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JASON: Hey, everybody. Hey, everybody. It's Jason Calacanis. Today on the program Chris Dixon, the
legendary
entrepreneur. He's laughing.
The legendary entrepreneur,
angel investor, and, now, venture capitalist has joined Andreessen Horowitz. This is
the first interview, [which] he's done since joining.
It's going to be an amazing program. Stick with us.
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JASON: Hey, everybody. Hey, everybody. Welcome back to the program. I'm Jason
Calacanis. This is "This Week in Startups" and we are here at WeWork in San
Francisco. I'm up here forů
a couple of weeks before the big Launch festival, March 4, 5, and 6. Andů
you know uh... You may have read the Chris Dixon left New York
to come out west and join Andreessen Horowitz,
the uh... incredibly successful, yet, very young uh... venture capital firm, that's
raised billions of dollars, run by Ben Horowitz and uh... Marc Andreessen.
So, Chris, welcome back to the program. CHRIS: Thanks for having me.
JASON: Why did you decide to join them? That's the question, right? So you were an angel
investor, entrepreneur,
doing pretty well. You sold Hunch to eBay. That seems to turn out well for you. You
just continue being a solo
angel investor, or you have Founder Collective going.
It is a pretty big jump joining a venture firm, I would imagine.
Why did you make that decision?
CHRIS: Uh...
so I thinků
So I guess for me there are sort of two things to think about. One was, you know, start
another company, or
doing more investing. I think, you, probably, do... you do both as well, and I'm sure
you've thought about the trade-offs.
The uh...
I think from... I really enjoy kind of building stuff, uh... doing an actual
startup. I think
I was just kind of... I think I've done enough
times. I've done two venture-backed startups and
some stuff before that. And uh...
It's just, you know, as you may notice, it can be a roller-coaster. JASON: Yeah.
CHRIS: I wasn't sure if I could take it again, basically.
JASON: I mean that isů
When you're an entrepreneur, and you work with VCs at venture-backed startup,
you start looking across the table, and, God,
those guys have a pretty good life. CHRIS: Yeah. I mean it's... It's...
you getů The nice thing about investing is that you get to
uh... kind of ride along
with some of the excitement without
having to have to deal with it directly and everythingů
You know. The reality is, if you are a VC and, you know, you get sick one day, like, the
company does not fall apart. Right? JASON: Yeah. CHRIS: When as an entrepreneur, it does. Uh...
So for me that was one thing I thought a lot about. Uh...
I think it would have been, you know, if you knew your next thing would be uh...
super successful and a runaway hit, that was
different, than, you know, the reality, which is you don't know. JASON: Right. CHRIS: And so I
think I thought about, a lot about that. This is like from my personal career
point of view,
and I thought, maybe, you know, I'd go.
I had sort of ideas. I think every sort of serial entrepreneur has little
fantasies about
doing like aů,
you know, BetaWorks type things. Like, I've built three things, and it will beů, you know,
be kind of building stuff, but have a little moreů
skill. I think that rarely works in practice. I think it's... you know. JASON: Yeah.
Theů What would you call it? Like, it's like an incubator. Bill Gross did it. CHRIS: Yeah.
In some ways, like, Ev Williams did it. I think he did it in a very smart way. JASON: Obvious [Corp.]
CHRIS: Kevin Ryan
with Gilt Groupe and 10gen. JASON: And now Science [Inc], Peter Pham.
CHRIS: Science [Inc]. It's hard to pull off. That was something I thought a lot about.
And thenů JASON: But that means that you are having to originate the ideas largely, having to
recruit a bunch of entrepreneurs. That's a lot different than being a VC, right?
CHRIS: Yes. So I'm just saying, like, I'm just sort of in the things that I might have
been done, could have been done. I thought about starting something,
maybe, something in between, kind of, like, you know, BetaWorks type thing.
um...
And I honestly hadn't
particularly thought about joining an
uh... established
uh... institution, you know, VC [firm].
And I started talking to the
people at Andreessen
Horowitz. And uh...
uh... I just think what they've done
uh... is really interesting. Uh... They're kind of a model for
uh... you know, [a VC firm]. The way, through which we describe it, is if ah...
building the VC firm, that we wish we had as entrepreneurs. JASON: Right.
It's an entrepreneur driven
venture firm.
And...
It seems like they have taken this approach. They
made a lot of VCs, other VCs nervous. Why do you think that is? Why a lot of VCs sort
of like uhů [are nervous]? Andreessen Horowitz is
making them nervous.
CHRIS: Well, I think... I mean... You know, there's
historically been sort of this top-tier
set of VCs, who are,
you know, with the really kind of hot deals. JASON: Yeah.
Sequoia [Capital], Kleiner [Perkins Caufield & Byers], whatever, Accel [Partners]. CHRIS: Exactly. Uh...
JASON: And post Facebook.
CHRIS: And so, I think it's... Anytime you have sort of new entrants into that
group,
you know, there's a competitive aspect. I think though, thatů
I mean the way I sort of view it isů There's that aspect, that is
one lens to look at it through, the other one isů JASON: Marc is a big presence.
Ben is a big presence. So now, you've got another top-tier firm, which means,
if there are ten great deals a year,
Andreessen is going to get a couple of them.
CHRIS: That's right. And thenů
But I think a more radical way to look at it, which is how I kind of look at it, is
to think it's not just that, but it's also the proposing a brand new model.
JASON: Yes. That's the thing that's interesting. What is that model?
CHRIS: So I think of it as likeů
you know, how we talků the thing with the language we are using, when we talk about VC, they say
things like, "He's great at picking companies."
Do we say that about lawyers or accountants? Like, "That lawyer, he's
really good at picking clients." No, you don't say that. You say,
"He's really good at helping his clients." Right? So it's a different model. Do you
think of it as the VCs picking the entrepreneurs, or do you think of it as
entrepreneurs picking the VCs? JASON: Right.
CHRIS: And so what has happened over [time], since the beginning to venture capital forty
years ago, whatever,
uh... is it back then, capital was scarce, VCs were scarce. This became, you
know... They became abundant,
and to some extent commoditized, and
uh... entrepreneurs got much savvier about sort of sharing information. JASON: Yeah.
The old term-sheets were shared now. CHRIS: Yeah. Remember, like, when we started off,
it was like, to even understand what the term in the term-sheet was like thisů
like dark magic. You need to go to consult, find someone of the ten
people in the world, who understood it. It
was all mysterious. Now it's all wide-open. You know, who... That stuff is on like
HackerNews, and people are chatting. JASON: These kids coming up know
how to negotiate term-sheet much better than you and I. CHRIS: They are very sophisticated.
Yeah.
JASON: When they're doing... Like, "I did a waterfall [model] of how this work out at
forty million, eighty million, and a hundred and fifty million dollar [exits]." Like,
you and I never did a waterfall model how the exit would work. CHRIS: No. And the pitch decks
are all like
incredibly well done. It's just a lot of more information flow.
And soů
I think, like, given those changes in the world, like theů
the start-up idea behind Andreessen Horowitz is [that]
the world has changed in that way, let's make a venture capital firm that looks
more like how we describe service firms in other parts of the
economy, like a law firm. It wouldn't be like, "Oh! They are so good at picking." I think
about the Midas list. It is so wrong. You wouldn't have the Midas list of
lawyers. You would have another list. Look, how well they serviced them. This is how
we think about it, and that's actually an attitude we have inside of the firm. Like,
the high-fives are typically around, like, "Wow! We got those guys as a great customer,
versus, you know, wow, we won this deal." It's a different mindset for
thinking about how the firm works. It's a different, by the way, economic model.
So the vast majority of management fees for most VCs goes to the general
partners' salaries. Here it doesn't. It goes to the sixty operating partners we have,
who do all these things to help. JASON: Sixty operatives! This is the thing. CHRIS: There are seven investors.
