Andreessen Horowitz Part I

We kick off Season 9 with a classic: Part I of the a16z story. How did this brand new venture firm charge out of the gates in 2009, going from zero to disrupting the entire venture industry overnight? You probably know Marc & Ben's history with Netscape and Loudcloud/Opsware... but what about the Black Panthers, Nintendo 64, Al Gore, Doug Leone, Masayoshi Son, and an epic feud with Benchmark Capital that became Silicon Valley's version of the Hatfields and the McCoys? Buckle up, Acquired's got the truth. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Links: David Streitfeld's great NYT piece on the Horowitz family: https://www.nytimes.com/2017/07/22/technology/one-family-many-revolutions-from-black-panthers-to-silicon-valley-to-trump.htmlMarc on the Tim Ferriss Show: https://tim.blog/2018/01/01/the-tim-ferriss-show-transcripts-marc-andreessen/2003 Marc in SF Gate: https://www.sfgate.com/business/ontherecord/article/OPSWARE-INC-On-the-record-Marc-Andreessen-2525822.php#photo-2684736Carve Outs: Ben: The Elephant in the Brain: Hidden Motives in Everyday Life: https://www.amazon.com/Elephant-Brain-Hidden-Motives-Everyday/dp/0190495995David: Resonant Arc Podcast / YouTube Channel: https://www.youtube.com/channel/UCFzWAEPDGiY34bGpwM_DWmANote: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  What do you think about playing the full Who Got the Truth song at the end?

• 0:04Ben Gilbert?

  At the end? I like that.

• 0:05David Rosenthal?

  Yeah, it's so good.

• 0:07Ben Gilbert?

  Who got the truth?

• 0:28Ben Gilbert?

  Welcome to season nine, episode one of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs and our venture fund, PSL Ventures.

• 0:44David Rosenthal?

  And I'm David Rosenthal, and I am an angel investor based in San Francisco.

• 0:50Ben Gilbert?

  And we are your hosts. Well, listeners, David and I decided to open this season with the complete story of the firm that totally upended the entire venture capital ecosystem a decade ago, Andreessen Horowitz. But as we started researching, of course, that meant telling the journeys of Andreessen and Horowitz themselves before founding the firm, which of course means telling the history of the web browser, the creation of Mosaic, the founding and eventual IPO of Netscape, which was the first real internet tech startup, and of course, the tumultuous story of LoudCloud and Opsware.

• 1:26David Rosenthal?

  And so much more than that, that you don't even know, Ben.

• 1:30Ben Gilbert?

  Well, this is great. This is the first time I've literally not opened your notes at all. Like, normally, we don't trade notes, but I have no idea what you've prepared. And listeners, the impetus for that is that this was going to be a one-part episode until last night, when David texted me and said, how about we do a two-parter? So there are early things about Mark and Ben that I did zero research on, and I am excited to learn from David along with you all today.

• 1:55David Rosenthal?

  I'm like the old, the legendary Chicago Cubs shortstop, Bernie Banks. Let's play two.

• 2:01Ben Gilbert?

  Well, I'm really pumped to do this one as a two-parter. I think the history of Mark and Ben is really important to understand the worldviews of both of them and how they were shaped by it. And I think for all of us working in a startup ecosystem that was so shaped by the 2009 creation of the firm Andreessen Horowitz, I think it's paramount to understand the things that shaped them because they have shaped us all. And I don't know, I'm really excited because I feel like my investor psychology has already changed since starting the research into Mark and Ben.

• 2:36David Rosenthal?

  Totally. Can't wait to dive in.

• 2:38Ben Gilbert?

  Yep. Well, listeners, two things to be aware of if you like the show. One is our Slack. There is awesome discussion that takes place on not just our episodes, but also the tech news of the day going on there. We're now 8,000 strong, so you can come and join us at acquired.fm/slash Slack. And two is the limited partner program. And this is where we drop subscriber-only content, like our library of over 50 interviews and deep dives on company-building topics like venture capital fundamentals. And you'll also get access to our LP Zoom calls with David and I. So you can click the link in the show notes or go to acquired.fm/lp. All right, listeners, now is a great time to tell you about a longtime friend of the show,

• 3:21Ben Gilbert?

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• 3:35David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 3:56Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 4:18David Rosenthal?

  In half? Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 4:36Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. Well, David, take us in and listeners, you know, normally this is where I would warn you that this show is not investment advice. David and I may have investments in the companies we discuss and the show is for informational and entertainment purposes only. But this episode, all this stuff's pretty old, like good luck investing in any of this defunct technology.

• 5:22David Rosenthal?

  We're going to be talking about a lot of dead companies on this episode. Next time, we'll be talking about a lot of live companies. One disclosure before we jump in here. I think this is the first time I at least have done this on this show. I have a new investing vehicle that I'm not quite ready to talk about just yet, but I'm doing it with my buddy Nat Manning, who's the COO of Kettle and should tell everybody that a couple of the GPs at Andreessen Horowitz are LPs in that vehicle. I don't think it has affected my telling of the history, but everybody should just know that going in.

• 6:00Ben Gilbert?

  Congratulations, David.

• 6:02David Rosenthal?

  Thanks. Super excited. Can't wait to talk more about it soon. All right. So we start history and facts in 1966.

• 6:14David Rosenthal?

  In London, England. Not what you expected, was it Ben? So this is not Mark? Nope, not Mark that we're talking about here. We are talking about Ben, who was born in 1966 in London, England. I did not know that. It was the 60s, the counterculture is in full swing. In London, you've got the mods and the rockers, the Who, the Rolling Stones, all that. And Ben's family that he was born into, young family, is living in London at the time. They're American expats. The husband of Ben's father had come to London to work for Bertrand Russell, the- Philosopher?

• 7:00David Rosenthal?

  Philosopher, polymath, logician, mathematician. Oh, wow. So the family already had either one or two children. I'm not sure if Ben is the second child or third child, but nonetheless, in 1966, Benjamin Abraham Horowitz is born, of course, would grow up to become the Ben Horowitz. So usually on this show, on most episodes, we would just kind of like stop there with the family. Like, oh yeah, this is the like milieu that our protagonists were born into. We can now move on to the people themselves. This time, we're going to spend a little more

• 7:39David Rosenthal?

  time on Ben's family. His mom's name is Alyssa, then Horowitz, and now Krauthammer. And his dad is David, David Horowitz. Now, that name may not mean much to probably most people listening, but some of you listening are saying, wait, David Horowitz? That David Horowitz? Yeah, I have no idea what you're talking about. Yeah, well, so David was and is a radical political activist and very much a large and still active part of American history, even though I think most people these days are not aware of it.

• 8:21David Rosenthal?

  So at this time, the reason he was in London is he was one of the leading young intellectual radicals that was championing the new left at the time and the counterculture. And they were in London. He was working with Bertrand Russell, protesting the Vietnam War and advocating for like world peace and worldwide nuclear disarmament.

• 8:41Ben Gilbert?

  Oh, wow.

• 8:42David Rosenthal?

  So he was working with not only Russell, but Jean Paul Sartre, Simone de Beauvoir, James Baldwin, Stokely Carmichael.

• 8:49Ben Gilbert?

  Whoa.

• 8:50David Rosenthal?

  He is in the middle of everything happening in the 60s. So this continues for a couple of years. And then in 1968, David gets an opportunity he can't refuse, which is to move back to America and become the co-editor of the magazine Ramparts, which was like one of the leading publications of the hippies and the counterculture. They originally published Che Guevara's Diaries. It's crazy. And Ramparts was based in Berkeley, California, which is how Ben Horowitz ends up growing up in Berkeley, California.

• 9:26Ben Gilbert?

  It's funny, I knew Ben grew up in Berkeley and I just didn't make the connection that like anytime you hear that someone was in Berkeley in the late 60s, you should ask the question like, well, what were they doing in the counterculture movement? Like what role were they playing? And how did they end up there? Rather than just being like the way you would today, which is like, yeah, it's a little bit of a hippie dippy town, but you know, it's part of the Bay Area. It's part of technology.

• 9:49David Rosenthal?

  Nice suburb. You got the college campus there, better weather than San Francisco. It was a little different back in the day. Okay. So speaking of different, we know David's sort of already part of the counterculture. When they get back to Berkeley, get this, he intersects with Huey Newton, the leader of the Black Panthers and becomes very close with him and with the Panthers. And when I say very close, I mean like very close. So he writes about them and Ramparts all the time, helps bring them to national prominence. The whole family, including of course, young Ben, would go to the Black Panther Church every Sunday in Oakland, the Son of Man Temple.

• 10:29Ben Gilbert?

  Wow.

• 10:30David Rosenthal?

  Crazy. And you know, this is like a little bit certainly outside the scope of acquired, but just to paint the picture of like where Ben came from, the Black Panther Party, like if you're not American or from the US and studied American history, like It was one of the most powerful forces for Black and civil rights in America's history, and the whole family is right in the middle of it. But unlike Martin Luther King and the civil rights movement, the Panthers did not advocate for nonviolence, shall we say. Less about the civil disobedience, more about the disobedience. More about the disobedience. I didn't know this, but it was actually originally founded as the Black Panther Party for Self-Defense. Oh, wow.

• 11:14David Rosenthal?

  And the whole purpose of it was to resist police brutality against Black people in Oakland. That was the origin of the Black Panthers. Wow. I mean, this was like wild times. So in 1969, FBI Director J. Edgar Hoover described the Black Panthers as the greatest threat to the internal security of America. That's how wild this was. So they're like right in the middle of it, including young Ben, the Patty Hearst kidnapping, like everything. So then in 1974, when Ben is eight, an incident happens which changes things dramatically, very dramatically. So the Panthers needed help with their bookkeeping. And so Huey turns to David, who's sort of running this

• 11:58David Rosenthal?

  organization, Ramparts, says like, hey, can you help me? Like, we need bookkeeping. Now, if only they had pilot, like history would have taken a very, a very different course. So David introduces them to Ramparts' bookkeeper, a woman named Betty Van Patter. The Panthers bring her on. Six months later, Betty disappears. And a few weeks after that, her body washes up ashore across the bay in San Francisco. Oh. Wild. So the crime was never solved. No one was ever charged, but David and many, many others believed that she found out too much and Panthers had ordered her killed. Wow. So, you know, later Ben, of course, would write the hard thing about hard things. And, uh, you know, lived through all this crazy technology stuff. You just got to imagine,

• 12:43David Rosenthal?

  he was eight and his family went through this.

• 12:46Ben Gilbert?

  Wow.

• 12:47David Rosenthal?

  You know, a busted IPO doesn't seem so hard after stuff like this. So anyway, we will move on and get to Mark and Netscape and LoudCloud and Andreessen Horowitz now. But yeah, it's crazy. And for David, he does a complete 180 and ends up becoming an arch-conservativist. He was one of the primary strategists behind Trump's political strategy for defeating Hillary Clinton in 2016. Jeff Sessions and Stephen Miller were like proteges of his.

• 13:14Ben Gilbert?

  Oh, I had no idea.

• 13:15David Rosenthal?

  David Horowitz Freedom Center is one of the biggest funders of Trump-leaning political ideology in America. And crazy enough, they still talk, uh, Ben and David. They apparently still have a great relationship. There is a wonderful New York Times piece that we'll link to in the show notes. I recommend everybody go read about all of this that came out a few years ago by David Stratefield about it. But yeah, this family history is just wild.

• 13:41Ben Gilbert?

  That's fascinating. And it's so cool that family bonds can transcend and not just political beliefs, but like deeply seeded ideological beliefs about the way the world should be.

• 13:51David Rosenthal?

  Totally. And yeah, that out of all of this, 50 years later comes Andreessen Horowitz. Okay. So back to Ben. Obviously he like soaks all this in and has a huge influence on him. But he also wants to blaze his own path and get out of his dad's shadow. And he gets turned on to this other revolution that is happening in the Bay Area in the seventies, which is the computer revolution. He ends up going to Columbia in New York for undergrad and studying computer science there. Probably wanted to get sort of away from everything happening in the, the family life at that point in time. He then goes to UCLA afterwards

• 14:30David Rosenthal?

  and gets a masters in computer science. And while he's there, he interns at the legendary Silicon Graphics.

• 14:39Ben Gilbert?

  Otherwise known as SGI, led by.

• 14:43David Rosenthal?

  Jim Clark.

• 14:44Ben Gilbert?

  Jim Clark, who will come up later many times.

• 14:47David Rosenthal?

  Oh, he's definitely going to come up in the story. And SGI is just legendary. I don't think we've talked about them as much on acquired, but they were, you know, right alongside Intel and Microsoft and Apple. One of the big early computing companies in Silicon Valley. The current Google campus was originally.

• 15:08Ben Gilbert?

  Yeah, that's crazy.

• 15:09David Rosenthal?

  The SGI campus.

• 15:10Ben Gilbert?

  It's wild.

• 15:12David Rosenthal?

  They did the, not just graphical computing, but 3D graphical computing. So they did the effects for tons of Hollywood movies like Terminator, Jurassic Park, the N64 Nintendo video game console, which is going to come back up later in the story. SGI made that. They made the processors for the N64.

• 15:29Ben Gilbert?

  Really?

• 15:30David Rosenthal?

  Yeah. So if you played Mario Kart back in the day, you have SGI to thank.

• 15:34Ben Gilbert?

  Okay. The thing that I know that we're going to talk about later, about N64 coming back up makes way more sense with Jim Clark having the SGI background and SGI making the chip for that now. So is there any ties between Lucasfilm and SGI?

• 15:50David Rosenthal?

  Oh, that's a good question.

• 15:51Ben Gilbert?

  The University of Utah folks that ultimately became Industrial Light and Magic.

• 15:56David Rosenthal?

  So Jim Clark was one of those Utah folks.

• 15:59Ben Gilbert?

  Ah, along with, of course, Nolan Bushnell and Alan Kay?

• 16:05David Rosenthal?

  I think that's right. I think that's right. I don't know if there are any direct ties between Lucasfilm and SGI, although I'm sure they were using SGI's hardware for the effects at ILM at Industrial Light and Magic.

