AI transcript
0:00:05 First one is folding chairs. We have about 20 LPs to start in our little conference area with our flat panel TV on the wall.
0:00:07 It’s grown to be a somewhat larger production.
0:00:09 It’s like a process of falling up the stairs.
0:00:14 Just when you think you’ve got it and figured it out, some weird issue pops up and you’ve got some new thing to prove.
0:00:19 Every one of these companies that end up being a global world beater always has one of these stories of the path not taken.
0:00:27 Today’s conversation is with Marc Andreessen, one of the rare people who’s helped shape both the Internet’s past and its future.
0:00:38 We reflect on the firm’s earliest days from folding chairs and a flat screen in a small office in 2010 to what’s now a multi-stage, multi-sector platform backing the next wave of generational companies.
0:00:51 Marc shares what it was like raising Fund One in the shadow of the 2008 financial crisis, why scale became a strategic asset and venture, and how software is eating the world evolves into a much broader and deeper investment thesis.
0:01:04 We also talk about the shift from generalist investors to vertical experts and how A16Z’s Little Tech Agenda is reframing policy conversations around innovation, AI, and American dynamism.
0:01:06 Let’s get into it.
0:01:22 As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund.
0:01:28 Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast.
0:01:35 For more details, including a link to our investments, please see A16Z.com forward slash disclosures.
0:01:47 So, the firm was started, we raised the first fund in 2009, which was in the depths of the stock market crash after the height of the financial crisis of 2008.
0:01:51 So, we had the first LP meeting in 2010, so this is number 15 or something.
0:01:53 Yeah, the first one was folding shares, about 20 LPs to start.
0:01:54 Wow.
0:01:58 Folding shares in our office, in our little conference area, with our flat panel TV on the wall.
0:02:00 And actually, some of the same people are still with us.
0:02:02 A bunch of our original LPs are still here.
0:02:04 And then, yeah, it’s grown to be a somewhat larger production.
0:02:06 And take us to some of the first LP.
0:02:10 They must have been true believers at the time, not just because of the strategy, but because of market timing.
0:02:12 Take us a little bit back, what that was like.
0:02:19 So, the thing to remember is the dot-com boom bubble was sort of 95 to 2000, although it has its own ups and downs even during that period that got forgotten later.
0:02:22 But in 2000, of course, catastrophic crash.
0:02:24 And then it took three or four years to dig out of the dot-com crash.
0:02:27 And so, it was like 2003, 2004 before anything really started to happen.
0:02:34 And then immediately what happened was any sign of anything working in tech was immediately viewed by just screams in the press of just bubble 2.0, bubble 2.0.
0:02:36 It was just like, it’s all happening again.
0:02:37 These crazy idiots are back at it again.
0:02:39 Then everything’s going to come crashing down.
0:02:41 There were two big M&A events in, I think, 2005.
0:02:43 Yahoo bought Flickr and Delicious.
0:02:46 So, did Yahoo buy them both, I think, or something?
0:02:48 And they were like $25 million tickets each.
0:02:50 And literally, the press just like bananas.
0:02:51 You know, Facebook was getting started.
0:02:52 Social media is a joke.
0:02:53 What did your cat have for breakfast?
0:02:54 Nobody cares.
0:02:55 How are they going to make money?
0:02:56 How are they going to make money?
0:02:56 They’ll never make money.
0:03:00 And so, it was just this like wall of negativity heading into 2008.
0:03:01 And then the financial crisis happens.
0:03:03 And just like everything just gets like completely devastated.
0:03:06 Everybody’s flat on their back in the financial investment world.
0:03:12 And so, Ben and I, in March of 2009, decided it’s a perfect time to go start a venture capital firm, which was an absolutely unique view at the time.
0:03:15 There were only two venture capital funds raised in all of 2009.
0:03:16 It was us and a New Coastal Ventures Fund.
0:03:19 And Vinod, of course, was one of the legends of venture capital.
0:03:20 So, he was able to do that.
0:03:23 But we were the only other literally venture fund raised that year.
0:03:25 And at one point, were you considering starting another company together?
0:03:27 Or were you like, hey, we really want to support entrepreneurs.
0:03:28 This is the company.
0:03:29 Yeah, we were done.
0:03:30 We had started multiple companies.
0:03:31 And so, we were done.
0:03:32 We completed that part of life’s journey.
0:03:34 And so, then we decided to start a firm.
0:03:37 We met some people who were really nice to us and really helped us kind of get underway.
0:03:39 And then we started meeting the LPs.
0:03:45 We’ll get to the evolution of firm, but just because you mentioned it, the Zuckerberg acquisition story, you, of course, have been on the board of Facebook for a long time.
0:03:48 Take us back to that memory and your conversations with Mark.
0:03:49 And what was your perspective at the time?
0:03:50 Yeah, I mean, this has been chronicled over the years.
0:03:55 But basically, what happened was, it wasn’t negativity at that time of like, this technology is evil and it’s going to destroy the world.
0:03:57 The negativity was, this technology is absolutely useless.
0:04:00 Absolutely useless, has no point, has no purpose.
0:04:00 It’s a joke.
0:04:02 It’s a farce, basically.
0:04:04 And like it, as you said, never make any money.
0:04:07 And that was just kind of the uniform public conversation around it at the time.
0:04:10 And so, Facebook took off and they had ad revenue early on.
0:04:11 But early on, it was like remnant ad revenue.
0:04:12 They didn’t have targeted ads yet.
0:04:17 So, the early ad revenue at Facebook literally was selling remnant banner ads from the Bing ad network.
0:04:19 And so, it was like these super low CPMs.
0:04:22 And, you know, Mark always had this theory of how he could turn it into a big thing.
0:04:24 But, you know, he just set this wall of negativity.
0:04:26 And then he just at that time had a lot of people around him.
0:04:33 I mean, it had been a fast rush from 2004 to 2008 to get to the point where all of a sudden they’re starting to get offers in the hundreds of millions of dollars.
0:04:35 And was this after a down round or before the down round?
0:04:37 The Microsoft down round was after that.
0:04:39 Because that was after the $15 billion round.
0:04:40 It was like a down round.
0:04:41 So, that was a couple years later.
0:04:43 But, you know, I remember Yahoo at the time.
0:04:45 Yahoo was doing a turnaround under Terry Semmel at the time.
0:04:49 And Terry correctly figured out that, yeah, Facebook was a property that they should buy.
0:04:51 And so, they actually struck a deal.
0:04:54 I don’t know if it got literally signed or verbally agreed to, but they structured a deal.
0:04:55 It was a billion dollar takeout.
0:04:56 It was an agreement to do a billion dollar takeout.
0:04:57 And then the financial crisis hit.
0:04:59 Advertising immediately collapsed.
0:05:02 Because advertising is the first thing that gets cut in a recession.
0:05:06 And Yahoo came back and essentially renegotiated the deal, tried to lower the price.
0:05:11 And that gave Mark basically the, I don’t know, cover kind of wherewithal to be able to walk away from the deal.
0:05:12 Wow.
0:05:15 But look, at the very least, strongly considering it at the billion dollar level.
0:05:19 And again, it’s just like at the time, it was just like a spectacular home run for a company growing that fast.
