How Andreessen Horowitz Disrupted VC & What’s Coming Next

On this episode of The Ben & Marc Show, a16z co-founders Marc Andreessen and Ben Horowitz dive deep into the unfiltered story behind the founding of Andreessen Horowitz—and how they set out to reinvent venture capital itself. For the first time, Marc and Ben walk through the origins, strategy, and philosophy behind building a world-class venture capital firm designed for the future—not just the next fund. They reveal how they broke industry norms with a bold brand, a full-stack support model, and a long-term commitment to backing exceptional builders—anchored in the radical idea that founders deserved real support, not just checks. Joining them to guide the conversation is Erik Torenberg—Andreessen Horowitz’s newest General Partner—who makes his Ben & Marc Show moderating debut. Erik is a technology entrepreneur, investor, and founder of the media company Turpentine. You can learn more about Erik via Marc’s announcement [here]. Together, they explore: - Why traditional VC needed reinvention - How a16z scaled with a platform model, not a partner model - The "barbell strategy" reshaping venture capital today - Why venture remains a human craft, even in the age of AI We’re thrilled to welcome Erik to the team—and we hope you enjoy this inside look at the structure, philosophy, and future of a16z. Topics covered: 00:00 - Intro / Welcome Erik Torenberg to a16z 00:26 - Why Traditional Venture Capital Was Broken 03:05 - Marc on Discovering VC and Its Legends 05:12 - Surviving the Dot-Com Crash and Angel Investing Collapse 07:05 - Helping Founders Raise Venture / Fix VC Relationships 08:47 - The a16z Strategy: Building a Support Platform 12:07 - First Fund Wins: Skype, Instagram, Slack, Okta 12:50 - Building a 'World-Dominating Monster' 15:00 - The Sushi Boat VC Problem 18:07 - Treating LPs Differently 21:40 - Marc and Ben's Working Relationship 23:30 - Updating a16z’s Media Strategy for the Social Era 27:20 - History of the Decentralized Media Environment 30:36 - Decline of Corporate Brands and Going Direct 36:06 - Naming the Firm 40:13 - Building the a16z 'Cinematic Universe' of Talent 42:16 - Creating a Federated Model 51:02 - Deciding to Market the Firm 53:26 - Recruiting General Partners 56:33 - Evolution to Full-Stack Companies 01:03:53 - The Barbell Theory: The Death of Mid-Sized VCs 01:11:50 - Why Venture Capital Should Stay Overfunded 01:19:50 - When a16z Knew It Could Be Top Tier 01:25:58 - Venture Capital is an Art, Not a Science Books referenced on this episode: - "The Revolt of the Public" by Martin Gurri https://bit.ly/4jDloba - "Infamous Scribblers" by Eric Burns https://bit.ly/4lSkaKy Listen to Us! Apple: https://bit.ly/3SdsfNt Spotify: https://spoti.fi/3SclPOr Resources: Marc on X: https://x.com/pmarca Marc’s Substack: https://pmarca.substack.com/ Ben on X: https://x.com/bhorowitz Erik on X: https://x.com/eriktorenberg Erik's Substack: https://eriktorenberg.substack.com/ Stay Updated: Find us on X: https://x.com/a16z Find us on LinkedIn: https://www.linkedin.com/company/a16z This information is for general educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. Turpentine is an acquisition of a16z Holdings, L. L. C., and is not a bank, investment adviser, or broker-dealer. Individuals and companies featured during this podcast are not endorsing AH Capital or any of its affiliates (including, but not limited to, a16z Perennial Management L. P.). Any investments or portfolio companies mentioned, referred to, or described in this podcast are not representative of all a16z investments and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by a16z is available at https://a16z.com/investment-list/. All investments involve risk, including the possible loss of capital. Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but a16z does not guarantee its accuracy.

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

• 0:00Marc Andreessen?

  We met with one firm, Ben, you might remember, one of the partners said, venture capital is like being at the sushi boat restaurant. Thousand startups come through and you just meet with them. And then every once in a while, you kind of reach down and you just pluck a startup out of the sushi boat and you invest in it. And I was like, oh my God.

• 0:13Ben Horowitz?

  But the sushi there is typically not great.

• 0:18Speaker 02

  What does it take to build a venture firm from scratch? And how should it evolve as the world changes around it? I recently sat down with Mark and Ben for a wide ranging conversation on the origins of A16Z, the evolution of the venture capital industry and the structural choices that have shaped the firm from platform to federation and beyond. We talk about everything from how A16Z got started in 2009 to how we think about platform media governance and why venture is more barbell shaped than ever. As it happens, this conversation took place during my first week. So it was the perfect moment to reflect on where the firm has been and where it's headed. This episode originally aired on the Ben and Mark Show, which you can follow for more candid conversations from inside the firm. Let's get into it.

• 1:04Marc Andreessen?

  The content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investor or potential investors in any A16Z fund. Please note that A16Z and its affiliates may maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com/disclosures.

• 1:33Erik Torenberg?

  Hey, everybody. Welcome to another episode of the Ben and Mark Show. I'm Eric Torreberg. I'm Andreessen Horowitz's newest general partner, and this is my first week. Lots of exciting things planned for the future of the firm, but we thought that this would be a great opportunity to talk about a bit of the history, about the conversations that led you guys to start Andreessen Horowitz. When did you know that, hey, you guys had to do this?

• 1:55Ben Horowitz?

  I think it was a conversation on AOL Instant Messenger, if I recall it correctly. We had sold Opsware to HP and had been out of it for a little while. We had started doing some like angel investing and that kind of stuff. We had a angel fund called Horowitz-Andreessen. That's not even a joke, too. So we were doing that and. We're talking about what might each one of us do next. And as I recall it, and Mark might recall it differently, he said, you know, venture capital is so underwhelming in that it's a great product for investors, for LPs, but it's a kind of very mediocre product for entrepreneurs because,

• 2:40Ben Horowitz?

  you know, you get almost nothing. You get like some money and then a smart person. But you know, that smart person, they see you once a quarter. They don't know much about what you're doing. So their value kind of diminishes to zero in about three or four months. And we thought, you know, it's so hard to build a company. Somebody ought to be able to do something better than that. And I said to Mark, I was like, we could start a firm and we could call it Ben Marc, you know, which was a pun on Benchmark.

• 3:11Marc Andreessen?

  I don't think I ever got that until just now.

• 3:12Ben Horowitz?

  Yeah. So that was the beginning of the conversation. And I was surprised because Mark was into the idea. I think he had the idea separately. So it was just one of those things.

• 3:23Marc Andreessen?

  I'm just like absolutely amazed and flabbergasted that venture capital even exists. My first 22 years of life, I had no idea. I had never heard about it growing up. I never heard about it even in college at Illinois. And I came to Silicon Valley and my first business partner, Jim Clark, was like, yeah, we start a company, we go raise money from these venture capitalists. And I was like, what's that? And it just like completely blew my mind that there were these people. They were literally scouting for basically crazy startup entrepreneurs to start these things. And they would give you money when you had nothing. And I was like, wow, that's amazing. And so one is just the fact that field exists is amazing. VC in its modern form started in 1960s. And I just look back at the history of these guys, Don Valentine and Tom Perkins and Pitch Johnson, Bill Draper, Arthur Rock. These guys for me are like legends because the fact that they could go out and source a Bob Noyce,

• 4:05Marc Andreessen?

  you know, to start Intel or Steve Jobs to start Apple or these things is just amazing. I had quite good experiences. Ben mentioned that the issues with the field, but Ben and I had the chance to work with two VCs at the very top of their game, when their firms were on top of the world. And that was John Doerr, when he was at Kleiner Perkins in the 90s. And was kind of the top VC. And then later, Andy Rockleff, who was a founding partner of Benchmark, when they were kind of on top of the world. And, you know, in general, we got a lot of value from those guys and considered them partners and had very good relationships. And they helped us build, I think, good businesses. But Basically, over the years, what happened was we kind of learned from those experiences. But also what happened over the years was Ben and I had become active angel investors and sort of advisors and mentors to a new generation of founders. And this is in the 2000s through the 2000s. And just so people understand the setting for this, after the dot com crash in 2000, there had been an angel and venture boom in the late 90s.

• 4:49Marc Andreessen?

  And then after the dot com crash in 2000, like almost all angel investing went away and a large amount of VC went away. And, you know, it was like a full on depression for early stage tech. And so about like 2004, the crash sort of unspooled over five years. And by 2004, when Ben and I kind of ramped up our angel investing, I think, I don't know, maybe the whole industry was down to like a half dozen angel investors or something. I mean, Yeah, it was small. We knew all of them.

• 5:11Erik Torenberg?

  Angel investors had so much power that there was this scandal, Angel Gate. Remember the like angels meeting together and fixing prices?

• 5:17Marc Andreessen?

  The Angel Gate, yeah. So this is a famous- Well, we all talked to each other. So there was something to that.

• 5:23Marc Andreessen?

  So then basically tech started to take off again in the late 2000s. And then TechCrunch at the time, Michael Aronson had built up a TechCrunch to be kind of the main online news source for startups and venture investing. And Michael, one of his like most remarkable things was he was at some dinner and he somehow cracked the code that there was a back room at the dinner where like all of the, actually, Ben and I were not there, but like most of the prominent angel investors of that era were basically sitting around this round table. And Michael Aronson kind of walks in and he's a journalist and at least he described it as like these massively guilty looks on everybody's faces. Ben and I weren't there, so I don't know what happened, but the accusation was that they were colluding, right? They were sort of, you know, all teaming up to try to see if they could keep valuations low, which is a no-no in business. But a significant thing about that maybe is that that actually meant that there were enough angels to actually fill a table, right? Because that was like when they were like a dozen of them as opposed to just a half dozen. Yeah, anyway, so Ben and I just started working with, would turn into be dozens of

• 6:08Marc Andreessen?

  founders. And, you know, we ended up being very involved in because we had raised venture before and run companies. We ended up helping a lot of startups in that era raise venture. And so we helped them meet the venture firms and understand how to negotiate the deals. And then the other thing that happened was is we would get called in when they would get sideways with their VCs. It's happened kind of a lot. A lot. So this became, it turns out, this is one of the main things people were calling us on was like, all right, I'm in some big fight with my VC. He wants the money back or this or that, or he freaked out at the board meeting and what's going on? And I hear rumors this firm is shutting down and he's going to fire us all my stock. Or by the way, or the VCs would call us up and they'd be like, this founder is nuts. And could you please talk to him and try to get him to like do the right- Thing. So we ended up in this sort of, I don't know, arbitrator, coach, judge, arbitrator mode, helping patch these things up. And I think Ben, because you and I arranged the investing at that point, a big part of it was, well, hell, like, if we're going to

• 6:53Marc Andreessen?

  end up doing that anyway, if we just showed up with the checkbook, we could short circuit

• 6:56Ben Horowitz?