• 16:17Ben Gilbert?

  It was. It was Alan Kay went to the University of Utah and graduated with his masters in 68. So it would have been that same time as Nolan Bushnell.

• 16:28David Rosenthal?

  All this stuff going on. So later, we're now in the very early 90s.

• 16:34David Rosenthal?

  Young Ben, coming out of school, coming out of his master's program, he joins SGI. He doesn't stay that long, though. After about a year, he leaves and he joins a startup that's coming out of SGI. And that startup kind of fails, but it's his first startup experience. And then he moves on and he joins Lotus.

• 16:53Ben Gilbert?

  Ah, yes. What should have been the way that we all processed words and numbers, but alas, Microsoft crushed them.

• 16:59David Rosenthal?

  Yeah, what was it? Lotus 123, I think?

• 17:01Ben Gilbert?

  Yep, and Lotus Notes.

• 17:03David Rosenthal?

  Lotus Notes, yep. So it's while Ben is at Lotus that he hears about this new, exciting paradigm development, new piece of software coming out of not Silicon Valley, but the middle of the country, the Midwest, the heartland of America, Illinois. We are talking about Mosaic, the Mosaic web browser.

• 17:27Ben Gilbert?

  The NCSA Mosaic.

• 17:29David Rosenthal?

  Indeed.

• 17:31Ben Gilbert?

  Wasn't it originally X Mosaic?

• 17:33David Rosenthal?

  Oh, I don't know that.

• 17:35Ben Gilbert?

  Yeah, it was originally released as a sort of prototype piece of software, originally only for Unix systems and used the X Window system. And it was sort of a common thing to denote it with an X in the name of the piece of software.

• 17:48David Rosenthal?

  Ah, wow. Well, we're going to get into the name more in a minute here. But Ben hears about Mosaic and of course, it's celebrity, wonderkind, young, brash founder? I guess? Question mark? Marc Andreessen. So who was Marc Andreessen? A man who needs no introduction, but his background was, let's just say, pretty different than the milieu that Ben was growing up in. So he was born in Cedar Falls, Iowa, which is not a super, super small town, but he was raised in New Lisbon, Wisconsin. Do you know what the population of New Lisbon, Wisconsin is today, Ben?

• 18:32Ben Gilbert?

  10,000?

• 18:33David Rosenthal?

  2,554 people.

• 18:38Ben Gilbert?

  Wow.

• 18:39David Rosenthal?

  So Mark's father Lowell was a sales manager for a seed company called the Pioneer Hybrid International Seed Company, and his mother, Pat, worked in customer service at Lands End. I think Lands End, I think they would go on to become a sizable customer of Loud Cloud, but that is in the future to come. So Mark, he talks about this all the time, listeners. If you've heard Mark talk about his background, he could not wait to get out of this small town and the Midwest and computers and the internet were the vehicle he was going to do it. He says of his family, which he rarely, rarely talks about, the one quote I was able to find is he says they were Scandinavian hardcore, very self-denying

• 19:23David Rosenthal?

  people who go through life never expecting to be happy.

• 19:27Ben Gilbert?

  Wow.

• 19:28David Rosenthal?

  Yeah, wow.

• 19:29Ben Gilbert?

  Well, and it's worth pointing out too, that like when you say this non-traditional background, you alluded to him as this wonderkind, and that was just not true yet. At this point in history, and we have Brian McCullough from the Internet History Podcast to thank for this. I binged like the first 10 episodes of that podcast to prep for this. But he brings up the point that Mark was like an hourly worker at NCSA.

• 19:51David Rosenthal?

  Oh, yeah. He was getting paid 625 an hour.

• 19:54Ben Gilbert?

  Yeah, like no one recognizes his genius yet. And the innovation of creating Mosaic, of actually mobilizing people to work on this thing was like, hey, we have a lot of fallow resource here. We have some smart people. I have no authority, but I'm going to wrangle the troops to try and do this with me.

• 20:12David Rosenthal?

  Well, and I think if there's one thing that's young Mark Andreessen, and now older Mark Andreessen is very good at, it is putting himself in the right environment to meet the right people and to succeed. So.

• 20:26David Rosenthal?

  You know, we're referring to the University of Illinois, where he would end up going to college. He was very intentional about deciding that. He decided that he wanted to go to school, A, to study computer science. And so he wanted to go to school with a great CS program that his family could afford. And B, he also wanted a place where he would have the opportunity, not just to study CS, but to actually like work while he's in school on like cool stuff that's going on. And of course, Urbana-Champaign had not just a great CS school, but what we referred to a few times now, the National Center for Supercomputing Applications, was attached to it, the NCSA.

• 21:04David Rosenthal?

  So Mark, when he gets to Illinois, he immediately starts interning, doing like work-study at the NCSA. And while he's there, so how did you like, how does this kid, as you mentioned, you know, who like, he's not yet Marc Andreessen, how does he end up coming up with Mosaic? So while he's at NCSA, they're interfacing with all of the other supercomputing centers around the world, including like academic research, like particle accelerators, particularly with CERN over in Switzerland, the particle accelerator, which is where Tim Berners-Lee is. And that's where Tim Berners-Lee comes up with the set of standards like HTTP

• 21:46David Rosenthal?

  and all that stuff that he dubs the World Wide Web. And all the way across the world, like halfway across the world in Illinois, this kid working there, Marc Andreessen, he hears about it and he's like, oh, well, that sounds very interesting.

• 22:02Ben Gilbert?

  Totally. It's cool thinking about how this came to be because you got Tim Berners-Lee there on one of the few next workstations, like the next cube that actually shipped and was actually used by people because it was this crazy expensive thing that only went to people working in academia. And of course, this is sort of Steve Jobs's company before returning to Apple. And it says so much about Tim and the environment in which the internet and the World Wide Web was sort of started, that it was on a next machine because it came out of this rigorous Academia corner of the world, which is frankly so different than a lot of the startup innovation that is happening today. I mean, a lot of the like, the frontier tech stuff

• 22:45Ben Gilbert?

  comes out of academic labs, but I think we often forget, especially with how sort of countercultural a lot of new things on the internet have become that it started in a very-

• 22:56David Rosenthal?

  A very closed way, honestly.

• 22:58Ben Gilbert?

  Yeah.

• 22:58David Rosenthal?

  You know, the original intention behind all these set of protocols and the world wide web, like, it was supposed to be just for universities and research.

• 23:05Ben Gilbert?

  So they could share research notes.

• 23:07David Rosenthal?

  Yeah, and it was very controversial what Mark was doing because people didn't want to let the riffraff in. They thought it would dilute the quality of like, this is supposed to be a pure thing about like, conducting research and-

• 23:20Ben Gilbert?

  All right. I got this great quote from Mark. So that he gave this an interview in 2003 that's talking about on starting Mosaic. And he says, "But the internet community back then, the key technical people didn't want the internet to become easy to use or graphical because that would pollute the environment. Only smart people could use the internet was the theory, so we needed to keep it hard to use. We fundamentally disagreed with that. We thought it should be easy to use and graphical, so you should be able to point and click."

• 23:45David Rosenthal?

  Totally. Oh, it's so great. And like, it's really just because of Mark, like, he doesn't give a crap. He's getting paid 625 an hour over at NCSA. So he's like, "Well, what's the worst that can happen? You know, I'll just code this thing up." He convinces Eric Bina, who's a full-time employee there to work with him and code up an easy-to-use graphical browser to sort of open this up to everybody. And it's like, "Yeah, they'll fire me if it doesn't work. Who cares?"

• 24:08Ben Gilbert?

  Totally. And this is the first playbook theme that I want to pull forward. And listeners are trying something a little new today, interspersing more of the playbook throughout the story, but this is the very first time Mark runs the playbook of, there's something right now that's only for some small closed group of people that's in an inaccessible way. I think there's something very interesting to be done by opening up to the masses. And of course, there's no business model behind this yet. It's just, let's let everyone use the internet and let's make that possible. And when you think about Andreessen Horowitz, all these years later, funding things like Clubhouse and investing in social media platforms like Twitter, like Mark did very early-

• 24:46David Rosenthal?

  Or hell, Coinbase.

• 24:48Ben Gilbert?

  Absolutely. It is very much this, let's take something very esoteric and make it very available to everyone, and then we will figure it out later. This is the very first time he runs that playbook.

• 25:00David Rosenthal?

  Totally. And the other sort of counterintuitive thing, or going against the grain element of building a mass market browser for the web was that this was not how most people thought the internet was going to go at the time. At the time, this is in the early 90s, people are talking about the information superhighway. And actually, SGI was a big part of this. SGI was working with the cable companies to build like these internet-enabled set-top boxes.

• 25:36Ben Gilbert?

  That's right. Everyone thought it was going to be TVs.

• 25:39David Rosenthal?

  It was going to be TVs. And even worse, it was going to be the cable companies and the government in like private-public partnership that owned all these pipes. Could you imagine? And that they were going to control the stuff that was going to go on there. And Americans were going to access it through their televisions.

• 25:56Ben Gilbert?

  This was a big platform with the Clinton administration when they were campaigning for the 94 election was that we are going to be a big part of the information superhighway from the federal government. And it's fascinating to like zoom out a little bit. It makes sense that you have these like big screens and you have fat bandwidth that's able to send perfect, not choppy, high-fidelity audio and video to TVs. And then you look over at this internet thing, which is only a thing for academic institutions. There's like 40 nodes or something at all. Like there's 40 servers, period, on the whole internet. And all it can do is send texts back and forth. Like, no, you're not going to bet on that platform to be the way that this ends up coming to market.

• 26:37David Rosenthal?

  Yeah, totally. Now, to be fair to the soon-to-be Clinton administration, and in particular to Al Gore, who would become Vice President Gore, in the 1991 Gore Bill,

• 26:50David Rosenthal?

  Which is allocating funding for all these various internet projects that are being built out in America. They actually specifically allocate funding to the Mosaic project at the NCSA. So this is how they get the resources to pay Mark's 625 an hour salary for all the hours that he and Eric are going to work on coding this thing up.

• 27:11Ben Gilbert?

  So you're telling me Al Gore did invent the internet?

• 27:14David Rosenthal?

  He did, sort of. I guess he was kind of like the VC who funded the internet?

• 27:21Ben Gilbert?

  Wow, Al Gore was Marc Andreessen's VC. You heard it here first.

• 27:24David Rosenthal?

  You heard it here first. So they do this. They create Mosaic. And in 1993, they open it up for anyone to download and use for free. But importantly, and this is going to come up again later, they do not open source the code. So the NCSA retains the code behind Mosaic. It's not free and available and open source, but anybody can download it and use it. And of course, people go nuts and do. In 1994, Wired would write, "The second phase of the revolution has begun. Don't look now, but Prodigy, AOL, and CompuServe all are suddenly obsolete, and Mosaic is well on

• 28:07David Rosenthal?

  its way to becoming the world's standard interface."

• 28:11Ben Gilbert?

  Well, because those were all these walled gardens. I mean AOL, like everyone should remember AOL was not the internet. It was AOL keywords. It was pay to play. It was, you could only publish the content on AOL if you did a deal with AOL, which is of course how they had this incredible revenues that they were reporting. And everyone thought this was the most unbelievable company ever. But the internet was fundamentally something different. The world wide web was something completely different. That was, open is probably not the right word yet, but used standard protocols. And so when you mentioned that it grew like crazy, I grabbed some stats on that. In February of 93, when they released the first version, and this is like super prototyping, there's some great comments

• 28:52Ben Gilbert?

  from Marc Andreessen out on the NCSA ex-Mosaic listserv when they released version 0.5 in January of 93 that say things like, "I'm looking more for feedback on design and functionality than bug reports right now. Don't take the current code too seriously."

• 29:10Ben Gilbert?

  New releases will probably come out every seven to 14 days until 1.0 arrives. The bulk of the program will be rewritten in C++ anyway. So there's like disclaimers all over the mailing list that he's distributing this thing out to, but the stats are crazy.

• 29:23David Rosenthal?

  It's like the early Ethereum.

• 29:25Ben Gilbert?

  Totally. So the next month, there's 12 users in February of 93. Within three to four weeks, there's 1,000. And by spring, so like you got January is that listserv, February is 12 users. A month later, it's 1,000 by spring. So two months later after that, it had 10,000 users. And then nine months later, in early 94, it has a million users. So like the very first thing that Marc Andreessen shipped had insane growth and perfect product market fit right out the gate.

• 29:58David Rosenthal?

  Those are still pretty good numbers today.

• 30:01Ben Gilbert?

  Sure. Oh, absolutely.

• 30:03David Rosenthal?

  And this is in an era when people maybe have a dial-up connection, probably people have PCs, but like not that many people.

• 30:11Ben Gilbert?

  Oh yeah. The TAM of the internet was super small. Like if you had a million people by early 94 using your software on the internet, like I don't know what percent of internet users that is, but it's meaningful.

• 30:22David Rosenthal?

  You had like 10% of all internet users.

• 30:25Ben Gilbert?

  Totally. It was the killer app for the internet.

• 30:28David Rosenthal?

  So this is funny, right? So we're talking about, it's 1993. This is also Mark's senior year at Illinois. So he graduates in spring of 93, probably when Mosaic is at the like, I don't know, 10,000, 20,000 ish user adoption curve. He doesn't think that this is going to be a thing. And he's like, oh, this is like a cool thing I did during my, as an internship during my college years. I want to move out to Silicon Valley, move out to California and get a job, you know, at like a real computing company. And famously, he talks about this. He felt like he already missed it. He felt like Silicon Valley had happened.

• 31:05Ben Gilbert?

  Absolutely. I got the quote from this too. So Mark did a great interview on the Tim Ferriss Show a few years ago. And he says, "When I got to the Valley in 93 and 94, I thought I had missed the whole thing. The great PC companies had gotten built during the 70s and 80s, and by the time the 90s arrived, PC was done. It was finished. You could go buy one, and it was great, but it was done. People in the Valley thought there was nothing else left to do. And then there was this moment where I and various people wrapped our heads around the implication of the Internet, which today seems obvious, but at the time, it was very contrarian. If you said the Internet would become a mainstream consumer medium that 3 billion people are going to use worldwide for all forms of human activity, you would have been laughed at. You would have been institutionalized."