0:05:24 Started in a dorm four years earlier during a time when, again, this stuff was all just viewed as a complete joke.
0:05:33 The sort of ultimate kind of thing in the story is a few years later, somehow, I don’t know how, but somehow the internal Yahoo deck on the acquisition got leaked and got published.
0:05:39 So Yahoo’s internal analysis of Facebook at that time and Yahoo people were bullish on the company, which is why they offered to buy it.
0:05:43 But they and everybody else radically underestimated the future growth of the company.
0:05:46 Like it’s just like this incredible low bound kind of estimate.
0:05:49 And then not only did Facebook grow really fast, but they figured out targeted advertising.
0:05:55 And then, by the way, they went through the exact same crisis again, basically, after they went public in 2012.
0:05:58 They went public right as the transition from desktop to mobile was happening.
0:05:59 That was really when the iPhone was getting critical mass.
0:06:00 Right. Fascinating.
0:06:06 And there was just this wall, again, in the press, this wall of negativity, which is, I mean, you read the articles at the time,
0:06:12 and they were just like, this is going to destroy Facebook because everybody knows that Internet ads are based on the amount of screen real estate that you can sell.
0:06:14 Like the ad rates literally are the number of pixels on the screen.
0:06:20 And therefore, logically, because mobile screens are much smaller than desktop screens, the ad rates are going to shrink.
0:06:20 And that’s going to be it.
0:06:22 And the stock came out and shit the bed right out of the gate.
0:06:27 And it was literally this argument of the mobile ad opportunity was much less than the desktop ad opportunity.
0:06:33 And what we know now today, right, is that mobile meant people were going to use this stuff far more all day long.
0:06:33 Usage went way up.
0:06:35 And then we learned that the targeting works, right?
0:06:40 And everybody knows today it’s sort of obvious that a company like Facebook is a trove of personal data that you can target ads against.
0:06:43 But at the time, it was not something that people believed would be the case.
0:06:47 I often describe these companies, even the ones that kind of from the outside look like they’re just like up and to the right the whole time.
0:06:50 I always describe it as it’s like a process of falling up the stairs.
0:06:50 Yeah.
0:06:51 Right.
0:06:58 Because it’s just when you think you’ve got everything figured out, like some weird issue basically pops up and you’ve got some new thing to prove and you’ve got some other thing.
0:07:02 And Mark’s one of the best who’s ever lived at being able to work his way through every single thing that’s come along.
0:07:06 It’s funny that we went from mobile ads won’t work to organizations.
0:07:10 You know, Tristan Harris dedicated to stopping ads from working too well, basically.
0:07:12 He does work so well.
0:07:14 We have an epidemic of sort of people using it so much.
0:07:15 It’s just so fun.
0:07:16 I would even heighten that.
0:07:19 Within four years, it went from the ads don’t work at all to they are literally mind control.
0:07:20 Right.
0:07:21 They are literally mind control.
0:07:22 Right.
0:07:23 And, you know, this political ad specifically.
0:07:29 And they can literally like put the whammy on people to vote for candidates who nobody would ever vote for had they not been mind controlled.
0:07:29 Exactly.
0:07:30 Right.
0:07:30 By the Facebook algorithm.
0:07:36 And the whole thing the whole time was so weird because it’s like, wow, like if the mind control works so well, like why don’t we have triple the ad rates on selling toothpaste?
0:07:38 Why does it only work for Trump?
0:07:38 Yeah, exactly.
0:07:41 A few hundred thousand dollars can shift a whole entire election.
0:07:41 Yeah, right.
0:07:42 Exactly.
0:07:42 That’s the thing.
0:07:43 The Russians can spend.
0:07:48 By the way, I think the result of it was I think it was a result of $80,000 of ad spend on the Russians in the relevant period of the election.
0:07:50 It was like a total of like 140,000.
0:07:52 But during the actual run of the election, it was $80,000.
0:07:57 And so the theory was $80,000 of ads channeled into this magic mind control device.
0:07:58 About bang for the buck.
0:07:58 Yeah.
0:08:01 That literally swung an election that Hillary Clinton spent $3 billion on.
0:08:02 Right.
0:08:04 And the whole time we’re just sitting there.
0:08:06 I’m just sitting there just like I can’t even believe.
0:08:07 Like it doesn’t make any sense.
0:08:10 I went to Hillary’s first big speech after she lost at Stanford.
0:08:15 And she literally said on stage, Donald Trump is only president today because Vladimir Putin hacked Facebook.
0:08:18 And I’m like, Vladimir Putin hacked Facebook?
0:08:20 What the F are you talking about?
0:08:24 Anyway, and so literally it went from 2008 to this is useless to 2012.
0:08:26 This is still useless.
0:08:30 However, it does get some credit for the Arab Spring, right, and for getting Obama elected.
0:08:35 And there were lots of headlines at that time of social media saves democracy because of the Arab Spring.
0:08:37 And then to 2016, it’s the evil mind controlling death machine.
0:08:44 It just, it turned out that the method that was supposedly used by the Russians slash, you know, the Trump campaign to do the mind control, you know, basically like that method.
0:08:46 I mean, we now know basically it never worked.
0:08:50 Like the whole psychometric thing that they were doing, the Cambridge Analytica was supposedly doing.
0:08:51 It’s not something people do today.
0:08:55 Like this is the other part of the narrative you’re told to believe is it was magic mind control, but only for that election.
0:08:56 And then nobody ever tried it again.
0:08:57 Yeah, exactly.
0:09:01 It’s fascinating to imagine sort of alternative tech history.
0:09:03 Like what if Yahoo had actually been able to buy Facebook?
0:09:05 Obviously, there would have been a massive blow for Facebook.
0:09:08 But sometimes it works the other way of maybe Snap should have sold to Facebook.
0:09:09 Maybe it would have been better for everyone else.
0:09:11 It’s just fascinating to explore sort of tech alternative.
0:09:24 In my view, it’s so hard to redo the counterfactuals because this is like the classic debate of sort of historians, which is like how much has history guided like these big impersonal trends, you know, these big kind of impersonal forces, these tides or waves that swamp everything versus how much is based on sort of individual action.
0:09:26 And I just think these things are so contingent.
0:09:28 I have endless stories like Netscape.
0:09:28 We almost bought Yahoo.
0:09:31 There was like a bit-ass spread between $3 million and $5 million.
0:09:31 Oh, my God.
0:09:33 Yahoo almost bought Google.
0:09:35 And there was a very low price deal at the time.
0:09:37 Netflix almost sold a blockbuster early on.
0:09:38 Yeah.
0:09:42 Every one of these companies that end up being a global world beater always has one of these stories of the path not taken.
0:09:42 And so.
0:09:44 Uber and Lyft almost merged at one point.
0:09:45 Yeah, exactly.
0:09:49 And so my view, just having been through it, I mean, look, the forces means something.
0:09:50 Like the smartphone was going to happen.
0:09:52 There were going to be killer apps on the phone.
0:09:54 There was going to be something like this.
0:09:55 Somebody was going to do it.
0:09:58 And like had, I don’t know, in the counterfactual Facebook sold Yahoo and Yahoo let it languish.
0:10:00 Somebody else probably would have figured it out.
