To be crystal clear, neither Jeff, nor I, nor any of our partners at Andreessen Horowitz, are in the running for, or would accept, any operating role at Yahoo, including CEO, acting CEO, chairman, or executive chairman.

Jeff and I have high regard for Yahoo, but we are fully committed to our day jobs as general partners at Andreessen Horowitz and board members of our portfolio companies.

Ning is my third company, founded several years ago by Gina Bianchini and myself, and run for the last couple years by my close friend and colleague Jason Rosenthal.  Over the last two years, Jason and his team have brilliantly executed a dramatic transformation of the company and today Ning hosts over 100,000 social networks covering every conceivable topic and interest, from 50 Cent to Sarah Palin and beyond. Ning’s mission has always been “your own social network for anything” and the team at Ning has worked hard to achieve this.

Glam is a company founded by longtime entrepreneur and innovator Samir Arora.  I first met Samir almost 15 years ago in his role as founder and CEO of NetObjects, one of the first, and best, web and e-commerce development systems, later bought by IBM.  Before that, Samir was a longtime senior contributor at Apple, where his work led to Apple’s famous “Knowledge Navigator” vision video and then later, through a long and winding road, to the Apple iPad.

In Glam, Samir and his outstanding team have built one of the leading premium content networks on the web.  Glam’s high-end content has amazing reach: 200 million users and 2.6 billion page views across 2,500 publishers, with advertising participation by 1,000 premium brands. Combining Ning’s social technology, user base, and 100,000+ networks will immediately boost Glam’s reach to 240 million users and 3.1 billion page views, add recurring subscription revenue to Glam’s business model, and most importantly, set up the combined company to be the leading social media content company on the web.

As consumer behavior broadly moves from old media to the web—as software eats content—the opportunity for high-end online content is gigantic and our combined company will be in the pole position in this huge market.  To that end, I am also delighted to announce that I will be joining the board of directors of Glam after the completion of the merger, which we expect to occur in the fourth quarter of 2011.  I’m thrilled to be able to work with Samir and his team at Glam, as well as Jason and his team from Ning, to build an amazing combined company.

Now, I owe some people huge thank you’s.

To Jason, the management team, and all of the wonderful current and former team members at Ning who have worked so hard to get us here, as well as our extremely supportive investors along the way, thank you so much. Working with you over these last several years has been one of the highlights of my life, and I look forward to working with you for years to come.

To Samir and the Glam team, thank you for building Glam into such a great company. I’m excited to pursue the huge combined opportunity with you.

Finally, a very special thank you to Gina, my cofounder and longtime friend and colleague, for all of your insight, innovation, hard work, and commitment going back all the way to the beginning.

How in the world do you interview and recruit someone for a role you’ve never done before? Start with Ben’s latest blog post “Hiring Executives: If You’ve Never Done the Job, How Do You Hire Someone Good?“.

Against this backdrop of amazing stories, we recently met an entrepreneur whose personal background is so jaw-dropping that it ought to written into a Hollywood movie script. Head on over to Ben’s Blog to hear the story of Christian Gheorge, co-founder of a company named Proferi, which we recently funded along with our colleague and friend Aneel Bhusri at Greylock. The story begins with in Communist-ruled Romania in the 1970s. Go read the rest of the story.

So I suggested that Ben answer this line of questioning directly, which he does in his latest post The Right Kind of Ambition. In addition to his trademark rap quote, he also quotes esteemed management philosopher Theodore Geisel—a.k.a. Dr. Seuss—speaking in the voice of Yertle the Turtle. That’s got to be the first time Drake and Dr. Seuss appear on the same page of, well, anything.

Ben explains in his latest blog post what a CEO can do to minimize corporate politics. It’s not intuitive. For example, Ben points out that CEOs need to give career guidance to junior employees in a very different way from giving advice to executives. Read the post to learn how to minimize politics—especially around the traditional flash points of performance reviews, promotions, and re-orgs.

Entrepreneurs rarely think as much or as deeply or as rigorously about how to scale their companies. Best practices for scaling human organizations are harder to find, and the whole endeavor feels much more like an art than a science.

Ben leaps into this information void with his latest blog post titled Taking the Mystery out of Scaling a Company. This post will be the first of a series Ben will write on this topic because each skill CEOs must learn to scale their companies—such as designing and rolling out re-organizations, hiring functional executives for functions they’ve never done personally, optimizing incentive systems, and so on—need a post (or three) of their own.

