150 employees at the time, including their partners, parents and even children, to review their asset allocation and investment behavior in case the "investment advisory firm" had a stake in potential clients. It was a costly, time-consuming exercise, and the investment team could no longer talk publicly about portfolio or fund performance -- including on A16Z's famous podcast.

The second is the "confusion" of LP. What is the purpose of the funds they gave A16Z to keep? Which investment field does the A16Z belong to after the transformation? This, I'm afraid, is not something that A16Z has thought particularly clearly about itself, which the company declined to answer in the TechCrunch report.

However, for A16Z, which values trends and has long been optimistic about the cryptocurrency space, the costs of switching may be far less than the costs of not switching.

A16z partner Chris Dixon has described blockchain as "the pirate flag of Silicon Valley once again, leading people into fun, slightly dangerous and disruptive activities." Now, with a16Z and its investment projects, armed with billions of dollars, steering the rudder of the pirate ship further afield, a new era may be unfolding.

04 epilogue

From the determined pursuit of software in the mobile Internet era to the heavy bet on encryption today, A16Z's bets on new trends have been sharp and decisive. Founder Andreessen continues to be a pioneer, whether it is bringing the Internet, which was originally used by governments and the military, into millions of homes, later investing in social networks, and today's outstanding achievements in SaaS, biotechnology, encryption and more.

Always betting on the next era, always looking for the next big opportunity to "eat the world", to be the one who "sees the future", is the secret to success.

A famous LP in Silicon Valley said of A16Z: "I think the advantage of A16Z is that the two founders are both willing to learn and good at adjusting." In the development of A16Z, it is an outstanding trait to be good at learning and borrowing from others, especially the cross-field integrated innovation. It drew on the business model of CAA, a Talent agency in Hollywood, which not only won excellent performance for itself, but also overturned the traditional model of venture capital, imposed a new cost structure on its rivals, and promoted the construction of the whole venture capital ecosystem.

As Andreessen famously said, "Great careers are always different."

"The world has been suffering from big institutions for a long time". From the era of institutional media to the era of "we media", the booming decentralized creator economy is also challenging the era of platform and algorithm-based "We media", and the power of voice is increasingly shifting from "others" to "ourselves".

A16z is the earliest 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, and also holds the influence assets in its own hands. This strong influence is particularly prominent in encryption in the past two years. Almost every outstanding talent in encryption, they have more or less maintained a good connection with A16Z.

A16z is leading a global revolution in venture capital by building its own media and accumulating influence assets. It is also worth learning for every enterprise. Mastering the initiative of narrative is an increasingly important topic for technology companies.