0:10:02 But in a sense, some of these things were bound to happen.
0:10:07 But the specific companies involved is just that there are so many kind of twists and turns.
0:10:07 Yeah.
0:10:11 It’s so contingent on very specific people doing very specific things at each point.
0:10:12 Totally.
0:10:16 That I think it’s just, it’s extremely sensitive to the micro level decisions that are made along the way.
0:10:16 Yeah.
0:10:20 Speaking of twists and turns, let’s go back to the firm because the first fund is $300 million, correct?
0:10:23 And we didn’t have a sense for how big it would become.
0:10:25 But you wrote Software Zating the World.
0:10:28 So you had a sort of hypothesis that these companies were going to get bigger.
0:10:29 There’s going to be more of them.
0:10:34 Take us through when you realized that scale was going to be a strategic asset for venture
0:10:36 and that the future of venture was going to look like this barbell.
0:10:36 Yeah.
0:10:41 So I actually remember a conversation with John Doerr in the mid-90s because KP was an investor in Netscape at the time.
0:10:44 You know, when I was young, basically the model was very straightforward at the time,
0:10:46 which was basically series A, series B.
0:10:49 And there wasn’t even really seed that much in the mid-90s.
0:10:52 It was mostly you just raised like a venture A round, which would be like a $3 or $4 or $5 million round,
0:10:54 maybe $6 or $7 if you were super ambitious.
0:10:56 And then there’d be like a B round of 20 or 30.
0:10:59 And then there was what was called the mezzanine round, which was the C round.
0:11:00 And that basically is the pre-IPO round.
0:11:04 And so you kind of raise a total of three rounds and maybe $30 or $40 million.
0:11:05 And then you go public.
0:11:07 And then if you needed money, you would go public.
0:11:09 Basically, there were no follow-on rounds after the C round.
0:11:10 And so you would go public.
0:11:17 And you could go public in those days at like, it was sort of $50 million in revenue and then a 10x revenue multiple meant a $500 million market cap was the bar to go public.
0:11:23 By the way, as an example, Amazon went public in 97 and I think it was $400 million valuation.
0:11:24 So right in line with that model.
0:11:25 Netscape was similar in 95.
0:11:28 And so venture had this very specific role.
0:11:32 But what was becoming clear even in the 90s that actually, I think it was a conversation John and I had about Cisco originally,
0:11:34 which is just like some of these companies are really going to rip.
0:11:35 They’re really going to run.
0:11:38 At the time, it was like they’re going to run to $100 billion, which at the time was like the big ceiling.
0:11:41 It’s just like, all right, like all of a sudden the venture B round looks great.
0:11:43 All of a sudden, by the way, the mezzanine round looks great.
0:11:45 Like maybe the VCs should basically just keep re-upping.
0:11:46 Yeah.
0:11:47 Is it a mistake?
0:11:53 If you can make as much absolute money investing $50 million in Cisco at their Series C as you could five in their Series A.
0:11:53 Right.
0:11:57 In those days, it was like a big statement to say maybe the venture firms should do that.
0:12:00 And then, of course, what’s become clear since then is the ceiling isn’t $100 billion.
0:12:01 It’s much larger than that.
0:12:01 Yeah.
0:12:02 It’s much higher than that.
0:12:04 And that’s just a consequence of tech proliferating.
0:12:06 It’s becoming more important.
0:12:07 So anyway, so we had that sense.
0:12:08 And some of that had started.
0:12:10 And Facebook actually was raising larger rounds by that point.
0:12:11 Yeah.
0:12:11 You know, DST.
0:12:15 DST kind of redefines growth investing when they did the Facebook round.
0:12:19 So basically, this idea of sort of venture growth investing was starting to really materialize.
0:12:21 And so we did define the firm right up front.
0:12:22 We said we want to be stage agnostic.
0:12:24 We want to be seed venture and growth.
0:12:25 That was in the original pitch deck.
0:12:29 It wasn’t enough money to do a lot of growth investing, but we could start to get underway.
0:12:32 Basically, this is our argument to the LPs was, look, it’s not about being in a certain stage.
0:12:34 It’s about the total aggregate opportunity.
0:12:39 If you’re going to get into one of these world-beating companies, you can still do it at the B, C, or D, and you’ll still have venture scale returns.
0:12:42 And so, yeah, we defined that right up front.
0:12:49 And when did we figure out, because our approach of sort of specialized funds is different than some of these other partnerships that, hey, we’re just all generalists.
0:12:50 We’re a small team.
0:12:51 We all do everything.
0:12:52 When did that model originate?
0:12:53 What was that journey like?
0:12:54 Yeah.
0:12:54 So, we started that way.
0:12:56 So, we started as generalists.
0:12:59 And Ben and I had both worked in both consumer and enterprise, which are kind of the two big categories.
0:13:03 At the time, it was basically consumer software VC, enterprise software VC, and then sort of biohealth tech.
0:13:09 The older venture firms actually did both what they called digital or IT investing, software investing, and then they also did biotech.
0:13:15 And actually, a lot of those firms, they got, like, internal divorces and spun their groups off because those industries at the time were going in different directions.
0:13:17 But Ben and I had done consumer and enterprise.
0:13:21 And so, you know, we just said, look, we’ll just be a generalist firm, sort of modeled after the benchmark model.
0:13:32 And a big part of this is just industry evolution, which is around the time we started the firm, it was also the time that I would say the tech industry fundamentally changed from primarily building tools to actually going, like, directly into industry.
0:13:34 So, we call it full-stack companies.
0:13:43 And so, I think the reason the generalist model worked well for as long as it did is because, like, fundamentally, a database company, a router company, a word processor company, an operating systems company, like, they’re all fundamentally tools.
0:13:48 And so, they’re different if they sell to consumer or enterprise, but, you know, a router is a piece of software in a box.
0:13:52 Chips are a little different, but a database and an operating system are similar.
0:13:56 The technical challenges, the form of the company, the organizational model for the company is similar.
0:14:02 Word processors and video games at the time both got 50 bucks, both sold in a box on retail store shelves, you know, kind of similar.
0:14:05 And so, the generalist model, I think, worked really well when the industry was that earlier model.
0:14:12 And then 2009-2010 was a pivot, we now know, which was the rise of Uber and Lyft, the rise of Airbnb, the rise of Tesla, the rise of SpaceX.
0:14:19 The world-beating companies of the 2010s in many cases were companies that were full-stack, direct insertion and markets.
0:14:25 And then we, therefore, started investing in the, you know, everything from these e-commerce marketplaces to these new kinds of defense companies.
0:14:30 And then we decided to take on biotech because we thought biotech was becoming much more based on software and IT and data and AI.
0:14:39 And then basically what we realized is, okay, the generalist model doesn’t work anymore because each of those things now is actually a very deep domain in and of itself, right, with like very specific domain knowledge.
0:14:46 And then the specific problem that a generalist has is that a generalist can sense heat, but a generalist has a very hard time getting into the specifics.
0:14:54 And the reason the specifics really matter is because so much of venture, because the way venture works is if you invest in one company in a space, you can’t invest in the other.
0:14:59 So, if you pick the space correctly and invest in the wrong company, you’re screwed, right, because you can’t fix your mistake.