You walk in there.
There are sixty-eight people, whatever the number, something like that, and only
seven of them do investing. JASON: Are you the seventh [General] Partner? CHRIS: Yeah.
JASON: So this is the thing, that I've had specifically, multiple VCs tell me,
"Ah!" You know it.
There are sixty people there, servicing entrepreneurs doing what?
CHRIS: So there are
five groups. Uh... There's a marketing group,
which helps them with PR and kind of things like that. There is
uh... a technical recruiting group,
which uh... helps with the programmers and
designers.
I get sometimes from angels, "Hey, do you know a graphic designer?" And you are likeů Maybe,
you do, but everyone is looking for. We have a guy, whose job it is to find graphic designers
for our companies. That's all he does. And he has like
Salesforce, and he's finding people, he's like
vetting leads, and doing
all sorts of things. So we have the technical recruiting, we have executive
recruiting, and then, we have this group, called the Market Development Group, which,
literally, every... There is a whole separate floor in our firm, whereů
uh... where every day we bring in corporate [customers], you know, Citibank, whatever,
and then, we have ten portfolio companies come in and pitch the CTO,
like, every single day. Like someů A lot of, most of the firms have their CTO
conference once a year. We have it every single day. Uh...
And there is a research group. Uh ...
Actually, we just started a new group, called Corporate Development Group, which is helping you
with an M&A,
uh... strategic investments, venture debt, that all sorts of other [stuff], you know.
That's our group. That's like five people, who were like
professional bankers, who, now, work for these companies. JASON: This is [that] people are taking this
veryů This is sort of "very inside baseball," but
uh...
uh... from what I've heard, people are taking this kind of personal, because
the management fees, when people are getting two or three percent dough, every year on a billion
dollar fund, or something. It's a lot of money.
And Marc Andreessen has
basically may have said, "We don't care about that short-term money,
put that into the business, and let's play the long game. Let's get our startups
put all that money into startups essentially. Which means, when you went to work there, I'm guessing
that the salary, the cash compensation upfront every year, every month
is much lower, than what you had offered at other places. CHRIS: That's right. JASON: You had a couple of
people going after you.
CHRIS: Uh...
I haveů
uh... Itů JASON: One can assume you did.
CHRIS: It's... It's
like an order of magnitude lower. JASON: Order of magnitude? CHRIS: I don't know quite yet, but about right. JASON: OK. It's much lower.
What was your thinking on that? I mean,
you can work at a firm that was as prestigious, but with,
you know, some multiple on the salary. What was your thinking on that? It
felt betterů CHRIS: I think, first, I'm not necessarily optimizing for
money right now in my life, but uh... I'm doing it for like interesting stuff, butů
but I think that, if you just think about money, that the theory is,
if you win the
best deals and you have the best returns, you are more than make up for in the carry.
JASON: So it's, "Go long."
What do you think about 'strategics' [strategic investments] today? Because
the thinking, at least when you and I were coming up as entrepreneurs for the last twenty years, was,
"Do not take strategic money! This is a huge mistake."
But, now, we see that Samsung starts a billion dollar fund.
It's not just like Intel Capital.
All the 'strategics' are getting much more involved and want to invest.
Is that still holding true today? Would you advise startups doing
their A or B round do not take Samsung's money?
Would you not take a big company's money? CHRIS: I think there are a few issues.
Like, one is, if youů
it's a high-class problem, which money to choose. A lot of people [think], if you need
money, and that's the only money you can get, then take what you get. JASON: Sure. CHRIS: Uh...
Number two. I think, generally, like, it's better at a later stage. This reception.
So like C round. You are very often... If you are
selling equipment to, you know, wireless carriers, you see very frequently, you see in
the series C to have AT&T and Verizon, and a bunch of others will come in.
Often they are wanted as part of a
big B2B[?] deal or something.
uh...
I think that the other thing is the key thing to the terms. Like, you don't
give them the right of refusal on acquisition, that basically
kills you. JASON: Yeah.
CHRIS: That will kill you. Or right of notifications, which means,
basically, had a good advice, when you construct that deal. Have a good
lawyer or a good investor. Someone, who's done it before. So you got to be careful,
but it could be helpful. And some of this is just required to get the big deals done,
especially, at later stages.
JASON: Yeah. So
keeping them uh... to minority of information, to minority of less option. CHRIS: It also
depends on their competitor. Like, for example, we are doing a bunch of security investing.
And if like Citibank wants to invest, great! You know, because they are just a customer. They are not going to
compete. JASON: Not McAfee, or somebody, who is in the security space, or whatever.
Maybe, they're here to go fishing for
information. CHRIS: Exactly.
JASON: What's it like ů like
uh... for a guy like you?
How do you wind up getting
a phone call from Marc and Ben, "Hey, we wantů," maybe? What did they say on the phone when they call you?
Did they call you as a headhunter calls you? How does this go down? What was
the moment when they...[called]? CHRIS: I kind of knew them through the angel investing world. JASON: OK CHRIS: So I've, sort of,
bumped into them.
JASON: So take me to the exact moment. What moment did this start to
happen? I'm always interested in that
and the audience too.
Were you at Davos or something? And he says, "Hey, maybe you should think aboutů" CHRIS: This is a long [story] to join.
You know, this is a big deal to join as a
partner. Like, everyoneů
So it was like a six-monthů or three-month... I don't know what
process, or something. Uh...
JASON: Long process. CHRIS: And uh...
And I spent a lot of time in person. And uh...
uh...
You know, I kind of thought of myself as like too... Because I blogged a lot of stuff
that was sort of, like perceived to be antiVC.
It wasn't antiVC, it was more like... JASON: Just honest.
CHRIS: I think it was just honest. I think you would agree with me. JASON: Yeah. You are kind
of blunt entrepreneur-on-entrepreneur. CHRIS: Frankly, I was little surprised to have, you
know, the quote
uh...
you know, establishment.
You know, I sort of thought of myself as more a kind of iconoclastic or something, butů
JASON: Yeah. You were kind of like the entrepreneurs-on-angel-investors, that kind of
your brand isů CHRIS: Yeah. It was funny, because when I... I was like, "God, they are going to..., if
they read all that..." When they first
started talking, I was like, "Did they really read everything I've [written]?"
uh... You know, because I've written some stuff that you know, like, to make sure they realize
I'm sort of thisů [antiVC guy], you know. JASON: Yeah.
uh... An independent freethinker, turned entrepreneur. CHRIS: Yes. It turns out, yes, they've read
everything, and they liked it.
So they were like, "That's actually why we liked you.
Let's go do that stuff." Which was kind of like, "This is a good fit."
JASON: Something has changed, hasn't it? Like, it
used to be like that guys like us,
and gals, ah... people like us did not get
the VC shot as much. It was... That was like the MBA [slot], who you knew at
Harvard or Stanford. And now it seems like everybody wants Dixon, or
[Michael] Arrington, or a journalist even, e.g. Om Malik. CHRIS: I think this is the thing we talked about earlier, which is this shift.
It's like you're notů
Like, the model is no longer... Like, I think
venture used to be modeled after
hedge funds. It was like, "Who's the best stock picker?" Right?
JASON: Right. CHRIS: Now, it's modeled after, you know, like, other service, like a talent agency, or
something, where you're like,
"Who's the person that entrepreneurs want to work with?"
Right? That's the shift, I think. JASON: Aha!
CHRIS: So, it's thatů The way they think of it, we don't know, if Dixon
can pick companies, that's great,
but we kinda know that. Everyone, if you kind of one of the, you know,
plugged-in VCs, you kind of know who's good. It's notů JASON: Yeah. It becomes pretty apparent that Instagram,
or Pinterest, or whoever's hitting a certain curve. CHRIS: It becomes more about, "Do the
entrepreneurs want to work with this person?"
JASON: Ah! And you are affable, liked,
out-there person, who is built tons of the credibility through your blog.
