Andreessen Horowitz Joins The Start Fund To Seed YC Companies(techcrunch.com)
techcrunch.com
Andreessen Horowitz Joins The Start Fund To Seed YC Companies
http://techcrunch.com/2011/10/14/andreessen-horowitz-start-fund-yc/
7 comments
Like Ron and Yuri, Andreessen Horowitz are real pros. I think founders will like them.
I know investors tend to stick with the companies they fund and help them out, but since $150k split three ways isn't all that much for each investor, how much commitment have you seen on the angels' part? I mean, even if a quarter of the YC companies take the offer, I imagine they'd have a lot of companies to deal with.
I had the same question when they made the investment. The SV Angel team and Felix from Start Fund have not hesitated once to help when asked, and we've had more than our share of proactive, unprompted introductions to key people from them.
In the past they've paid about as much attention to the startups as they would have if they'd done a seed investment of the same size a la carte.
As always, yC pulls off another caper. 150K split three ways between AH, RC and YM is akin to having 15M worth of cred.
PG == the new patron saint of start-ups.
PG == the new patron saint of start-ups.
I emailed a16z to ask for a meeting or phone interview about an "amazing" opportunity to invest "early" in a new startup. They did not respond or ask any questions, I was completely ignored.
All their deals seem like big money and late stage. Do they know a good startup when they see it? Seems like instead of finding startup investment opportunities by themselves they're going to let YC filter out the good deals for them.
They even said in the article it's just about deal flow.
All their deals seem like big money and late stage. Do they know a good startup when they see it? Seems like instead of finding startup investment opportunities by themselves they're going to let YC filter out the good deals for them.
They even said in the article it's just about deal flow.
Don't you do the same thing when you get emails offering you amazing business opportunities?
As a general rule, no VC firm will respond to a cold email. You need an intro from someone they know. Your best bet is to try to get an intro from someone at a company they've invested in.
As a general rule, no VC firm will respond to a cold email. You need an intro from someone they know. Your best bet is to try to get an intro from someone at a company they've invested in.
As a SV outsider who recently spent a month there, I totally agree. The only way to get meetings is through your network. Start with people you meet at events and then add to it (co working spaces like www.rocket-space.com are great for this). Eventually you'll be speaking to company founders and they can refer you. Remember that the quality of the referral is also important, so if you have only met someone for 5 mins and then ask them to refer you, their referral email will be rather weak. Spend the time building the relationship and getting them excited about your product. Then when the time comes you will get a solid referral and a near certain meeting.
>Don't you do the same thing when you get emails offering you amazing business opportunities?
Isn't this the exact business that VCs are in? Identifying amazing offers?
You make the claim as if VCs are not in the business of looking for amazing deals, vs everyone else who is in infinite other businesses...
Yeah, there is the rule that intros are best - but still, why try to architect vision and innovation out of the VC market?
Isn't this the exact business that VCs are in? Identifying amazing offers?
You make the claim as if VCs are not in the business of looking for amazing deals, vs everyone else who is in infinite other businesses...
Yeah, there is the rule that intros are best - but still, why try to architect vision and innovation out of the VC market?
Yea, but everyone thinks they have an "amazing idea". That just comes with the territory of being an entrepreneur. If you can't get out there and convince others of your idea (via intros, YC, products, whatever...), then you'll most likely have trouble executing on even the best idea.
That wasnt the gist of his argument though.
He was talking about how they (VCs) are not in the business of vetting ideas - but pursuing sure things. Yet all the rhetoric around the VC industry says otherwise.
He was talking about how they (VCs) are not in the business of vetting ideas - but pursuing sure things. Yet all the rhetoric around the VC industry says otherwise.
It really just boils down to, networking your way into a strong personal introduction is a trivial task compared with one hundred other far more challenging aspects of launching a successful startup, and every VC in the world knows this and uses it as a filter, because it's true and it works, so there's absolutely no reason they would or should deviate from this logic.
I understand that - except the point is that it is not marketed as such. That is my point.
Regarding vendors or business opportunities, I usually respond and politely tell the person that I'm not interested. It only takes a few seconds.