0:15:02 You can’t then invest in a successful company because of the conflict issue.
0:15:12 And so, what we realized was the thing that was becoming very important in this new world was understanding deep in the vertical what was going on, specifically for the purpose of being able to tell which company was actually the one that was most likely to win.
0:15:16 And that’s just really hard to do if you don’t have domain knowledge.
0:15:18 And so, that catalyzed us to verticalize.
0:15:19 And then we did that in two steps.
0:15:22 We did a partial verticalization early, probably, I don’t know, 2013 or something.
0:15:25 And then by 2017, I think we did the full, you know, the one we have now.
0:15:29 It’s fascinating because 15, 20 years ago, things like Y Combinator were getting off the ground.
0:15:31 And you were this yourself.
0:15:39 People said there was an arbitrage around young technical founders and this idea that you could teach them the business elements and they could be successful.
0:15:41 You don’t need to go to MBA to be a successful founder.
0:15:42 That’s accurate.
0:15:50 And yet, today, maybe there’s a similar arbitrage around domain experts where the tech has gotten easier and it’s easier to get sort of things off the ground.
0:15:55 And domain expertise values more and distribution is valued more maybe than it was 15 years ago.
0:15:57 And maybe that’s true on the founder’s side and on the investor’s side.
0:16:00 Yeah, although at least until now, I think the question is whether AI is going to change this.
0:16:04 But at least until now, it still was the case the founders also needed to be very deep in the tech.
0:16:07 And even the founders that would go out and there was this wave of like design founders, right?
0:16:09 And it’s like, okay, that’s great.
0:16:09 The design founders are great.
0:16:12 It just turns out the successful design founders are also very strong technologists.
0:16:12 Right.
0:16:16 And they maybe pretended sometimes that they weren’t because they wanted the design cred.
0:16:18 But like it turned out, they were actually very deep and substantive.
0:16:18 Yeah, interested.
0:16:20 Yeah, these are Ben Silberman and Brian Chesky.
0:16:23 These guys are like top end technical founders in addition to being great designers.
0:16:27 And so, yeah, like I would argue, there’s really no escape from deep domain knowledge.
0:16:35 To your point, I think the question is, okay, if AI makes deep domain knowledge distantly accessible to anybody, you know, if you have 03 deep research or it’s equivalent at your fingertips.
0:16:40 And if you’re a generalist or a person wearing many hats, like can AI give you the depth when you need it?
0:16:41 And I don’t know.
0:16:43 I’m excited to see people try that.
0:16:44 Yeah.
0:16:48 It’s a little bit like the debate happening around coding right now, which is, okay, is vibe coding a substitute for like actual coding?
0:16:48 Right.
0:16:53 And sitting here today, like vibe coding is like super exciting for casual development.
0:16:59 But at least right now, all of the really sharp technologists I know don’t think that you can vibe code a top end like software company today.
0:17:03 But like the coding capabilities of these models are getting really good.
0:17:05 And so the agents are starting to work.
0:17:10 And so, you know, the sort of famous Dilbert, which is Dilbert’s boss pitches Dilbert on, they’re going to go start a company together.
0:17:13 And the boss is like, I’m going to bring the idea and be the manager and you’re going to do the coding.
0:17:15 And Dilbert’s like, and so what you’re saying is you’re going to contribute nothing.
0:17:16 Right.
0:17:23 And so does the existence of like really state of the art AI coding actually change that to Dilbert’s boss all of a sudden can have the AI write the code?
0:17:24 Yeah.
0:17:26 And then you get these very entertaining thought experiments.
0:17:27 Are agents going to get really good writing code?
0:17:31 And then are you going to be able to have a non-technical person supervising a thousand AI coders?
0:17:32 Yeah.
0:17:32 Right.
0:17:36 And outracing a top end technical person who’s supervising a hundred great coders.
0:17:36 Right.
0:17:37 It’s possible.
0:17:37 We’ll see.
0:17:39 It’s the era of the ideas guy.
0:17:39 Yeah.
0:17:40 Yeah.
0:17:43 I want to talk about areas where we’ve chosen to play and areas where we haven’t chosen to play.
0:17:45 So let’s look at internationally.
0:17:50 We talked about how we pressionally didn’t enter China in ways that other firms did.
0:17:52 We’re a U.S. firm, American dynamism.
0:17:58 Europe, when it’s not shooting itself in the foot regulation wise, they’re increasing their defense spend.
0:17:59 Could you imagine Europe dynamism?
0:18:07 How have we thought about, and I know there’s big things on the horizon, which we can’t exactly get into right now, but how have we thought about internationally, historically, and how do you think about it going forward?
0:18:09 The good news is, look, the world is globalizing.
0:18:11 There’s incredible activity and interest all over the world.
0:18:13 Like everywhere we go, people want to talk about tech.
0:18:14 They want to learn about tech.
0:18:20 Ben saw this more than me, but like when Ben wrote his book and went on a tour, it didn’t matter what country he went to, thousands of kids show up and they want to learn how to do this.
0:18:26 And look, the internet had a big impact there, which is every kid anywhere in the world now can watch Peter Thiel talks and our podcast and everything else.
0:18:31 And so I would say global knowledge is way up, global enthusiasm is way up, relevance to societies is way up.
0:18:33 As you mentioned, like defense, Europe needs to rearm.
0:18:37 Presumably, they’d be better off rearming with the new systems as opposed to the old systems.
0:18:40 Drones forms instead of aircraft carriers, right?
0:18:40 That kind of thing.
0:18:41 We’ll see.
0:18:44 And then just the reality, there’s just smart people all over the place.
0:18:45 And so there’s human capital everywhere.
0:18:50 I think historians will look back and they’ll just say, wow, the 21st century is really primitive society.
0:18:54 They had all these smart people all over the world and they never figured out how to actually utilize them, right?
0:18:56 They never figured out how to identify them and use them.
0:19:00 And so the startup process is a way to especially get smart young people to do ambitious things.
0:19:02 So that’s great.
0:19:02 It’s all fantastic.
0:19:06 Against that is just this incredible drag by bad governments and bad policies.
0:19:13 As you mentioned, Europe, you’re persistent shooting itself, not just in the foot, but in the other foot and in the ankle and in the knee and in the gut.
0:19:18 And they’re just on this absolute frenzy to regulate and kill tech in Europe, the UK.
0:19:19 And they’re proud of it.
0:19:19 And they’re proud of it.
0:19:20 Like they’re very proud of it.
0:19:25 Yes, the actual European line now is we quote, this is in the FT, this is an actual quote from a European senior politician.
0:19:30 We know we cannot be the global leader in tech innovation, so therefore we will be the global leader in tech regulation.
0:19:39 And so you just imagine being like a German or French tech founder and reading that, just being like, oh, God, to get to the U.S. embassy and apply for a visa as fast as possible, right?
0:19:40 And in fact, that’s what’s happened.
0:19:44 As a consequence, a lot of these really curious, bright people basically end up moving to the U.S.
0:19:47 And so we’ve been an enormous beneficiary as a country and as a firm of that.
0:19:49 And so that remains a really big challenge.
0:19:55 It’s interesting to watch in the U.K. right now because I thought under the previous government they were going to become enlightened and bring in.