If you did not have your blog, do you think you had the opportunity, if you weren't so out there
writing? CHRIS: I think that blogging is the most underrated ah...
I mean, I know it is, because people talk about it, but I'm actually surprised that more people in
tech, especially, like investors, and other people don'tů
they don't do more of it. I think,
it is uh... It's,
like, if you're... if you're, like, if you're, you know,
starting off in your career and want to do tech, it is by far
the fastest and most effective way to build
a sort of personal reputation, I think.
JASON: I agree.
CHRIS: And I'm surprised that you do it, I do it, Fred Wilson,
Mark Suster [do it]. That's like ten. JASON: Yes. CHRIS: That's it, really. JASON: [Michael] Arrington,
Om Malik. CHRIS: By the way, it tends to that people that aren't in Northern California. JASON: Because we
have to! CHRIS: Exactly. Like, we were forced to.
JASON: Yeah. Hey, pay attention to us.
Fred Wilson is like, "Hey. This stuff is going on in Boulder."
CHRIS: That's true. It's true. I thinků
um...
but... Yeah, I think that
blogging was huge for me, and I think it's just huge in general. I'm surprised.
That was the sort of period like four years ago, when it seemed, like, everyone would do it,
and that, kind of, fizzled out. I'm sort of surprised. JASON: It's kind of hard. And you, also, I think, have to have
an opinion.
Right? I think so many people are afraid to write about the subject
that's in any way controversial, or
this whole idea I might bump into somebody, and somebody might get offended
by what I wrote. Like, I was going to write a whole thing about Skout,
which was actually the Andreessen Horowitz investment, you know, where they had this
terrible stuff happened
with the kids meeting, [when] underage
kids getting meeting predators on it.
I didn't wind up writing it, because I was like, "Ah!"
I just
feel bad for the entrepreneur, because I know he didn't go into this to have that happen.
And I just this sort of like censored myself, but, I mean,
that is part of like, "What do you write, what you don't write." You've probably
canned a couple of pieces in your career. CHRIS: I have very few rules. One of the
rules that I don't ever uh...
uh...
say negative things about any early stage startups, because I'd having been
there, and I know what it's like. Having some dude, like, sayů I just don't do that.
I just think it's uncool.
JASON: I agree.
I did it a couple of times earlier, when I wasn't successful. Like, I write something, I think it's a
bad idea or that won't work. I stop doing it for the exact reason. CHRIS: You just know it. It's so hard in
likeů JASON: It's hard already. CHRIS: When we get the negative stuff about us, like,
it's already so hard, and then you have your employees read it to explain it to them.
It's just like the whole thing... Why is this person doing this?
JASON: Yeah. CHRIS: You know.
It's not like... I mean there's like... There is so much, like, nefarious activity in this
world, including,
you know, let's say Wall Street, for example. I just don't understand when people are like,
"Oh! The tech world needs more,
you know, critical stuff." It's like,
"Not really." We were like one of the few areas of economy, where we actually are trying to
make things better, and, like, work hard, and, you know... JASON: Innovate, dream, create jobs. CHRIS: Yeah, I
don't really see why we needů[criticism]. I think there's plenty of other things
that need criticism in this world. JASON: You know, it's funny. I was just having dinner in Boston.
This was very nice. Dharmesh [Shah] from HubSpot sets up this dinner for me.
And they were introducing everybody, and they introduced somebody, he was like, "Yeah. I'm from BzzAgent."
And uh... I was like, "BzzAgent? I know that." He's like, "Yeah.
You wrote this incredible horrible piece
about how our company should die, because we're doing deceptive marketing."
I was like, "Oh! Yeah. I remember that you are the guys were doing deceptive marketing,
and
FTC went after you. How that worked out?" They were like, "Well, you were right, but it was
really brutal and ruin my life for years." I was like,
"I'm sorry."
I
was a different person back then. Have you ever spited? What story has
the spite?
You must have said like, "I'm not going to publish this, or canned it, or you've shown
it to another person and said, "Hey! Should I publish this or not?""
CHRIS: Uhů That's a good question. I did one
uh...
that... a few that were criticizing VCs for particular activities, like one that was
about
this firm, that backed out of a signed term-sheet. JASON: Oh. I know about this. Yeah.
And don't worry, I'm not going to go there. CHRIS: I've suffered much for this, so I don't want toů [suffer again]. JASON: But that isů
aů
I mean, if you
putting this on... this is on the list of things
that a VCů
that's pretty much the worst thing a VC could ever do? CHRIS: So the thing is so... Likeů
it's bad. Theů
JASON: I can't think of any worse. CHRIS: So the way it works is that...
So do you know like a TA[?] summit model? They called it TA, whatever. That's like the private equity
guys used to do that, what they have backed at due diligence,
so what you do is a competitive deal, this is the later staged up, a competitive deal you are coming
with the really high price. You lock in a deal. The other guys go away.
And then, you have a signed term-sheet. Right? And thenů
And then you are starting to say, "Oh! Wait. That customer is not a really good customer. I'm going to
back out unless you lower the price." That was like an established model in the private
equity world.
uh... And, you know, and... And what happened in the private equity world that people starting adding
like break up fees and things like this to protect theů [startup]. Because the
promise is that, once you signed the term-sheet, the investor has all the leverage.
And if the investor backs out, everyone thinks they must have discovered some kind of
malfeasance or something, right? JASON: Oh!
CHRIS: And so the entrepreneurs are kind of screwed.
So in the venture world, the way we force this is just
through reputation, right? JASON: Right. CHRIS: So it'sů
uh... if you back out on the signed term-sheet without... You're allowed to, if you
discover that
they materially misrepresented something, likeů
It should be like confirmatory diligence, notů
not, you know, dispository, or whatever you call it, notů
JASON: You are not auditing to look for problems, to negotiate the price downů CHRIS: No. You're making sure they are not criminal,
that they did not lie aboutů JASON: It's not a fraud. CHRIS: Yes. That's the kind of stuff you investigate in term-sheet.
JASON: If you lied about your
graduate degree,
you can back out. CHRIS: Yeah. Sure. That, or, like, you've misrepresented revenues, or users
or, you knowů
That stuff, butů
If you just have a few bad phone calls with customers, and they don't sound lukewarm,
and that's not
grounds, right? JASON: Right.
CHRIS: And so, you know, that's a very important uh... JASON: So you canned that piece, because you thought,
"Oh! It's going to be too expensive." CHRIS: No, I didn't. I didn't can it, actually. JASON: Oh! That was you
did do. Did you ever say the name of the firm? You did not say the name of the firm. CHRIS: No. I don't want to go into that. Um...
JASON: Yes.
The only other the worse thing, I can think of, a venture firm could do it to stop
a sale.
And that happens pretty frequently. I mean, I have a list of
entrepreneurs, whoů CHRIS: Yeah. That's always the thing. Like, you see the HackerNews and they always like,
"The company sells, like, the VCs made themselves [a lot of money]." like, it actually is never the case, it's
almost always the opposite case, which is the VC want them to go for it.
Like, if it's ever tension, it's the opposite, right? It's not uh... JASON: Why is
that?
CHRIS: Because of the VCs have a portfolio, and they want to haveů [big wins]. They'd rather have a
few more lottery tickets, whether for the entrepreneurs, it's their whole life, and soů
you know, let's say you raised five million bucks, and you have a fifty million dollar offer,
and the entrepreneurs are like, "Look, I make whatever millions of dollars. I'll be able
to start another company." And the VCs are like, "Wait! You are goingů We
invested in two billions of dollars." That's usually where tension comes.
JASON: Right. Uhů
Not the other way around. CHRIS: I don't know, if I've ever seen a VC actuallyů [stop a sale].
I've heard stories of it, I've never
personally witnessed them. JASON: I see the couple, where [they are] like, "We are going to go longer."