This time around, we’re thinking about cloud computing as investors rather than entrepreneurs. On his blog, Ben walks through why we invested in Okta, our first cloud investment. We couldn’t be more excited.

As Ben shares in latest blog post, he often felt this way as a first-time CEO. He also shares how (and why) he quickly got over this need to be unfailingly positive—and how this was a turning point in his development as a CEO. Go find out why CEOs need to tell it like it is.

Every job in a startup is (usually) hard: building a new product is hard, marketing a new product is hard, selling a new product is hard. But no job is harder than the job of a CEO. Also, no job is murkier: what do the best startup CEO focus on day after day?

Ben walks through our thinking on what the CEO ought to be doing from the vantage point of how we evaluate CEOs as we decide whether to fund their companies. The job is not easy to describe, much less ace. In my view, my friend and colleague Ben has done a fabulous job of both.

Cue the Kanye West.

Not surprisingly, Ben picks a fight with conventional wisdom in his latest post, Why Startups Should Train Their People. The post describes why and how even startups should invest in training. No company operates so flawlessly that the right training at the right time doesn’t make a huge, measurable difference.

A question I hear a lot at startup board meetings is this one: "is the current VP of Marketing or VP of Sales or CFO big enough to do this job in 18-24 months when we go international or need to build an indirect sales channel or do the roadshow for our IPO?"

While you always want the best executive team you can recruit, there are downsides to asking this question too early or in the wrong way. Ben enumerates the risks in his latest blog post The Scale Anticipation Fallacy, then offers his suggestions on the right way to evaluate and develop your executive team. 

(As you can tell, our blogging agenda for the next few months—and maybe longer if the fan mail keeps coming in—is a comprehensive set of posts on entrepreneurship, management, strategy, fund raising, and leadership. Coming soon: the return of my archive on these very topics. Stay tuned.)

Filed under: Startups ]]> http://blog.pmarca.com/2010/05/06/big-enough-for-the-job/feed/ 0 pmarca http://blog.pmarca.com/2010/05/06/big-enough-for-the-job/ http://feedproxy.google.com/~r/pmarca/a16z/~3/UzWG9L30kUg/ http://blog.pmarca.com/2010/04/28/why-do-we-prefer-founders-as-ceos/#comments Wed, 28 Apr 2010 23:46:15 +0000 pmarca http://pmarca.wordpress.com/2010/04/28/why-do-we-prefer-founders-as-ceos ]]>

When I introduced our venture firm on this blog in July, I wrote extensively about the types of entrepreneurs and companies we want to fund: technical founders, brilliant and motivated entrepreneurs, product-focused companies, and so on. I got widespread head nods on most of the criteria.

But many people were skeptical about the "founder-as-CEO" filter. To express their skepticism, people would ask me some variant of this central question: "shouldn't the founding CEO just get the company jump started, then recruit a professional CEO to drive once the company is up and running?" 

While we agree that startup CEOs and "grow the company" CEOs need dramatically different skill sets (a point Ben hinted at in his last blog post), we wanted lay out our thinking on why we prefer funding startups whose founding CEO plans to run the company for a good long time. Cue the hip hop.

My good friend Steve Blank does a great job of describing the metamorphosis a scalable startup needs to undergo to become a big company. During that metamorphosis, many startups hire executives from big companies to help scale the business. Some go on to do a good job. 

But I've seen more than a few of those big-time execs get organ-rejected within the first couple of months of the tranpslant. Ben published a post today about this exact phenomenon called Why is it Hard to Bring Big Company Execs into Little Companies. 

In the post, Ben dissects the reasons why big company execs can flounder in startups, how you can spot warning signs during the interview process, and (perhaps most importantly) what you need to do to integrate the freshly hired exec into your company. Read it to save yourself a lot of heartburn created by hiring the wrong exec or failing to do your part to integrate them into the company.  

My partner Ben and I have been active angel investors for years and now full-time venture capitalists for 9 months. But prior to that (and for most our lives), we've been entrepreneurs.

Now that we've sat on both sides of the table—and have spent more time with other venture capitalists—my partner Ben has a few observations to share about what he likes and dislikes about what some VCs do. Mostly what he dislikes. Though to be fair, he has recommendations for behavior he'd like to see instead, so it's not just a rant.