0:19:56 And they did the opposite.
0:19:58 Like they tried to ban AI and they said they were going to liberalize crypto.
0:19:59 They never did.
0:20:01 But the new government, they say they’re going to open up some of this stuff.
0:20:03 They still want to keep all the regulations.
0:20:04 But they say that they want economic growth.
0:20:06 So we’ll see the defense stuff.
0:20:06 Yeah.
0:20:07 I mean, there’s already a dispute.
0:20:09 This is just in the headlines.
0:20:09 There’s already a dispute.
0:20:15 If Europe cranks their defense spending up to 5% of GDP, which they’re supposed to, will they buy any of that from U.S.?
0:20:17 Will it only be purchased from indigenous European defense vendors?
0:20:19 So it’s already becoming part of the whole trade war.
0:20:20 Yeah.
0:20:26 I mean, look, I think most of the state of the world is very, at least for what we do, it’s high caliber people being held back by being in bad systems.
0:20:26 Yeah.
0:20:31 And what is our criteria for opening up offices in other places more generally?
0:20:31 Yeah.
0:20:35 So basically there’s two kinds of activities that make sense for a firm like us to do internationally, I think.
0:20:36 Maybe three.
0:20:38 One is just sales is the crude term.
0:20:40 We dress it up with fancy words.
0:20:40 Business development.
0:20:41 Yeah.
0:20:41 Go to market.
0:20:43 A lot of the market is global for all of our companies.
0:20:46 And so helping our companies succeed and build up businesses globally.
0:20:47 And we’ve been doing that from the beginning.
0:20:49 And that’s always an important thing.
0:20:50 Two is investing.
0:20:51 And look, we’ve invested.
0:20:53 We’ve always been, I would say, other than China.
0:20:55 Generally, we’ve been open investing in many places in the world.
0:20:57 And we have investments in a lot of places.
0:20:58 Very recently, a withdrawal in France.
0:20:59 Yeah, exactly.
0:21:02 But we’ve made investments in the past in Vietnam and lots of other interesting places.
0:21:03 We’ll go where the flow is.
0:21:13 You know, having said that, again, just because of this kind of political dynamic has just been striking over the last 30 years, how many great founders who could have stayed in country X and started a company there have just moved to the U.S. instead.
0:21:13 Yeah.
0:21:19 And so we just, from a practical standpoint, have tended to emphasize U.S. investing because we figure we’ll get most of the best of the global founders anyway.
0:21:19 Yeah.
0:21:23 And then maybe the third thing, we’re not really active on this right now, but we’re very active now in U.S. policy.
0:21:26 But, you know, there are these policy issues all over the world.
0:21:32 Do we need to go get more, insert ourselves more into God help us European politics or whatever?
0:21:34 And then there’s a question, you know, can we, as Americans, are we allowed to?
0:21:35 Yeah.
0:21:37 Well, I know we’ve only done this sort of kicking and screaming.
0:21:39 This was not our intent, even on the U.S. side.
0:21:45 But talk a little bit about how just a little tech concept, is this sort of different from big tech, sort of emerged in our thinking.
0:21:46 Yeah.
0:21:49 So basically, this also goes right back to this thing of the tech industry kind of changing around 2010.
0:22:00 So in the era between, call it 1950 to 2010, when the industry was in what was called tool phase, chips and word processors and routers and spreadsheets and things like that, startup tech particularly was never really a salient political topic.
0:22:03 Really, the only time I would ever enter politics really was with antitrust.
0:22:03 Yeah.
0:22:13 And so it was like a really big deal in the 90s when the government dug into Microsoft because that case was a big deal, but also because it was a very rare case of the government actually caring about tech and wanting to become involved.
0:22:17 And so there was sort of a state of sort of, I would say, I don’t know, benign neglect or something up until 2010.
0:22:21 And by the way, in both directions, like the Valley companies never thought it was important to go to D.C.
0:22:23 The D.C. companies didn’t really think the Valley companies mattered.
0:22:27 And then, yeah, that all started changing in around, I don’t know, probably 2012, 2013.
0:22:32 You had this sort of increasing political, I would call, I don’t know, energizing happening just, you know, in general.
0:22:38 And you started getting this anti-tech narrative, started getting more political, got wrapped up in the Occupy Wall Street 1% thing.
0:22:40 And one of these tech people is just as bad as the finance people.
0:22:44 The FT just ran a big story saying the tech people are now definitively worse than the finance people.
0:22:46 I read this story twice and I still don’t understand it.
0:22:50 But the gist of it was something like at least the finance people you can have dinner with and it’s fun.
0:22:50 Right.
0:22:52 Whereas the tech people are just like all.
0:22:56 Or sometimes they say at least the finance people know that they’re money motivated or something, whereas the tech people have the delusion.
0:22:58 Yeah, they’re saying sanctimonious and insufferable, which, you know.
0:23:00 Sometimes.
0:23:01 Maybe there’s a little bit of truth to that.
0:23:03 But yeah, it started to kind of energize then.
0:23:06 And then really, you know, the takeoff was 2015, 2016.
0:23:07 And it was really Trump.
0:23:12 It was really Trump’s nomination and election that really radicalized a pretty big block of political actors in the country against tech.
0:23:18 And then, by the way, the way I would describe the last decade is the left got like super angry at tech because of Trump and because of inequality and all these other things.
0:23:22 And then the right got super mad at tech because the right thought the tech was all on the left.
0:23:22 Yeah.
0:23:23 Right.
0:23:27 And so we’d go talk to Republicans and they would basically say, yeah, we agree with you, but like you’re all Democrats.
0:23:29 So, you know, F off.
0:23:30 Yeah.
0:23:31 They thought it was very entertaining.
0:23:33 Social media was the tip of the spear of that for about five years.
0:23:40 And then in the last five years, crypto became incredibly politicized and the U.S. government basically launched a full-on war against it, tried to kill it.
0:23:45 And then AI got just like incredibly politicized starting basically right around 2021, 2022.
0:23:48 And the government was moving in very hard on AI.
0:23:52 And for us, it was the combination of crypto and AI that got us like extremely alarmed.
0:23:54 And so we decided we had to become involved.
0:24:02 But like I said, there’s specific point issues in both of those domains, but there’s just this general kind of thing, which is like, all right, we always wanted to build things that matter.
0:24:03 It turns out these things matter.
0:24:09 And as a consequence, like we’re either going to show up and explain ourselves or other people who hate us are going to describe us.
0:24:13 And so what we’ve done is we’ve generalized that idea out into what we call the little tech agenda.
0:24:13 Yeah.
0:24:15 And the first part of that is the little tech.
0:24:18 And we say little tech specifically is differentiated from big tech.
0:24:19 I like that it creates a cleavage.
0:24:20 Yeah, that’s right.
0:24:21 That was another thing we discovered.
0:24:26 That was a result of kind of our early interactions like four or five years ago in D.C., which is just, they were just like, well, tech is tech.
0:24:27 You know, just meet with them on behalf of startups.
0:24:29 And they start yelling at us about Google or something.
0:24:30 And it’s like, we’re not here representing Google.
0:24:31 And it’s like, that’s tech.
0:24:33 And by the way, it was a startup 20 years ago.
0:24:33 Right.