They have a form right on their site for submitting business plans.
http://a16z.com/about/contact-us/
http://a16z.com/about/contact-us/
Even if a VC offered an email address to send business plans to, I'd try to get an intro instead.
(Also, the instructions on the form say it is for "other inquiries." You're supposed to send business plans to one of the email addresses on the right. So if you used the form that may be why you didn't hear back.)
(Also, the instructions on the form say it is for "other inquiries." You're supposed to send business plans to one of the email addresses on the right. So if you used the form that may be why you didn't hear back.)
Let me be a little less polite than PG
VC public e-mail addresses == /dev/null .. they exist purely to appease the raging masses of entrepreneurs hanging outside their walls, reading Venturebeat ( fill in another 10 top " blogs " of your choice ) more than mails from their mum.
Cold calling any of them will not work. Heck even intros from the highest level are not treated that nicely if you're a first time guy.
Best place to be in, acquire unfair advantages like a yC tag and learn everything you can from insiders. Make a product that even in its most seed form shows a pathway to an entire industry. Get traction.
"If you're in a fair fight, you didn't plan it properly." - Nick Lappos, Chief R&D Pilot, Sikorsky Aircraft
VC public e-mail addresses == /dev/null .. they exist purely to appease the raging masses of entrepreneurs hanging outside their walls, reading Venturebeat ( fill in another 10 top " blogs " of your choice ) more than mails from their mum.
Cold calling any of them will not work. Heck even intros from the highest level are not treated that nicely if you're a first time guy.
Best place to be in, acquire unfair advantages like a yC tag and learn everything you can from insiders. Make a product that even in its most seed form shows a pathway to an entire industry. Get traction.
"If you're in a fair fight, you didn't plan it properly." - Nick Lappos, Chief R&D Pilot, Sikorsky Aircraft
>VC public e-mail addresses == /dev/null .. they exist purely to appease the raging masses of entrepreneurs hanging outside their walls, reading Venturebeat ( fill in another 10 top " blogs " of your choice ) more than mails from their mum.
Doesn't this sound like an opportunity then?
Why have a blackhole at all? Why be so un-innovative? Sure, it will cost you money - but if you claim that this is the reason for NOT doing it - you admit that innovation is not your goal, but profit only, thus it will go against so many supposed charters of VCs out there...
Let's be honest here. What is the bottom line?
Either VCs only want a "sure thing" or they actually want to foster innovation and progress, and receive profit as a result.
If you are in the former, not the latter, then - sorry - but I have no respect for you. Regardless of your success.
Paradigm shift, we need it.
Doesn't this sound like an opportunity then?
Why have a blackhole at all? Why be so un-innovative? Sure, it will cost you money - but if you claim that this is the reason for NOT doing it - you admit that innovation is not your goal, but profit only, thus it will go against so many supposed charters of VCs out there...
Let's be honest here. What is the bottom line?
Either VCs only want a "sure thing" or they actually want to foster innovation and progress, and receive profit as a result.
If you are in the former, not the latter, then - sorry - but I have no respect for you. Regardless of your success.
Paradigm shift, we need it.
Sam, I noticed your later comment. My apologies if I peeved you off.
Perhaps, you are correct, I do not have the expertise to have a POV.
Just a minor correction, I do not have an MBA and or the admin with the description you gave. That's rather demeaning to the women who may be reading this list.
Just another coder in a team of four trying to figure things out. You've correctly identified err.. my virtues[1].. guilty as charged.
Take it easy mate.
[1] - http://en.wikipedia.org/wiki/Larry_Wall#Virtues_of_a_program...
Perhaps, you are correct, I do not have the expertise to have a POV.
Just a minor correction, I do not have an MBA and or the admin with the description you gave. That's rather demeaning to the women who may be reading this list.
Just another coder in a team of four trying to figure things out. You've correctly identified err.. my virtues[1].. guilty as charged.
Take it easy mate.
[1] - http://en.wikipedia.org/wiki/Larry_Wall#Virtues_of_a_program...
:) I had a little wine. This makes me punchy on text... Sorry about that. Nothing personal.
I just want the startup world to get the return on value that they produce.
I am still jaded in this area...
Thanks for the reply.
I just want the startup world to get the return on value that they produce.