• 31:48David Rosenthal?

  Spoken only as Mark Andreessen can. To insert a playbook theme here, I mean, this is always true. There is like no moment in Silicon Valley writ large in tech where this is not true. I mean, I remember graduating from GSB in 2014 and commiserating with all my friends, being like, "We missed it. It's over. Like, the valuations are so high. It's crazy."

• 32:12Ben Gilbert?

  I felt like this after shipping apps to the App Store. And then iOS 5 or 6 hit, and suddenly there were a million apps. And I was like, "Shoot, it's over." And meanwhile, machine learning had yet to arrive. Crypto had yet to arrive.

• 32:25David Rosenthal?

  There's actually a really, really great, uh, Mike Moritz at Sequoia has a wonderful saying of this. I don't know that this is actually like publicly written anywhere, but that this is the biggest lesson that he took from Sequoia's Cisco investment, which he was like, looking at the returns on Cisco, and he was like, "How are we ever gonna top this? This is the top. We'll never do better." And he was talking with Don Valentine about it. And Don was like, "It's always gonna be bigger." Like, as long as Moore's Law continues, then just like the number and scale of industries that computing and technology can address is always gonna grow as long as that is happening. So the next generation is always gonna be an order of magnitude bigger than this generation.

• 33:08David Rosenthal?

  That has played out time and time and time again.

• 33:11Ben Gilbert?

  And of course, Moore's Law technically didn't continue, but like the number of cores for the same price that you can put on a single system on a chip has sort of followed the same trajectory as Moore's Law. So even when we hit the upper limit on certain things in physics, the industry seems to figure out a way to continue to have the spirit of Moore's Law and the sort of price and power of compute continues such that, and this is another Andreessen saying, but at some point, the hardware limitations go away and compute becomes free. And then it's really all about with an infinite and free resource of compute, what can you do with software? All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across

• 33:55Ben Gilbert?

  every team and deploying them is no longer the hard part.

• 33:59David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 34:13Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 34:23David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 34:41Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 34:57David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 35:13Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 35:23David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. So, okay, back to Mark. He can't even get a job at like a big respected PC or software company. He moves out to Palo Alto and he gets a job at Enterprise Integration Technologies, which I think was a tech like implementation consulting firm, like doing like PeopleSoft installations for companies.

• 35:53Ben Gilbert?

  Sweet.

• 35:54David Rosenthal?

  You can imagine Mark Andreessen's fit with an environment like this. So of course, but as this is happening, this is when Mosaic is rocketing up this adoption curve. So he kinda, it's this weird thing where he's this kid out of school, working a no name job, but he's kind of a celebrity.

• 36:11Ben Gilbert?

  And he's gotten kind of shoved out. And there's two sides of this story. I think the folks at NCSA would say that Mosaic was an official project. Mark says they sort of self organized. It became very clear to him that the sort of bureaucratic leadership at the NCSA was going to sort of take the lead on this and start doing the press interviews. And they did own the license to the source code. And so they, you know, he was an employee and it became NCSA's thing, not Mark Andreessen's thing.

• 36:38David Rosenthal?

  Yep. Oh, boy, is that going to come back. So, enter Jim Clark, of course. Jim Clark, founder of Silicon Graphics, STI, Utah, you know, mafia alumni. He had just left STI. He had been feuding with the board and he's out. He's looking for his next thing, but he has a non solicit from STI. So he can't take any of his people with him, but he knows he wants to start a new thing. He's got a chip on his shoulder. He's like, I got another act. I'm going to prove all these people wrong. He needs to go find new blood. He hears about Mosaic. He tries it out. He's like, oh, this is amazing. This is the future. I gotta look up this Mark Andreessen guy who's there on the about page is like Mosaic

• 37:21David Rosenthal?

  by Mark Andreessen. So he calls him up. He just cold calls him and they get together. They have breakfast. I think Mark would famously say this is like the one and only time he got up at 7:00 AM in his twenties. So here's how it goes down. They have breakfast and Jim is like, Mark, you should commercialize this thing that you're doing with Mosaic. Like you gotta get out of this job and I think we should do it together. And Mark is like, I don't know. You know, I'm really enjoying this consulting lifestyle, doing software implementations, PeopleSoft. I'm like, hell no, let me get out of here. Let's go do this damn thing. Yeah, yeah, yeah. No, that's not how it went down at all.

• 38:00David Rosenthal?

  You probably know this Ben from the research, but you would think that that would be the now in retrospect, obvious thing. No, Jim does take a shine to Mark and he's like, okay, great. I want you on my team, on this new team I'm assembling. I want some young blood. But the idea I have is this N64 Nintendo console that we've been working with Nintendo over at Silicon Graphics. This is going to be the perfect information super highway node into living rooms. This is how we're going to win the internet. We're going to build an online service for the N64 console.

• 38:36Ben Gilbert?

  It makes sense. I mean, given the background, given the hype that was going on around N64 at the time, I see why that was the belief.

• 38:44David Rosenthal?

  I mean, I remember being a 12 year old, like reading every single gaming magazine that would come out, just trying to get details on the N64. I got mine on launch day. I would have convinced my parents to pay any amount of money for an online service for that console.

• 38:59Ben Gilbert?

  Which is so interesting that this was what they conceived of instead of the browser, because this would go on to become a huge business. You look at Xbox Live, three, four decades later, this becomes an enormous opportunity. But at the time, this would have been absolutely the wrong move. And there's another playbook theme. Mark has a quote that says, if they had shipped a year earlier, referring to the N64, we probably would have done that instead of Netscape.

• 39:28David Rosenthal?

  Yeah. So this is the history turns on a knife point. The console gets delayed for a year. And because of that, they're never able to reach a deal with Nintendo and it's unclear that anything's going to happen. Meanwhile, they're both itching to get a company going. So they have a kind of brainstorming session where they're thinking of other ideas for stuff to do. And eventually Mark is like, well, you know, this mosaic thing, like I did build that. And all my buddies that I kind of did it with back in Illinois, they're about to graduate too, or they already have graduated. We could just go hire all them and recreate it and commercialize it. And Jim's like, huh, okay, fine. Let's do it.

• 40:13David Rosenthal?

  So they incorporate and they start the world renowned, go on to be history making Mosaic Communications Corporation to commercialize Mosaic.

• 40:23Ben Gilbert?

  I love that. They were like, yeah, we'll just use the same name. We'll name our company Mosaic, even though that's a thing that's owned by that lab at the university.

• 40:30David Rosenthal?

  Yep. So obviously, NCSA was none too happy with this. They threaten lawsuits, it's all back and forth. Eventually, they changed the name to Netscape Communications and that is how it comes to be. It was actually Greg Sands, who was the first PM that they hired.

• 40:47Ben Gilbert?

  Greg Sands of Costa Noah?

• 40:49David Rosenthal?

  Greg Sands of Costa Noah, previously of Sutter Hill.

• 40:51Ben Gilbert?

  Oh, awesome.

• 40:52David Rosenthal?

  And Greg Sands' little sister Emily was at Princeton with me and Jenny and was, I think she was salutatorian of Jenny's class, one of the absolute like top five most brilliant people I've ever met in my life. So they changed the name of the company to Netscape, but the internal code.

• 41:13Ben Gilbert?

  I was gonna ask you if you knew this. Yes.

• 41:15David Rosenthal?

  Yes. The internal code name that they use and they continue to refer to the actual browser code itself is Mozilla, which stands for Mosaic Killer.

• 41:29Ben Gilbert?

  Oh, it's so good.

• 41:30David Rosenthal?

  It's so good. It's so good. So if you are wondering where Mozilla came from, that's it.

• 41:37Ben Gilbert?

  Yep.

• 41:38David Rosenthal?

  So as they're getting going, Clark, at this point in time, his net worth from SGI is, he would say around like 15 million or so. He puts in four million bucks. He finances the whole thing himself, hiring all these people, great people like Greg.

• 41:51Ben Gilbert?

  Which by the way, his net worth was 15 million from SGI, not because that was a little company, but because he had to take on a colossal amount of financing on very onerous terms in order to make that company succeed.

• 42:03David Rosenthal?

  Totally. Yeah. That he would walk away with 15 million from SGI after decades and.

• 42:09Ben Gilbert?

  15 million and a chip on his shoulder.

• 42:11David Rosenthal?

  And a huge chip on his shoulder. So he's wary of all these VCs that financed SGI. I think NEA was the big VC behind them and took so much of the equity. So he puts in four million, but then he's worried about like, well, this is really getting a lot of buzz, starting to take off. We're going to need more capital. I don't have enough to finance it myself. I guess I will bring on some venture capitalists. He goes and he talks to his old buddies at NEA, but.

• 42:36David Rosenthal?

  Enter Kleiner Perkins and John Doerr. Here's about the deal. And Outbid's NEA invests $5 million in the fledgling Netscape Communications Corporation for 25% of the company. So 20 posts.

• 42:52Ben Gilbert?

  Yep. Wow.

• 42:54David Rosenthal?

  Times were different back then. So not too long after that, Ben, our erstwhile, steeped in hippie Berkeley, true Bay Area counterculture DNA friend Ben, he's over working at Lotus at the time. And he had heard about Mosaic, of course, been using it. He thinks this is the future. He hears about all this going on at Netscape and he's like, I gotta get in there. I gotta make it happen. So he has a friend, get him in a connection. He goes in the interviews and he gets a job and he gets put in charge of the enterprise web server product line at Netscape.

• 43:31Ben Gilbert?

  And this is because there aren't web servers yet, right? What's the point of having a browser to load web pages if there's no software that can sit on servers that can create web pages?

• 43:39David Rosenthal?

  Exactly. So this is going to become like really big. But at the time, I don't know how Ben was feeling, whether he was excited about this or not, but it was kind of like, eh, okay. I mean, like this is how we're gonna like make money. We're gonna sell licenses for the server business so that companies can create websites and have commercial websites. But the big sexy thing is this browser that is getting millions of people using it. So it was kind of this part of the company that was like, yeah, like necessary. This is how we're gonna make money.

• 44:08Ben Gilbert?

  And it is a beautiful time-tested business model. Like give away the consumer thing for free. Get as many people on that as you possibly can. It's actually kind of the first real example of aggregation theory. Netscape ends up becoming powerful in the ecosystem because they're able to get all the internet users using it and thus then sort of apply pressure to businesses that if you want to create great websites, you can do so. And we promise to be compatible with Netscape, the browser that everyone uses. So you should buy these tools from us. It makes a lot of sense.

• 44:38David Rosenthal?

  Yeah. And really, I think only came about because of the history of Mosaic being part of NCSA. Like if- I don't know, some company like Microsoft, say, were to otherwise have gone out and created a new piece of software, like they did with Word or Excel or PowerPoint that they bought.

• 44:57Ben Gilbert?

  Consumer licenses.

• 44:59David Rosenthal?

  Yeah, natural thing you do. You put it in a box, you put it on a CD, you shrink wrap it, you get it into CompUSA and you would sell that sucker for 50, 100 bucks to every consumer that walked in the door. Not the route that the browser took to its great advantage.

• 45:13Ben Gilbert?

  Which is fascinating because that affected everything henceforth. I've never paid for a web browser. You could make an argument, people are paying for Brave in different ways, or I'm sure people pay for specialized browsers, but like, it set the trend that you do not pay to get access to the web.

• 45:29David Rosenthal?

  Yeah, totally. So famously, people at Netscape would talk about how we invented internet time and that it was this parallel universe that was accelerating faster than than reality time. By August 1995, so we're just 16 months after the company starts.

• 45:49Ben Gilbert?

  In April 94.

• 45:50David Rosenthal?

  In April 94, Netscape has an 80% market share of web browsers in the world and they decide, Jim Clark pushes them that they're going to go public.

• 46:03Ben Gilbert?

  And they've successfully killed Mosaic at this point.

• 46:06David Rosenthal?

  Right.

• 46:06Ben Gilbert?

  80%, just, I don't know, 12 months ago, the other thing that Marc Andreessen created had close to 100% of the market share, which is wild.

• 46:15David Rosenthal?

  All right. Well, it turns out they haven't totally killed Mosaic.

• 46:20Ben Gilbert?

  Okay, so 16 months, you're talking from founding to IPO, like any good tech company, you know?

• 46:25David Rosenthal?

  Right. Any good tech company. So, you know, the bankers, Morgan Stanley and Frank Quattron and Mary Meeker on the analyst side are taken in public.

• 46:34Ben Gilbert?

  Just absolute killers.

• 46:36David Rosenthal?

  Killer superstar team.

• 46:38Ben Gilbert?

  Frank Quattron of the Amazon IPO, Mary Meeker of Bond Capital and famously the Kleiner Perkins, started the internet.

• 46:46David Rosenthal?

  Yep, yep.

• 46:47Ben Gilbert?

  The people who would go on to do unbelievable things took this company public.

• 46:51David Rosenthal?

  Totally. So they're not quite sure how to price that. I mean, nothing like this has ever happened before. So they decide they're supposed to price at $14 a share, which I didn't do the exact math, but that would be roughly like, I don't know, 500, 600 million dollar market cap, shall we say? So like. Astronomical at the time. I mean, 12 months ago, this was like a 20 post, uh, series A that Kleiner did. So they're thinking $14 a share the night before. Clark, remember he's like, he's pretty salty from what he walked away with at STI. He pushes them to up the IPO price, what they end up pricing at the night before to $28 a share. The next day, the stock doesn't

• 47:35David Rosenthal?

  open because there is so much buzz about this company. Like, obviously, the institutional demand is, you know, high. Uh, and famously institutional investors were kicking themselves for having missed out on Microsoft a decade earlier and how big that became. And so the hype is like, this can be the next platform. This can be the next Microsoft. But meanwhile, they've got millions of people, like moms and pops and kids using this thing on their home PCs. They all hear, you know, in the news that Netscape is going public. They're using Netscape. They want retail wants it on the IPO. So famously-

• 48:14Ben Gilbert?