0:24:37 And we’re just like, well, look, Google, they have 10,000 players and policy people and compliance people.
0:24:38 Like, they’ve got their own.
0:24:38 Right.
0:24:39 They can carry their own water.
0:24:40 That’s not what we’re here for.
0:24:46 And in fact, a lot of what the venture ecosystem does is it funds competitors to big tech.
0:24:47 Yeah, we’re disrupting big tech.
0:24:55 And this is the story I always tell in D.C., which is 100% true, which is the caricature of this sort of reckless Silicon Valley, is that we’re starting companies that go disrupt whatever, health care or something.
0:24:58 I said, most of what our founders are trying to disrupt is big tech.
0:24:58 Yeah.
0:25:04 And I said, frankly, big tech companies, I would say they have a love-hate, we like them, but they have a love-hate relationship with us because we’re the escape hatch.
0:25:09 If there’s somebody at a big tech company that basically gets frustrated, they come to us to raise money to start a company to compete with their former employer.
0:25:10 Right.
0:25:13 And so big tech is not always in favor of us.
0:25:16 And then look, big tech, they just have become very big companies and they have their own agendas.
0:25:22 And a lot of big companies over time try to form cartel, basically, structures to prevent new competitors and startups from emerging.
0:25:26 And so we just noticed in more and more cases, there was a divergence of interests.
0:25:28 That actually turned out to help a lot the minute we figured that out.
0:25:30 And then we sort of coined this little tech thing and kind of ran with it.
0:25:34 Like immediately, that was like the icebreaker because everybody in D.C. hates big tech.
0:25:35 They only agree on two things.
0:25:36 They only agree on big tech and China.
0:25:39 This is the only two things they agree on, but they really agree on those things.
0:25:41 And a big tech, they just all hate big tech.
0:25:44 And so the minute we say we’re not here on behalf of big tech, we’re on behalf of little tech.
0:25:46 And in fact, our companies attack big tech.
0:25:47 We get like these huge smiles.
0:25:48 Totally, yeah.
0:25:50 They’re like, oh, wow, tech startups are actually good, right?
0:25:51 It’s actually, this is actually exciting.
0:25:51 Yeah.
0:25:52 So that’s a little tech side.
0:25:55 And then the agenda side is, it’s essentially freedom to innovate, right?
0:25:55 Right.
0:26:03 So ability for companies in new fields that are not completely yet well understood that lawmakers of the past did not anticipate that they should actually be able to operate.
0:26:07 And then the other maybe important thing is we’re not like lobbying for no regulation, right?
0:26:13 So sometimes we get tagged by, you know, we’re these crazy libertarians and we want these companies to just run wild and like commit fraud and do all this crazy stuff.
0:26:15 And that’s not what we’re pushing for.
0:26:15 We want clarity.
0:26:16 We want clarity.
0:26:16 We want clarity.
0:26:17 We want clarity.
0:26:18 We want clear guidelines.
0:26:19 We want sensible rules.
0:26:22 We always tell these people like consumer protection regulation, go crazy.
0:26:24 Like 100%, no problem.
0:26:25 That’s all good.
0:26:27 In fact, we want that because we want our companies to be compliant.
0:26:29 We certainly don’t want our companies committing fraud.
0:26:35 By the way, the other thing we don’t want is we don’t want our compliant companies competing with non-compliant companies that aren’t getting regulated or prosecuted.
0:26:35 Yeah.
0:26:39 We are advocating on behalf of regulation as often as we’re doing anything else.
0:26:39 Yeah.
0:26:40 You know, it’s funny.
0:26:52 On Twitter, there was this sort of Paul Graham Palantir dust up the other week, which I thought was just pretty symbolic or emblematic, not to pick on Paul, but it was sort of like older Silicon Valley versus newer Silicon Valley or just like how the space has changed.
0:26:54 You know, Palantir has to work with the government.
0:26:55 They’re building hard tech.
0:26:58 It’s not just sort of put something up and talk to customers right away.
0:27:01 And Paul Graham has been in England for quite a bit.
0:27:03 You know, YC is still innovating, doing fantastic things.
0:27:11 But I just thought that was such a fascinating example of how Silicon Valley is evolving, which is just new kinds of companies, new kinds of go-to-markets, new kinds of sort of ethos.
0:27:11 That’s right.
0:27:14 And so the specific dust up, I think, was over Palantir working with ICE.
0:27:15 Yes.
0:27:16 The U.S. government immigration agency.
0:27:18 So this is a generational change.
0:27:19 I think this is a very deep and profound change.
0:27:31 And there’s a generational aspect of this, which is basically, so the U.S. tech industry and startup industry in Silicon Valley were basically deeply intertwined with the defense and intelligence, the sort of deep state defense and intelligence agencies in particular, the federal government.
0:27:36 Really, if you go all the way back, Steve Blank has these incredible videos, essays where he goes through all this all the way back.
0:27:38 Silicon Valley actually started in like the 1920s.
0:27:39 And it was like defense tech in the 1920s.
0:27:45 It was like radar, right, and like early missile guidance systems and avionic systems and things like that in like the 20s and 30s.
0:27:51 And then from that time through to like basically the 1960s, it was just assumed that there was this very deep relationship.
0:27:56 And, you know, this whole war, and of course, industry and government have to work together to build all these systems to defeat the Soviets.
0:28:03 One of the first computers literally was called SAGE, which was a U.S. government project, a giant mainframe computer for missile early warning systems.
0:28:08 So it was just assumed that this was all kind of hand in hand, and then really what happened was it was Vietnam.
0:28:16 So Vietnam was the first modern war where you had this massive protest movement, and then the college campuses went wild with this anti-war movement and all that stuff.
0:28:26 And what happened, if you talk to people who were involved back then, basically what happened was the leading edge American universities that did science and technology were doing military science and technology, and many of them just stopped.
0:28:33 So like Stanford, there’s this thing called Stanford Research Institute, SRI, that’s actually no longer associated with Stanford because it’s the remnants of what used to be Stanford’s military R&D.
0:28:36 MIT had something similar with the Lincoln Lab.
0:28:42 And so that created a culture, and the Valley was always been a mix of right and left wing, but, you know, the hippie anti-war movement, a lot of it was in California.
0:28:43 Right.
0:28:45 A lot of it was at Stanford and Berkeley specifically.
0:28:48 And so there was just this mood shift, I guess.
0:28:49 We have the vibe shift now.
0:28:52 So in those days, it was like probably the groove shift like that, right?
0:28:53 So it’s called the groove shift.
0:28:56 So the groove shift 50 years ago was no more work with the military.
0:28:57 No more—U.S. government is evil.
0:29:07 The U.S. government is an evil, colonial, oppressive power wreaking havoc overseas, and it would be better to have, like, disarmament and basically pacifism, and the U.S. should sort of give up all these foreign engagements.
0:29:10 And that was a very hot, very hot political topic because the Soviet Union was still up and running.
0:29:15 But anyway, as a result, like a lot of these universities—and then as a result, a lot of the companies just basically disengaged.
0:29:16 They just weren’t willing to do that.
0:29:19 Another topic that became very hot at the time was ROTC recruiting.