And they had control of the company andů CHRIS: Did you see when they actuallyů[stop a sale]? JASON: Yeah.
They stopped it. Yeah. In this case, it was a founder,
who had given the CEO slot to somebody else, he was on the boardů
CHRIS: I see. I see.
Yes. That's usually the thing, if the VC does try to block it,
then you lose the CEO-founder, but if they've already replaced the CEO-founderů
JASON: Yeah. You've lost a little bit of leverage. Let's talk about M&A.
uh...
Amazon,
Google,
Apple with a hundred and forty
billion dollars, the largest hedge fund in the world, it's insane.
uh...
Marissa [Ann Mayer], now at Yahoo,
is starting to buy a bunch of small companies, it seems like acqui-hire style.
What's an M&A outlook is going to look like
in 2013 forward with all this huge cash,
and these companies are operating in such a high level?
CHRIS: I think that... So I don't like... I cannotů I donĺt have a crystal ball, but I do think what's happening
is that mobile is obviously big. I would say,
in the last six weeks, I've done my job talking to entrepreneurs, I would say it's
bigger, than I even
would have thought from reading the press. Like,
it's almost like, if you're...,
you know, if I think about investing and it's notů
and it's not sort of long mobile,
something's wrong. I mean, it's so important. Uh... And what's happening, I think,
with the big incumbents, so that like Microsoft, Apple, Google,
uh...
Amazon, and, probably, Samsung,
is umů [that]
they seem to be moving to a model, where they want to control kind of a whole vertical stack,
meaning
the retail experience,
uh... the handset manufacturing and design, the uh...
OS, the apps,
you know, like, everyone is doing maps, email, and cloud services, andů
JASON: This is the direct result
of Apple and Steve Jobs.
CHRIS: That's right. I think Apple proved the vertical model was vastly superior and, now,
Google, of course, bought Motorola, and,
you know, Amazonĺs making their own
tablets, and,
you know, everyoneĺs going to move into all these differentů[things]. It looks like everyone's
moving into doing all these different things. Either through very
strong alliances or through building it themselves. JASON: We did hear that Google
was going to have stores,
and Google launched this [Cromebook] Pixel,
an incredible laptop with the best resolution of any laptop.
CHRIS: No. That's right. And if you look at these markets, typically,
historically, probably, two companies survive.
So you've got five companies with
hundreds of billions of dollars in market cap and cash.
uh... All of them are,
like, directly colliding,
and two will survive. Like, it's going to be... I think it's going to be like
an epic battle, and if you're a startup, usually, startups benefit from that
from the M&A point of view. JASON: Why of that? CHRIS: Because, if you'reů if everyone wants
the whole stack, and if you have a piece of the stack, you know,
and these guys say, "How are we going to get that?" And also the competency, so, like,
you know, like, Apple is
amazing company, but they've always been weak at web services and data services.
And so, you know, at some point, presumably, they're going to figure out [that] they
have to acquire for that. JASON: Yeah.
CHRIS: And if you're web services, if you're,... you know, I don't know what the name company,
in mapping, or storage, or whatever, like, you just are really good at that stuff, you're,
probably, pretty interesting to them. JASON: Yeah. Absolutely.
uh... CHRIS: And every each of these companies tends to have their kind of weaknesses. Uh...
Although, Google is executing so incredibly well. JASON: Yeah. Let's go through each of them. Let's talk about each one.
uh... Google.
What are your thoughts on [Google]?
CHRIS: I think the execution, in the last week, since Larry came back, I don't know when it
was, just unbelievable, like, everyů JASON: Phenomenal! CHRIS: They are hitting it.
I mean, like,
their core business on advertising, just more, they're effectively... you know,
they're completely dominant on that.
You know. The search, all that stuff. I think they... People report seventy-five
percent share, it's really ninety something percent. Everyone, who like
has a website, will tell you that. JASON: Yeah.
When you look at the traffic refers, that's pretty clear that theyů[own that]. CHRIS: They own that.
Uh... The uh... And then, the amazing thing is, when they are doing all this, sort of, like,
you know, core business stuff so well, but they are also doing all this crazy interesting
futuristic stuff. The cars, the glasses,
you know, and mobile. Did you remember when they bought Android in 2004? JASON: Yeah. CHRIS: Everyone was like head-scratching.
Look how visionary these guys are! They're... They're going toů And
they're doing like... not like the technology, but, now, that seems they begin to design well. Like,
the Maps app and all these other things are just like super well done. I just think they areů
JASON: Yeah. When you go into
Apple's ecosystem on their home turf,
and you absolutely slaughter them app by app, like, Gmail. CHRIS: And look, if you think about, Microsoft isn't
even in this game.
And mobile, like,
for Microsoft to not be in the game... Like, for a search company, to be
crushing the biggest OS company is pretty remarkable, right? JASON: That's
amazing.
Does Microsoft have any chance? Have you played with Windows 8? What are your thoughts?
CHRIS: I've used it a little. I think it's nice. It's the problem with these markets.
It's driven by the
developers. Right? I mean, whoever has the developers wins. A consumer
walks into a store,
and they say, "What do you care on your phone?" You care how it looks and this
map. Which is all... They're all looking pretty good now. And hardware,
you know, it's pretty standardized these days. JASON: The new Blackberry looks
exactly like an iPhone.
You can't tell them apart.
CHRIS: No. So that, everyone would get. Microsoft did that fine.
And then people care about what? You care about, "Does it have Google Maps and thisů? And
then, does it have all these other games in the long tail stuff, right? JASON: Sure.
CHRIS: And that'sů The only people, who have that and probably have a shot at it, are Android and iOS. So,
you knowů JASON: Uphill battle.
CHRIS: Microsoft is trying to pay their way into it. Like, they're, you know, paying developers and
things, but it's tough, I mean.
JASON: The market seems to move faster now, than it ever has. What impact does it have on
startups? What do you think?
CHRIS: I think it's mixed, because, on the one hand, you see these amazing [companies], you know,
theů
Pinterest and SnapChat, whatever. These kinds of things justů JASON: Uber, Airbnb.
CHRIS: Yeah. They just come out of nowhere and they go. I mean this. This rap, the
pace of
scaling is unprecedented. On the other hand, there is this... especially in, like, the
mobile apps world,
this concern about sort of hit-driven [business],
kind of, you know. It almost starts looking like Hollywood, right? JASON: Right.
CHRIS: When you see like, "Oh! This is, you knowů"
This uh...
I don't want to name startups names, but you can go through a whole bunch that raised venture money,
you know, where they had this graph going up and, suddenly, the graph went down,
because they were fetish or whatever. JASON: Yeah. I mean people might think
Foursquare would be one of those or something, which had huge boom and then
went sideways. And anotherů
It's almost like that, what they call it, "travel[?] sadness" or something. Where you have this huge boom,
it seemed very pronounced in
mobile, where, like, everybody goes, rushes in and checks out the new club, and then,
maybe, it doesn't have sustainability.
CHRIS: Yeah. I think it's part of itů The most extreme examples
are games. And those are just naturally kind of
fad. People likeů It's like you've been there.
uh... But it does seem to be beyond games, and thatů
that I think it'sů
JASON: So what would that mean forů? What does it mean for an entrepreneur? You got to just... If it doesn't
hit, quit,
and start again.
CHRIS: Well, one is what's your financing strategy.
That model can be phenomenal, if you're a sole developer
making a game, and it's a minor hit, you can do extremely well. It justů It means,
maybe, it's not right for venture markets, like, for VC markets. I think that's a part of this.
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How do I say it more clearly? Squarespace is awesome Software-as-a-service.
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I mean this is a very revolutionary thing. And, hey, it starts at only twenty-four
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JASON: OK. So let's talk about uh...
We talked a little bit about Google, talked about a hit-driven business for apps,
and let's talk about Apple.