  You're telling me there's gonna be a pop?

• 48:17David Rosenthal?

  This is like the origin of the pop, the IPO pop, uh, or at least the extreme IPO pop. So famously, Charles Schwab, the brokerage, they had to change their phone systems leading up to the IPO. Cause remember, there's no like internet brokerages at this point. You can't place orders online, even through Netscape. So they changed their phone system that when you called your broker at Charles Schwab, you would get a message in the couple of days leading up to the Netscape IPO that said, "Welcome to Charles Schwab. If you're interested in the Netscape IPO, press one."

• 48:51Ben Gilbert?

  Press one.

• 48:52David Rosenthal?

  Press one. One. Oh my goodness. So there is so much demand. It takes hours to open up the stock on the day of the IPO. It opens at $75 a share.

• 49:04Ben Gilbert?

  Wow.

• 49:05David Rosenthal?

  Remember, the bankers were like, "I don't know that we can go up to 28 the night before."

• 49:09Ben Gilbert?

  So they thought they were gonna price it 14. The bankers reluctantly IPO'd it at 28. And then the first retail trade happens at 75?

• 49:18David Rosenthal?

  75. Yep. It falls a little bit during the day, but it closes at $58 a share, giving the company a $3 billion market cap.

• 49:28Ben Gilbert?

  Just insane.

• 49:30David Rosenthal?

  Totally insane. I think Microsoft was about 10 billion at this point in time, if I remember right.

• 49:35Ben Gilbert?

  And it's worth saying a few things. One, this absolutely kicked off the dot com bubble. This was the moment that it started. And there were a couple of internet IPOs before this, but this is the one that blew the doors wide open, made valuations not matter, and created four and a half years of absolute madness from this point forward. But Netscape had an unbelievable growth trajectory, not just in users, but in revenue. Like in the Ben Horowitz corner of the business, revenues were doubling every quarter, which means they were 16 X-ing revenue year over year.

• 50:10David Rosenthal?

  Well, they'd only been around for five quarters.

• 50:12Ben Gilbert?

  Sure, but at a 16 X year-over-year run rate on revenue?

• 50:16David Rosenthal?

  They did 17 million in revenue in the first six months of 1995 alone, which like, you know, for a company that entered 1995 being, what, eight, nine months old? And then was doing, you know, what call it run rate 50, 60 million revenue in that first full year of existence? That is very impressive.

• 50:37Ben Gilbert?

  Yeah, for sure. The other thing that's worth mentioning here is that it was unusual for companies at this point in time to IPO without being profitable. And so people were sort of like bankers were making this exception of like, well, this one's going to be hot, even though the company's not profitable. Whereas now you look around and it's absolutely the minority of the time that a company is profitable before the public is willing to take on the risk of continuing to finance that company. So it's just funny how, how much things have changed.

• 51:05David Rosenthal?

  I mean, it really, the Netscape IPO, this was like a cultural moment for tech, for the world, for finance, for everything.

• 51:14Ben Gilbert?

  Funny story, this was only six days before the launch of Windows 95. So this is the most like interesting month ever in the tech industry to this point.

• 51:25David Rosenthal?

  And if there's, I mean, this must have been in the risk factors of the IPO prospectus, I didn't look it up. But if there is one bare narrative on the Netscape IPO, it's Microsoft out there. Like, everybody knows Microsoft is, you know, they control Windows, they control the operating system of 95% of the install base of PCs in America, you know, in the world at that point in time, you know, what are they gonna do? But nobody pays too much attention to it. And famously, shout out to Brian McCullough for finding this and calling it out. Around the IPO, Andreessen gives an interview, Mark gives an interview and says famously that, you know, they ask for, he's worried about Microsoft and competing. And he says, I'm not worried about it. Netscape can become

• 52:08David Rosenthal?

  a company that will turn Windows into a, quote, "mundane collection of not entirely debugged device drivers."

• 52:18David Rosenthal?

  Well, pride comes before the fall, as we all know. Obviously, you know, this is Microsoft in the 90s, which is like absolute killers.

• 52:26Ben Gilbert?

  Pre DOJ.

• 52:27David Rosenthal?

  Pre DOJ, which happens because of all this. So in May of that year, you know, Bill Gates saw this happening. He saw Netscape, he saw where this was gonna go. And in May of 95, he had written the internal internet tidal wave memo.

• 52:43Ben Gilbert?

  And for anybody who hasn't read that, it is just worth reading in its entirety to understand, one, the genius of Bill Gates, but two, to understand the context of that time, even Bill Gates, like even Microsoft, who was so steeped in this stuff, their strategy was the information superhighway. They were long, all this stuff, interactive TV, but they, just like most other people, did not predict that this low end disruptor, the internet, based on text being sent over HTTP and, ooh, images in line that Marc Andreessen managed to get into the browser too, that that actually was going to be the thing. And it's not until early 95, when he pens that memo, where it becomes obvious to even the smartest, most

• 53:27Ben Gilbert?

  well-positioned people in the whole tech industry to react to this.

• 53:31David Rosenthal?

  But once he realizes and writes that memo, oh, boy, is it ever game on.

• 53:36Ben Gilbert?

  Guns out.

• 53:36David Rosenthal?

  So Gates says, you know, this is strategic priority, like number one of the company. We're gonna compete here and we're gonna, we're gonna win. So turns out.

• 53:48David Rosenthal?

  They actually have the perfect strategy to kill Netscape already in progress within Microsoft, which is that back in 1994, Thomas Reardon, a famous Microsoft employee, and then would go on to be founder of Control Labs, which Facebook acquired a couple of years ago, he had actually licensed, he was playing around with, you know, he thought browsers were interesting, this was going to be a thing. He had licensed for Microsoft some code for a browser from a little company called Spyglass Inc., which happened to be located in Illinois, in Urbana-Champaign. Why was it located in Urbana-Champaign? Because

• 54:30David Rosenthal?

  it was the commercial entity started by the university to spin out and commercialize the IP that they developed at the NCSA, including the Mosaic web browser.

• 54:42Ben Gilbert?

  Ooh.

• 54:43David Rosenthal?

  So, Microsoft's got a license to the Mosaic web browser. And they're like, well, hmm, we've got this license, we can use it. And the terms of the license actually are that we pay Spyglass, you know, a portion of the revenues that we make from distributing this thing. Well, what if we just bundle it into Windows and we give it to everybody for free? Oh my God, it's stone cold killers. There actually ends up being a big lawsuit about this. Spyglass sues Microsoft and it's like, hey, you're giving this away to like hundreds of millions of people and you're not paying us anything because you're not charging for it.

• 55:19Ben Gilbert?

  And classic, Microsoft legally, they're like, hey, look, like we savvily negotiated an agreement with you and, you know, sorry, it's your fault that you didn't anticipate the way that we would go on to distribute this thing.

• 55:31David Rosenthal?

  Famously, they run this playbook and done the same thing with DOS back in the day.

• 55:36Ben Gilbert?

  Okay, this is worth a quick sidebar because this is absolutely unbelievable and is part of the reason Microsoft got sued. But Microsoft had a deal in place where in order to use DOS at all, to license DOS from them, if you're an OEM, you know, making computers, you had to pay them whether or not Not you chose to use DOS as the operating system on that PC. It was a per CPU shipped license.

• 56:07David Rosenthal?

  Wow.

• 56:08Ben Gilbert?

  If you're a PC manufacturer, in order to get access to DOS, Microsoft's like, sure, we'll license it to you. But we're not tying the amount of money that you owe us to the amount of computers with Windows on it. It's the amount of CPUs you ship, period. So then, of course, the incentive there is for the OEM to say, well, we're going to make the most of this license since we're getting charged for it anyway. They put Windows on everything they ship. And that is how Microsoft became the dominant platform with DOS, where then every application became written on top of DOS because every CPU had DOS on it.

• 56:40David Rosenthal?

  Yeah. Well, and famously, Microsoft did not develop DOS. They did a very similar deal. They licensed it.

• 56:45Ben Gilbert?

  From another Seattle company.

• 56:47David Rosenthal?

  Yeah. Another story for another day. God, they were killers. So the net of it is even after the lawsuit, they pay a grand total, Microsoft does, of $8 million to Spyglass, which will go back to the University of Illinois. The NCSA in Illinois get $8 million for Mosaic, which becomes Internet Explorer. That's right. Mosaic, which, you know, Marc and Jason and Eric Bina wrote at NCSA. The IP stays at NCSA in Illinois, spun out into Spyglass, licensed from Microsoft. That is Internet Explorer.

• 57:22Ben Gilbert?

  And for anyone who is thinking, geez, how did Internet Explorer launch so quickly after Microsoft needed to catch up and create a browser? This is how they did it.

• 57:30David Rosenthal?

  Yeah. So people know that this is happening and Netscape knows that all this is going on.

• 57:35Ben Gilbert?

  Meanwhile, Netscape at this point is helmed. Joining before the IPO was a new CEO, Jim Barksdale. They brought in sort of a professional CEO operator. He was the former COO of FedEx. He came actually from McCaw Cellular and AT&T before that. They have this sort of grizzled industry veteran at this point because even Jim Clark, for all of his executiveness from SGI, for the IPO, Netscape actually did want this sort of like robust professional public market CEO.

• 58:04David Rosenthal?

  So everybody knows this is going on, but Netscape thinks and the market thinks that, okay, you know, Microsoft's now that they've got this Internet Explorer thing, they licensed Mosaic. They're going to run the Office playbook here. They're going to sell this at CompUSA and, you know, you're going to buy it and blah, blah, blah. And then, as you said, Ben, two weeks after the Netscape IPO, they launch Windows 95 and not fully bundled in then, but they say that there's the Windows 95 Plus pack and Internet Explorer is bundled into it for free. And of course, this would eventually, very quickly, Internet Explorer would just be bundled

• 58:49David Rosenthal?

  for free directly into every copy of Windows 95 and then Windows XP. All of a sudden Netscape is now forced to compete with free and bundled.

• 59:01Ben Gilbert?

  Brutal.

• 59:01David Rosenthal?

  With every operating system basically on the planet.

• 59:04Ben Gilbert?

  Absolutely brutal.

• 59:06David Rosenthal?

  Totally brutal. So now this little division that Ben Horowitz is running, the enterprise server division, that becomes hugely more important. This is the only part of the company where they can even like conceivably compete against Microsoft and this becomes like major strategic initiative at Netscape. We're going to focus on selling enterprise server products.

• 59:29Ben Gilbert?

  And of course, the enterprise server products have to produce webpages that are compatible with Internet Explorer because that's now what everybody is using. It sucks.

• 59:37David Rosenthal?

  Oh, it's so, so brutal. So famously, they start scrambling, Ben and the team start scrambling. They're going to make the product way better than Microsoft server product. They're working on a bunch of new features. They line up a big announcement event in New York City for March of 1996 about the new version of the product. And famously, two weeks before the event, Mark ends up giving an interview to Computer Reseller News of all publications where he just reveals the whole thing.

• 1:00:12David Rosenthal?

  And Ben sends an email to Mark and the email says one line, I guess we're not going to wait until the fifth to launch the strategy. Mark responds, the email was just from Ben, just to Mark. Mark responds, copies in Jim Clark, copies in Jim Barksdale and says, quote, "Apparently you do not understand how serious the situation is. We are getting killed, killed, killed out there. Our current product is radically worse than the competition. Competition being Microsoft. We've had nothing to say for months. As a result, we've lost over $3 billion in market capitalization. We are now in danger of losing the entire company and it's all server product management's fault. Next time, do the effing interview yourself. F you, Mark."

• 1:00:58Ben Gilbert?

  Reading this email is like in print and of course, we're being family friendly here on the air, but like just seeing like, "F you, comma, Mark." I just can't imagine signing an email that way.

• 1:01:11David Rosenthal?

  Here's the best part. That email was written the very same day that the Time Magazine cover came out.

• 1:01:20Ben Gilbert?

  The barefoot, no way.

• 1:01:22David Rosenthal?

  Mark Andreessen on the cover of Time Magazine, barefoot on a throne as the throne of the next new Silicon Valley king. Wow. Mark would later say about this whole escapade, quote, "This is why I should not run a company."

• 1:01:41David Rosenthal?

  No kidding, no kidding. Maybe you should be a venture capitalist instead. Oh, boy. Wow.

• 1:01:46Ben Gilbert?

  That's actually a good question. In Mark's entire career, including the LoudCloud story that we're going to go on to tell later, has Mark ever been the CEO of a company?

• 1:01:56David Rosenthal?

  I don't know. Was he the CEO of Ning?

• 1:01:59Ben Gilbert?

  He was the CEO of Ning. You're right.

• 1:02:00David Rosenthal?

  Okay. So, once.

• 1:02:02Ben Gilbert?

  We'll get to that, but it's very interesting that all the biggest successes, he was either effectively the co-founding CTO or a board member or the venture capitalist behind it. And, you know, not the CEO of any of the most successful stuff he's done.

• 1:02:16David Rosenthal?

  Well, this is going to be the great. I don't want to say lie because it's not a lie, but the sort of posturing from one of the key elements of the beginning of Andreessen Horowitz, which was their motto, that, you know, all the general partners here need to have been CEOs. Like, half of the first, like, five or six general partners had never been CEOs.

• 1:02:33Ben Gilbert?

  Right. There's a lot of credibility behind that they were strong operational leaders, executives, but yeah, it's a good point.

• 1:02:39David Rosenthal?

  Absolutely. Like Jeff Jordan led the PayPal acquisition and ran PayPal within eBay. He was not the CEO of eBay, but like, I would take him on my board. But yeah, that's funny.

• 1:02:49Ben Gilbert?

  Well, I think this is a good point. Before we get into like the 96, 97, 98 continuation of the browser wars, what happens to Netscape? And I'll leave it there for the moment. All right, listeners, now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:03:13David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:03:29Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:03:44David Rosenthal?

  And that's how you get features that customers love, like Tabular Review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:04:08Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:04:27David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:04:57Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you. All right, well, David, so we're in the browser wars. Microsoft just blew Netscape out of the water. What's going on for Netscape now?