0:29:25 So the military used to just actively recruit for new officers on these campuses, and a lot of these colleges outlawed that 50 years ago.
0:29:28 Anyway, so I would say Paul is a very bright guy.
0:29:34 Paul is from that era, not the Vietnam era, but, like, the arc that followed, like, in the 80s and 90s when it was just universally assumed.
0:29:34 Right.
0:29:39 That, of course, you don’t try to enable the military industrial complex defense agencies.
0:29:41 I never really felt that way, and I don’t know.
0:29:43 Maybe it’s just—I don’t know where I grew up or whatever, but I never really felt that way.
0:29:45 But I knew I was swimming in those waters for a long time.
0:29:48 My company, Netscape, was always very active with defense and intelligence.
0:29:49 We always leaned hard into it.
0:29:53 It’s the only real thing that you’re—Alex Scarf, I think, is a national hero.
0:29:56 The one thing when he does is he sees Palantir as the first company that’s ever done this.
0:30:00 And I’m like, no, no, we were doing it 10 years earlier, but that’s okay.
0:30:01 He gets tons of credit.
0:30:08 And so anyway, so I would say Paul represents that, call it, I don’t know, neo-hippie 80s and 90s phase, where it’s just clearly you don’t do this.
0:30:12 And then to your point, now the Vive Shift is now more recently with, you know, Palantir and Andrel.
0:30:17 And again, to give Alex Karp huge credit, give, you know, Ryan Schiff and Palmer Luckey huge credit.
0:30:19 Peter, you know, these guys really led the way on this.
0:30:22 And so, yeah, of course you work with them because, number one, you’re a business and they’re a customer,
0:30:26 and you shouldn’t be, like, sitting there as, like, moral judge for, like, every single customer.
0:30:26 Yeah.
0:30:30 Because how are you going to do business if you’re just sitting there having these moral conversations all day long?
0:30:33 And then number two, it’s like, all right, these national missions actually matter, right?
0:30:41 And the border one is very inflammatory, but I should say most people in the history of civilization have thought that borders are an important and valid thing going back many thousands of years.
0:30:45 And then, yeah, I mean, is the world a safer place because the U.S. is in it versus not?
0:30:47 And because the U.S. military is strong versus weak?
0:30:50 And do we want to protect ourselves against terror attacks?
0:30:50 Yeah.
0:30:53 So I think there’s a lot of us that are like, oh, clearly we want to do those things.
0:30:56 I’m encouraged by it because I think things are headed in the right direction according to what I want.
0:31:00 But I also recognize that these are serious underlying moral, philosophical, ethical questions.
0:31:02 And I, like, I don’t question Paul’s intent.
0:31:06 I think when he says those things, he’s operating out of a very strong sense of ethics and morals.
0:31:06 Right.
0:31:07 Totally.
0:31:09 I disagree with him.
0:31:09 Yes.
0:31:13 Software has eaten the world and it didn’t stop at social networks or marketplaces, right?
0:31:15 It got into, or internet marketplaces, it got into everything.
0:31:15 Yeah.
0:31:19 And in fact, what happens, if you go to D.C. and if you talk to people who run the defense intelligence agencies in D.C.,
0:31:23 almost every topic that they talk about or think about has a major tech component to it.
0:31:23 Yeah.
0:31:25 Like almost every single one.
0:31:29 Just the Ukrainian battlefield is a completely new kind of battlefield because of all this new drone technology.
0:31:30 Right.
0:31:30 And all these things.
0:31:36 That’s basically true for, like, every area of, basically, national geopolitical policy has a big tech component to it.
0:31:37 Right.
0:31:39 And of course, my approach is, obviously, we should be in the middle of that.
0:31:42 And obviously, we should be investing against that and trying to help those things happen.
0:31:44 But I understand why people get uncomfortable with it.
0:31:44 Yeah.
0:31:46 That’s a perfect place to wrap our conversation at OP Summit.
0:31:47 Mark, thanks so much.
0:31:47 Thank you, Eric.
0:31:52 Thanks for listening to the A16Z podcast.
0:31:58 If you enjoyed the episode, let us know by leaving a review at ratethispodcast.com slash A16Z.
0:32:00 We’ve got more great conversations coming your way.
0:32:01 See you next time.
0:32:36 Thank you.
0:00:07 It’s grown to be a somewhat larger production.
0:00:09 It’s like a process of falling up the stairs.
0:00:14 Just when you think you’ve got it and figured it out, some weird issue pops up and you’ve got some new thing to prove.
0:00:19 Every one of these companies that end up being a global world beater always has one of these stories of the path not taken.
0:00:27 Today’s conversation is with Marc Andreessen, one of the rare people who’s helped shape both the Internet’s past and its future.
0:00:38 We reflect on the firm’s earliest days from folding chairs and a flat screen in a small office in 2010 to what’s now a multi-stage, multi-sector platform backing the next wave of generational companies.
0:00:51 Marc shares what it was like raising Fund One in the shadow of the 2008 financial crisis, why scale became a strategic asset and venture, and how software is eating the world evolves into a much broader and deeper investment thesis.
0:01:04 We also talk about the shift from generalist investors to vertical experts and how A16Z’s Little Tech Agenda is reframing policy conversations around innovation, AI, and American dynamism.
0:01:06 Let’s get into it.
0:01:22 As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund.
0:01:28 Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast.
0:01:35 For more details, including a link to our investments, please see A16Z.com forward slash disclosures.
0:01:47 So, the firm was started, we raised the first fund in 2009, which was in the depths of the stock market crash after the height of the financial crisis of 2008.
0:01:51 So, we had the first LP meeting in 2010, so this is number 15 or something.
0:01:53 Yeah, the first one was folding shares, about 20 LPs to start.
0:01:54 Wow.
0:01:58 Folding shares in our office, in our little conference area, with our flat panel TV on the wall.
0:02:00 And actually, some of the same people are still with us.
0:02:02 A bunch of our original LPs are still here.
0:02:04 And then, yeah, it’s grown to be a somewhat larger production.
0:02:06 And take us to some of the first LP.
0:02:10 They must have been true believers at the time, not just because of the strategy, but because of market timing.
0:02:12 Take us a little bit back, what that was like.
0:02:19 So, the thing to remember is the dot-com boom bubble was sort of 95 to 2000, although it has its own ups and downs even during that period that got forgotten later.
0:02:22 But in 2000, of course, catastrophic crash.
0:02:24 And then it took three or four years to dig out of the dot-com crash.
0:02:27 And so, it was like 2003, 2004 before anything really started to happen.
0:02:34 And then immediately what happened was any sign of anything working in tech was immediately viewed by just screams in the press of just bubble 2.0, bubble 2.0.
0:02:36 It was just like, it’s all happening again.
0:02:37 These crazy idiots are back at it again.
0:02:39 Then everything’s going to come crashing down.
0:02:41 There were two big M&A events in, I think, 2005.
0:02:43 Yahoo bought Flickr and Delicious.
0:02:46 So, did Yahoo buy them both, I think, or something?
0:02:48 And they were like $25 million tickets each.
0:02:50 And literally, the press just like bananas.
0:02:51 You know, Facebook was getting started.
0:02:52 Social media is a joke.
0:02:53 What did your cat have for breakfast?