  Yeah, yeah, yeah, right. We wouldn't have to fix all these problems. I mean, yeah, and that was like a little bit of it as well, which is, there were just very few people at that point in venture capital world who had built any kind of company that had gone to any kind of complexity or was worth anything. It was just a different kind of background of people. So the ability to relate to founders, like really relate to founders was a little bit missing.

• 7:25Erik Torenberg?

  Okay, so you decided to start Andreessen Horowitz in 2009. You come up with a $300 million fund. Talk about what the strategy was going into it, or how you were planning to differentiate from the outside in. You know, you guys were very loud. You had this platform approach. Talk about behind the scenes, how you thought about differentiating.

• 7:41Ben Horowitz?

  By the way, like, the big VCs at that time seemed just overwhelmingly invincible. They were giant, like, long-lasting businesses. I mean, the whole industry had been around for 50 years. Some of these guys had invested in like every good, I mean, if you look at some of the things Sequoia had invested in along the way, it's like quite a spectacular set of companies. And so we're trying to figure out how to challenge the status quo. And one of the ideas we had was we would do like a lot of angel investments in addition to venture investments, which was unheard of at the time. And we would start out in this complimentary way. And then like,

• 8:20Ben Horowitz?

  eventually, we'd build enough reputation where we could start doing kind of the A's ourselves, was how we pitched it. And we actually took it around, we visit a lot of our VC friends, and many of them said it was a really dumbass idea, and we should definitely not pursue it. And it's been tried before, and it didn't work, and so forth. And then the other idea that we had was what I alluded to earlier, which is gee, like, what if the venture capital firm, and we got a lot of this from our friend Michael Ovitz from CAA. So what if the firm wasn't just a collection of partners? What if it was more than that? What if, rather than paying the partners a lot of money, or in

• 9:03Ben Horowitz?

  our case, we didn't pay ourselves any money, what if we took all that money, because it was a lot of money, you know, we're like, even on a $300 million fund, it was a really a lot of money. What if we took that money and we built a platform and the purpose of that platform was to give an entrepreneur, basically, the confidence and power of a big time CEO like a Bob Iger or a Jamie Dimon or somebody like that, who could literally pick up the phone and call anybody, like, at any time. Why should I be CEO of this little company, even though I've never managed anything myself? All I did was invent the product? Well, because like Bob Iger, I'd call anybody from the President of the United

• 9:43Ben Horowitz?

  States to the CEO of FedEx or whatever, and I can get them on the phone. And so we're like, what if we built that capability for our companies? And people said, I think that criticism was, it's been tried, it'll never work, you guys are stupid. That was like the polite version of it. You know, those two things were really the original idea that we pitched. In fact, if you look at our original deck, that's how we pitched LPs.

• 10:10Erik Torenberg?

  And the first fund works, right? I believe you put 50 million into Skype, and there's a big markup there in that acquisition. There's Instagram.

• 10:17Ben Horowitz?

  It's actually 65 million. But 15 of it was generously given to us by Silver Lake for participating in the deal. Yeah, but we invested 65 million, yeah.

• 10:27Erik Torenberg?

  Yeah. So Instagram, TinySpec, which turned into Slack. So the first fund is a winner.

• 10:32Ben Horowitz?

  Yeah, Okta.

• 10:33Erik Torenberg?

  Okta. Did you know, Fund One, what your long-term vision was? Would you say, hey, we're gonna start 300, and then we're gonna scale and be one of the biggest firms to venture? Or what were you thinking was the future at the time?

• 10:44Ben Horowitz?

  The thing that Mark and I knew from our experience in starting companies was,

• 10:50Ben Horowitz?

  It is just as hard to start a small boutique thing that means nothing in the world and build it as it is to build the world dominating monster. Like it's no more amount of work to do the latter. So we were never interested in anything but the latter. We had zero interest at all in building a little venture capital firm that was like a beta to the big boys. We were never wanting to do that. We always thought like this was the start of doing something much bigger and much more important. And you know, how we got there, we certainly didn't have all mapped out from the beginning, but the ambition was always there.

• 11:33Marc Andreessen?

  Yeah. And a lot of this comes from the fact that we'd been running companies. And so if you're running a company, like it's a product company and it's in like full competitive battle with other companies and you're going through the wars that companies go through, like you naturally think in terms of strategy, ambition, industry structure, the economics of the business, the competitive position, evolution over time, marketing strategy, unique selling proposition, differentiation. It's all these things that any business operator thinks about. And actually, to their massive credit, a lot of the original VCs who built the firms originally back in the 50s, 60s, 70s were actually operators, right? So Tom Perkins and Gene Kleiner had been operators, Don Valentine, Pierre Lamont had been operators, the founders of Greylock had been operators. And so it was very natural for the sort of first generation to think in those terms. But by the time we entered the field, their successors, for the most part, had not run businesses. They

• 12:17Marc Andreessen?

  had sort of grown up as professional investors and they were inheriting businesses that other people had built. And so there was just this sort of fundamental difference in mindset. And by the way, the formula was working very well for them. They were very happy to, you know, the cliche goes kind of sit on San Hill Road and the deals. I mean, I've got countless stories in this, but we met with one firm, Ben, you might remember, a very prominent firm. And one of the partners said, it's like, ah, venture capital is like so much fun as a business. He's like, venture capital is like being at the sushi boat restaurant, right? And so these are like the sushi restaurants where there's like the sort of track.

• 12:44Ben Horowitz?

  The sushi there is typically not great.

• 12:49Marc Andreessen?

  Yeah, that was the first thing that jumped out at me is, yeah, that's not where the good sushi is. I wasn't sure if we went to the same sushi restaurants. But you know, you say, if you haven't met a sushi boat restaurant, you sit there and like literally these little sushi boats, these little trains go by on the conveyor belt and you just pick up pieces of sushi. And he said, that's just what it's like. And you just sit here on San Diego Road and a thousand startups come through and you just meet with them. And every once in a while, you eat it with his hand, you kind of reach down and you just pluck a startup out of the sushi boat and you invest in it. And I was like, oh my God, you know, like, you know, complacency, right? Like entitlements immediately, it was just, you know, the hair on the back of my neck went up and I was like, all right. So, you know, basically soft target.

• 13:24Ben Horowitz?

  Yeah, we were just so oriented, you know, with the startup, all you do is work and you're focused on the work. And if you aren't doing enough work, you think of other work that you could do that might improve things. So it was such a foreign idea that you would be oriented around doing no work. Like literally sitting at a sushi boat restaurant, having a great life and playing golf or whatever they did. And so that was inspiring that like, okay, we can do it better. And by the way, like building a company was so hard. And so any additional help would be so appreciated. Yeah, it was how we always thought about it.

• 14:01Marc Andreessen?

  Yeah. By the way, one more story. So around the same time we met with another VC and like I said, we've been running companies, we've been dealing with investors. And then we'd been running public companies. Ben was the CEO of a public company. And so when you're running a public company, you've got investors, you've got your investor relations team, but like you've got hedge funds invested in your company. And like, when you meet with them, you don't even know if they're long or short your stock.

• 14:19Ben Horowitz?

  Often short.

• 14:20Marc Andreessen?

  Often short. So like half the time you're giving them like ammunition that they're going to use to try to like go out and swear you and drive your stock price down. So it's just like absolute bedlam when you're running a company with shareholders. And so in venture, it's different, or at least we thought it was different because your investors and the funds are called limited partners. And these are these institutions like endowments and foundations and sovereigns and so forth that invest. And then they invest on these lockups. They invest on like these 10 or 15 year lockups. So they put the capital in and they really sit patiently and let you do your thing. So we were just like, wow, dealing with an investor who's locked in to be long with your company for 15 years. Sounds like the best thing in the world. Like this sounds amazing. And these are like super smart people, we're running these endowments, people like David Swenson and others and Ann Martin and all these people. And so we were like, wow, this is going to be great. And then we met with a very famous, prominent, long time VC. He said, boys, he said, the part of the job you're going to hate the most is dealing with the LPs.

• 15:05Marc Andreessen?

  Cause he said, these people are like not smart, they're not, you know, whatever. And he's like, the way that you do it is you treat your LPs like they're mushrooms. You put them in a cardboard box, you put the lid on the cardboard box and you put the box under the bed and you don't take it out for two years.

• 15:19Ben Horowitz?

  He literally said that, which was like, it was such an insane thing to hear because like we treated hedge funds that were shorting us better than that. But then, you know, like when we went out, this was actually the thing that kind of made me know that we had made a good choice by starting the firm is when we went out to visit the potential LPs, you know, and we're pitching them and so forth. No, like they had very interesting things to say. They knew a lot about the industry and they knew a lot about investing in general. And Dave Swanson, who Mark mentioned, wrote the definitive book on like how endowments invest and so on. And then

• 15:57Ben Horowitz?

  when they invested, they were so interested in us, which, you know, it's just a nice thing in life when anybody takes any interest in you. And our LPs did 30 or 35 reference calls on both me and Mark. Every single one of them did. And they learned a lot about us. I mean, they really got deep on it. And funny, actually, one of the funny things about the firm is I think we're the only firm in Silicon Valley who has this. We have a two-person key man thing where so normally, as long as one person is intact, there's no vote on the fund or whether the fund continues. But in Fund One, both of us had to be there because they're like, you guys are both flawed,

• 16:41Ben Horowitz?

  but when you're together, the flaws go away. Like they had gotten that deep on us. And so it was cool.

• 16:47Erik Torenberg?

  Say more about that. How do you guys complement each other? Say more about what they were getting at?

• 16:52Ben Horowitz?

  So like there was Netscape and LoudCloud. And I think that with Netscape, Mark started that company when he was 22 years old, or 21, 22 years old. And so he was like literally a kid. So he had some things in his reputation. For one, he was like actually a little kid. Like you grow up. The shit that I couldn't do when I was 22, I can do now and so forth. So there was some of that. And then there was some of the same thing on me. Like, you know, LoudCloud got into absolutely horrible trouble. We burned through a stupid amount of cash and this and that and the other. And so there were definitely negative things, but it was interesting because both companies had very good outcomes. And so I think how the legend went was somehow, you know, between us, we could figure it out. Now, I don't know if the criticisms were right. Maybe they were. And I

• 17:37Ben Horowitz?

  don't know if the solution was correct, but it, but it was just kind of a fun thing that they had got so deep into our backgrounds that they would like insist that that be in the LPA.

• 17:48Erik Torenberg?

  Talk about how you guys have made it work or divided, you know, divided and conquered, or just your working style, or whatever you could share about that.

• 17:54Ben Horowitz?

  We're co-founders and we work very, very closely together on the strategy and the direction of the firm. But like the CEO position is a chain of command position. And, you know, to, you know, that's me. I'm the CEO of the, of the firm. In that sense, you know, Mark doesn't try to override like, you know, these kinds of chain of command decisions. It's not, you know, his thing. And then, you know, like Mark, of course, does things that I can't do. He's just like a much bigger celebrity. He's, you know, kind of, I always say like, he's a little bit of a magic trick that people in the firm call him Mark GPT because he knows everything about everything. So like, like these got very unique things that he does.