• 1:05:30David Rosenthal?

  Such a tragedy. I mean, that year of the IPO in 1995, this is the thing, like this actually was a really great company. It did 85 million in revenue, Netscape did, in 1995. And then in 1996, it did 346 million in revenue.

• 1:05:46Ben Gilbert?

  Wow.

• 1:05:47David Rosenthal?

  And then 534 the next year in 1997. Like, people like love to dunk on this now as like mania, you know, IPO mania, unprofitable, blah, blah, blah, tech bubble. Like, it was for real. But the stock, once Microsoft's strategy, bundling strategy became obvious here in December 95, I think, which is when they announced that it was going to be bundled into all copies of Windows 95 going forward. The stock had peaked then at $171 a share, which is even hugely up from where the IPO was. But it never got above that. It was just kind of straight downhill from there, unfortunately.

• 1:06:27David Rosenthal?

  And then in 1999, finally, famously, Netscape sells itself to AOL for $4.2 billion. But it's an all-stock deal with AOL. Yikes. And that's pre Time Warner merger. So who knows by the time shareholders actually ultimately got liquid on that, what they were able to get out. So Mark Andreessen, as part of the sale, becomes CTO of AOL.

• 1:06:55Ben Gilbert?

  I love this.

• 1:06:56David Rosenthal?

  You could imagine how well that's going to work out.

• 1:06:59Ben Gilbert?

  The funny thing is like, he's not actually responsible for any day-to-day operations. He's kind of like chief futurist at AOL. I think his role is forward-looking technologies or something like that. He only lasts until like September of 99, when they, like right ahead of the Time Warner deal. He's like, yeah, I want no part of this and leaves before that.

• 1:07:19David Rosenthal?

  Yeah. Oh, wow. I didn't realize he didn't even stay a year.

• 1:07:22Ben Gilbert?

  No.

• 1:07:23David Rosenthal?

  So I wonder if he forfeited some earn-out element, or maybe he was just like, the stock is going to be worthless soon anyway.

• 1:07:28Ben Gilbert?

  Probably.

• 1:07:29David Rosenthal?

  I'm out. Wow. So Ben, though, this is going to become very interesting. Actually, this deal becomes huge for the next chapter and ultimately for Andreessen Horowitz, the firm. So Ben becomes the VP of AOL's e-commerce division. And what he ends up doing is him and pretty much the whole old server team from Netscape, what he figures out that they ultimately are tasked with doing is that all of the brands that are selling, trying to sell on AOL within the AOL walled garden, you know, this is Nike, this is LLB, and

• 1:08:13David Rosenthal?

  this is Lands' End, like we're talking about, you know, all these retailers and CPG companies, they want to sell, but they're not internet companies. They don't have like e-commerce apps and servers and all the infrastructure that they need to make this happen. So AOL can help them, but they got to go stand up like servers and data centers for all of these customers. And that's what Ben's team ends up doing. And quickly, he realizes like, there's actually an opportunity here. Like AOL is going to do this for their partners selling on AOL.

• 1:08:48Ben Gilbert?

  Which again, is not the internet.

• 1:08:50David Rosenthal?

  Is not.

• 1:08:50Ben Gilbert?

  Or at least is not the web.

• 1:08:52David Rosenthal?

  Is not the web. Yeah. It's the internet, but not the web. The web is, you know, I know that this is where the, the whole market is and is going to be in the future. These companies, Nike, et cetera, they're going to need help doing this same thing for their web applications. Why don't we go start a company where we can operate this infrastructure for all these companies that are not technology companies? And then they can just host their websites and their web applications on our infrastructure. It's kind of like a cloud, like a cloud of internet infrastructure that you can just deploy your applications to.

• 1:09:32Ben Gilbert?

  You can dynamically spin up and spin down these like virtual machines, David. So not even like owning your own server, but like having virtualization across multiple servers that scale elastically as you need them.

• 1:09:43David Rosenthal?

  Yeah, I mean, that's kind of a big idea, right, Ben?

• 1:09:46Ben Gilbert?

  Wow, in 99, that feels a little ahead of their time.

• 1:09:49David Rosenthal?

  Yeah, maybe a little ahead of their time, but they liked the idea so much that they moved back to Silicon Valley. They leave DC where AOL was based. Actually, I don't know if they ever moved there or if they stayed in Silicon Valley, but they leave AOL and they start the company. They call it, they really want to embrace this cloud concept that they're pioneering. They call it Loud Cloud.

• 1:10:11Ben Gilbert?

  Oh, yeah, I can't wait to get into this. I do want to close the loop on a couple of Netscape things, though, before we move into the Loud Cloud chapter. So I was wondering, first of all, why did AOL buy Netscape? Like, if they're getting wrecked by Microsoft, why are they giving $4.2 billion of their stock? Is it A, because they knew their stock was wildly overvalued? And let's say it's 10x overvalued. Eh, what's $400 million of actual value to go and pick this company up? Which, what we now know about the way that they were motivated to do the Time Warner deal, to basically do a stock swap for a company whose stock they felt actually had real intrinsic value, it makes a lot of sense that they would wildly overpay for this sort of pseudo-defunct Netscape, even if all they got was the

• 1:10:54Ben Gilbert?

  people and some technology behind it. So that's one explanation. The other would be basically to get a bargaining chip against Microsoft in case it became relevant for them to try and be less dependent on IE, to have a browser of their own that they could bundle in and distribute. There are other people who believe that AOL was interested in Net Center, which is basically Netscape's web properties, which drew a lot of the traffic. It's sort of the like MSN play that Microsoft had to be the destination website. So that's sort of the reasons why AOL could have. Been willing to part with $4.2 billion of their stock to do this. Now, if you trace it all the way through to today, I really have been trying to figure out,

• 1:11:37Ben Gilbert?

  well, what happened to like the Netscape brand and what happened to the Netscape IP? Well, the brand is an easy one to trace. That stayed with AOL until they ultimately were bought by Verizon. So the big red checkmark Verizon owns the Netscape brand today. But somewhere along the line, the brand actually got separated from the technology, the bundle of all the intellectual property and everything that Netscape was, which did need a new name because they couldn't use the Netscape name anymore because that brand was owned by Verizon. So that got renamed New Aurora Corporation, which AOL sold to Microsoft,

• 1:12:17Ben Gilbert?

  who then in turn sold them again, to wait for it, David, to Facebook.

• 1:12:23David Rosenthal?

  Oh, yes. Oh, my gosh. I'm so glad you found this.

• 1:12:27Ben Gilbert?

  So this is from Jamie Zawinski or JWZ, who was an early employee pseudo-founder. I think many credited him with being a founder of Netscape. He has this great blog and crazy sort of bar and concert venue in San Francisco called The DNA Lounge. He writes, "The former Netscape company is currently a non-operating subsidiary of Facebook, still known as the New Aurora Corporation. The Netscape brand remained with AOL."

• 1:12:52David Rosenthal?

  Wow.

• 1:12:53Ben Gilbert?

  How crazy is that?

• 1:12:54David Rosenthal?

  That's so crazy. I'm so glad you paused us because there's another thing we got to talk about coming out of the Netscape ashes.

• 1:13:00Ben Gilbert?

  Mozilla.

• 1:13:01David Rosenthal?

  Mozilla, of course. Yeah. So I didn't realize this actually happened before the AOL acquisition.

• 1:13:09Ben Gilbert?

  They open sourced in 1998, I believe. But yeah, you're right. Before AOL, they open sourced all the browser code. Ironically, like it's so interesting that Mozilla, the code name of the Mosaic killer, ended up becoming the name of the foundation who ended up stewarding the open source code project, which of course then created Firefox. So out of the ashes of the sort of duplicated without ever looking at the code, Netscape, which kind of came from Mosaic, you then have Mozilla. And they did name the browser Mozilla for a while and had a separate browser called Mozilla, which was compiled from similar source code and then Firefox.

• 1:13:47David Rosenthal?

  Which was a whole new thing, right?

• 1:13:49Ben Gilbert?

  There was some code in common with the original Netscape browser.

• 1:13:53David Rosenthal?

  But it was very different. Firefox, when it first launched, I remember this, had the search bar in the browser, which was a concept they borrowed from Opera, but that was not in Netscape.

• 1:14:05Ben Gilbert?

  Correct. And it was in the top right. It wasn't the Omni bar that Chrome pioneered. It was sort of that separate search window. But it makes sense to me now, knowing all this lineage, why user agents have always been such a mess. This is going to date me. But if you've ever written raw HTML code and needed to do a user agent check because you need to figure out if it's IE and you need to account for some three stupid pixel offset that they have that shouldn't actually be in there, but the rendering engine sucks because it's licensed from whatever old Mosaic thing. That's actually, that's an unfair criticism. The real reason why it sucks is because they had such dominant market share that Microsoft could do whatever they want and deviate from spec and just say, eh, everybody's using our stuff anyway. So who cares what the World Wide Web Consortium says it should do? The truth is what we say it is.

• 1:14:50Ben Gilbert?

  So anyway, if you ever do these user agent checks on the strings, it has like every browser name under the sun listed. So if you're doing like a string search, you're looking and you're like, what is this? Mozilla slash Firefox slash Netscape slash blah, blah, blah. And it's because it all freaking comes from the same original branch. And all these different browsers are competing against each other. But there's kind of only two major lineages. There is the Mosaic lineage and then all those engineers left. And without looking back at the old code, they wrote new code called Mozilla. And everything is basically either from Mosaic or Mozilla. And there's been different stuff over the years with WebKit and with whatever other,

• 1:15:31Ben Gilbert?

  I don't know where Opera is derived from, but it's amazing how much of the browser market share over time really just comes from those two.

• 1:15:38David Rosenthal?

  Yeah. And it all still funnels through to today.

• 1:15:43Ben Gilbert?

  Yep.

• 1:15:43David Rosenthal?

  Which is crazy.

• 1:15:45Ben Gilbert?

  Yep.

• 1:15:46David Rosenthal?

  It's so fun to actually have the right excuse now to be able to tell this whole story on Acquired.

• 1:15:52Ben Gilbert?

  Right.

• 1:15:52David Rosenthal?

  Like, it always felt like Netscape was kind of, there was a point in Acquired's life where we would have done a whole episode on Netscape. But now it's like, ah, I don't know that we can do that. And this is the perfect vehicle. I'm so glad to do it.

• 1:16:04Ben Gilbert?

  Totally. Well, thank God from the lessons of Netscape and LoudCloud, which we're about to go into, became the ashes upon which the phoenix of a landscape-changing venture firm would come from. So we have the excuse.

• 1:16:16David Rosenthal?

  The Firefox of venture firms, shall we say?

• 1:16:20Ben Gilbert?

  I mean, honestly, though, after the financial crash, when all the funding, like, it's not crazy to call it a Firefox or a Phoenix or whatever in founding a venture firm in 2009 and deploying capital the way they did. I know, I'm jumping ahead. I know we'll get there.

• 1:16:32David Rosenthal?

  Absolutely. If you want to be really nerdy, you could call it the Thunderbird of venture firms. I used to use Thunderbird. I thought it was great.

• 1:16:41Ben Gilbert?

  Yeah.

• 1:16:42David Rosenthal?

  Okay, so back to the story. Ben and his server team, they've realized this market opportunity. They've got this idea for a cloud computing, cloud infrastructure. So he hooks up with two of his core team, Tim Howes and Sikri. They leave AOL. They go back to Silicon Valley. They're like, we're doing this. And it's still $19.99. The bubble is still quite inflated at this point. And there is a lot of hype.

• 1:17:10Ben Gilbert?

  And everyone's drunk. Netscape IPO'd with great revenues and great growth, but now everyone's just drunk.

• 1:17:16David Rosenthal?

  Yes. So immediately, they want to get Mark involved, of course. Like, who wouldn't want Mark Andreessen involved in something like this? Mark totally gets it. He's like, yep, this is a big idea. And actually, this is amazing. At the press briefing for the launch of LoudCloud, Mark would be there and he would use, in trying to describe what this concept is, this cloud infrastructure concept, he would use the very same electricity metaphor that Bezos would then use eight years later, describing AWS at the YC event.

• 1:17:50Ben Gilbert?

  And what is the metaphor?

• 1:17:51David Rosenthal?

  So Bezos' analogy that he used was German beer distilleries used to produce their own electricity to mash the hops and everything and do what they were doing in the distilleries. And then they hooked up to the grid and just used electricity from the grid. And the innovation they realized is the electricity doesn't make the beer taste any better. There's no reason why they should create the electricity. And the whole idea of cloud infrastructure is the same thing. Renting your infrastructure from LoudCloud or Amazon or Azure or Google doesn't make your beer taste any better if you're an application provider.

• 1:18:32David Rosenthal?

  So Mark was the first one to use this. So of course, they want to get him involved. But remember, Mark has learned at this point that he shouldn't run companies. Although I guess he made that mistake with Ning later. Mark says, I don't want to be an active co-founder, but I'll be chairman and I'll invest $6 million. So I guess he was able to get enough money out of the AOL stock that he can invest $6 million. So they go out to raise, Ben and team go out to raise venture money on top of this. And they meet Andy Rackliff at Benchmark Capital, who they just love. And Ben, in Hard Thing About Hard Things, is a quote that he has describing Andy.

• 1:19:13David Rosenthal?

  He says, "If I had to describe Andy with one word, it would be gentleman." And the relationship between him and Ben and Mark is deep and continues to be deep to this day. And Andy, of course, was Benchmark's, you know, like, infrastructure guy. He started as a telecom investor. So this is completely in his wheelhouse and he gets it. So now this is where things get a little murky. And no doubt, this scene is one of the major seeds of Andreessen Horowitz and the firm's whole philosophy, and it would get sown right here. So I don't know exactly how it went down.

• 1:19:57David Rosenthal?

  I don't think anybody's ever given the whole story, but this is as best as we can reconstruct it. So we'll have to just have the protagonists on for a kumbaya one day.

• 1:20:08Ben Gilbert?