I am still jaded in this area...
Thanks for the reply.
>>Doesn't this sound like an opportunity then?
Think incubators like yC and others are already onto this.
>>Paradigm shift, we need it.
Perhaps, maybe there is someone like that with the time at hand.
A singular paradigm shift as defined by Kuhn et.al., strictly speaking, would perhaps take half or quarter of a lifetime of effort.
Most entrepreneurs would want to invest that energy into building their companies, not involved with too much political muck.
VCs / institutional folks are functionally services. Its like a 7 star hotel, there are some people who can afford to stay there. Some can even afford a presidential suite. They don't give a hoot about those that cannot pay the tab.. mostly because they are fielding all the demand they can get .. and have no time for anyone's feelings.
You have a better chance of getting empathy from groups like yC than VC.
" Idolatry is the name of the error which attributes a sacred character to the collectivity; and it is the commonest of crimes, at all times, at all places. "[1]
" In particular, the modern factory reaches perhaps almost the limits of horror. Everybody in it is constantly harassed and kept on the edge by the interference of extraneous wills while the soul is left in cold and desolate misery. What a man needs is silence and warmth; what he is given is an icy pandemonium "[1]
[1] - http://www.amazon.com/Simone-Weil-Anthology/dp/0802137296
Think incubators like yC and others are already onto this.
>>Paradigm shift, we need it.
Perhaps, maybe there is someone like that with the time at hand.
A singular paradigm shift as defined by Kuhn et.al., strictly speaking, would perhaps take half or quarter of a lifetime of effort.
Most entrepreneurs would want to invest that energy into building their companies, not involved with too much political muck.
VCs / institutional folks are functionally services. Its like a 7 star hotel, there are some people who can afford to stay there. Some can even afford a presidential suite. They don't give a hoot about those that cannot pay the tab.. mostly because they are fielding all the demand they can get .. and have no time for anyone's feelings.
You have a better chance of getting empathy from groups like yC than VC.
" Idolatry is the name of the error which attributes a sacred character to the collectivity; and it is the commonest of crimes, at all times, at all places. "[1]
" In particular, the modern factory reaches perhaps almost the limits of horror. Everybody in it is constantly harassed and kept on the edge by the interference of extraneous wills while the soul is left in cold and desolate misery. What a man needs is silence and warmth; what he is given is an icy pandemonium "[1]
[1] - http://www.amazon.com/Simone-Weil-Anthology/dp/0802137296
>>>>Doesn't this sound like an opportunity then?
>>Think incubators like yC and others are already onto this.
Did this not get directly refuted by PG in his earlier comment in this thread?
I am sorry - but your post rings so full of hubris and egotism that I cant take you seriously.
If I am just obtuse, then I apologize. Please consider the following;
>Most entrepreneurs would want to invest that energy into building their companies, not involved with too much political muck.
Where are you showing VCs/even YC to reduce political muck? It appears to be rampant. I see that the initial investment (YC seed, through others) has increased - but that does not prove the value to dollar ratio has necessarily increased at the same rate.
Political muck indeed.
>VCs / institutional folks are functionally services. Its like a 7 star hotel, there are some people who can afford to stay there. Some can even afford a presidential suite. They don't give a hoot about those that cannot pay the tab.. mostly because they are fielding all the demand they can get .. and have no time for anyone's feelings.
This is fucking BS; you state that Receiving VC is equic with CHOOSING to stay at a 7 star joint.
Look - people do NOT choose to stay at a 7 star place (no such thing) unless they already have the funds - in your case, you are saying that one only counts if they have already been included in the circle to, not only, receive the 7-star funds, but are also in a position to spend said funds on same resort.
Please correct me if I am wrong.
You sound like an MBA/Finance, uh, geek who entered into VC at too young of an age and the only person you have managed directly is the hot admin with big tits whom, had they not ordered your coffee correctly, you would have berated them for their poor upbringing.
Sorry - but, I do not think you are really of the proper domain expertise to be answering such threads.
Did this not get directly refuted by PG in his earlier comment in this thread?
I am sorry - but your post rings so full of hubris and egotism that I cant take you seriously.