• 18:40Erik Torenberg?

  Mark, Mark initially recruited me and then said, hey, Ben, Eric, you guys figure out the details.

• 18:45Ben Horowitz?

  Yeah. So that's a good example. So, you know, Mark had kind of been on this thing that, look, the world has moved and the, the way we kind of market the firm and think about the media hasn't changed nearly as much as the world has moved. And so we need to bring somebody in. And, you know, I was like, do you have someone in mind? And he had you in mind. And so I was like, okay, good. So I listened to, you know, and I had been on the show. So I knew who you were and whatnot, but I went back and listened to a lot of the Turbentine stuff and so forth. And I was like, yep, that seems like a good idea. And then it was on kind of me as in my kind of CEO job to put the thing together.

• 19:29Erik Torenberg?

  And, and Mark, maybe just give us a couple of minutes on how the, the world had changed from it. We'll do a whole separate episode, deep dive on it, but maybe just preview what was sort of the main change that you identified of like, hey, the, the world has changed from a media perspective.

• 19:45Marc Andreessen?

  Yeah, so you know, a lot of my thinking on this is from, you know, a book from our friend Martin Gury that he wrote back in 2015 called the, I think it's called The Revolt, The Revolt of the Public and the Crisis of the Thirty in the New Millennium. And so, so basically, it's like, the world really did change, like how information flows through the world really did change, not just with the arrival of the internet, but specifically with your arrival of social media. And so, you know, it just, it just so happens that like all of us who grew up over the last seven or 80 years, like we grew up in an environment of primarily top-down media, you know, in which there's, you know, these sort of major, major kind of forces in, you know, broadcast, you know, TV or cable TV or newspapers and magazines, where, you know, editors and publishers and reporters, and they, they sort of write all the stories and then, you know, it's everybody else's job to kind of read them and keep up. You know, to a world that looks, you know, completely different, whereas it's

• 20:30Marc Andreessen?

  basically everything is peer-to-peer. And so, you know, hierarchy to network, and then centralized institution to, you know, decentralized, decentralized network. And, you know, that's happening throughout the economy and throughout, you know, throughout society. And, you know, there's good and there's bad to it, and there's, there's, you know, tons of, tons of arguments to be had about it, but it, but it is happening. And so, just, you know, in, in the new world, it's just, you're not, if you're, if you're running a business or running a movement, like you're just not going to do it through the traditional method. You may still participate to some extent, but you're going to primarily tell your own story, and you're going to go direct, and you're going to have your, your own relationship with your, with your constituents or with your fans, or with your customers. And, and, you know, like in some sense, that sounds like, it all sounds like a truism and a cliche, but like, I think there were a couple of tipping points where it really started to happen. And one was around 2015,

• 21:14Marc Andreessen?

  because social networking kind of hit mainstream, and smartphones hit mainstream around that time, which is when Martin wrote his book. But then, I think really, it's only been in the last five years, when I think almost everybody, like, let's say, let's say, basically, everybody under the age of 70, and a very large number of people over the age of 70, basically have shifted from top-down media as their main source of information to social media as their main source of information. And so it actually is relatively new to live in this world in which in which the information really does flow differently. And so it's just it's just it's just a fundamental shift. And so I think, you know, as a firm, we spent, you know, we as Ben said, we always had a big focus on marketing and telling a story. We, you know, we did that primarily through the the old centralized channels from 2009 to, you know, probably 2017 or something, you know, but really since then, it's been, you know, at least it's effective

• 21:59Marc Andreessen?

  or more effective to kind of do it, do it the new way. And, you know, it's like the old William Gibson thing was like the the the future is already here, it just isn't evenly distributed yet. Like everything I'm saying, people can like nod at, but like, you know, as you know, Eric, like, most companies have still not adjusted to this.

• 22:13Erik Torenberg?

  Right.

• 22:13Marc Andreessen?

  Right. Most politicians have still not adjusted to this. Most entertainers have still not adjusted to this. Most sports leagues have still not adjusted to this. And so it's, I think it's very important that we that we that we continue to do it. And then I think it's also important that we set a set an example for our portfolio companies.

• 22:27Ben Horowitz?

  Yeah, and a lot of it has to do with kind of like the apparatus, right? Like, so there's the, you know, from a company standpoint, you're you know what you do, like, you know, we know how to help entrepreneurs, this and that and the other, what a, you know, product company knows how to build their product and so forth. And then it's like, okay, and now you've got to get your message out. How do you do that? And then the apparatus that gets your message out, all the people, all the kind of tools, all the channels are oriented, at least partially in the old world. And so, you know, you, it actually is, and somebody's much longer to adjust than it is for the individual consumer who goes, oh, there's just better stuff over here.

• 23:06Erik Torenberg?

  Yeah. And and Mark, also talk about the shift from from corporations to individuals in terms of kind of where where brands went and who people want to hear from, not to say there isn't, of course, a role for the corporation, but but talk a little bit about that for the corporate brand.

• 23:20Marc Andreessen?

  Yeah. So so rewind history a little bit. So it's actually pretty striking, like this sort of decentralized media environment is that we're entering is not new. It's actually very old. And and of course, finally, the centralized media environment we all grew up in is not the historical norm. And so basically, the the way that we think about centralized top-down media today is basically an artifact of basically the period of the 1940s through, you know, essentially 1970s, like before the 19 Forty's, you didn't have media in the same way. If you go back to the 1930s or before, you had a much larger number of newspapers. You had a much larger number of of radio stations. You had a much larger number of sort of fly by night publishing operations. You know, pamphlets and so forth. And then if you go back even further, one of the most interesting things to study on this is just go back to the American Revolution.

• 24:03Marc Andreessen?

  You know, the time of the colonies in the 1760s through like the 1790s. And it basically, I've been rereading some of this stuff recently, like basically the media environment of the colonial American era was a lot like today's social media environment. You would have 15, 20, 30 little newspapers per city. They would be like, they would occupy every micro sliced knit. You talk about echo chambers or whatever, like they, they, they each have their own little echo chamber. You know, the founding fathers would write all these columns and essay, they would fight things out by writing essays. And then they would publish the essays under pseudonyms. And you have these characters like Benjamin Franklin or Alexander Hamilton that would literally have like a dozen or two dozen pseudonyms at a time. They'd actually write, they'd actually get into fights with themselves. They'd actually, they'd have their pseudonyms actually fight with each other.

• 24:43Marc Andreessen?

  Ben Franklin used to set off arguments against his different pseudonyms to drive, you know, to really like litigate out an issue and to drive newspaper sales. But like really serious stuff also, like the Federalist Papers, which were kind of the explanation of the new constitution. And in 1789, Hamilton and Madison wrote those under pseudonyms. Right? And so this idea of like the internet anon is like, that's an old idea. And the idea of a pseudonym is an old idea. And the idea of like self publishing is an old idea. And the idea of like basically these pitched smash mouth battles, you know, with very little centralized control over what people say. Like, you know, if you read about like how, you know, like Hamilton and Jefferson, and then also Jefferson and Adams had these just like absolutely. They had their own basically pet newspapers and they was just like absolute level of smash mouth politics.

• 25:25Marc Andreessen?

  Like I would say even more like extreme and deranged than even what we have today. Which we people kind of can't believe, but like if you read about the election of 1800, like it was maybe, I think it was more extreme than certainly any election in my lifetime. In terms of like what, you know, it's literally John Adams and Thomas Jefferson, like just like slandering.

• 25:40Erik Torenberg?

  Polarization is the norm.

• 25:42Marc Andreessen?

  Like really, like on every conceivable front. Yeah. So like polar, you know, sort of as, as our, as our, you know, as they say, unfettered conversations were the norm. Anonymity was the norm, you know, rumor, you know, scurrilous, you know, accusations were the norm, you know, pitch back, you know. Sort of Overton window being wide open was the norm. And so, and just for people who want to read about this, the best book on this is called Infamous Scribblers, which was sort of the name for journalists in those days. And so, like, you know, this has happened before. And so, anyway, so the point is like, this sort of centralized media thing that we've been living in, that we grew up in, or, you know, people my age grew up in, like, it's a historical aberration off the norm. And again, it's a consequence of technology change. It's a consequence of this sort of mass publishing, mass media, mass radio, mass television, mass newspaper

• 26:26Marc Andreessen?

  kind of thing that only started in 1940s. And then, correspondingly, therefore, you know, Eric, to your question, like, everything that we think of as corporate branding is an artifact of just a specific point in time of the sort of 1940s to recall of the 1980s or something. Like, all of like, brand marketing, corporate brands, corporate messaging, corporate crisis management, like, all these playbooks that they teach at business school were very specific to a time and place that had a very small number of centralized media outlets with tremendous influence and control. But, and therefore, the corporate brand, like, why does the corporate brand exist? Like, why does a Procter and Gamble brand or any of these brands exist? It exists because if you have centralized media, you know, information's going through this very narrow straw, right? There's very little bandwidth to get something on a TV, or very little bandwidth to get something in the newspaper,

• 27:11Marc Andreessen?

  and therefore to get it to consumers' attention. And so, you kind of had to wrap up everything about a company into like, a single word and a single image. And then you would just, through advertising, you would just pound that over and over and over again, trying to get people to remember it. But that's because that's all you could do. If you, if you open everything up, and everybody can publish, and everybody can debate, and everybody can be present, and everybody can, you know, and then you have these, you know, individual, you know, influencers, you know, with 200 million followers and all this stuff. Like, all of a sudden, you have this completely different method of communicating with an audience that can be much more based on personality, right? So, authenticity, transparency, and then, and then personality, right? That there can actually be a human being. And then it just, and then it just happens, like, because your audience always consists of people, people relate much more to other people than they relate to a corporation, right?

• 27:57Marc Andreessen?

  And so, as, as an individual, am I going to feel a stronger emotional affinity to like, a person who I follow? Or to some, like, disembodied corporation? An office tower in New York City. And if if the communication bandwidth is there where I can interact with both of them, of course, I'm going to have a lot more affinity for the people. And so I I think I I'm sort of radical in science. I think the whole idea of like corporate brands is basically just like it it just it kind of they're on their way out like it's just as as a concept, it just doesn't make sense in the new media environment. And then correspondingly, this site, you know, there's the terms people use these days like influencer marketing and so forth, but the the parasocial relationship is actually really, really interesting one. But you know, sort of one to many personal relationships. You know, I just think so much about how it's going to work in the future is this is based, this is based on, it's based on relationships with individuals. And obviously, you know, like this is happening, right?

• 28:42Marc Andreessen?