And yes, there's a quote from a rap artist (Dr. Dre, to be precise). 

These days, nearly all the entrepreneurs who come pitch at our venture firm Andreessen Horowitz highlight how little money they are raising and how "lean" they are planning to run the company. While we don't want to invest a single dollar more than a company needs, there is a case to be made for raising enough money to win the market. 

My partner Ben makes this case convincingly in his guest post on AllThingsD titled "The Case for the Fat Startup." Read it, and along the way you'll also hear the story of how Ben navigated our company Opsware through the turbulent dot-com implosion to a $1.6 billion acquisition by HP Software in July 2007. 

Hint: he didn't do it running lean.

Filed under: Uncategorized ]]> http://blog.pmarca.com/2010/03/17/the-case-for-the-fat-startup/feed/ 0 pmarca http://blog.pmarca.com/2010/03/17/the-case-for-the-fat-startup/ http://feedproxy.google.com/~r/pmarca/a16z/~3/8SjuTPQCHF4/ http://blog.pmarca.com/2010/03/15/ben-on-leadership/#comments Mon, 15 Mar 2010 06:00:57 +0000 pmarca http://pmarca.wordpress.com/2010/03/15/ben-on-leadership ]]>

Hot off the virtual press: my partner Ben has posted a great essay on leadership over at TechCrunch.

The post should be of particular interest to entrepreneurs who are raising money from our venture fund, as Ben articulates the three key traits we look for in the leaders of the startups we fund. 

Bonus feature: in the post, you'll learn what we like best about three Silicon Valley icons: Steve Jobs, Bill Campbell, and Andy Grove. 

[This blog post is by Ben Horowitz, the Horowitz of Andreessen Horowitz.]

At our new venture fund, we’ve been spending time looking into new ways that will make the lives of entrepreneurs seeking funding easier. To that end, we’ve linked up with Ted Wang who has been working on an open source legal project called the Series Seed documents. We’re impressed with his work and are going to use these standard funding documents as part of our seed stage investments wherever appropriate.

We have to give a big shout out to Ted: he nailed this. It’s exactly in step with our intention of letting entrepreneurs focus on building businesses in today’s environment, without having to follow old VC rules.

In a nutshell, entrepreneurs and the businesses they are starting have evolved. Start ups today don’t need to build a manufacturing plant (as DEC, the very first high-tech VC investment, did in 1957) to start a business. They need less money to build a product and prove that it works before scaling the business. Yet, the paperwork involved in funding entrepreneurs hasn’t changed to meet these needs. Series Seed is the first to establish this new way of supporting funding suited for today’s entrepreneurs – and we’re big fans.

Let us know what you think: check out the Series Seed documents, and share your thoughts.

Here’s more background on our thinking behind how entrepreneurship has changed, creating the need for these simplified funding documents. I’m speaking here from the point of view as both an angel investor and a venture capitalist, two very different kinds of investors.

Angels vs. Venture Capitalists

Why do angel investors exist?

Before answering these questions, it’s useful to ask and answer a related question: why are there angels and why have they become more prominent in the last 10 years? After all, doesn’t the definition of venture capital include all of the activities that angels perform?

The answer lies in the history of technology companies and the differences between how they were built 30 years ago and how they are built now. In the early days of technology venture capital, great firms like Arthur Rock and Kleiner Perkins funded companies like Digital Equipment Corporation (DEC) and Tandem. In those days, building the initial product required a great deal more than a high quality software team. Companies like Tandem had to manufacture their own products. As a result, getting into market with the first idea, meant, among other things, building a factory.  Beyond that, almost all technology products required a direct sales force, field engineers, and professional services. A startup might easily employ 50-100 people prior to signing their first customer.

Based on these challenges, startups developed specific requirements for venture capital partners:

• Access to large amounts of money to fund the many complex activities
• Access to very senior executives such as an experienced head of manufacturing
• Access to early adopter customers
• Intense, hands-on expert help from the very beginning of the company to avoid serious mistakes

In order to both meet these requirements and build profitable businesses themselves, venture capitalists developed an operating model which is still broadly used today:

• Raise a large amount of capital from institutional investors
• Assemble a set of experienced partners who can provide hands-on expertise in building the product and then the company
• Evaluate each deal very carefully with extensive due diligence and broad partner consensus
• Employ strong governance to protect the large amount of capital deployed in each deal. This includes requisite board seats and complex deal terms including the ability to control subsequent financings
• Manage own resources effectively by calculating the amount of capital/number of partners/maximum number of board seats per partner to derive the minimum amount of capital that must be invested in each deal