What do you think? A hundred and forty billion dollars, obviously,
best products in the market, but it feels like
some of the hardware isů [not great].
Android has reached parity. Do you think that Android's
on par, now, with Apple iOS
offering?
CHRIS: I'm an iOS user. Personally, I have no Android device to try it out.
I find itů
I don't find it as intuitive,
but I hear more and more sort of chatter from smart friends that like the hardware
as good or even, possibly, better. And
the OS [Android] is getting better andů
JASON: It feels like eighty percent way there. CHRIS: Yeah. It'sů
You know, these markets, if you believe in the Clayton M. Christensen's theory on
these things, like, what happens is, they start off vertically integrated, and then,
over time as,
you know, competitors come in, and uh... the hardware and software get better, you know,
the sort of
the less vertically integrated guys are able to compete just as well.
And over time, those people will eventually win, like, the uh... stratified non-vertically
integrated [companies]. That's the theory. That's what happened, if you look at the history
of desktops. That's sort of what happens. JASON: Microsoft.
Will that hold true this, though? Because it happened previouslyů
CHRIS: That's the sixty-four million [dollar] question, or
trillion-dollar question, or whatever billions.
JASON: It's a six hundred and forty billion dollar evaluation question.
CHRIS: So that's, probably, the most... That is literally the
most important question for the tech economy in next five-ten years.
What will the structure of industry in mobile be?
JASON: Right. Is it going to be all
Apple
versus Android? Or other people are going to play? CHRIS: Yeah. How many people are in the market? Likeů
How is it structured? Likeů How is the stack? Is it one company owning the stack or
multiple ones?
Where do the profits flow? Do they flow, like, to the iOS and their apps, like the way they did with the
desktop?
Or is it Google making money on advertising and
subsidizing the OS? JASON: Yeah. Or Amazon is making money on the content and subsidizing
the hardware. What do you think ofů?
Before we leave the Apple subject.
Can Apple
succeed in this OS space, if they don't build world-class apps themselves, because it feels
like their,
sort of, cluster of great apps
have now been just absolutely thrones by Google, right? The Maps app.
The Gmail app is so much better than Mail.
You know. Right down the line. It feels like
Apple doesn't know how to make great apps. Do they need to be a great app company or buy them?
CHRIS: Their Achilles' heel isů That's trueů
fromů They are an amazing company. They are, I think, the most innovative company in
technology in the last thirty years. JASON: Clearly. CHRIS: Clearly and uhů
But they've had this Achilles' heel of web services and data services. I would
put Maps in the data services versus their search or other things. And iCloud
and all this stuffů JASON: iCloud is a disaster. CHRIS: I know, it's no good. JASON: I had like twice my phoneů CHRIS: And frankly,
iTunes and all of that [is no good]. They did a good job in the media deals, but
no one likes the software. And, like, I have an Apple TV and it alwaysů
the downloads don'tů it's not reliable, like,
in the way that like Dropbox is or something.
uh... And so, that's always been their Achilles' heel. So if they are going to get that togetherů
And then also, will they pull another, you know, rabbit of the hat with, like,
I don't know, TV or something. JASON: Watch TV. CHRIS: The watch TV, you know, because at some point, you
know, the iPhone and the iPad will sort of run their course, but
they'll beů
the competition will be good enough.
JASON: And if you were running it,
when you were on the board or something, would your advice be like,
"Just go buy like the top
ten apps out there, buy Evernote, buy Twitter?"
It seems like somebody's got to buy Evernote and Twitter at some point. I mean they have
a hundred and forty billion dollars. If it's me, maybe, just go buy those things. CHRIS: I had
a uh... a super interesting moment, [which] was when
uh... Apple Maps came out, and then Google had a choice, "Do they release Maps
for the iOS or do they not."
JASON: Right. CHRIS: And they could have said no. You know, if you want me... I
personally might switch to the Android to get the Maps. The Apple Maps did not work.
And I dependů JASON: Yeah. Its key feature. CHRIS: That could've beenů
you know. They decided to go for that, and that's interesting, because they can always
change that in three years. And if Apple doesn't have a decent Maps [app], or someone doesn't have a decent
Maps [app], that's a big issue.
uh...
You know. So, on the other hand, maybe, what they are trying to do is, you know what, people won't
even care about iOS anymore, because we'll have so many good apps. When they [people]
walk in to the store, all they say is, "Does it have Google Maps, Gmail, Google Calendar?"
And then, they are like, "OK, now, get the one that has the coolest form factor or
something." Maybe, that's that Google's strategy. It seems that the strategy is just sort of,
like, to have people care about the apps,
and not the OS. Um...
I think, at some point, there is going to be a battle over those apps, and
people will buy those companies, and I think it's also like,
every
big company has own M&A philosophy. So there's, like, people, like, the Cisco's
or Oracle's of the world, who sort of view themselves as distributors, not as,
for the most part, R&D labs, anymore. So they are very happy to buy uh...
uh... someů [companies]. JASON: Linksys or whatever. CHRIS: Yeah. You know, or someů
Or some enterprises, you know, uh... SuccessFactors. They get to hundreds of
millions in revenue,
"We buy them, we plug them into our stack, we can now up sale in 5X." They immediately
raised the price in 5X, and they can sell it, because they are distributors, and they are happy buying. You know,
like securities, like Symantec might buy companies everyday for
big premiums, because they can plug them in a channel. Where companies like Apple, who have said "No." They
rarely do acquisitions, right? JASON: No, really no.
CHRIS: Or what they do is like talented, smallů [firm acquisitions].
And the question is, now, they areů
you know, they're in a different strategic point, and they don't have Steve Jobs,
uh... will they be forced to sort of change their attitude toward that?
Microsoft, for example, for a long time, they've never made an acquisition. And now, they [do].
Obviously, Skype [Technologies], Avenue A [/Razorfish], Yammer, that have changed that. JASON: And those seemed to work really well.
Skype seems to be flourishing. Yammer seems to be flourishing. I mean, it seems to be a pretty
good strategy. CHRIS: Yeah. At some point, will Apple make that shift as well? It's going to be a really interesting question. JASON: That's interesting.
I think they need to at some point. CHRIS: I think especially around the web services and data.
JASON: It's such a disaster. Have you had your phone, like,
to have to be restored and everything from the iCloud? It's so
kludgy. CHRIS: I don't even use iCloud. I just find it such a mess. JASON: Oh! I've paid a hundred
dollars for it. It is never-ending thinking. It doesn't tell you, like, even simple
thing, telling you the percentage that it's completed. It doesn't do stupid, silly stuff like that. CHRIS: I love Apple,
you know. All I own are Apple devices and I've always loved them, but
that stuff is just terrible. JASON: All right. Let's move on to Amazon. What an amazing company, this
has been, right? CHRIS: Yeah.
JASON: Uh... One company takes over
retail,
and, concurrently,
uh... cloud computing. CHRIS: And, importantly, they still have their founder-CEO
visionary, right? He's like running it. JASON: Yeah. Bezos is kind ofů
Is he under-appreciated, maybe?
CHRIS: I think people are starting to see him, like theů, as
the main,
you know, kind of, [visionary].
I guess, Larry Page, back at Google, also has it too. You know that's important.
Like, thoseů If you look at the history of these really innovative companies, like
look at Sony with [Akio] Morita, or whatever. Likeů
It was always, when you had the founder-CEO, that was like the golden age, right? JASON: Yeah.
CHRIS: Uh... So Amazon has that. They have a really really strong... I think, their commerce
position is just, you know,
very very strong.
uh... And it
might be really interesting leverage into, like,ů They are ableů This is really fascinating,
because, like,
they're able to use that, to subsidize, you know, the Kindles and
everything else.
In the same way, Google is able to use the advertising.
One thing interesting to it, is a strategic battle, you got not only
different competencies, but actually totally different business models.
And which one would end up dominating there? Uh...