  Everything I'm describing is is what's happening in in the entertainment industry and is happening, you know, consumer brands. And you've got, you know, Kim Kardashian with these, you know, with these multi billion dollar businesses, you know, doing, being direct marketed online. You know, many people doing this, many politicians, you know, are now adapting to this. And so this is happening, but I just, I still feel like it's it's underestimated. And if we project forward 10 years, you know, most people, most people are going to think about, most people are going to think about the people they relate to as opposed to the companies they relate to.

• 29:07Ben Horowitz?

  It's very interesting how you bring that up, Mark, about that. You know, there were no kind of centralized medias and no corporate brands or corporate brands weren't the thing kind of pre 1940s. Because as a kid, I always was surprised that I knew more entrepreneurs from like pre 1940 than. So I knew Thomas Edison and Henry Ford and JP Morgan. But who are the entrepreneurs after that? And they there weren't, they were just corporations, right? Like you didn't know actually who ran any of those things, you know, even the the new companies at the time, but just. You know, it would leak out slowly and so forth, but it but it wasn't really a thing.

• 29:48Ben Horowitz?

  And then now, you know, we're getting all these celebrity CEOs again, are are kind of, that idea is reemerging, which is fascinating.

• 29:56Marc Andreessen?

  Yeah, that's right. People kind of can't believe it, but like before, like 1930, like number, either you like literally, you would just go to the store. Or it's just like the corner store and then you would buy like, you know, a pan. And they weren't branded like, you know, maybe, or maybe it was like Joe's store, but it wasn't like, it wasn't like, you know. And so like the the like consumer brands didn't exist in the modern sense. And then to Ben's point, like to the extent you knew any, any business that was at a scale, it was, you know, and businesses, you know, prior to like 1930, they were almost all named after their founders. You know, kind of for that reason, right? It was the Ford Motor Company. And so, and then it was actually this, you know, there's this whole school of psychology is actually, I think it was Freud's son-in-law, if I remember correctly, Edward Bernays, who was sort of the father of public relations, you know, was the new field in the 1920s when

• 30:39Marc Andreessen?

  when radio and newspapers took off and centralized kind of media started to take off. And, you know, they sort of created this whole psychological theory of creating these sort of abstract brands for the, for the reasons that I described, but, you know, by the way, which is very linked to the, although the methods also political propaganda, you know, that became, you know, kind of very successful, you know, in those days. But it's just, it is amazing to me as this like, you know, there were hundreds of years before, there were hundreds of years of industrialization before that and modern, modern economic activity before that, where those things, you know, essentially didn't exist. And, and that's why I'm so confident in sort of pegging all this to technology shifts, which is that, you know, the thing that shifted, the thing that shifted how we think about companies happened as a consequence of the shifts in communication technology. And then correspondingly, if the communication technology unwinds, which is what's happening,

• 31:23Marc Andreessen?

  then you're actually going to go back to the future. And yeah, and then of course, there's, there's more data points to support that every day.

• 31:29Erik Torenberg?

  And is this something the US had internalized in 2009? Is that, is that why you called the firm Andreessen Horowitz, when any, every other firm was going for some big?

• 31:37Ben Horowitz?

  No, that was a different thing. So what happened then, so when we were raising the money and it was, you have to remember, it's 2009, so it was a difficult year to raise venture capital. In fact, I think there were only two new funds raised that year. There was Zara's and Cosla. So the, the biggest, the number one objection we got on the fund was, you guys are very successful entrepreneurs. What's going to stop you from going out and quitting doing this and just starting a company? And then we're going to be left holding the bag and nobody's going to be investing or watching our money. And we had no plan to do that. So we got the idea, well, one easy way around that is just name the firm after ourselves.

• 32:19Ben Horowitz?

  Then they'll know that we're going to be tied to it forever. And we did that. And then I had the idea that since nobody could spell Andreessen Horowitz, we should have this A16T thing. And that, that was the name of the firm. And of course, immediately all the competitors said that we were egomaniacs and like narcissistically insane because we named the firm after ourselves. Which we we just ignored. Like, what couldn't we do? You know, maybe they have a point.

• 32:49Erik Torenberg?

  Yeah, it's kind of true.

• 32:50Ben Horowitz?

  Yeah.

• 32:51Erik Torenberg?

  Well, the irony is that you're still running the firm, you know, 16 years later, still as active as you were even beforehand, whereas a lot of other folks have retired. That is also true.

• 33:01Ben Horowitz?

  Yeah, no, it worked. It did tie us to the firm. So.

• 33:05Erik Torenberg?

  Yes. Yeah. And and is it as simple as, you know, you guys have had, you know, billions in distributions? You don't obviously need to be doing this anymore. Is it as simple as, hey, this is your baby. This is where you have the most fun? What's kept you going, you know, far after you guys you guys need to, going at this pace?

• 33:23Ben Horowitz?

  You know, look, I think that, one, the firm always had a mission. So it was never like the mission of Andreessen Horowitz was never like, let's make a lot of money. That wasn't, you know, we actually, both of us had, you know, enough money for a normal person, you know, to be happy in life before we started the firm. So that that was never the thing. It was always, you know, could we make it much easier and better? Like, could we make it both easier to build great companies? And then with those, could we make those companies better? And then like, what in the world would be that, what possible activity could either of us have? That would be more important than that. Because, you know, one thing Mark and I both share is that,

• 34:06Ben Horowitz?

  you know, maybe the single best thing that you can do to improve the world is to build a company that, you know, delivers some product or something that that improves the world. Like, that is actually, that's the thing. It's actually better than, has a better impact than any kind of activism or political activity or anything else is just like literally just making things that make the world better. And then, you know, kind of doing something larger than yourself, where you bring a lot of people together to do that. And they all kind of grow and improve their lives through it. So, you know, what could be better than helping people do the single best human endeavor possible?

• 34:48Ben Horowitz?

  Like, neither of us ever thought there was anything we wanted to do with our time that was better than that. And and so there's no reason to stop, because we don't have any better ideas. I would say, you know, like, this is the best idea.

• 35:02Erik Torenberg?

  Mark told me he got the, there's a story about Larry Page, or I think if I understand correctly, Larry Page says, I see no better use of my money than giving it all to Elon Musk to build more tech.

• 35:13Ben Horowitz?

  Yeah, so that it's a little bit of that. Yeah, exactly. You know, as a philanthropic idea, for sure.

• 35:18Erik Torenberg?

  One other idea I wanted to bring back to the idea of people as corporations is it's not only the CEOs, right? It's I see as, you know, as building a cinematic universe, right? It's, it's, it's, it's the CEOs, but it's also the surrounding. It's, it's Chris Dixon, it's Catherine Boyle, it's Martin Cusado, it's Alex Rampell. Like you guys have done, you know, a phenomenal job of, of sort of building stars and built, you know, sort of a collection of people.

• 35:42Ben Horowitz?

  Yeah. So, and I would say about that, you know, we're not really, you know, we're not a company, we're kind of, we're a firm. And, you know, those people who we were able to recruit in like very like hyper talented people, really it's just like, it's a platform for those people, you know, and we're, we're two of them, but we're certainly,

• 36:05Ben Horowitz?

  you know, not, you know, it's not that hierarchical in that sense, as you know, you probably observed since you've been here. Like, everybody is kind of doing their thing, but in a common context with a common culture and, you know, kind of a,

• 36:23Ben Horowitz?

  mostly common set of investors and so forth. And so it's much more like a team. It functions more like a team than, than a normal kind of hierarchy, you know, in that sense. And, you know, it's great because we were able, like, if you look at the top people, you know, if you look at Martin Cusado and Chris Dixon and Alex Rampell and David Uhlavich and so forth, like, that team is better like IQ wise, capability wise than the executive teams of Meta or Google or Apple or any of them. And it's just because, you know, in a way, they're all the boss and they all act like the boss and that works.

• 37:05Ben Horowitz?

  But that's, that's just kind of been like a nice outcome of, of the platform.

• 37:10Erik Torenberg?

  Talk about how you guys developed this, this idea of a platform, because most, most firms don't have that, didn't have that. Or you guys moved to the sort of almost federated model. Talk, talk a little bit about how the evolution of the firm and how you guys figured that out or what that was like.

• 37:25Ben Horowitz?

  Yeah, so it's pretty interesting. So one of the things, so it came in two pieces. So the first thing was when we started the firm, the history of venture capital, like if you had done like a back test on it, what you find is there were never ever more than 15 companies in a year that would ever make it to $100 million in revenue. Because you know, the technology industry, that was like the general size of it. That's the amount of new technology that the world could absorb, you know, in those days. But you know, Mark had an idea, which he wrote up in, I think, 2011 called Software

• 38:05Ben Horowitz?

  is Eating the World. And the idea behind that was, well, every company that was going to be worth anything was going to be a technology company because software was able to just to make anything so much better. And so there were going to be not 15 companies, but 150 or 200 companies. Now, the result of 15 companies meant the optimal venture capital firm was like six or eight people going after those 15 companies. You know, each one gets two and you've got a monopoly. So there was no need to ever be bigger. And as a result of that, the way they kind of set up their organizations were basically

• 38:47Ben Horowitz?

  with something what I'd say is called shared economics, but also shared control. And that shared control made sense if you're only going to be eight or 10 partners, or six or 10 partners, or whatever. Because if you're never getting bigger than that, then you don't have to reorganize, you don't have to make difficult management decisions that people are going to disagree with. We knew, or like we thought software was going to eat the world, and we were going to need to be way bigger, way bigger than, you know, six or 10 partners. And so we were going to have to be able to reorganize, decompose the problem, set up the organization in a way where very smart teams of people could

• 39:28Ben Horowitz?

  work independently and address the different facets of the industry that needed to be addressed. You can see it with American dynamism and infrastructure and apps and crypto and bio and so forth. And so we never had shared control. We always had centralized control. And this is something we got that advice from, you know, Herb Allen was super helpful in in us understanding why that would be important. And then, you know, also, actually, Mark's father in law, the late, amazing John Ariaga, was like, just very, very clear on like, if you're going to run something, you know, eventually, there's going to be conflict, there are going to be these issues, and you've got to have control. And that's going to be important, you know, it's not important until it is important. And then it's the

• 40:12Ben Horowitz?

  only thing that matters. And so, you know, with that control, we've been able to kind of reorganize, reimagine the firm, and then go address every single kind of vertical where you need, like, the people who know American dynamism, like, to know that in depth, everything from like, rare earth minerals to rockets to these kinds of things, there's no way those same six people are going to know everything about crypto. It's not even possible. Like, these fields are too deep. And not only the technology, but also the whole entrepreneurial ecosystem. And so you need separate teams to address these separate very large markets. Whereas before, you just needed a person on that. Like, you could

• 40:54Ben Horowitz?

  have a person on crypto, it'd be fine, or a person on AI, it would be fine. No, no, no, that's never going to work again. And so our ability to field a whole team against that, and restructure things and say, okay, you were doing consumer internet, like, that's not going to be relevant in the next 10 years and so forth. These kinds of things are very hard to do if you don't have control.

