Yesterday, Marc Andreessen, the founder of Netscape, announced the formation of a new VC firm called Andreessen Horowitz, with his partner Ben Horowitz. Andreessen has also been involved in Facebook, Twitter, and NetScape. This new tech focused fund is unique in that it has limited its scope to tech investments solely based in America. The $300mm fund will also focus on investments ranging in size from $50,000 up to $50mm.
http://dealbook.blogs.nytimes.com/2009/07/06/netscape-founder-starts-silicon-valley-venture-firm/
The Venture Capital Journal website posted a fantastic interview with Andreessen (http://www.vcjnews.com/story.asp?sectioncode=26&storycode=47879), and I thought it would be important to post this because it covers so many topics ranging from the VC industry, to Andreessen's experiences, to investment strategy. I do believe that the mindset of a VC investor is very similar to that of a value investor in the sense that they search for the best upside / downside ratio in investments, whether they are early stage or late stage. However, VC investors are also product / industry focused, with an emphasis on operational abilities, whereas value investors tend to have a more financial focus. Regardless, it will be beneficial to learn a few lessons from an investor of Marc Andreessen's caliber.
I think one of the main things that surfaces early in the interview is Andreessen's discipline. He closed the fund at $300mm (albeit, this is a large sum now), selected only a limited number of GP's (general partners), and has set a strict limit in terms of the fund's sector focus - information technology. Not only that, but they have defined exactly what they will not invest in - green-tech, nanotech, biotech, etc. I venture to say that his past success is likely attributable to his ability to specify exactly what they will invest in - what Buffett calls a "circle of competence". This is readily apparent when Andreessen says "it's necessary to understand the product....Everything in the domain I described we can really get our heads around the product in detail." It is interesting to point out that Andreessen is so focused on the product of each of the companies he invests in. To a lesser extent, he focuses on valuation. This seems to be much different from other VC funds that have the "cash burning a hole in my pocket" syndrome, and who are willing to get deals done just to get the cash invested. Both of these last points highlight again, how important discipline is in terms of understanding what you are investing in.
A realistic, long-term model is something that Andreessen also focuses on, as he has opted to elongate the typical 5-7 year VC investment model into a 10 year fund, and even talks about 12-15 years if necessary. This is atypical, and shows his ability to think long-term while also thinking outside of the box, two traits of successful investors / operators.
Throughout the interview, it becomes readily apparent that Andreessen has a very clear understanding of what his vision and mission is, and to me, this is the starting point of investing success.
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