JASON: Which one would you bet on? You bet on the advertising model, the,
you know, margin in the product, like Apple's [model], or the
"We might be able to up sell you on some commerce with the Kindle" [model].
CHRIS: I tend to think
they are both great companies. And Amazon, I tend to think, will eat more
out of offline commerce, than it will
Google. Do you know what I mean?
Like, that's where I wouldů If Iů
If you are going to go long Amazon, you're going to short BestBuy. I wouldn't, probably, short Google. I think
they're both really powerful and will do well.
Does it make sense? JASON: Yeah. They are not... CHRIS: I mean, the e-commerce is still only eight
percent of commerce. It's shockingly low.
That number is going to go to thirty or forty. JASON: It's got to. CHRIS: Yeah.
Of course. The only thing they are still going to do like physically is that you are going to do
showrooms, right? JASON: Yeah. CHRIS: Which is like,
you go to check out the new Apple thing, like "high-touch" stuff. JASON: And you probably don't even
buy it. You're, probably, like, "I saw, I order online later." CHRIS: Yeah. You won't keep
inventory.
You'll get it online. And the other thing, maybe, you'll do, like..., you know. You need
whatever, I want to get some crackers, and in the next five minutes, maybe, I walked out to [a store].
There will be a corner deli or something, but
otherwise, retail'sů [dead]. I can't imagine, why do you have retail stores?
JASON: It feels likeů Are you an Amazon Prime [customer], and they deliver to your house? CHRIS: Yeah. It's like,
if I need like, toothpick or whatever. It's like, "Go to Amazon Prime and it's there."
It's awesome. JASON: And forty-eight hours later, it's there.
And so where are you going to invest? I mean, it seems that the New York contingent
was kind of like, "Oh, the sell-out is going to West Cost and
you got a little bit of uh... *** at that." But
you still have your place there, you are going to invest there. I would assume that one of the reasons
they wanted you, because New York is booming. CHRIS: Yeah. That's for sure. And, like, the
only reason thatů Soů
Andreessen Horowitz has a philosophy of
one office,
so there's not
going to be Andreessen Horowitz China or something. That's not, because we... That's
not, because we don't want to invest in other places,
it's because of just, like, old-fashioned [style], like, team, camaraderie, you know.
That kind of thing.
It's important, that, you know... It's sort of aů
just like any, sort of,
well-run company. You have people together, and they get along, and things like that.
It's not a reflection of where we want to invest. Right? Soů
So I would love it if, you know,
half of my investments or, maybe, more were
in places like New York. And I thinků
I think separately that there is aů
that there's a strong argument
that a lot of... a lot more tech innovation will happen in places like New York and
LA.
uh... In that, we're now, kind of... If you've read like historians of
technological revolutions, the last five, like, going back to like, you know, steam and
automobile, the first half what they usually call the installation phase, where you're sort of
first building up the Internet and, like,
the basic things like, now, we have a search engine, now, we have optical
switching, now, we'reů If you look at the nineties the best returns were
companies, which invested in like optical switching, all this kind of stuff. It actually
wasn't apps layer.
And we sort of built the apps, now, we have the social graph, now, we have the search [engines].
And then, the next phase of these revolutions is what they call a
deployment phase, which is when you end taking it and saying, "Now, let's use this Internet to
revolutionize health care, and the media, and LA, and,
you know, advertising, and finance, and likeů JASON: Magazines and publishing, whatever. CHRIS: Exactly. And so and other things
tendů So, like, you look at the automobile revolution,
the first half was all located in Detroit.
Right? Which was the Silicon Valley of its time.
New cars, new engines.
And the second half was like highway system,
uh... McDonald's, BestBuy, big box retail, like, all of these things were like "applications"
of cars. They were all over.
JASON: Drive-ins. CHRIS: Drive-ins, exactly, those are the apps of the cars.
JASON: What are those things called, when you've gotů you drove in your car and got served food on the side of your car?
CHRIS: Oh... Yeah. Like, from there was from like "Happy Days" [TV series], or whatever. JASON: Yeah. I'll ask you to come up and
put it on the windshield, or something, some food there. CHRIS: I don't know that they are called.
But, yeah, those were apps of that era. And those apps tend to be
dispersed outside of Detroit.
Right? So, by the same token, I think that will happen in the next ten-twenty years
in our industry.
JASON: How many investments, and what size
are you going to do? Have you had that discussion?
Was that part of it? Like,
you are going to be the angel guy orů
CHRIS: No. JASON: You areů It seems like... What did they say that Andreessen was going to be
stage
indifferent? CHRIS: Yeah. We are stage indifferent. Uh...
And I'm stage indifferent. Like, my job
description is to be stage indifferent. Uh...
Everything from seed toů [buyouts], you know. They didů we did the... I wasn't there, but we
did the uhů
the Skype buyout.
JASON: Right! I remember that. Yeah. Double the money like in a year. CHRIS: It's likeů
Which feels more like a private equity type deal. It's more like, you know,
the classical Silver Lake [Partners] type
deal, as opposed to venture [deal], so it's really literally stage agnostic.
That's my job as well. JASON: And [Michael] Ovitz is over there, now, I understand. What... Is he
part of the firm? What's the story there? Or do you even know? CHRIS: I don't know his official thing, but
he is there all the time. JASON: That's what I hear. Is he there all the time?
Everybody knows. It has been written. CHRIS: No. I
don't know what is his official thing. I think he's an advisor. JASON: Hanging out? Yeah.
CHRIS: Uh... Yeah.
He hangs out there all the time. JASON: What is he like? I mean, now, you have this Hollywood guy hanging out.
CHRIS: I donĺt know him.
I've only been on this job for six weeks.
uh... He is like a super interesting nice guy, and, now, talk aboutů
He's really engaged in tech. I think he's having a lot of fun. He seems to be, like, excited.
JASON: Yeah.
CHRIS: He sits in our like partner meetings and
says much stuff, and soů
I don't know any [more].
JASON: And how big are the funds now? I mean, I kind of lost track, because it felt like
the firm is three years old, now, or something. CHRIS: Yeah.
So the current one is one and a half billion.
It's the third fund.
JASON: One point five billion
on anything.
So you could
put a hundred million dollars into a later stage thing orů CHRIS: Yeah. We did
a hundred into GitHub, for example.
JASON: But you would put a hundred thousand into
something smaller even that low. CHRIS: Yeah.
JASON: Have you guys [put $100000]? CHRIS: Yeah. There is a whole active seed program.
JASON: All right. You, guys, have a Sequoia [Capital's] Scout [Seed Fund] style program. CHRIS: It's not
Scouts [Program]. It's just that weů JASON: Oh! You, the partnersů CHRIS: Yeah. We have a meeting
with someone interesting, and, you knowů JASON: Interesting.
And what's Marc Andreessen like? I mean, you've been thereů CHRIS: He's awesome. He's awesome.
He isů
He's kind of as advertised, like, he's like incredibly smart, like,
uh...
like sort of supernaturally smart. I don't knowů
JASON: He does seem... There is a word for it too. What did they call that? Predato...
It's like "superhuman," preternatural human, or something. Anyway.
CHRIS: He is very very smart,
overly smart.
And uh...
He's like a super nice guy, like, he wants to doů I donĺt know, you have spent time with him.
JASON: Yeah. He almostů He was going to be the investor in Weblogs, Inc. before we sold.
CHRIS: And I think he's
like the whole group. I mean,
he's like really charged up with like, you know,
how can we changed the world, and
do cool stuff. It's sort of likeů The funny thing at the firm is like,
every time someone has an idea, it's always like, "How can we do that twenty times
larger and more, you know, cooler, you know?"
It's sort of... That's the attitude, it is likeů
JASON: Go big. CHRIS: Yes.