• 41:16Erik Torenberg?

  And those two examples, crypto and American dynamism are also interesting, because these are examples where you guys helped create the categories, where I believe you're the first big venture firm to have dedicated crypto and AD practices. You're also creating a firm, and you've created a firm that is can be adaptive to new sort of theses, new ideas, new, new, new trends, and build firms against them.

• 41:38Ben Horowitz?

  Yeah, and that was something, you know, like, I just say that Mark kind of identified early on, you know, he, one of the things he used to say when we started the firm is venture capital is a young man's game. That's because venture capitalists, that was like one of the things he got out of the many conversations we had with him. He's like, and what he was really saying is a young person's game is You know, the technology is always changing and you know, to learn and the people who know the new technology best turn out to be often new people. And so to what you see in many venture capital firms is once whatever they exploited runs out. So they did network effects and consumer internet and they were amazing at that. But then when that stopped being the thing, they didn't

• 42:22Ben Horowitz?

  get to the next thing. And we were able to get to the next. So you know, one, we're always watching for the next thing. But then as soon as we see it like, and we have such brilliant people, you know, Chris Dixon saw crypto and we're like, Chris, go get it. And you know, David Ulevich actually saw Catherine Boyle, who saw American Dynamism and Catherine's like, like, this is a very important thing. And so we just go do it. And we can do it because we don't have to repurpose our old people. We can build a whole new team. We can change the organizational structure.

• 42:55Erik Torenberg?

  Off in an offline conversation, we were talking about how some firms look the same as they did, you know, 30 years ago, from a, from a structure perspective, and the world has changed. And, and, and, you know, firms need to change to, to meet those sort of the evolving, the evolving needs. And this is one example where the sort of stuff has gotten so much more complex. There's been this great complexification. And so to your point, a generalist firm could have been able to cover the entire landscape. But now, no, you know, individual can have deep knowledge on all the fields, you know, bio, crypto, all the fields we cover. And so that's one great example of how

• 43:34Erik Torenberg?

  the world has changed and that leads to a need in venture firms to change as well. Are there other examples that come to mind around how the asset class has evolved or should have evolved to meet the, the needs of the, of the world changing?

• 43:51Ben Horowitz?

  Well, you know, it's probably changed more since we started the firm than it did in the whole history before then. And there's so many ways. So, you know, one of the things is right, like, as Mark said earlier, angel investing, kind of, that that became a real category. And then the public markets have become I would say very difficult and dysfunctional to the extent that, you know, OpenAI just did a giant raise in the private markets, which I don't think they could have done in the public markets. So now, like, the fact that you can raise more money in the private markets than the public markets in one shot just has, speaks to the expansion of the private markets to deal with the fact that the public markets

• 44:34Ben Horowitz?

  are just not a great environment anymore for, you know, for companies. And so that changes venture capital because we're the private market. So our market just, you know, got much more enormous. And then, you know, as you said, like, media change, like how you go to market. Like, we actually were the first ones to market a firm in venture capital and, you know, Margaret Wittenmark has did like an amazing job of,

• 45:00Ben Horowitz?

  you know, creating a brand for a firm that, you know, popped up out of nowhere. And that had never happened before, but then the way you market it changed entirely as we just discussed. So, you know, it's evolving. The world is changing really fast, just in general. And now, look, I think, AI, just the way we work, the way we operate as a firm is changing very fast due to AI and, you know, like what we can automate, you know, how big a reach, how many entrepreneurs we can know, all these things are very different now.

• 45:28Erik Torenberg?

  Let's double click on the brand point because you guys in 2009, you came out and you were alluding to it earlier, but you made a lot of noise, right? You know, some people had different opinions, but everyone had an opinion. And, and you, you thought deliberately about, hey, we're going to build a brand in a new way, you guys and market and team. And you, and you kind of crushed it. Talk about what that strategy was and, and what perception it was and what was it like as you were, as you were building out the brand?

• 45:53Ben Horowitz?

  Well, look, you know, as a conversation Mark and I had, and you know, Mark is kind of like, one of the ways we understand each other. So Mark asked me, he said, you know, like, I've been studying the history of venture capital. I've been trying to figure out why they don't do any marketing. And it turns out like the industrialist in venture capitalists, the Rothschilds, you know, JP Morgan's and so forth, were sometimes like funding both sides of a war. And so like any kind of publicity like might get them killed. And that just kind of carried through to modern venture capital. So that the, the original rationale for not doing it was no longer really valid.

• 46:37Ben Horowitz?

  And they, they told themselves other things like, we're very humble. So we don't market in this kind of nonsense, which is always a rationalization for laziness. So he said, you know, like, what do you think should we market it? And, you know, like sometimes when Mark asks a question like that, and I already know what he thinks, and I haven't thought about it that much. I just go, oh yeah, of course, like, let's market it. And that was kind of that conversation. And then, you know, he had, he had worked with Margaret, you know, prior at Ning. And he thought super highly of her. And so what happened is, you know, he said, well, let's, you know, let's talk to market. Let's see what we can do and so forth. And, you know, we spoke to her and the, this was kind of hilarious thing.

• 47:20Ben Horowitz?

  And you, and you have to remember that this is the days when like magazines were a big deal, which, you know, they're not so much anymore. And so when we launched the firm, she said to us, she said, do you want to be on the cover of Fortune or Forbes? And we were like Fortune, of course. And, and that's exactly what happened. So that was the beginning of it.

• 47:43Erik Torenberg?

  And you guys were able to recruit amazing people early on. Talk about what it was like to get one of the first big partners. Like you, you know, you've got some partners like, like Chris who've been here, you know, over 12 years. What, what was it like in terms of how you thought about recruiting the, the early partners and, and landing them?

• 48:01Ben Horowitz?

  I would say that's like, kind of one of the things we got wrong in our, in our thinking. Well, we got right and we got wrong. So like, one of the things we got very right was the first person we hired was Scott Cooper, who we knew like, super well and had worked with for years. And it was just like a brilliant, like, and really fundamental to building the firm. He's recently joined the, the presidential administration in the White House. But he was just kind of invaluable and fantastic. And he didn't want to join when we started the firm because he was worried we wouldn't be able to raise the fund. So we raised the fund and then we hired him. He was employee number one.

• 48:40Ben Horowitz?

  Then the, the second idea that we had was to kind of only founders or CEOs were allowed to be general partners. And the reason for that was, you know, a little bit what Mark said earlier, which is we were counter-programming what had happened in, in the industry where you had a lot of people who were smart but didn't understand founders. So we wanted everybody in the firm to understand founders. But that profile turned out to be not perfect in many ways. But we hired some really great people, you know, one of the early people is Peter Levine, who still works with us now and so forth. And then, you know, we kind of started, the first thing we relaxed was, okay, maybe the company, you had to found a company or be CEO, but it didn't have to be that great a company.

• 49:26Ben Horowitz?

  Like, if the company did okay, then that was okay. And that kind of gave us permission, which was controversial at the time, to hire Chris Dixon. And one of the things Mark and I recognized early was Chris Dixon was a far better investor than either of us. And so that, that was like, a little bit of an indication that maybe we were too rigid in our criteria. And that, that started to open it up quite a bit.

• 49:48Erik Torenberg?

  I want to go back to one of the unique insights you had was, going back to, you know, Mark's Software's eating the world piece, was that there were going to be more winners and those winners were going to be much bigger. And there's a lot of implications that stem from that. You'll raise bigger funds, you'll have this decentralized team or federated model. You'll be able to invest at higher valuations if these companies are going to get bigger and bigger. And it feels like that was something that you guys saw relatively early that other firms or even later-stage firms then got on board with.

• 50:29Marc Andreessen?

  Yeah, so the big thing on that is this really important transformation that's happened in tech that went unremarked on as a pattern, although you started to see it in the early 2010s, which is up until roughly 2010, if you make a list of all the big winners in tech over the preceding 60 years, they were basically all a form of a tool company. It's a technology tool. So they were built personal computers or microchips or operating systems or databases or routers or web browsers or whatever. But fundamentally, they were building components of a computer system. And then they would sell those tools to either consumers or businesses, and then the consumer or business would figure out what to do with the tools. And that had been the pattern. In fact, Ben, I recall when I first started the firm, one of my early investing things

• 51:11Marc Andreessen?

  was no verticals, because you just look at that list and you're like, basically, the big winners have all been these big horizontal tech companies building general-purpose tools that lots of, that many other, many downstream industries pick up and use. But the big winners, historically, if you had a tech startup that was focused on a vertical, it just meant that you were a small tools company. The classic example, so a classic example is I am a tech company and I want to be in the boutique hospitality industry. And so therefore, I start a software company that makes booking software for bed and breakfast hotels. And such things existed, by the way, and they were just very tiny companies. Fast forward to 2010, you had this, basically, and I think it's really the internet really started to work, broadband really kicked in, a bunch of things really catalyzed.

• 51:55Marc Andreessen?

  And what you started to see was actually the vertical, the tech companies went into verticals, started to get to be huge. And probably the first two of those that really made this clear for me were Uber and Airbnb. Where Airbnb, okay, like, how about we not only build the booking software for the best? And breakfast, but how about like we run the entire service like how about we run the entire booking engine? How about we run the entire search engine? How about we do all the transactions? How about we do all the customer, you know, all the customer service, like the entire end to end experience? Or the same thing for, you know, Uber or Uber and Lyft, which is, you know, as you could, you could have a small boutique software company doing taxi dispatch software for taxi limo operators, or you could build Uber or Lyft and build, actually build a giant transportation network with, you know, drivers and riders and, and, and money flowing through. Um, and then, you know, more recently, you could, you know, a company like Andro, right?

• 52:39Marc Andreessen?

  Like, you know, our, our, our companies for many years have sold many, many, you know, parts of, of computers and software into the, into the defense department and into the, into the defense contractors. But, you know, Palmer Lucky came along and said, let's just build a defense contractor. Like, let's build a, a, a direct competitor to the big defense primes and actually, you know, build defense systems. You know, Tesla, another one, right? Like, you know, instead of building, you know, embedded, you know, whatever power management software for, you know, for, for cars, you know, how about just like build the car? SpaceX, we keep going, but basically like in, in the last 15 years, if you, if you write that, if you do that same list again, you know, many or most of the big winners have been companies that have gone into a vertical. But what they've done is they've gone in and they've tried to basically eat the entire vertical, right? They've, they've, they've provided an end to end experience with everything required to basically, you know, service that vertical.

• 53:23Marc Andreessen?