  Yep.

• 1:20:09David Rosenthal?

  So obviously, this was a super hot deal. And yeah, Netscape had failed, quote unquote, but you know, like you said, Ben, everybody was drunk at this point in time. Somehow, I believe that Andy and Benchmark agreed to do the deal without a full partner meeting. And they agree to do it for a very high price, even at the time, which was a $45 million pre-money valuation. And Benchmark is going to invest 15 million in the company.

• 1:20:40Ben Gilbert?

  It's a big check for them. Are they even doing their $400 million funds at this point? Probably around that.

• 1:20:45David Rosenthal?

  No, and I think this was before their billion dollar fund, which famously, they said they'll never repeat. I think their funds were like maybe 250, 300 million at this point in time. So big check, big valuation. Brand new company and no partner meeting, at least as far as I can tell. So the deal's going down and the Benchmark Partnership, though, doesn't like that Mark is investing so much personally. He's not actively involved co-founder. He's investing 6 million bucks. And here's the thing. The price of the deal is based on a pre-money valuation because venture deals, you know, until the last five, six, seven years,

• 1:21:29David Rosenthal?

  they all used to be priced on a pre-money valuation. Now, the problem with a pre-money valuation.

• 1:21:35Ben Gilbert?

  Nobody knows what they actually own until you specify exactly how much is being raised.

• 1:21:40David Rosenthal?

  Exactly. So if more money gets raised, then you're going to own less of the company because the post-money valuation goes up based on the amount of money raised. So Benchmark is writing this huge check. They want to get 15 divided by 60. They want to be the only money into the round.

• 1:21:58Ben Gilbert?

  Well, then they should have specified the post, David.

• 1:22:00David Rosenthal?

  They should have specified the post, but people didn't do that back in the day. So here's Mark coming in now. He's pumping the valuation up by 6 million bucks and he's coming in. So they tried to cut Mark out of the round.

• 1:22:14Ben Gilbert?

  Oh.

• 1:22:17David Rosenthal?

  Yeah, so that was wrong move number one. You don't really want to cross Mark Andreessen.

• 1:22:22Ben Gilbert?

  Even if we just stop the episode there and say, let's look at this from a single-turn game versus multi-turn or iterated game. Massive, massive bad idea for Benchmark to contribute to creating Andreessen Horowitz in the future. Sure, it could have been the most valuable thing to do for this deal in that moment, but for the next 20, 50, 100 years, it would be great for Benchmark if Andreessen Horowitz didn't exist.

• 1:22:50David Rosenthal?

  Not only if Andreessen Horowitz didn't exist, but if Ben and Mark were like part of the Benchmark family.

• 1:22:59Ben Gilbert?

  Totally. That's an even better point.

• 1:23:01David Rosenthal?

  Oh, my gosh. Oh, my gosh.

• 1:23:03Ben Gilbert?

  Yeah, creating a little bit of a friction point here, assuming that that is any factor contributing to going on to create their own venture firm.

• 1:23:11David Rosenthal?

  Well, that wasn't the only part. So it gets worse. So supposedly after the deal is done and closed, Mark, of course, is like, F you. I'm gonna, I'm putting my $6 million in and you think you're going to come between me and Ben? Like, we've been through this. So it'd be like, you know, that'd be like Benchmark trying to come between you and me. Like, that's not going to happen.

• 1:23:32Ben Gilbert?

  Right.

• 1:23:32David Rosenthal?

  So Mark invests the $6 million. It's a $66 million post-money valuation. Benchmark only gets like 22.7% ownership. After the deal's done, remember, and I think this is why I think they didn't present the whole partnership before the deal was done, because Ben and Mark and the whole leadership team of LoudCloud of this new company, they come in to meet the full Benchmark partnership. I think they only really knew Andy at this point. They come in, you know, it's supposed to be like a slap on the back, get to know you, like, you know, oh, this is great. You're our VC firm. Hey, that was weird with Mark, but like, we'll get over it.

• 1:24:13Ben Gilbert?

  Right.

• 1:24:14David Rosenthal?

  So supposedly in this meeting, David Byrne, who was then one of the GPs at Benchmark, and he had been a very successful executive recruiter before joining Benchmark as a GP, Ben is presenting and the whole management team's there. And he says to Ben in front of everyone, hey, just stop. When are you going to get a real CEO? And Ben is like, uh, what do you mean? Like, he knows what David means here, but like, he's trying to like, hey, like, this is a friendly meeting. Like, let's not break out the knives yet.

• 1:24:46Ben Gilbert?

  And in front of the management team.

• 1:24:48David Rosenthal?

  In front of the management team and Mark.

• 1:24:50Ben Gilbert?

  Like, that just pulls out the rug underneath his ability to lead these people to do that.

• 1:24:56David Rosenthal?

  Yeah. So apparently then Byrne just like doubles down again and keeps attacking Ben and is like, you're not qualified to. Lead this company, like, how are you going to take this thing public? You know, blah, blah, blah, all of this stuff, which also is ridiculous because of course Ben is qualified to lead this company. Even if he weren't, why on earth would you say this?

• 1:25:18Ben Gilbert?

  He was doubling revenue quarter over quarter at Netscape in his division. I mean, and on top of all of that, Marc Andreessen threw $6 million in. So, I mean, he kind of needs you, but doesn't really need you. And you've already committed, like, just do the value creating activity of giving the leadership team the confidence in their leader at this point.

• 1:25:36David Rosenthal?

  Totally. So this creates, as you can imagine, an intense dislike between Ben and Marc and all of the Benchmark partnership, except for Andy, because, you know, I guess nobody else really like stepped up to defend them here. So we will later in part two, get to the amazing profile that Tad Friend did in the New Yorker of Marc Andreessen in 2015. But 2015, so 16 years later, there are these great quotes in there. Ben says about the whole philosophy of Andreessen, he says, "We were always the anti-Benchmark. Our design was not to do what they did." And he's talking about this.

• 1:26:19David Rosenthal?

  And then Marc says about Bill Gurley, of course, the, you know, most visible Benchmark partner at the time, "I can't stand him. If you've seen Seinfeld, Bill Gurley is my Newman." Jerry's bet noir. Oh, wow.

• 1:26:36Ben Gilbert?

  This is something that you definitely have to know about Andreessen Horowitz, especially in their early days, about when they were starting. They were loud about being different. Like, they wanted to position themselves as, "In every way we possibly can, we are the opposite of your classic venture capital firm, personified by Benchmark."

• 1:26:55David Rosenthal?

  Which is totally, we're going to get into this in part two, but is so great because that is the exact same playbook that Benchmark took against Kleiner Perkins when they started.

• 1:27:04Ben Gilbert?

  It's fascinating. It's such a good strategy.

• 1:27:07David Rosenthal?

  And who was the architect of that strategy? Andy Rakleff. And who is the one Benchmark partner that they love? Andy Rakleff. And Andy would then retire from Benchmark not long after.

• 1:27:20Ben Gilbert?

  And the ties here end up actually running deep, like Eric Fishria, who was, you know, VP of Marketing, exec, would go on to become fantastic partner at Benchmark.

• 1:27:30David Rosenthal?

  Well, here's the funny thing about all of it. Like, this is so great. It's such drama. And I really do think that this experience was a big part of what planted the seed for Ben and Mark to start Andreessen Horowitz. But all of this drama is just great for everybody. It's great for Andreessen. It's great for Benchmark. No press is bad press. And the more that people are talking about and writing about this as Andreessen Horowitz is getting off the ground, the more it just increases the stature of both firms.

• 1:27:58Ben Gilbert?

  Well, and the 2015 piece you're talking about is literally called Tomorrow's Advance Man about Marc Andreessen. That's the one you were mentioning, right?

• 1:28:06David Rosenthal?

  Yep.

• 1:28:07Ben Gilbert?

  That is the puff piece of puff pieces. Like, it's a great analytical piece, but it's like, hey, you're the best futurist in the world. Say whatever you want. And so having a platform to be able to kind of do any of this stuff, Marc takes full advantage.

• 1:28:23David Rosenthal?

  Oh, totally. It's so smart. All of this drama around the funding aside, nonetheless, people are still jazzed about LoudCloud. Two months after the Series A, they raise another $45 million. Wired runs an article calling LoudCloud Marc Andreessen's second coming, but then the clock starts to run out.

• 1:28:44Ben Gilbert?

  It's also crazy that like, the press can't get enough of Marc Andreessen. Ben Horowitz is running the company, but Marc, it's like this internet king narrative that everyone just wants to keep perpetuating, which is true in many ways, but just interesting that he was not the CEO of neither of those companies.

• 1:28:59David Rosenthal?

  I mean, yes, but he was on the cover of Time Magazine on a throne, so.

• 1:29:06David Rosenthal?

  Okay, so here's the thing, though, about LoudCloud, which is very, very different than Netscape. It's not a software company. It's an infrastructure company. And the thing about an infrastructure company about what they're doing is that if you want to grow, if you want to take on more customers, you got to go lease some more data setters and you got to go-

• 1:29:26Ben Gilbert?

  Buy some more servers and rack them and-

• 1:29:28David Rosenthal?

  Rack them and stack them.

• 1:29:29Ben Gilbert?

  It sounds like CapEx to me, David.

• 1:29:30David Rosenthal?

  It sounds like a lot of CapEx. So as they're raising all this money, they're investing forward in all this CapEx and they're getting orders in, like, you know, pets.com is like, oh, yeah, thrilled to get some of this infrastructure. So then in early 2000, of course, in March 2000, the bubble starts to deflate. A lot of these orders start vaporizing, but they're still, they have forward contracts to buy all this CapEx. So they need money, even though they just raised $65 million. They go around, this is such a great moment. They're trying to raise money from everyone and all the VCs are spooked at what's going on. So they're literally traveling around the world. They go to SoftBank. They go, I don't know if they actually fly to Japan or if they meet with SoftBank in the US.

• 1:30:16Ben Gilbert?

  Oh, I had no idea.

• 1:30:17David Rosenthal?

  They meet with Masa. This is great. So Bill Campbell, the coach, legendary coach is by this point in time on the board of LoudCloud. And Masa backchannels to Bill and says, this is in Hard Thing About Hard Things. Ben's like, Bill, how'd it go? How'd it go? Like with Masa. And Bill's like, honestly, he thought you were smoking crack. So you know it's bad, even when he's like, this is crazy. So eventually they do raise a Series C of $120 million at a 700 post, but it's like by the skin of their teeth. This is in mid 2000. They still burned through all of that quickly and are once again on the brink by the beginning of 2001.

• 1:31:03David Rosenthal?

  The only crazy last ditch potential financing option available to them is to try and go public because weirdly, there were still some like believers in the public markets, even though all the VCs and private investors at this point were like, oh boy, we don't want to be funding any of these money burning companies. So in March of 2001, they actually go public at $6 a share. And the Wall Street Journal runs a piece leading up to the IPO where they have, it's called the IPO from hell. I think it might've been either referenced in the piece or the title of the piece. Everybody's calling this the IPO from hell.

• 1:31:46David Rosenthal?

  They have a quote from Dick Cramlich at NEA saying, quote, "This is what we call a hail mary deal. You throw it up in the air and you hope for the best."

• 1:31:55Ben Gilbert?

  Oh my God.

• 1:31:57David Rosenthal?

  Wow. You know, that's not good. Immediately after the IPO, which they do get done, they lower their guidance.

• 1:32:04Ben Gilbert?

  It's a great thing to be doing in your first quarter as a public company.

• 1:32:07David Rosenthal?

  Totally. The stock drops by two thirds to $2 a share and Goldman and Morgan Stanley had book run the IPO. They drop research coverage on the company.

• 1:32:17Ben Gilbert?

  No way.

• 1:32:18David Rosenthal?

  Even like one quarter is done. Amazing.

• 1:32:22Ben Gilbert?

  So what's the logic there? It's just expensive to have analysts covering your company and they're like, look, we just don't believe in the company anymore, even though we underwrote it. So we're going to stop paying analysts to do this work.

• 1:32:33David Rosenthal?

  That's a good question. It could be that, or I wonder if it's more that like, hey, if we were to cover this company, we would say, so you should not invest in this company. Yeah, you should sell. And we don't really want to do that because we were just the book runners on the IPO. So probably easier to just drop coverage. Yeah. Wow.

• 1:32:55Ben Gilbert?

  And the logic of why they're dropping guidance is like, look, all the companies that we thought were going to be customers are going out of business. So like, we are a picks and shovels business for an industry that is going away.

• 1:33:04David Rosenthal?

  Yes. The gold rush is drying up. People are not going to want to buy Levi's and at this point in time.

• 1:33:12Ben Gilbert?

  No one is moving to California.

• 1:33:14David Rosenthal?

  It's unclear yet that Levi's are going to become a fashion statement, which of course they do metaphorically speaking.

• 1:33:22Ben Gilbert?

  David, you're like three levels deep here. Take me back to storytelling.

• 1:33:25David Rosenthal?

  Exactly. Okay. So by 2002, like it's clear that they're running into a brick wall. Ben manages to engineer a deal to offload the entire infrastructure business to EDS, Ross Perot's Electronic Data Systems Company.

• 1:33:40Ben Gilbert?

  Which that we need to do a company profile on at some point. That's like a fascinating one.

• 1:33:44David Rosenthal?

  Oh, totally. Totally. So they sell basically the entire business for $63.5 million. They lay off almost everybody at the company.

• 1:33:55Ben Gilbert?

  That's 1/10 of what they last raised at. Or no, that when they went public for more than that, for more than 700 million.

• 1:34:02David Rosenthal?

  I think it was actually about flat when they went public.

• 1:34:05Ben Gilbert?

  So 10 cents on the dollar is what they're liquidating the server business for.

• 1:34:09David Rosenthal?

  Totally. But they don't want to give up. They decide, hey, you know, we've got this tool that we've built internally to help us provision the servers that we're racking in our data centers. We might be able to sell that as software. It's pretty good. And EDS is actually really interested in this. They want to own the infrastructure business because that's part of their business. But they're like, yeah, I mean, if you can deliver that as a software product, we'll pre-sign up and we'll be a $20 million a year customer for you for the server automation product.