Very very much. Likeů In fact,
like, the worst thing, an entrepreneur can say, is like, "Here's the exit strategy or
something." It's just likeů
JASON: What? No. What's the way this takes over the world? CHRIS: Yeah. Which is, frankly, a different way
thinking. Like, as an angel investor, I didn't
really think that way as much. It was much more likeů
You've done angel investing. If you invested at five million dollar evaluation and they sell for a hundred
million, you're like awesome, right? JASON: Right.
CHRIS: Uh... So that's like for me at least personally like a bigger adjustment,
I guess. It's just thinking about things that way, like thisů
If it's going to be like a hundred million dollar exit, that's not
a good fit for us, I mean.
JASON: The goal post has moved
in a big way.
What's the uh... most successful angel investment to date for
you?
I just want it on the pure return base, and then, just in terms of enjoyment.
uh...
It's hard to pick favorites, butů
CHRIS: Well, I mean, it's like the consumers' [investments]. So my consumers' ones are like
Kickstarter, Foursquare. JASON: Oh! My God! That's incredible.
Both are great.
CHRIS: Some of themů
Like, I'm an investor in Pinterest, but that was the later stage. So I don't know. Obviously, it
is a great company. I did a later stage [investment].
uh... I've a bunch of B2B stuff that
doesn't get as much attention, but they are the great companies, uh...
that I really like.
JASON: What do you think is going to happen with Kickstarter? It's uh... I was at a poker game recently, and
I was talking toů There were two directors at the table. It happened to be two directors at the poker table in Hollywood,
and I was trying to explain to these
two gentlemen, who were pretty high profile, that you could actually fund the film on
here for thirty million dollars. CHRIS: There are three Oscar-nominated films this year,
that were made on Kickstarter.
I don't know which ones are there. JASON: Beasts of the Southern Wild. I think is one of them. But,
yeah, documentaries. It's a place for documentaries. Go to for docs. CHRIS: Yeah. There are three of them.
I think like you know... You can imagineů
Think about likeů
It was one of the tech companies like
Twitter, like, two or three years ago, and like Facebook five years ago. It was like a point
at which, it was like,
kind of where Kickstarter is now. All the techies know it. And we talk about it,
but like Hollywood hasn't heard of it yet. Remember likeů And each of these things
was at that point at one point,
and some of them didn't cross over, and some of them suddenly did. It usually
happens like in a month.
JASON: Right. CHRIS: Something happens. JASON: Like, Britney Spears and
Paris Hilton started using it.
CHRIS: That's right. Or, I think, Kickstarter is like Quentin Tarantino, like some
cultishů JASON: That's what I told him, what if Quentin Tarantino
put a film up there? CHRIS: Oh! God. Not that he needed the money, but, like,
if he did the Star Wars on there, you get the money like in an hour, right?
JASON: Absolutely.
You put a Boba Fett
movie on... Not that Disney needs the money, but if you put a Boba Fett movie on there,
forget it!
CHRIS: I agree. I think it's uh... I... I think it and... I think that
could happen. I don't see why [not]. Not only did you get the
money, you get the community, you get the engaged fans, you get theů, you know. JASON: Wait, you get a hundred
percent ownership of the IP. CHRIS: Yeah.
I think what's happened... You know whatů
like, I think, Fred Wilson talks about this a lot of how the Internet unbundles
industries.
And so I think... I think of Kickstarter as potentially the thing that
unbundles the financing layer of the media industry.
So you think what traditional media companies do - financing,
you know. I guess,
you know it's better than I do, but like production, marketing, distribution. JASON: Yeah.
Marketing, distribution, finance. CHRIS: And so like distribution..., you know, like, at least in
like music, distribution, sort of, gone now. Or, maybe, it through Spotify, I don't know what.
And then, like, there's the finance part, which could be like Kickstarter or the other
kinds of crowd funding things.
uh...
You know, you sort of imagine YoshiLore[?] picked off andů
JASON: Yeah. Distribution's changing. This uh... film "Arbitrage"
that came out to twelve millions on the VOD [Video on demand] alone, or twenty million, or something. CHRIS: I watched it on Apple TV.
JASON: You watched it on Apple TV? CHRIS: Yeah. JASON: My friend, Nick [Nicholas] Jarecki made it.
He made this film, and it's like he made it for twenty million and made twenty million
on VOD. He's in the black out of the gate. CHRIS: It's
amazing. Yeah. JASON: So, in the media space, the House of Cards [TV series] is coming out now on Netflix.
Amazon is optioning scripts. I don't know if you've read this, that's Amazon Studios thing.
CHRIS: It's interesting. JASON: Why isn't Apple
taking this hundred and forty billion dollars
and saying, "Let's put ten billion to work funding TV shows?" CHRIS: What you say is super interesting, because, likeů
like, think about Spotify. Like, if you talk to, like, the tech world, half of the tech world is
like, "They're awesome." And the other half is like, "They are screwed, because
they're content licensing and all the profits are going to go to the content." Right?
JASON: Right.
CHRIS: That's like... And people talk about that with Netflix too,
but, I think, if you take a broader view, historically, there's always been a
battle between content and distribution.
Right? And at various times, they have a different shifting balance of power
or something. So the argument with Spotify or Netflix, once you get big enough,
then you can go in the content. JASON: I.e. iTunes.
CHRIS: Yeah, iTunes. What Netflix is doing is fascinating. And Spotify soon
will do that at some point too. JASON: You think, they actuallyů CHRIS: I don't know, they have to. JASON: Yeah. That would be an
amazing thing. CHRIS: I think so, right? I mean, maybe, it's different with music, because of the life span of music.
JASON: I think that Sean Parker would do that though. He'sů
He was that... He was trying to buy one of the music labels. CHRIS: I think, at some point, you have to, to get leverage
against the... against the content guys, right?
JASON: Yeah. Uh... CHRIS: Now, I think that the reason Apple hasn't [done it], because they don't see that as a
profit center. They see that just like aů
They runů ITunes for them is non-profit, that they can
just use to make the devices better. So they don't really care that they do not make much money
on that.
JASON: But imagine if they own uh...
a studio, and they just went inů did likeů
the shows that
the networks canceled, like Arrested Development, that people just wanted a
couple more seasons, they just started funding that stuff,
and it was only available
on your iPad,
or available for the first-year on iPad, then everywhere else, that would have been huge.
CHRIS: I think that... Like, I think likeů
You might see that the future might be in video games, right now. So Kickstarter started a
hundred million
funding of
independent video games last year. That was the biggest category, I think.
And then, it's going to be distributed now through Steam [steampowered.com]. And if you know, this is like the most underrated
media company in the world. JASON: Yeah.
Steam is incredible. CHRIS: Like, a billion dollar in revenue. Like, it's phenomenal. Right? And
Steam... Like... By the way, Steam is the most interesting company that's probably going to move
into the console space, because they have this massive distribution now.
JASON: So just buy like OUYA or make oneů CHRIS: Yeah. Buy one, or make one, or whatever. Like, they
are the powerhouse. So you see it happened likeů
like, that you're funding on Kickstarter, you're distributing through Steam,
like, you're playing it on any device or something. Like, the whole thing is getting
unbundled.
I think, probably, video gamesů yeah, I think it's the most forward looking right now. JASON: Yeah.
I think that is the biggest. Actually, people are complaining about it, "Oh! It's too many games up
there." It's like a game sewer. That's when you know, a company's doing well, when people
start complaining about,
"It's too much of this. It's too many celebrities on Twitter." CHRIS: Yeah.
JASON: What's your take onů We would end up on this one.
...Facebook, and Twitter, and LinkedIn? We look at three social networks there. LinkedIn is
obviously a juggernaut for revenue. Their market cap is
close to exceeding Yahoo's [capitalization].
Could they ever catch up to Facebook in terms of revenue thing or...?
CHRIS: It's like, you know, if you think of it is like there is
one sort of the personal network, and one is the professional network.