  Often in direct competition with the incumbents in that vertical, right? So Andro competes head to head with existing defense primes. You know, Uber competes, you know, competed head to head with taxi limo operators, Airbnb famously competed head to head with hotels. We've got extremely angry about that, right? And so, you know, Netflix competed directly with cable channels, right? And movie theaters. And so, so, so basically it's just like, all right, you're going to have more and more of these companies that are going to use technology to go insert into an end market and then just try to go take that end market. Those companies, good news, those companies can get to be gigantic, right? Cause if you, if you, if you crack the mother load, like, you know, Netflix has, for example, entertainment, you know, you could be like Tesla has in cars. You can build a company that's maybe multiples in size even of that entire industry earlier.

• 54:04Marc Andreessen?

  You know, the way that existed before, the, the challenge is that those kinds of companies are much different than historical tech companies. Those are like full service. And so they're, they're, they're like much more complex, right? They have like a lot more moving parts on the operating side. They require a different kind of discipline on the part of the management team. You know, they, they, they're going to be operating in, in a lot of cases, they're operating in regulated industries, right? Where there's a completely different political, political dynamic. And by the way, and they're going up against entrenched competitors, right? Who certainly have no intention of just turning the, turning the business over. And so I, I, I think in many ways, that's been the defining theme of the last 15 years in the valley is kind of the, the evolution from just tools companies to, you know, what we used to call full stack, like just do the whole thing.

• 54:42Erik Torenberg?

  It's fascinating. The one knock against entries that I've heard over the years is, hey, it's, you know, they think of their firm as a product or there's like a, there's like a machine as if, as if that's not, you know, a great thing. Like if a startup said, hey, we have no moat, you know, I'm just a smart guy. You'd say, hey, that doesn't, doesn't feel super defensible. It doesn't feel like you've really built something of, of power. And yet sort of when people think about their venture firms, they sort of run them the opposite of ways that they want their startups to, to run. They really think about structural advantages, durable advantages, or network effects, or all, all of these things that they want their startups to have. It's been an interesting sort of contrast there.

• 55:19Marc Andreessen?

  There's a kernel of truth in the critique. The kernel of the truth is like, look, at the, at the end of the day, as an entrepreneur, you do, you do.

• 55:24Erik Torenberg?

  You want personal touch.

• 55:26Marc Andreessen?

  You don't want personal touch. And the reason for that is you're going to have somebody on your board, right? Like you're going to have somebody on your board. You're going to have somebody you call at 4am when like, you know, the, the world is caving in. You're going to have somebody who you, you, you're, you know, you're dealing with. And, and that's going to be, you know, and it's going to be, you're going to be dealing with that person in high tension situations. You're going to want to really rely on them. You're going to want them to really know what they're talking about. You're going to want them to, you know, have, have throw weight in the industry. And so you're like, that, that really, that does really matter. There, there is that personal relationship. And so I, I, I don't think what would work is just like trying to not provide that. And instead just, just provide, as you said, like I'm just provide a machine. But what I think works incredibly well is to provide that and provide the machine.

• 56:03Ben Horowitz?

  Well, and, and the team. So the thing that I, I would say really distinguishes kind of what we do from, from what we experience is like, we always had a person. And when we tried to reach through that person to the rest of the team, they were like, Not my company. I'm not making that introduction. I'm not doing that. Whereas, you know, like almost on a daily basis, you know, we'll have a company who'll run into something and they'll go, "Oh, wow. You know, yeah, like you should talk to Joe Morrissey. He dealt with that sales issue over here. You should talk to Ben. Like, he knows how to like, deal with a crisis like this."

• 56:40Ben Horowitz?

  In fact, we just had one this week, you know, where, you know, one of our partners, he's like, "Well, this is seems like a bad crisis." You know, like, bring in, bring in the guy who like, lived through all the crises. And, you know, that's me. And like, I can really help in that because I, I know I understand like, what to do, but I understand what it feels like. And, you know, so much of, you know, that kind of thing is, is, is having a deep understanding. And in the firm, we understand almost every situation you would be in. And there's somebody who's a great expert who will be there in like a flash, even if that's not the person on your board. And that, that I think is probably the thing I'm most proud of in the organization is,

• 57:24Ben Horowitz?

  people always get their money's worth from that perspective.

• 57:27Marc Andreessen?

  This is the big industry structural transformation thing that we think has taken place. And we, we, we did, and this is one where we did predict it. We have been talking about it for a long time, but I think it's really happened. Like, it's really played out over the last 15 years and it's still playing out, which is,

• 57:41Marc Andreessen?

  there's this pattern, there's this pattern in industries as they mature, which is, they often start with what you would call like, basically, a strategy that's kind of like being in the middle. So, classic example using this is like retail, you know, retail shopping where, you know, once upon a time, there were these things called department stores, you know, it says names like Sears and JCPenney. And then you would go to the department store and the thing about the department store is it would have a pretty good selection of products at a pretty good price. And, and, you know, growing up, that's, you know, that's where we would always go shopping. You know, by the time you hit the eighties and nineties, you know, basically the department stores stopped working. And, and, you know, for the most part, they've gone under at this point. And, and what happened was they got replaced by competitors that were not in the middle, but were on the far, the far end of one side or the other, of kind of the spectrum of strategies. That's why we would call the outcome the barbell. And so the department stores are placed by two, two sets of companies.

• 58:23Marc Andreessen?

  So first of all, high scale, right? So high scale, Amazon, Walmart, right? Where, where- Where what you get is like an incredible selection at absolutely fantastic prices. Right, but but but it's a very, you know, to your point, like it's a very machine experience. It's a very, it's a very machine, it's a very, you know, it's a, you know, it's a high scale. You go to Walmart, like, you know, the shelves up to the ceiling and the whole thing like, you know, it's it's a specific thing. But like that like wiped out a huge part of the department stores. And then the other thing on the other side was basically specialist boutiques. Where for the thing that you care about the most, whether that's, you know, fashion or jewelry or consumer electronics or candles or whatever, right? Whatever is the thing that you actually care about the most, you go to the boutique, right? And you say, I was talking about it, like you go to the Gucci store, you know, to buy your scarf. You go to the Apple store to buy your iPhone.

• 59:08Marc Andreessen?

  And what the boutique offers is a very narrow selection at a very high price. But what you're getting is a very specialized experience. And and your point, you're often getting the personal touch, right? So you go into a, I don't know, you go into like a, you know, wrist fresh boutique or something. And it's just like, it's just like great. It's like, wow, would you like some champagne? You know, we're in the whole thing. Oh, let me get you a comfortable chair. It's like, you know, here's all the espresso, you know, it's just like the whole thing. Oh, you want to stay late? Great, we'll lock the doors. You can stay for another, you know, half hour and browse through everything. You know, you just get, you get this very, you know, you get this very, you know, kind of personal touch, you know, personal touch kind of experience. So what happened was the department stores just died because they didn't offer either one. They did not offer, they didn't offer scale and they didn't offer the boutique personal touch experience. And and and what you find, if you look at the history of business is basically as industries professionalize and mature, many of them go through this.

• 59:52Marc Andreessen?

  And so what I'm describing also happened in advertising agencies. By the way, this is a big theme of the TV show Mad Men because they were right in the middle of it. You know, I remember there's a certain point in the show where they sell, you know, they're running this kind of midsize ad agency and then they they actually sell it to McCann, which was one of the big scale players. And then they got frustrated there because it was just a big, big machine. And so then they went and started their own boutique. And so it was kind of, kind of during that, during that, during that era. And then it's an ad agencies, happened to law firms. It happened with Hollywood talent agencies. Michael Lovitz catalyzed this when he was in Hollywood in the seventies and eighties. It happened in the financial, it happened in banks. It happened in investment banking, commercial banking. It happened in hedge funds. It happened in private equity. So we we just like seen this pattern that this happens over and over again, but it hadn't happened in venture capital.

• 1:00:34Marc Andreessen?

  And so when we entered the field, basically what we observed was you just basically have their old department stores and the venture capital version of the department store is six to eight general partners with a, you know, 300, 400, $500 million fund, you know, doing the sushi boat strategy, right? Like sitting and waiting, you know, not, you know, by the way, you know, no website, right? Because like, oh, you know, God forbid that you like, you know, ever, ever tell your story to anybody or make yourself visible. And then you just, you basically sit on San Diego Road and you basically wait for the deals to come through. And then, you know, it had run that way for a long time. And so it was kind of this cartel, self, self referential thing. And, and so it just, it just kind of ran that way. And basically our, our bet when we went for scale and we went to build out the kind of teams that been described and, and sort of this machine that results from it, you know, the

• 1:01:17Marc Andreessen?

  bet was basically the, the, the, the, the death of the middle is going to happen, the barbell is going to play out. And so there was going to be an opportunity for a handful of firms to go for high scale, but only a handful, right? Because what you get on the other side of this is you don't get 50 at high scale. You get, you get, you know, you get a bunch, but like, it's not that many. It was a scale economics kick in. And then what would happen on the other side is the rise of the seed, their angel investor and the seed investor. And of course, we had been part of that, right? We had been on that side of the barbell. And this was part of the transformation that had happened in venture, which is the original venture firms were like, the original venture firms in the 50s, 60s, 70s, they were first money in, right? They, they were the first check, right? A company like Intel or Apple. By the time the 80s and 90s rolled around, they were no longer the first money in. They were off in the second or third check after the

• 1:02:01Marc Andreessen?

  angels and the seed investors. And so, you know, we put two and two together and said, aha, what's going to happen is this field is going to bifurcate, just like every other field. We're going to go for scale and then we're going to encourage the seed investors. And I've been, you know, we've been very actively trying to invest in seed investors and trying to help them. And we're, you know, I was trying to be very friendly with them. And then basically the, the question, the structural question is posed is what's the point of having a department store, right? Of having a, having a sort of mid-sized firm? And, and the answer is, by the way, there's no point. Like they're, for the same reason, there's no point to department store. There's no point to the mid-sized firm for the reason that Ben described, which is that, that, you know, they don't have any, they're, they're not the first money in. They're not at scale and they don't have any depth. And so at the end of the day, there's, there's really fundamentally no, no, no value proposition to the thing. If, if you have access to seed investors on the one side. Side of the scale platforms on the other side.

• 1:02:46Marc Andreessen?

  And I would say, you know, 10 or 15 years ago, we would say this and everybody would get mad. You know, because it sounds like we're predicting everybody's going to die. But like, sitting here today, you know, this has really played out. And many of, many of the mid-sized firms that I grew up with are gone. And in some cases, they're gone because they failed. But in a lot of cases, they're actually gone because they succeeded. You know, the partners made a lot of money. And then at some point, just the rationale for being in business started to fade away. And, you know, maybe they had to start working a little bit harder and that wasn't fun. And, and right, and so they just kind of folded up shop. And then, and then the LPs correspondingly have adapted to this. And so if you talk to the LPs now, increasingly, they are focusing capital either on the scale platforms or they're focusing capital into, you know, this, this very specific kind of early-stage seed angel strategy. And their interest in funding the department of store equivalent of the VCs, you know, has really faded.

• 1:03:31Marc Andreessen?