If I am just obtuse, then I apologize. Please consider the following;
>Most entrepreneurs would want to invest that energy into building their companies, not involved with too much political muck.
Where are you showing VCs/even YC to reduce political muck? It appears to be rampant. I see that the initial investment (YC seed, through others) has increased - but that does not prove the value to dollar ratio has necessarily increased at the same rate.
Political muck indeed.
>VCs / institutional folks are functionally services. Its like a 7 star hotel, there are some people who can afford to stay there. Some can even afford a presidential suite. They don't give a hoot about those that cannot pay the tab.. mostly because they are fielding all the demand they can get .. and have no time for anyone's feelings.
This is fucking BS; you state that Receiving VC is equic with CHOOSING to stay at a 7 star joint.
Look - people do NOT choose to stay at a 7 star place (no such thing) unless they already have the funds - in your case, you are saying that one only counts if they have already been included in the circle to, not only, receive the 7-star funds, but are also in a position to spend said funds on same resort.
Please correct me if I am wrong.
You sound like an MBA/Finance, uh, geek who entered into VC at too young of an age and the only person you have managed directly is the hot admin with big tits whom, had they not ordered your coffee correctly, you would have berated them for their poor upbringing.
Sorry - but, I do not think you are really of the proper domain expertise to be answering such threads.
Yes as I said I emailed them. I sent everything, my business plan, my site, everything. Now maybe they didn't like my application. Maybe it was no good. But from my perspective, the only interaction I have with this VC is being stonewalled by them after spending time applying and dropping (what I believe) to be a great oppurtunity right in their laps.
VCs have a fund (basically a big finite amount of cash). They can make X investments with that cash. They also have a very finite # of hours they can invest to help their companies. The best ones (like these guys) are literally buried in highly qualified deal flow. That means entrepreneurs coming in with great references, working in great markets, often with traction. They have no shortage of deal flow.
On the other side of the marketplace, there are literally zillions of entrepreneurs who want their money.
All that said, it'd be nice if they had an auto-responder on the site saying, "We try to look over all of these, but can't offer a reply unless something REALLY catches our eye," to set expectations accordingly.
On the other side of the marketplace, there are literally zillions of entrepreneurs who want their money.
All that said, it'd be nice if they had an auto-responder on the site saying, "We try to look over all of these, but can't offer a reply unless something REALLY catches our eye," to set expectations accordingly.
From what I've heard about a different VC firm, even though they have a business plan submission form, they literally never contact people who submit through it, and rely exclusively on personal introductions.
They also made the point that they know lots of people and anyone should be able to network their way into a personal introduction, a trivially easy task compared with many other tasks needed for forming a startup, so they actively use that as a filter.
They also made the point that they know lots of people and anyone should be able to network their way into a personal introduction, a trivially easy task compared with many other tasks needed for forming a startup, so they actively use that as a filter.
See, the form is used to submit your business plan. If your email is something along the following line like:
"Hi, I have an 'amazing' opportunity for you to invest 'early' in a new startup. I am willing to meet at time XXX or you can call me at XXX."
It is very likely that you will get ignored. In fact, I did send an email with a rough business plan about my previous startup to the above email before. And, someone from a16z replied me telling me that they were not interested in the market that I was in then.
Why don't you try to send an email with a real/concrete proposal about your startup/idea? It is more likely that you will get a reply from them in this way.
"Hi, I have an 'amazing' opportunity for you to invest 'early' in a new startup. I am willing to meet at time XXX or you can call me at XXX."
It is very likely that you will get ignored. In fact, I did send an email with a rough business plan about my previous startup to the above email before. And, someone from a16z replied me telling me that they were not interested in the market that I was in then.
Why don't you try to send an email with a real/concrete proposal about your startup/idea? It is more likely that you will get a reply from them in this way.
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That's a filter for plans they don't want to read, not a submission form.
That's my point. If a VC can't even be bothered to look through or respond to opportunites that show up on their doorstep, how exactly can they be in a position to find or help startups? There wasn't even anything in the article about helping or working with startups. It's ONLY about getting the foot in the door and just letting YC do the filtering.
I think you're missing the point entirely. Yes, there's a chance that one of the people who cold emails them is good - but really, what are the odds?