The professional [one] certainly
seems important.
They've done an amazing job.
JASON: Twitter versus Facebook. I mean,
all the intelligent, like, powerful people are on Twitter, and
everybody is on Facebook. It seems like a conversation on Twitter is
the important people.
CHRIS: I think they are different. I think that Twitter is more of a publishing platform, then
it lessů it's sort of social, like you'll add Reply Me or something, but
for the most part,
it'sů I donĺt know the numbers, but I would imagine that it would look very power-law-like,
and you have a relatively small group with a lot of followers.
um...
JASON: Which is more important in ten years. CHRIS: I thought it sort of replaced our Access[?], didn't it, I mean?
JASON: Yeah. Big time. CHRIS: So it's a new web-publishing platform. I think they can bothů
I'll be bullish on both. I don't knowů JASON: What do you think the
difference is? Is that the
Twitter is for
famous people to publish themselves? Or,
Facebook is for everybody.
CHRIS: Yeah. I think that Facebook is essentially a photo-sharing network, isn't it? I mean,
Instagramů It's a photo-sharing network among your friends, and
Twitter is a text-publishing platform, you know, link-publishing platform, so
at least to me it is. That's how I use it.
uh... I think they are bothů I use Twitter constantly. I mean, you do probably too. Like,
most tech people do. I also find [that] Twitter, for me, is a much more professional tool. And I use
Facebook more as a personal tool. Like aů JASON: There is that little split there.
CHRIS: There's like a thing. When I was, you know, in New York, and like, there's a
hurricane, I go on Facebook to see
how friends are doing, and then Twitter was more like people in California are
talking about the iPhone, right?
JASON: It is very weird when it happens, because I made a joke about something
and people were likeů
Peter Rojas was like,
"I have no power. I have like a three-year-old. It's likeů [hell]."
You're joking about. I had no idea. Like, Manhattan still doesn't have power? It's like four days in.
You don't have power in Manhattan [, do you]? CHRIS: Yeah. I was there. It was... JASON: What is like not to have power
after five days in Manhattan? CHRIS: It got a little I-am-legend-ish at some point. It
was likeů you know. JASON: Yeah.
CHRIS: It was likeů
My place is in the East Village there and uh...
I love the East Village, but when you are out of power for four days, and like... JASON: East Village doesn't smell good afterů [four days].
CHRIS: Yeah. JASON: In the nineties, it didnĺt smell good. CHRIS: The only sounds you'd hear were like sirens, and it was just like a
little... you know.
JASON: This could go to hell real quick. CHRIS: I actually thought at one point, like day four, like,
"Yeah. It starts, there is no food, there is noů" Remember, the wholeů
You lived there. Like, the whole city is optimized for like, delivery, and, you know,
just-in-time food. No one keeps food stored. JASON: Yeah. Uh...
It can get ugly quick. CHRIS: It could have gotten uglier. Yeah, I think so.
JASON: Man. Thatĺs crazy. There is no global warming.
Hey, what do you think of AngelList?
CHRIS: I think it's awesome. First of all, I likeů JASON: It's a very surreal moment, and the audience
has no idea what.
CHRIS: OK. Uh... I think it's awesome. I loveů First of all, Naval [Ravikant] and [Babak] Nivi are great. Andů uh...
It has a super positive
influence on the, you know, early stage [companies].
The startup world is sort of democratizing. Of all things, good things, the Internet does. JASON: Yeah.
We talked before about a marketplace. Hey, there's a marketplace.
CHRIS: Yeah. I don't know if it plans to move into the crowd funding, but,
certainly, if they did, it would be interesting. JASON: They're doing a crowd funding onů
for accredited investors. Like, they make one LLC [Limited Liability Company] that does a hundred and fifty
thousand dollars, one thousand at a time.
CHRIS: Yeah. I think it's super interesting. I think it goes,
you know,
there's aů
In the beginning, we were talking about the future of venture capital. Like, I think
there's all sorts of probablyů It's funny, because, like,
we're in the business of trying to innovate and change industries, and, yet,
our industry hasn't changed that much. It's like, "Doctor, heal thyself!" kind of
things. Why haven't we done that? Andů JASON: Doctor's still smoking
cigarettes. CHRIS: Yeah.
I think we're starting to seeů [changes]. Like, AngelList is a great example,
you know. JASON: Andreessen Horowitz is a great example. Sixty people there are doing services
for the entrepreneurs. The entrepreneurs are coming into this like in vaulted cathedral, "Oh!
Please give me a check." You come in and it's like you get your nails done. CHRIS: Yeah.
I mean, I'm biased, but I argue that that's true. JASON: I'm an entrepreneur, I tell you it's true.
CHRIS: And I think this..., you know. I think there are also
places like, uh...
you know, First Round [Capital]. There are many other firms, like First Round, US [Union Square Ventures] of Fred Wilson.
Like, a bunch of people are doing really interesting stuff.
I think of AngelList and the whole rise of seed funds, superangels.
I think it's just good that we have all this experimentation going on. JASON: Have you
invested in a company from them? Have you found [one] on
AngelList that you remember? CHRIS: I
use it like the way, I use the Crunchbase, like a check on. I can't
recall if I actually found it through there, but I certainly take a look. JASON: You've taken the introductions from there.
I'm sure. CHRIS: Yeah. Sure. JASON: That's why I find very interesting. I'm like, "That looks very interesting. Intro,
intro, intro." I do a couple of intros a week to check people out.
CHRIS: I mean it's harder, becauseů
It depends, if you're doing it like angel investing out of scale, you
end up having to rely on lots of filters, that are beyond just, "Is it a
cool idea?" But it's more like, "This gets sent to me from like a person, whoů
you know, who's investing, who I trust. You know, because, it's justů
that's the challenge without it, if you are doing it at a scale, but certainly it's really interesting.
uh... JASON: Chris Dixon, what an amazing hour, such a great uh... advice for entrepreneurs, and
great insights on the industry. Everybody,
follow @cdixon on Twitter.
And this is great for me, because, basically, this is it. After inside.com,
that's my last startup,
and then,
I got recruited last year, pretty heavily, by two venture firms. That's it. I'm going to
Chris Dixon's route. I'm going to get recruited. CHRIS: I can tell you all theů
all their secrets over a beer sometime. JASON: Give me the tips, how to get recruited by a
VC. It's such a great life, you look like, you're so relaxed now,
comparing to running a startup. CHRIS: It's a lot easier, than
running, than doing startups. JASON: So much respect for founders. Like, it's just
you sit there, grinding your teeth at night, wondering if your baby is going to make it. CHRIS: I had a friend who
said, uh...
Before I started my first company, he was an experienced entrepreneur, he said, "Get ready to feel sick to your stomach for the
next five years." And I was like, "Eh, whatever." And then later, I was, "Shoot, I should
listen to the guy."
JASON: That's pretty much, the most accurate description, that I ever heard.
Five years of complete obnoxia. Or just likeů
This like, waking up in the middle of the night, like, you have that as an entrepreneur.
It's like waking up,
"I forgot something. Oh! My God. I forgot something." Uh... CHRIS: It's aů Thatĺs why,
you know... That's why we have so much respect for them,
because it's a really hard thing to do. JASON: I think that'sů This is itů
I look at you, getting
uh... high at Andreessen Horowitz as a great moment in the history of venture capital,
because
it's like one of the good, like, entrepreneur-angels is now at one of
the top firms. It's like a really big deal.
That's not just another MBA getting that slot. It
makes me feel like,
"Oh! Wow."
If I was starting a new company, like,
Andreessen Horowitz would be like one of the top three stops. Like, I'm going to go
here, and here, and here. Right? Like, your joining specifically cements it for a
lot of entrepreneurs, especially, for the New York ones.
CHRIS: Thanks. JASON: Uh...
And uh... Continued success. And see you all next time at "This Week in Startups."
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