  Anyway, so I, I view this as like, like, this is one of those things like this is a very natural evolution. This, this was destined to happen. It'll happen in many other industries in the future. You know, it's, it's, it's a somewhat, you know, it's, it's a process that plays out in response to customer demand. Right. Because the customers of venture firms are the entrepreneurs on the one hand and the LPs on the other hand. And if they both want this change to happen, then it's going to happen. And so it's a very natural process, but you know, it, it's disconcerting to be on the wrong side of this. And it's an adaptation process for people to kind of figure out that this is happening. But I, I think now it's pretty clear.

• 1:04:01Erik Torenberg?

  Yeah, that's, that's well said. And that's, that's one example of how the asset class has evolved. Let's get into other ones. I mean, one is that there's, there's been, you know, as your thesis has played true, software has eaten the world. There's been more demand on the LP side to, to get into, into the space. Much more money has flooded into the space, which means more venture capital firms, which means more competition. And of course, when, when supply is constrained, people are sort of competing on the axis of almost, you know, VCs have the power and founders are clamoring to, to get into, to be on the conveyor belt. And they're, you know, pretending not to care by, you know, not having websites. But when there's an explosion of, of venture firms, now founders are the ones picking. And VC firms have to change their tune.

• 1:04:45Erik Torenberg?

  You guys were, were early on to it, but it also changes sort of the, the, the types of LPs that, that want to be involved. And then, yeah, talk more about how, how, how the asset class has evolved from, from more capital flooding into the space or any other changes that emerged from it.

• 1:04:59Marc Andreessen?

  Yeah. So look, I'll say a couple of things. So first of all, our, our, we used to have this discussion with our friend, Andy Radcliffe, you know, who's kind of the master of venture. And, you know, as I said, co-founder benchmark, and then actually taught venture later at, at Stanford.

• 1:05:09Ben Horowitz?

  I'm very analytical on the topic.

• 1:05:12Marc Andreessen?

  Yeah, extremely thoughtful and really, you know, because we had this discussion with him of like, wow, you know, money comes in and out of it, you know, money comes whipping in and out of venture and these, right, these dynamics really change of who's, as they say in Seinfeld, who has hand, you know, in every relationship, somebody, somebody has hand, you know, the upper hand and is it the founders or the, or the, or the VCs? And we said, you know, how should we think about this? And Andy made this very interesting observation. He said, basically, for as long as he had been in the field, I think, you know, going back, you know, going back now decades, you know, he said, basically, venture has always been over, over, overfunded as an asset class. There's really never been a time in which vendor has, venture has been underfunded, maybe, maybe a little bit in the extreme crises, like, you know, maybe 2009 as an example, but like generally venture is overfunded. He said, he has rough, I think he said at the time, his rough back of the envelope math is a sort of roughly always overfunded by like a factor of four, you know,

• 1:05:56Marc Andreessen?

  I think, you know, maybe these days it's like a factor of 40 or 400 or something. You know, the Sequoia guys are always famous for complaining. Anytime Sequoia's guys give an interview, they always talk about how there's just like way too much money in venture as they're always trying to talk.

• 1:06:08Ben Horowitz?

  And they're always trying to discourage people from doing any venture, yeah.

• 1:06:11Marc Andreessen?

  Yeah, they're trying to talk to LPs in the, in the, in the stopping the money flow, but because, you know, more competition, but, but, but then this question is, okay, why is it always overfunded? And, and he said, basically, it's, it's a consequence of the, you think about the broader financial landscape. So, you know, what, what are LPs? LPs are large pools of institutional capital being invested for many reasons, but a lot of it ultimately is retired, they're ultimately retirement funds, like the ultimate theme is one for another, they're retirement funds. So, so they're large pools of capital that need to generate a certain level of return over the next 50 or 100 years to be able to pay for, you know, people's retirement. And, you know, in order to do that, they need to hit a certain level of return. And, you know, the nature of, of the modern economy is, you know, population decline, you have a lot more older people, a lot fewer younger people. And so you have this sort of fundamental issue, which is like, how as a steward

• 1:06:56Marc Andreessen?

  of institutional capital, how do you generate the long-term returns that you need in a, in an environment in which actually that's, that's actually not so easy. And so, you know, you invest in stocks and bonds and whatever, and, and, you know, you often still can't get the math to pencil out, you're not going to hit your return target. And then there's this asset class called venture capital where, you know, sometimes it works and sometimes it doesn't, but when it works, it blows the lights out. Right? Like when venture capital works, it's the top performing asset class. And you know, there are individual venture capital funds that have been, you know, just absolutely spectacular. You know, returns that have driven a lot of the return for an entire institutional portfolio. And so there's this, you know, and the way I describe it is, you know, venture capital is never the majority of the money in a, in an institutional pool. But it's like the, you know, it's like the cherry on the top of the sundae. It's the thing that, you know, it's the, it's the, it's the small position of, of the thing.

• 1:07:41Marc Andreessen?

  But if it works, it might make the entire formula work. And then you just look at like, how many, how many pools of capital are there like that out there? Right? How many, how many LPs are there out there like that? And the answer is there's a lot. And then basically what happens is all the LPs basically read the Swenson book, which describes how to run, you know, these institutional capital pools, which is a great book. And they basically say, oh, Dave Swenson says you put, you know, X percent of venture capital. And, you know, but, but Dave Swenson says the key to it is you only invest in the top venture capital firms. Cause venture capital is a feast or famine business and you only want to be in the top 10% of the firms. And then basically what they do is they go out and they talk to, you know, the firms. And then they find out they basically can't get into most of the firms they want to invest in. And then they sort of develop a theory of how these other firms are actually in the top 10%.

• 1:08:24Marc Andreessen?

  And you can actually pick that up because if you ask LPs, who are their top, who do they think are the top 10% firms? They often have very different lists and, and, and I, you know, and part of it is a function of maybe they've, they've sniffed something out. And a part of it is just because like they have to allocate the money. And so they kind of convince themselves that there, there are sort of undiscovered gems out there. And so as a result, they just, they, they just, they overfund the asset class. And then that, that, you know, it's just like too many LPs leads, right? Too many LPs managing too much money leads to too many VCs, leads to too many startups getting funded, which leads to the phenomenon that founders experience, which is I start a company and not only do I have three venture, venture backed competitors, I often have 30. Right? And it's like, you know, basically like what the hell? And so anyway, so Andy's point is like, look, like that's just an artifact of the world.

• 1:09:06Marc Andreessen?

  Like we, we are the, we are the tail on a much larger dog and the dog is large scale institutional money flows. Like venture is a rounding error in the global financial system, but it's one that's just prone to be overfunded for very long periods of time. And what, what Andy said was until there's a new approach to investing in these large pools of capital, like basically this, we should basically assume that this, this, this, this process persists over a long period of time. So, so I think it just is, is the case, you know, would it be better if the amount of money was kind of, you know, equalized to what it should be relative to the opportunity set? I mean, you know, for people like us, yes, that would be better.

• 1:09:39Ben Horowitz?

  For the world, it would be worse. Yeah.

• 1:09:41Marc Andreessen?

  I was gonna say, yeah. So that's the other thing. It's like, if you had less money in the space, would entrepreneurs be able to take as many swings? No. Right? And, and, and you know, look, you know, should I have the arrogance to sit here and say that we're going to invest in all the great companies and that we're not going to say no to people who we ought to be funding? And obviously, we, you know, we make that mistake all the time. And so like, if you're going to have an asset class that is to be overfunded, like this probably is the one to overfund. Right? In other words, that there's a societal surplus of all of the swings that entrepreneurs get to take that they wouldn't get to take if the sector wasn't overfunded. And some of those work, right? Like, and you have founders come out of nowhere and they raise money from no name VCs and like, they end up building huge, successful companies. And so I, on a societal basis, I actually think it's like, it's like, it's like a form of dysfunction that maybe is not optimal financially, but like, on a societal basis, I think it's probably not positive.

• 1:10:27Ben Horowitz?

  Yeah. I mean, like, what could be better in terms of wasting money than taking money from people who have too much and giving it to people who want to change the world and make it a better place? I mean, it seems like, you know, and are, and are building a company to do so. Like, that, that seems like a pretty good idea. You know, the other thing I'd add to that is venture capital is a little bit unique, you know, from our point of view, in that it's the only asset class where the top managers tend to persist for decades. So like, if you look at stocks or bonds or anything else, like the pickers, because they're all, you know, kind of picking against the same thing and they all have

• 1:11:08Ben Horowitz?

  equal rights to invest in everything. It tends to like, there's some amount of randomness or whatever that puts somebody on top and then they're no longer on top the next decade and so forth. But in venture capital, the top firms often remain the top firms for a very, very long time. And the reason is, the best entrepreneurs will only take money from the best venture capital firms. And so, you know, if this was the NFL draft, which I think is today, you know, we'd have the number one draft pick every single year, despite already kind of having the best team. And so that doesn't matter if there's too much money. If you always get to pick first, you still can win very consistently and that, that's sort of what happens. So, so it's a great system from our perspective. Good

• 1:11:52Ben Horowitz?

  for the world. Good for us. We love it.

• 1:11:55Erik Torenberg?

  Some people will say things like, oh, there's too many founders or too many people want to be founders as if it's like a already an efficient market and there aren't people out there in the world who whom.

• 1:12:05Ben Horowitz?

  That's a bit, yeah, it's the best thing in the world for like people to try, you know, to do something larger than yourself and try and make the world a better place and you know, get people along the ride with you and everybody's got a great purpose and they're all working hard. And like, and maybe there's a great outcome for them in the world. Like, why wouldn't you want to fund as much of that as you can? Like it's, I never understood the argument that there's too much venture capital. It's crazy. It can never be too much.

• 1:12:34Erik Torenberg?

  When did you guys realize that you were entering the, like, when did you realize, hey, this is really working? Like, what was sort of the biggest inflection point in A C's history of, when you guys felt you reached that point?

• 1:12:47Ben Horowitz?

  So like very early on, we realized we could win what we thought were very high quality A rounds from like our, from top tier VCs. And as soon as we could do that, we were like,

• 1:13:05Ben Horowitz?

  oh, we could be top tier. We could definitely be top tier. We thought, you know, in our original like kind of world domination plan, we thought, you know, that was going to take 10 years or whatever, but it happened really early on, like right in fund one. And by the time we got to fund three, it was in full effect. So

• 1:13:26Ben Horowitz?

  it just happened much faster. You know, like we're in a whole nother world now than we were then, but we knew it was, it's like as soon as we could be, you know, in those days, Kleiner, Benchmark or Sequoia in a deal, that that was a very clear indication that that we could be top tier.

• 1:13:42Marc Andreessen?