With introductions, the referrer stakes his or her reputation on the referee. Make too many bad recommendations, and that cuts out a bad lead. The most successful organizations I know recruit through internal contacts - and it just makes sense from a VC's perspective to do the same.
It's about the best allocation of time vs good finds, rather than just finding every good opportunity.
With introductions, the referrer stakes his or her reputation on the referee. Make too many bad recommendations, and that cuts out a bad lead. The most successful organizations I know recruit through internal contacts - and it just makes sense from a VC's perspective to do the same.
It's about the best allocation of time vs good finds, rather than just finding every good opportunity.
SV has a culture of getting to investors through trusted sources. Email a few of their portfolio companies that are relevant (but not competitive) with your business, ask to buy them lunch and chat for a bit, then ask for an intro at the end of the meeting if it goes well.
From the investor's perspective this a) filters out people with no conviction, b) filters out spray and pray-style emails, c) helps them manage hundreds of emails they receive every day.
From the investor's perspective this a) filters out people with no conviction, b) filters out spray and pray-style emails, c) helps them manage hundreds of emails they receive every day.
if you can't get an introduction, continue working on your product and gain traction, if you have a million users you definitely won't be ignored.
Since the moment they announced their formation, AH has consistently said they are completely stage-agnostic, and Marc had a previous history of investing personally in very small initial angel deals.
Interesting that both SVA and AH responded to the success of YC not by setting up separate programs to emulate it, but by coalescing around it. This clearly made sense for Milner as a relative newcomer but the other two groups had no shortage of connections and capabilities in place and could easily have taken either route. YC keeps increasing the margin by which it is the top program of its kind.
A16z doesn't have the bandwidth to start one of these, I think.
"easily"
Creating and running YC is not in the least bit easy.
Creating and running YC is not in the least bit easy.
Certainly not! Especially being the forerunners of their new model.
I just meant that SVA and AH could, if anybody anywhere could, and if they so desired, have concentrated their resources to try to set up a new program that emulates YC. Compared to anyone else's chances, in the universe, to emulate YC, SVA or AH would have had the financial, intellectual, and social resources to have had a relatively easier go at it.
But neither of them tried to emulate, they both chose instead to coalesce around and go to war with the YC they had.
I think that choice is non-trivial, and significant; and it lends ever more acceleration to YC putting ever greater depth between itself and any potential competing program.
I just meant that SVA and AH could, if anybody anywhere could, and if they so desired, have concentrated their resources to try to set up a new program that emulates YC. Compared to anyone else's chances, in the universe, to emulate YC, SVA or AH would have had the financial, intellectual, and social resources to have had a relatively easier go at it.
But neither of them tried to emulate, they both chose instead to coalesce around and go to war with the YC they had.
I think that choice is non-trivial, and significant; and it lends ever more acceleration to YC putting ever greater depth between itself and any potential competing program.
This is awesome for YC / YC startups as well as AH as they get to be in the YC companies at the very early stage. However, I am not able to understand why VC firms would go so broad and fund such a large number of startups with amounts that are insignificant for their fund sizes. Would it not be distracting? Would it not leave them with too broad a portfolio to be able to truly make significant contributions to the company's success? Does it not feel like a spray and pray approach? I totally understand this from a deal flow perspective but I'd love for VC firms to focus on deals they believe in and focus on building massive game changing businesses. And for this, I am sure they have to invest in 10 to find 1 that works, but investing in 200 feels not so right - and lacking conviction.
Almost all VC funds do seed-sized investments now. Both sides understand it's not the same as a series A, and both are ok with that.
Incidentally, Ron Conway is proof the model works. He has been operating this way for decades and founders are as a rule pretty happy with the amount of help he gives them.
Incidentally, Ron Conway is proof the model works. He has been operating this way for decades and founders are as a rule pretty happy with the amount of help he gives them.
I am not sure if VC firms doing seed investing have done it in such large numbers and if not (which I think is the case), are they setup to manage 100 startups a year versus 15.