It turns out that building a company has changed quite a bit since the early days of venture-backed technology companies. Building a company like Twitter or Facebook is quite different from building Tandem. Specifically, the risk and cost of building the initial product is dramatically lower. I emphasize product to distinguish it from building the company. Building modern companies is not low risk or low cost: Facebook, for example, faced plenty of competitive and market risks and has raised hundreds of millions of dollars to build their business. But building the initial Facebook product cost well under $1M and did not entail hiring a head of manufacturing or building a factory.

As a result, for a modern startup, funding the initial product can be incompatible with the traditional venture capital model in the following ways:

• Lengthy diligence process. Venture capitalists take too long to decide whether or not they want to invest because they are set up to take large risks and have complex processes to evaluate those risks.
• Too much capital. Venture capitalists need to put too much capital to work – often a VC will want to invest a minimum of $3M. If you only need 4 people to build the product and get it into market, this likely won’t make sense for your business.
• Board seat. Venture capitalists often require a board seat and, for that matter, a board of directors be formed. If 100% of the company is building the product and the team knows how to do that, then a board of directors may be overkill. In addition, it may be too early to decide who you want to be on the board.

As a result of the above, a venture capitalist usually requires a serious commitment from the entrepreneur to pursue an idea that is highly experimental. If the product doesn’t stick, it might make sense for the entrepreneur to pursue a totally different idea or drop the business altogether. This is much easier to do if you’ve raised $300,000 than if you’ve raised $3,000,000.

As entrepreneurs needed someone to bridge the gap between building the initial product and building the company, angel investors stepped up.

Angel investors are typically well-connected, wealthy individuals. They generally use their own money and come with none of the above VC constraints describe above: they don’t go on boards, they don’t need to put in lots of capital (in fact, they usually don’t want to), they prefer dead simple terms (as they often don’t have legal support), they understand the experimental nature of the idea, and they can sometimes decide in a single meeting whether or not to invest.

On the other hand, angels do not manage huge pools of capital, so entrepreneurs need to find someone else to fund the building of the company (as opposed to the product) and most angels do not plan to spend a great deal of time helping entrepreneurs build the company.

One more thing before answering the original question

Before getting back to the need for the Series Seed documents, it’s important to distinguish venture rounds and angel rounds from venture capitalists and angel investors. It’s possible for a venture capitalist to invest in an angel round and vice-versa. Sometimes this is a great idea and sometimes it’s tragic. We’ll first examine the rounds and then the investors.

When should you raise an angel round and when should you raise a VC round?

This question really comes down to the company’s development. If you are a small team building a product with the hope of “seeing if it takes” (with the implication being that you’ll try something else if it doesn’t), then you don’t need a board or a lot of money and an angel round is likely the best option. On the other hand, if you’ve developed a strong belief in your product or your product idea and you are in a race against time to take the market, then a venture round is more appropriate. You will benefit from both the extra capital and extra support that comes with a serious and large commitment from your investors.

So who is qualified to invest in each?

Obviously angels can invest in angel rounds, but what about VCs? Is it safe to have them participate? The answer turns out to be “if and only if they behave like angels.” What does it mean for a VC to behave like an angel? Well, they must:

• Be comfortable investing a small amount of money, e.g. $50,000.
• Be able to make an investment decision quickly, e.g. in one or two meetings
• Be able to invest without taking a board seat
• Not require control of subsequent funding rounds
• Not impose complex terms

If the VC wants to be in the angel round, but refuses to behave like an angel, then entrepreneur beware. Having a VC who behaves like a VC in the angel round can jeopardize subsequent financings.

Angels can be great participants in venture rounds, but it’s generally better to have a VC lead those deals as they have more financial and other resources required to build the company.

What does this mean about Andreessen Horowitz and the types of investments we’ll do?

As I stated above, at Andreessen Horowitz, we invest in both venture rounds and angel rounds. When we invest in angel rounds, we behave like an angel. As angel investors, we can invest as little as $50,000, we do not take board seats, and we do not require control.

Rooted in this desire to help germinate quality ideas, our support for Seed Source legal docs will allow both us as investors and the entrepreneurs we fund to focus on building a winning product rather than scrutinizing legal docs.