  Yeah. And it, look, I think it was basically, you know, this is sort of the advice I'd give people, not in, not, not how to compete in venture, but how to compete in other, in other spaces that are potentially ripe for transformation. Is really, it's two things we were able to do. I think it's two things. One is just like having been a customer, you just have a perspective on these things. And so there is a real, there is a real knowledge advantage if you've been a customer or something, really understanding the shortfalls and the opportunities. So that's, that's one lens, but you actually, you know, you have to do that. Like I think.

• 1:14:08Ben Horowitz?

  Yeah, that was a hell of a hard lesson that we had to learn that way.

• 1:14:11Marc Andreessen?

  It was.

• 1:14:12Ben Horowitz?

  You know, building a company is, is a lot of knowledge gathering.

• 1:14:16Marc Andreessen?

  Yes, 15 years, 15 years of pain and glory. And then, and then, yeah, look, the other thing is, you know, we've been talking about this the whole discussion, but the other thing is, you know, to take a structural view of the industry. Right. Which is like, you know, as we talked about before, but like, these industries are not, the, the, the, the structures are not permanent and timeless. Like, you know, just because things work a certain way today, doesn't mean that's how they've always worked. In fact, almost certainly that's not the case. Almost certainly the structure of any industry has changed a lot over time as circumstances have changed. And then therefore the structure of whatever industry is today is not going to be the same structure it's going to have in 10 or 20 or 30 years. But incumbents, especially incumbents that no longer have their founders, incumbents are highly likely to underestimate the amount of structural change and they're going to have a hard time adapting to it.

• 1:14:57Marc Andreessen?

  And so if you, if you adopt a structural approach, you can kind of get a, you know, you can get a little bit of a crystal ball, you know, and then combine that with the customer mindset. You can kind of look at a little bit of the crystal ball and say, okay, well, I'm going to, you know, it's going to kind of change this way. And then it's, it's the, it's the gap between the way that the incumbents are currently doing it and, and the future, the future way that it ought to work. I mean, that's where, that's where you have the insertion opportunity.

• 1:15:17Erik Torenberg?

  There's a related quote to this, Mark, in a New Yorker profile on you many years ago. There's this quote that says, Marc Andreessen sometimes wonders if Naval Ravikant is on to something, the founder of Angelist. He's asked Horowitz, what if we're the most evolved dinosaur and Naval is a bird? I'll pack that.

• 1:15:34Marc Andreessen?

  So this was in, this was in the middle, we call, this is in the heyday of Angelist.

• 1:15:38Ben Horowitz?

  That was a good question.

• 1:15:40Marc Andreessen?

  Yes. Well, so first of all, it's, it's a, it's a question that's totally ruined because we now know that the dinosaurs were birds. So that, you know, T-Rex is running around with feathers in a beak, which my, you know, my, my 12 year old self is deeply disappointed by. You know, Jurassic Park, you know, the next Jurassic Park reboot is going to be very sad and depressing. But, but, you know, the, the specific point when I, you know, when I, when I said that, whatever a decade ago, Ben will recall, it was when Angel List was kind of, you know, right in the, you know, basically Angel List was aspiring to basically structurally replace Venture the way that we were doing it. By having it be a, you know, essentially a marketplace, an online marketplace approach. And so that, you know, that was one, you know, kind of disruptive opportunity. And, you know, by the way, crowdfunding, you know, there's, there's a bunch of these and, you know, there, there are cases where that's worked really well. So that, that, that's one form of structural change.

• 1:16:21Marc Andreessen?

  The other form of structural change, of course, is like, okay, you know, AI, you know, which, which I wasn't, didn't have in mind a decade ago applying to Venture. But, you know, today you certainly asked that question, which was like, all right, smart guys. Like, you know, you're sitting around and like doing all this analysis and you have all these smart people and they're doing all this modeling and all this, you know, research and so forth. And like, you know, why, you know, why can't you just plug this into, you know, Claude or ChatGPT or Gemini and have it tell you what to invest in? And so that, you know, I would say that's, that's, that's the new version of the question. Yeah.

• 1:16:47Erik Torenberg?

  There was also crypto a few years ago, or, you know, ICOs or DAOs.

• 1:16:50Marc Andreessen?

  ICOs.

• 1:16:51Erik Torenberg?

  Is that going to be disruptive?

• 1:16:52Marc Andreessen?

  I mean, look, had ICO stayed, I mean, ICOs were outlawed basically, but had ICO stayed legal, you know, then you have, right, you're off to, you have just a totally different, you know, kind of way things happen. By the way, it turns out to Ben's point, the, the main thing that actually happened was the private markets grew up. And so, so what actually happened, actually, I, you know, played to the benefit of VCs just through happenstance, I think, in this particular case, which is it led firms like ours, where it's much larger growth funds. And, you know, play an even bigger and important role, but like there, there's absolutely no guarantee in life that the next structural change like that will, will work on our, on our behalf. And so, you know, Ben, Ben will tell you, I'm always a little bit of an obsessive paranoid about, you know, what happens when the next change happens.

• 1:17:26Ben Horowitz?

  Yeah, yeah, no, it's interesting. And, and, you know, I, I would just say AI, like, I think it might eventually definitely be kind of better at us than picking. But I, I would just say that the great thing about venture capital is picking is a small part of the game. But who gets to pick is as important and.

• 1:17:49Ben Horowitz?

  You know, how much of that can be done with AI? And I think so much of what a venture capital firm is, what are its relationships with the world? And, you know, do you get that benefit? Because to build a company, you just end up needing a lot of relationships. And, and then, you know, and that's, that's why I say like 90% of the activity at the firm is. Yeah.

• 1:18:15Marc Andreessen?

  And then Eric, you may know Tyler Cohen has talked about there, you know, there is this long-term pattern that actually goes back literally, you know, 400, 500 years of I think what he calls project selectors, project pickers, you know, so like, you know, the story's been told many times, but the origin of the concept of carrier carried interest in the venture capital, private equity world is kind of how we get paid. It actually, you know, goes all the way back 400 years ago to the whaling industry.

• 1:18:38Ben Horowitz?

  Right. How much whale can you carry?

• 1:18:42Marc Andreessen?

  How much, how much whale can you carry? And so what would happen is literally you would have these project pickers, you would have basically angel investors in whaling expeditions. And a whaling expedition, like in Moby Dick, it's like literally a ship and a captain and a crew, and they're going to like go out and they're going to try to like go get a whale and bring it back. Right? Like, and like, you know, it's like, I don't know, in the early days of whaling, it was like two thirds of the time, the ship comes back, you know, the other third of the time, the ship doesn't come back. Right? So like, you know, high risk, high return, you know, occupation. And then, so basically there were these guys who were the money, you know, the capital suppliers, and they would sit in these coffee houses or pubs, and then the captains would, would come in and pitch. And they pitched the project and they say, I'm going to, you know, buy this ship and I'm going to go to this spot and this is me and my project and here's how I'm going to staff my crew. And then the project pickers, the, you know, the financiers had to decide whether to back the captain.

• 1:19:27Marc Andreessen?

  And then if they did, they give the captain the money to go buy the ship and hire the crew. And then if the ship, you know, didn't come back, they'd lose all their money. If the ship came back with a whale, the carry, the carried interest was the 20% of the whale that the captain and the crew got to keep. And that was how they got paid. Right? And so, but, but, but like venture capital, like literally they're doing venture capital. You know, Queen Isabella did venture capital when she financed, you know, Christopher Columbus, right? Exact same thing. You know, the, actually the Puritan founders of America.

• 1:19:55Ben Horowitz?

  That paid off like massively. It had some negative consequences or side effects, but. It was a good investment.

• 1:20:02Marc Andreessen?

  It was a very good venture bet. You know, the original colonists, the original Puritan colonists of, you know, Flemish Rock, you know, they, they, they actually spent 20 years actually exiled in the Netherlands, actually essentially raising venture capital, raising money to be able to buy, buy land and come, come to the US and create the new colonies. And so, so you, and then, you know, we're also describing the process of, you know, what are called A and R people at record labels who pick new, new music. We're also describing book publishers, you know, who pick new, you know, new novelists. We're also describing movie studio executives who decide what movies get made. Right? And so, you know, basically what Tyler says, I think is basically like anytime you have a part of the economy in which you have this, you have an entrepreneur going on a high risk, high return endeavor where it is far from clear what's going to work. And there are many more aspirants to do that than, than there is money to fund them.

• 1:20:46Marc Andreessen?

  And it's this like multifaceted, you know, kind of skill set that's required to do it. And, you know, and then by the way, funding them to Ben's point, you're not just funding them like you have to then actually work with them to help them actually execute the entire project. Like that's, that's art, like that, that's not science, that's art. Like we would, we would, we would like it to be science, but like it's art. And by the way, how do we know that it's, how do we know that it's art and not science? Every great venture capitalist in the last 70 years has missed most of the great companies of his generation. Right? Like, so the, the great VCs have a success, you know, record of getting, I don't know, two out of 10 or something of the great companies of the decade. Right? And so like, if like, and that was true of all these guys, all the legends, you know, that I mentioned earlier. And so, you know, if it was a science, you could eventually have somebody who just like

• 1:21:30Marc Andreessen?

  dials it in and gets eight out of 10. But in, in, in, in the real world, it's not like that. You know, it's just, it's, you're, you're in the fluke business. And so there's, there's this, and there's a, there's an intangibility to it. There's a taste aspect, the human relationship aspect, the psychology. By the way, a lot of it is psychological analysis, like who are these people? How do they react under pressure? How do you keep them from falling apart? How do you, you know, how do you keep them going crazy? How do you keep them going crazy yourself? You know, you, you end up being a psychologist half the time. And so like it, it is possible, I don't want to be definitive, but like it's possible that that is quite literally timeless. And when, you know, when the AIs are doing everything else, like that may be one of the last remaining fields that, that the people are still doing.

• 1:22:08Erik Torenberg?

  Yeah. Ever since I co-founded a firm in 2016, but I'm sure before that too, people were talking about how software was going to disrupt venture completely. And whether it was crypto, whether it was AI or something else, it, well, the asset class has changed in a bunch of the ways that we described. It hasn't been sort of fundamentally disrupted in the same way that we think about disruptive innovation or the Clayton Christensen term, perhaps. As in other industries.

• 1:22:30Ben Horowitz?

  Yeah, not yet.

• 1:22:32Erik Torenberg?

  Yeah.

• 1:22:33Marc Andreessen?

  But it could. But again, you know, again, like it could, it could. But you know, we could be doing a podcast and you know, next year and be like, oh, oh, health.

• 1:22:41Erik Torenberg?

  Well, this is great to get some of the history of the of the firm. And in the future episodes, we'll talk about where we're going, among other topics that Ben and Marc's show is back. Mark, Ben, thanks so much.

• 1:22:51Marc Andreessen?

  Yes.

• 1:22:51Ben Horowitz?

  Okay, thank you.

• 1:22:52Marc Andreessen?

  Yep. And welcome, welcome, Eric.

• 1:22:53Ben Horowitz?

  Yeah, welcome, Eric.