Also I am wondering if this approach will have to be the new approach or the one that Khosla, Benchmark, Sequoia (I understand they are indirectly in YC companies) and similar ones have had for long, of identifying big trends, finding the right company and going big behind it, is still better. I have seen the latter fail as well as succeed. I think we have very little data on the former but there is bound to be a limited set of companies that a VC partnership can optimally support / manage and this new approach may put a strain on it. I guess we have to wait and see. Thanks much for replying, pg.
Also I am wondering if this approach will have to be the new approach or the one that Khosla, Benchmark, Sequoia (I understand they are indirectly in YC companies) and similar ones have had for long, of identifying big trends, finding the right company and going big behind it, is still better. I have seen the latter fail as well as succeed. I think we have very little data on the former but there is bound to be a limited set of companies that a VC partnership can optimally support / manage and this new approach may put a strain on it. I guess we have to wait and see. Thanks much for replying, pg.
They are buying 60 lotto tickets for $50,000 each, because it's cheaper than the opportunity cost of missing out on the next big one.
I wonder if $50,000 even gets you an in-person meeting.
I wonder if $50,000 even gets you an in-person meeting.
So, the deal stays at $150k correct?
What incentive do Ron and Yuri have to give up 1/3rd of the Start Fund deals to Andreessen Horowitz?
Forgive me if this is a naive question.
What incentive do Ron and Yuri have to give up 1/3rd of the Start Fund deals to Andreessen Horowitz?
Forgive me if this is a naive question.
1. AH could offer $50k on the same terms if they wanted, and most companies would probably take it. It's not like Yuri/Ron have any exclusivity arrangement.
2. YC classes have grown in size a lot. It's probably a bit more expensive than they planned, so they don't mind sharing the load.
3. Having AH as a partner helps the startups, which means they're more likely to succeed (hopefully).
2. YC classes have grown in size a lot. It's probably a bit more expensive than they planned, so they don't mind sharing the load.
3. Having AH as a partner helps the startups, which means they're more likely to succeed (hopefully).
1. Then why did they need to negotiate to be a part of Start Fund, surely they could offer a separate, secondary deal of $50k to each YC company
2. This is highly plausible and sounding to me like the most likely reason
3. Absolutely, I'm just trying to understand why its as 1/3rd of Start Fund instead of offering their own deal
2. This is highly plausible and sounding to me like the most likely reason
3. Absolutely, I'm just trying to understand why its as 1/3rd of Start Fund instead of offering their own deal
Syndication diversifies and mitigates risk. You're adding a third pro to the mix, so you're more likely to have a proper solution to any given problem.
Are Ron and Yuri then admitting worry about the outcome of these deals? If they see the need to mitigate risk to a 3rd party (to the extent of giving away 1/3rd of the potential outcome), it seems they may be unsure of the bets they placed with Start Fund.
Help me understand the thinking here...
Help me understand the thinking here...
You don't need worry to start reducing risk. Any smart investor will lower risk as much as they can. If they're worried about their total investments, they would simply offer more (the same) investment as before.
If they're lowering amount/group in favor of number of groups, it probably means it makes more financial feasibility to do so.
Edit: Also realize that the initial investment also acts as a doorway for them to enter future larger deals, if they so wish. Shifting from a 75k investment to a 50k investment means they increase their opportunity without really sacrificing good will on the founders' part.
If they're lowering amount/group in favor of number of groups, it probably means it makes more financial feasibility to do so.
Edit: Also realize that the initial investment also acts as a doorway for them to enter future larger deals, if they so wish. Shifting from a 75k investment to a 50k investment means they increase their opportunity without really sacrificing good will on the founders' part.
[deleted]
This is really cool. Love the fact that they are trusting PG and team's filtering process and guidance to build great startups. This is super sweet for the founders as well since they will provide some awesome advice and guidance.
This is great because it now means you not only get PG's advice (and the YC team), but that of Milner AND AH to boot. Makes me really excited about October 31.
Congrats YC! Fills a gap too. Ron - Seed, AH - VC, Yuri/DST mezzanine.
I am a little surprised that Ron and Yuri let them in on such a good deal. I am sure a lot of VCs would jump at this opportunity.
I am a little surprised that Ron and Yuri let them in on such a good deal. I am sure a lot of VCs would jump at this opportunity.