• 1:34:43Ben Gilbert?

  Which that's $20 million that LoudCloud's like, great, we can use that to make payroll.

• 1:34:48David Rosenthal?

  Exactly. Exactly. So they do this. They lay off, you know, most of the company and they restart as this software firm doing data center server automation. There's only one problem, the tool that they built, which is so great. It has no UI and it is called the Jive and is entirely pimp themed.

• 1:35:11Ben Gilbert?

  That's just one problem.

• 1:35:12David Rosenthal?

  That's just one problem. It's not exactly something you can really like deliver to EDS or any customer. When this happens, the stock craters to 35 cents, which is a $28 million market cap. Remember, they've got 63.5 million in the bank and a solid $20 million a year customer contract.

• 1:35:32Ben Gilbert?

  Whoa, talk about trading below book value.

• 1:35:35David Rosenthal?

  The street is valuing them at half of the cash on the books.

• 1:35:41David Rosenthal?

  But Ben is undeterred, and this is mostly what he writes about in The Hard Thing About Hard Things. They go to work and they rebuild the company back up. They claw their way all the way back over really not that long a period of time to five years later, they sell the company to HP for $14.25 a share or $1.6 billion.

• 1:36:04Ben Gilbert?

  Close to 2X what they went public for.

• 1:36:06David Rosenthal?

  Totally. So like, this is a win. Ben would write later about this. "If I'd learned anything, it was that conventional wisdom had nothing to do with the truth and that the efficient market hypothesis was deceptive. How else could one explain Opsware," which is what they changed the name of the company to, "trading at half the cash we had in the bank when we had a $20 million a year contract and 50 of the smartest engineers in the world? No, markets weren't efficient at finding the truth. They were just very efficient at converging on a conclusion, often the wrong conclusion." And this experience, I think, would totally inform really what I think was kind of the founding thesis

• 1:36:48David Rosenthal?

  of Andreessen Horowitz, which was, there is no bubble and the internet is going to keep getting bigger. And y'all think we're crazy for paying these prices for these companies, but like, we're not crazy.

• 1:37:00Ben Gilbert?

  Yeah. And what you're alluding to there, for folks that don't know Andreessen Horowitz's early sort of reputation is these guys started a brand new venture firm. They raised too much money because in 2009, a $300 million fund was big. And they're just giving startups these crazy valuations and overpaying and blowing everybody else out of the water. And David, you're exactly right. It's A, the efficient market hypothesis is wrong, and also that any crash we're in is a local minima. So all that matters is can you get through this localized crash and continue to ride the sort of intrinsic value wave that is the internet and software taking over everything?

• 1:37:41David Rosenthal?

  Totally. And it's not easy, right? Literally, the title of the book that Ben writes about this is The Hard Thing About Hard Things.

• 1:37:47Ben Gilbert?

  Which is so good.

• 1:37:48David Rosenthal?

  So good. Such a good title. It's like they had good marketing people there or something.

• 1:37:54Ben Gilbert?

  Oh, I mean, and to your point about it not being easy, like Ben gets asked in interviews, you know, how'd you get through that when you had to lay off half the company and then get the other half to recommit to basically starting a new startup with you? And his answer is a lot of crying by me.

• 1:38:08David Rosenthal?

  Yeah.

• 1:38:08Ben Gilbert?

  It's brutal.

• 1:38:10David Rosenthal?

  But I think the lesson to be learned from this, and I totally, it totally resonates for me is if you're in a technology market and you find yourself early to the market, like they did with, you know, the cloud and virtualization.

• 1:38:23Ben Gilbert?

  Beating AWS by seven years.

• 1:38:26David Rosenthal?

  By seven years. It's not good to be in that situation, but if you could just hang on and stay alive until the market can catch up with you, these markets will grow and you can become a big, big player, even if everybody's already written you off.

• 1:38:41Ben Gilbert?

  Can you stay alive long enough to become lucky?

• 1:38:45David Rosenthal?

  Yep. Obviously better to be lucky upfront, but if you're not, like wait for luck to come to you. Anyway, so there's one more other fun little part of the LoudCloud Opsware journey, one other character that's going to become very important later in part two, which is one of their other board members. So the board of LoudCloud, pretty awesome, Mark Andreessen, Andy Rakliff, Bill Campbell, the coach, obviously Ben, and the other independent board member who they had, do you know who it is, Ben?

• 1:39:18Ben Gilbert?

  No.

• 1:39:20David Rosenthal?

  Michael Ovitz.

• 1:39:22Ben Gilbert?

  Oh, that's how they met Michael Ovitz?

• 1:39:24David Rosenthal?

  That's how they met Michael Ovitz. Of course, we're talking about super Hollywood agent, founder of Creative Artist Agency, Michael Ovitz, later erstwhile COO and president of Disney under Eisner.

• 1:39:38Ben Gilbert?

  Briefly.

• 1:39:39David Rosenthal?

  Briefly, briefly. So after the whole Disney debacle, he was like, you know, looking for stuff to keep him entertained and wanted to invest in, you know, the then hot internet area. And so he gets introduced to Ben and Mark and ends up joining the board of LoudCloud. Isn't that wild?

• 1:39:57Ben Gilbert?

  Wow. So that's how, you know, Mark and Ben get infected with the idea of. Creating the CAA of venture.

• 1:40:05David Rosenthal?

  Of venture, totally. It's so funny how like, you know, we've painted, hopefully, the picture on this episode of all the life experiences, you know, leading into Netscape, leading into LoudCloud, leading into that moment with Benchmark, and then Ovitz joining, like, it's all, it all gets expressed in Andreessen Horowitz.

• 1:40:24Ben Gilbert?

  Wow. There's one more principle that you touched on earlier that I want to tie a little bit of a bow on, that's a founding principle of the company. When Ben Horowitz is getting dressed down in the partner meeting at Benchmark and they ask him, you know, when are you going to hire a professional CEO? This becomes a major tenet of Andreessen Horowitz about technical founders being CEOs and being armed with the resources that they need and the ability to, even before they would otherwise acquire those skills, sort of have a leap on being a professional CEO. And there's this 2003 interview, I love reading things from 2003 about Mark and Ben because it's this really interesting perspective where

• 1:41:05Ben Gilbert?

  it's post Netscape, post LoudCloud, post crash, but they're just angel investors. It's six years before they started Andreessen Horowitz. And one of the questions in this great Q and A that we'll link to in the show notes is, should a founding technologist run a mature company? And Mark's answer, you know, he's a brilliant person. He gives these long philosophical answers to every other question. This one, he just answers, absolutely.

• 1:41:30David Rosenthal?

  It's so great. This is so brilliant. We'll talk about this much more in the next episode. But what's so smart about this and so dumb about the rest of the venture capital industry, until Andreessen changed the game, which is like, let's put aside what's right or wrong, or what you believe or don't believe. It was so dumb to preach and practice anything else except that founders should run the companies they start. Because if you say anything else, who are you alienating? You're alienating founders, right? Like, so if you want to win deals, why on earth would you say anything other than, I support my founders and I'm loyal to them to the end?

• 1:42:11Ben Gilbert?

  Yeah, just wild.

• 1:42:13David Rosenthal?

  Just wild.

• 1:42:15Ben Gilbert?

  Okay, David, so take us forward. They sell the Opsware business to HP.

• 1:42:22Ben Gilbert?

  What's going on after that?

• 1:42:24David Rosenthal?

  So we've alluded to Ning a couple of times. Along the way, Mark had started Ning.

• 1:42:31Ben Gilbert?

  What year is this? What year is the Opsware sale? I can't, we did the episode with Michelle Feaster.

• 1:42:37David Rosenthal?

  Yeah, which was so great.

• 1:42:38Ben Gilbert?

  She was at HP and bought the company.

• 1:42:40David Rosenthal?

  Way back in early acquired history. So I want to say it was 2005. I think I actually don't have it written down when Mark started Ning. It was 2007 when Opsware was sold to HP.

• 1:42:55Ben Gilbert?

  Okay.

• 1:42:55David Rosenthal?

  So Mark was going along with Ning and Ning was sort of a way for any community to launch their own social network. I guess kind of in a way like what we have with our Slack.

• 1:43:06Ben Gilbert?

  It's like white label Facebook.

• 1:43:08David Rosenthal?

  Yeah. Once again, ahead of its time. Mark, I think, was not super thrilled with how that was going. So he ended up stepping back full time, brought in right after the acquisition, the Opsware acquisition, brought in Jason Rosenthal from Opsware, who had been a Netscape guy before that, to come in and run Ning. And Mark stepped back to just being a chairman. So remember, now we're in 2007. We're now in the heyday of Web 2.0, which it's so funny. Like any other point in time, if we hadn't had the tech bubble and the crash and everything everybody lived through here, the rest of the market would have been gaga over Facebook, LinkedIn, and Zynga, and Shutterfly.

• 1:43:52David Rosenthal?

  And what was Stuart Butterfield's first? Flickr. Flickr and everything that was going on. It was so exciting in the valley, but because everybody still had the hangover from Web 1.0, valuations were miniscule for these companies.

• 1:44:08Ben Gilbert?

  Well, and in 2000, 2001, 2002, even in 2003, venture firms weren't raising new funds. So everyone's preciously holding on to the last fund they raise, parceling out each dollar to their own portfolios, trying to make sure they're only investing if it's, you know, the very next Yahoo and using their bullets very carefully. And so, you know, when Facebook comes along in 2004, it's like one of the only sort of obvious ones that's growing like absolute crazy and kind of kicks off that next generation of, okay, like we're going to start, you know, venture capitalists are going to be able to start raising big funds again and kind of come out of the tech bubble screaming.

• 1:44:44David Rosenthal?

  But even that takes a long time. And ironically, it's Mark and Ben, you know, arguably people who got hammered hardest by the dot com crash, who recognize like, oh, wow, no, this is the time to put capital to work and embrace everything that's going on. So they start angel investing together.

• 1:45:04Ben Gilbert?

  Right. This is the era of super angels. If you think back to the sort of Ron Conway and Dave McClure era, and there was the famous sort of bin 38 scandal, but Mark and Ben are the super angels that are individually investing tens of millions of dollars in startups.

• 1:45:20David Rosenthal?

  It's easy to forget now, but they were like the prototype super angels. Easy to forget now because of now, of course, they're a venture firm.

• 1:45:26Ben Gilbert?

  And of course, Mark made like 150 million bucks on the Opsware sale from, I think it's about right because he owned about 10% of Opsware at the sale to HP. Ben owned 5.5%. So they've got cash to invest and they're dedicated to helping to build the next generation of startups.

• 1:45:45David Rosenthal?

  Yeah. And not only that, this is where the pieces start to come together. They also embrace as users, web 2.0. And what's a big part of web 2.0?

• 1:45:56Ben Gilbert?

  It's blogs.

• 1:45:57David Rosenthal?

  Blogging, ah, the P Mark A blog and Ben's blog. This is where it all starts.

• 1:46:06Ben Gilbert?

  Was so good. And it's before, I mean, Mark obviously became a prolific tweeter tweeting like 100 times a day until in 2016, he stopped and we'll cover all that in the next episode. But like very much embracing the idea that like, I'm going to be loud on the internet. I am going to share my thoughts with the world and very early to blogging.

• 1:46:25David Rosenthal?

  Yep. So through all this, they end up angel investing in companies like Twitter, of course, like Zynga, Facebook.

• 1:46:35Ben Gilbert?

  LinkedIn.

• 1:46:36David Rosenthal?

  Like LinkedIn.

• 1:46:37Ben Gilbert?

  And Mark is still on the board of Facebook and still keeps up with Mark Zuckerberg.

• 1:46:42David Rosenthal?

  I hope so. So the Facebook story is super interesting. When Andreessen Horowitz, the firm would launch, they launch with a big piece in CNN Money and Zuck is quoted in the piece and he says, I moved to Silicon Valley in 2004 and I was introduced to Mark Andreessen by Peter Thiel in 2005. Mark became a sounding board about management and how to build a strong technology company. He has strong views on that and they helped shape mine. Mark homes in on important things. It's very liberating. He has helped me not worry so much about the unimportant things. So what's Zach talking about here? So remember the Yahoo situation?

• 1:47:26Ben Gilbert?

  Where Zach turned down the billion dollar offer?

• 1:47:28David Rosenthal?

  When Zach goes and vomits in the bathroom, turning down the billion dollar Yahoo offer, literally everybody around the table is telling him like, sell. Supposedly all the VCs, everybody involved with the company, all the rest of the management team are like, we gotta take this offer. Cause remember it's Web 2.0, you know, Flickr sold to Yahoo for what? 30 million? Something like that?

• 1:47:49Ben Gilbert?

  Something like that.

• 1:47:50David Rosenthal?

  The idea that there could be a billion dollar outcome now post bubble is crazy. Apparently the only one of the advisors who told Mark not to sell was Marc Andreessen.

• 1:48:02Ben Gilbert?

  Wow.

• 1:48:03David Rosenthal?

  Andreessen has a quote about this. He says, "Every single person involved in Facebook wanted Mark to take the Yahoo offer. The psychological pressure they put on this 22 year old was intense. Mark and I really bonded in that period because I told him, don't sell, don't sell, don't sell." And that, because of that, is why Andreessen ends up joining the Facebook board in 2008, as well as the eBay board in 2008.

• 1:48:27Ben Gilbert?

  Yeah, that's a fascinating one.

• 1:48:28David Rosenthal?

  Oh, that'll come up next time for sure.

• 1:48:31Ben Gilbert?

  And he stayed on the HP board, by the way, after the LoudCloud Opsware deal until 2018. Like, he was a longtime HP board member, too.

• 1:48:39David Rosenthal?

  Oof, yeah. So it's pretty crazy. Like, they've built up this like vehemently founder friendly, don't sell, build big companies, we're gonna finance you.

• 1:48:52Ben Gilbert?

  Technical co-founders, stay as CEOs forever.

• 1:48:55David Rosenthal?

  Yep. We love technical co-founders. We are willing just the two of us to finance 45 different companies?

• 1:49:03Ben Gilbert?

  Including Dig.com, Angel List, Foursquare, LinkedIn, a lot of very meaningful companies of that era. High hit rate.

• 1:49:12David Rosenthal?

  I mean, they're like the most active venture capitalists in Silicon Valley at this point, but this is when Sequoia is writing the RIP Good Times memo, and they're not even venture capitalists. So this is the best. This is the best. I think this is my favorite part of the whole episode. So one day...

• 1:49:31David Rosenthal?

  Ben is still at HP. He becomes a VP of, you know, something or other at HP. And it's clear like this is going to be just like the AOL situation. He's going to stay there a year and then move on, do his next thing. He gets a call from Doug Leoni at Sequoia.

• 1:49:49Ben Gilbert?

  Oh, interesting.

• 1:49:50David Rosenthal?

  This is so classic, such a classic Doug story. I love it. Doug says, I want to know how you did it. And Ben's like, uh, did what? And Doug says in, uh, maybe not quite these words, but, but, but maybe actually these words knowing Doug. I want to know how you took a dog of a company and turned it into a billion dollar outcome. I've never seen this happen before and I want to learn how you did it. So great, great. Because A, it's so Doug, like what a learning machine. B, it's so great because it's obvious what is happening here.

• 1:50:22Ben Gilbert?

  Oh, he's trying to get Ben to come to Sequoia.

• 1:50:24David Rosenthal?

  He's totally trying to get Ben to come to Sequoia. Oh, so great, so great.

• 1:50:29Ben Gilbert?

  Do you think they wanted to recruit him as a partner or as like a person to come fund next?

• 1:50:35David Rosenthal?

  I'm sure they would have been happy with either, but I'm assuming probably as a partner. I bet they were trying to run the, um, the same playbook they did with Alfred, uh, which, uh, when Alfred joined Sequoia after Zappos, the original idea, and Don Valentine says this in the Stanford GSB talk that we always recommend. When he holds up Alfred's resume, he says, yeah, Alfred's here. He's a partner at Sequoia for now, and, but he'll start more companies and we can't wait for him to start companies and spin them out. Obviously that doesn't happen with Alfred, but I'm sure they just want to, they want Ben and presumably Mark as well to just come be part of Sequoia.

• 1:51:12Ben Gilbert?

  Man, we don't do this section on episodes anymore, but in the spirit of what would have happened otherwise, you think about if Ben had accepted an offer to go be a partner at Sequoia? And if Benchmark hadn't made the cardinal mistake of causing the executive team to potentially lose faith in their CEO right there in the boardroom, how things could have been different in the Valley?

• 1:51:33David Rosenthal?

  Totally. Well, the funny thing I was thinking about through all this is, uh, Obviously, as we've alluded to, Andreessen Horowitz is going to counter position against Benchmark when they launch. Nobody ever counter positions against Sequoia. I think it's just because like, how could you? They're so good.

• 1:51:50Ben Gilbert?

  Yeah, it reminds me of the, the quote from The Wire. You come at the king, you best not miss. I don't really want to make a run at Sequoia. I wouldn't publicly counter position against them.

• 1:52:03David Rosenthal?

  I was thinking the exact same thing. So great, so great. So Ben takes this call. I don't know the exact timeline here, so I'm, I'm both hypothesizing and dramatizing for effect. But with that said, he takes the call. He knows what Doug is up to. He hangs up with Doug and he shoots Mark an instant message. We ought to start a venture capital firm. And Mark replies, I was thinking the same thing. Boom.

• 1:52:37Ben Gilbert?

  Boom.

• 1:52:38David Rosenthal?

  And that, our friends, is where we're going to leave part one.

• 1:52:44Ben Gilbert?

  Ooh, that is a perfect, perfect spot. I feel like I now have a really robust understanding about the like frame of mind they're in going into starting Andreessen Horowitz, the firm. The question is, when they're texting, is this before or whether they're on IM, is this before the financial crisis?

• 1:53:02David Rosenthal?

  I am imagining this is sometime in 2008.

• 1:53:06Ben Gilbert?

  Yeah, which is fascinating because then between the time where they have the idea to do this, and when they actually launched the firm, there's a global recession and bank financial crisis that they have to fundraise during. It's pretty wild.

• 1:53:19David Rosenthal?

  Totally.

• 1:53:20Ben Gilbert?

  Well, I think we did a lot of great sort of playbook themes during the episode. Is there anything you want to highlight here?

• 1:53:27David Rosenthal?

  Yeah, there is actually one, and we'll get into this more next time, but.

• 1:53:33David Rosenthal?

  It's pretty courageous.

• 1:53:36Ben Gilbert?

  Ooh, did you choose that word carefully?

• 1:53:39David Rosenthal?

  I did not. I did not.

• 1:53:41Ben Gilbert?

  Okay.

• 1:53:41David Rosenthal?

  Came to mind. It's pretty courageous what they do here, right? Like, I mean, okay, it's not courageous in that they have a lot of money. They never need to work again, et cetera, et cetera. But, you know, to turn down Doug Leoni to say, we have a lot of money, but we're going to deploy this money and put it at risk while all the rest of the world thinks everything is falling apart. I think it's easy to look back now and be like, oh, you guys have, you know, Andreessen Horowitz has $19 billion in capital under management and is this massive, enormous 200-plus person firm with all of these funds and like, yeah, yeah, yeah, you guys are money managers. Like, that is not how it started by any stretch of the imagination.

• 1:54:27Ben Gilbert?

  Yeah, it's such a good point. And we'll get into this next episode, but from everything that I can sort of hear, that's still the way that Mark and Ben act today, that they're by no means sort of like enjoying the 19 billion under management lifestyle. I think they're very much thinking about what is the next, not just generation, but like, what is the next epoch of Andreessen Horowitz, the firm look like? Like, what are we beyond that venture capital firm? What is the sort of, yeah, what will this institution be in the future? And the way that you chose courage carefully, I chose future carefully. And we're going to talk about both of those in the next episode.

• 1:55:06David Rosenthal?

  I love it. I love it.

• 1:55:08Ben Gilbert?

  I've got a few, just to bring it back. I mean, the timing, luck and right place, right time is so strong here. I mean, especially in the N64 slipping one year part of the story. Like Netscape wouldn't have existed if N64 had shipped on time. And as crucial as it is to be brilliant, you have to be brilliant in the right place at the right time and get lucky also. And I think that, you know, we've seen that people always talk about Steve Jobs and Bill Gates being born at the right time and the right place to be able to start Apple and Microsoft. Kind of the same thing with Mark being around right from the start of the internet and being able to really jump onto the emerging web and create a huge part of it. I also think a big playbook theme is knowing what good feels like because you've experienced

• 1:55:53Ben Gilbert?

  it yourself. In launching Mosaic and getting a million users in the first year on a very nascent web for Mark's whole rest of his career, that's the bar. I think if you've never experienced something like that viscerally, where you've operated or founded or worked at a high level at a company that was undergoing that, because you don't know what the benchmark is, you don't quite know what you're chasing. And I think it meaningfully shaped all of his future experiences and Ben's experiences and Andreessen Horowitz's experience when they knew what true product market fit and crazy growth felt like from the very first experience.

• 1:56:33David Rosenthal?

  Ooh, I've got one I really want to add on to that.

• 1:56:36Ben Gilbert?

  So yeah, totally agree.

• 1:56:38David Rosenthal?

  Yes, everything you said. And what makes it really powerful is the contrast. Like, they also know what total failure looks like. And I think you see a lot, people think like what you said, knowing the benchmark, knowing success, that's what you need. I think you need both, because if you only know success, you don't know the difference between success and failure. And you don't really know what made for success and what was skill and what was luck. But I think what's really unique here in this story is they have, absolutely have both, like highest of the highs, lowest of the lows. And I think that can really help one triangulate on where you are in any given point in time and why.

• 1:57:23Ben Gilbert?

  Totally agree. I think it's a great point. Well, listeners, we are gonna hold on grading until the end of our next episode. We'll have that conversation about actually the firm, Andreessen Horowitz, rather than trying to grade something Mark and Ben's past. And David, do you want to do some carve outs before we bring it home?

• 1:57:42David Rosenthal?

  Yeah, let's do it. I've got a fun one that is tangentially related to at least the N64 aspect of the episode. I've just been on such a like gaming and classic gaming kick lately. I don't know what it is. Maybe it's like everybody you hit your mid 30s and then you just get nostalgic for the era when you were a kid. So my carve out is my new favorite podcast, besides acquired, of course, the resonant arc YouTube channel and podcast. These guys are so great. They take they, what do they call themselves? They call themselves a video game story book

• 1:58:24David Rosenthal?

  club. So they take old classic video games like RPGs like from this era. So they did Final Fantasy eight. They're now doing xenogears. They did near the first near game, which is more modern in the interim. And then they do like a book club. They do playthroughs. So they're like, we're gonna play not, not a stream, but like, we're gonna play from the beginning of the game to X point. And let's all, you know, we'll go play, you audience go play. And then we're gonna do a podcast. We're gonna do a three hour podcast at each checkpoint where we're gonna dissect the story, the development, who was the dev team? How did this project come together? What is the context behind all of this?

• 1:59:05Ben Gilbert?

  That's a clever structure.

• 1:59:06David Rosenthal?

  It's really, really clever. I really like it. So it ends up for all these games like being 10, 15, 20 hours worth of podcast time. But it's so cool. It is a really innovative format.

• 1:59:19Ben Gilbert?

  And you know, you're talking to people who are willing to dedicate 10 hours of podcast time to a single podcast, like a Berkshire Hathaway trilogy. So

• 1:59:26David Rosenthal?

  Exactly.

• 1:59:27Ben Gilbert?

  Couldn't have found a better place to recommend it.

• 1:59:29David Rosenthal?

  A podcast after my known heart.

• 1:59:32Ben Gilbert?

  I love it. Well, I have a little bit more of like a more serious one. Serious. It's a nonfiction book called The Elephant in the Brain. And it is a psychology book that was originally going to be this person's academic paper. And then they decided, I'm just gonna get together with my friend and actually write it as a book instead and reach a much broader audience. And just like, Publish it as a consumer facing book and it is a really interesting book. One of the main theses is we humans are animals. And so why do we sort of try and go around pretending that we're not and trying to do things that are socially acceptable when there's sort of an elephant in the brain

• 2:00:14Ben Gilbert?

  that we are animals and we are subject to these very base desires that come from evolution. And it's not saying act on those, but every chapter sort of points out a different and very observable, basic animalistic thing that exists in our brain. The thing that I took away from it was, once you can be more mindful of the way in which your brain is not acting quote unquote logically or appropriately as you should present in society as it says it's acceptable to, just like being aware of the way that your brain is working and why it is working in that way, so that you can then apply your higher functions on top of it, is very interesting. And I highly recommend it for anybody who is interested in psychology, capitalism,

• 2:00:59Ben Gilbert?

  how to fundraise for nonprofits, how to lead, how to organization build. All of this stuff is sort of tied in there and they basically take anything that seems like people are doing purely altruistically or purely for whatever reason, and they find the animalistic desires that underpin that and then find the data to support why that is often happening, especially if you're interested in going into politics. It's a phenomenal read.

• 2:01:26David Rosenthal?

  I love it.

• 2:01:27Ben Gilbert?

  So recommend that.

• 2:01:29David Rosenthal?

  All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 2:01:35Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale.

• 2:01:46David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers, and how fast you can use that signal to guide what you ship next.

• 2:02:07Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 2:02:19David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 2:02:30Ben Gilbert?

  All right, well, listeners, thank you for joining us on part one of this journey. And if you want to join us and talk about all things Acquired, all things tech, with a great community, really thoughtful, respectful, good, highbrow discussion, join us at acquired.fm/slash/Slack. As always, if you want to be a deeper part of what we do on the show, you can become an LP at acquired.fm/lp. Do you have anything else you want to say?

• 2:02:55David Rosenthal?

  Pumped for season nine. We are underway.

• 2:02:58Ben Gilbert?

  I know. Me too. And I think this next episode's going to be really fun. Andreessen Horowitz has played such a seminal role in the development of the tech ecosystem of the last 12 years that it's a walk down like kind of my whole adult life and career to walk through from 2009 to today. So I'm excited to do it.

• 2:03:16David Rosenthal?

  Yeah. Should we start recording right now? Just run it back? Let's play two.

• 2:03:21Ben Gilbert?

  No, I need a break. Listeners, we'll see you next time.

• 2:03:26David Rosenthal?

  We'll see you next time. And until then, young Spielberg, Mike Taylor, take us out.

• 2:03:42Speaker 02

  Who got the truth? Is it you, is it you, is it you? Who got the truth now? Is it you, is it you, is it you? Sit me down, say it straight, Another story on the way. Who got the truth now? Who got the truth? Everybody's talking, Nobody's listening. These days I feel lost, man. Lost in opinions. Everybody's fighting, Nobody's winning. Take me home, 'Cause I don't know What's going on in the world I'm living. Everybody's break, break, breaking up the dinner. Break, break, breaking up the dinner. Oh, baby.

• 2:04:26Speaker 02

  Break, break, breaking up the dinner. Who all is smoke, I need to know? Who got the truth?

• 2:04:34Speaker 02

  Is it you, is it you, is it you? Who got the truth now? Is it you, is it you, is it you? Sit me down, say it straight, Another story on the way. Who got the truth now? Who got the truth? Not here for the cheetah. They flip-flop like a seesaw. Not free under these laws. Now the world see what we saw. People wonder what to do now. It took a body cam to get the truth out. Hit the streets, time to move out. Got so much to lose now. Everybody's break, break, breaking up the dinner. Break, break, breaking up the dinner. Oh, baby. Break, break, breaking up the dinner. Who all is smoke, I need to know?

• 2:05:19Speaker 02

  Who got the truth? Is it you, is it you, is it you? Who got the truth now? Is it you, is it you, is it you? Sit me down, say it straight, Another story on the way. Who got the truth now? Who got the truth?