0:02:54 Nobody cares.
0:02:55 How are they going to make money?
0:02:56 How are they going to make money?
0:02:56 They’ll never make money.
0:03:00 And so, it was just this like wall of negativity heading into 2008.
0:03:01 And then the financial crisis happens.
0:03:03 And just like everything just gets like completely devastated.
0:03:06 Everybody’s flat on their back in the financial investment world.
0:03:12 And so, Ben and I, in March of 2009, decided it’s a perfect time to go start a venture capital firm, which was an absolutely unique view at the time.
0:03:15 There were only two venture capital funds raised in all of 2009.
0:03:16 It was us and a New Coastal Ventures Fund.
0:03:19 And Vinod, of course, was one of the legends of venture capital.
0:03:20 So, he was able to do that.
0:03:23 But we were the only other literally venture fund raised that year.
0:03:25 And at one point, were you considering starting another company together?
0:03:27 Or were you like, hey, we really want to support entrepreneurs.
0:03:28 This is the company.
0:03:29 Yeah, we were done.
0:03:30 We had started multiple companies.
0:03:31 And so, we were done.
0:03:32 We completed that part of life’s journey.
0:03:34 And so, then we decided to start a firm.
0:03:37 We met some people who were really nice to us and really helped us kind of get underway.
0:03:39 And then we started meeting the LPs.
0:03:45 We’ll get to the evolution of firm, but just because you mentioned it, the Zuckerberg acquisition story, you, of course, have been on the board of Facebook for a long time.
0:03:48 Take us back to that memory and your conversations with Mark.
0:03:49 And what was your perspective at the time?
0:03:50 Yeah, I mean, this has been chronicled over the years.
0:03:55 But basically, what happened was, it wasn’t negativity at that time of like, this technology is evil and it’s going to destroy the world.
0:03:57 The negativity was, this technology is absolutely useless.
0:04:00 Absolutely useless, has no point, has no purpose.
0:04:00 It’s a joke.
0:04:02 It’s a farce, basically.
0:04:04 And like it, as you said, never make any money.
0:04:07 And that was just kind of the uniform public conversation around it at the time.
0:04:10 And so, Facebook took off and they had ad revenue early on.
0:04:11 But early on, it was like remnant ad revenue.
0:04:12 They didn’t have targeted ads yet.
0:04:17 So, the early ad revenue at Facebook literally was selling remnant banner ads from the Bing ad network.
0:04:19 And so, it was like these super low CPMs.
0:04:22 And, you know, Mark always had this theory of how he could turn it into a big thing.
0:04:24 But, you know, he just set this wall of negativity.
0:04:26 And then he just at that time had a lot of people around him.
0:04:33 I mean, it had been a fast rush from 2004 to 2008 to get to the point where all of a sudden they’re starting to get offers in the hundreds of millions of dollars.
0:04:35 And was this after a down round or before the down round?
0:04:37 The Microsoft down round was after that.
0:04:39 Because that was after the $15 billion round.
0:04:40 It was like a down round.
0:04:41 So, that was a couple years later.
0:04:43 But, you know, I remember Yahoo at the time.
0:04:45 Yahoo was doing a turnaround under Terry Semmel at the time.
0:04:49 And Terry correctly figured out that, yeah, Facebook was a property that they should buy.
0:04:51 And so, they actually struck a deal.
0:04:54 I don’t know if it got literally signed or verbally agreed to, but they structured a deal.
0:04:55 It was a billion dollar takeout.
0:04:56 It was an agreement to do a billion dollar takeout.
0:04:57 And then the financial crisis hit.
0:04:59 Advertising immediately collapsed.
0:05:02 Because advertising is the first thing that gets cut in a recession.
0:05:06 And Yahoo came back and essentially renegotiated the deal, tried to lower the price.
0:05:11 And that gave Mark basically the, I don’t know, cover kind of wherewithal to be able to walk away from the deal.
0:05:12 Wow.
0:05:15 But look, at the very least, strongly considering it at the billion dollar level.
0:05:19 And again, it’s just like at the time, it was just like a spectacular home run for a company growing that fast.
0:05:24 Started in a dorm four years earlier during a time when, again, this stuff was all just viewed as a complete joke.
0:05:33 The sort of ultimate kind of thing in the story is a few years later, somehow, I don’t know how, but somehow the internal Yahoo deck on the acquisition got leaked and got published.
0:05:39 So Yahoo’s internal analysis of Facebook at that time and Yahoo people were bullish on the company, which is why they offered to buy it.
0:05:43 But they and everybody else radically underestimated the future growth of the company.
0:05:46 Like it’s just like this incredible low bound kind of estimate.
0:05:49 And then not only did Facebook grow really fast, but they figured out targeted advertising.
0:05:55 And then, by the way, they went through the exact same crisis again, basically, after they went public in 2012.
0:05:58 They went public right as the transition from desktop to mobile was happening.
0:05:59 That was really when the iPhone was getting critical mass.
0:06:00 Right. Fascinating.
0:06:06 And there was just this wall, again, in the press, this wall of negativity, which is, I mean, you read the articles at the time,
0:06:12 and they were just like, this is going to destroy Facebook because everybody knows that Internet ads are based on the amount of screen real estate that you can sell.
0:06:14 Like the ad rates literally are the number of pixels on the screen.
0:06:20 And therefore, logically, because mobile screens are much smaller than desktop screens, the ad rates are going to shrink.
0:06:20 And that’s going to be it.
0:06:22 And the stock came out and shit the bed right out of the gate.
0:06:27 And it was literally this argument of the mobile ad opportunity was much less than the desktop ad opportunity.
0:06:33 And what we know now today, right, is that mobile meant people were going to use this stuff far more all day long.
0:06:33 Usage went way up.
0:06:35 And then we learned that the targeting works, right?
0:06:40 And everybody knows today it’s sort of obvious that a company like Facebook is a trove of personal data that you can target ads against.
0:06:43 But at the time, it was not something that people believed would be the case.
0:06:47 I often describe these companies, even the ones that kind of from the outside look like they’re just like up and to the right the whole time.
0:06:50 I always describe it as it’s like a process of falling up the stairs.
0:06:50 Yeah.
0:06:51 Right.
0:06:58 Because it’s just when you think you’ve got everything figured out, like some weird issue basically pops up and you’ve got some new thing to prove and you’ve got some other thing.
0:07:02 And Mark’s one of the best who’s ever lived at being able to work his way through every single thing that’s come along.
0:07:06 It’s funny that we went from mobile ads won’t work to organizations.
0:07:10 You know, Tristan Harris dedicated to stopping ads from working too well, basically.
0:07:12 He does work so well.
0:07:14 We have an epidemic of sort of people using it so much.
0:07:15 It’s just so fun.
0:07:16 I would even heighten that.
0:07:19 Within four years, it went from the ads don’t work at all to they are literally mind control.
0:07:20 Right.
0:07:21 They are literally mind control.
0:07:22 Right.
0:07:23 And, you know, this political ad specifically.
0:07:29 And they can literally like put the whammy on people to vote for candidates who nobody would ever vote for had they not been mind controlled.
0:07:29 Exactly.
0:07:30 Right.
0:07:30 By the Facebook algorithm.
0:07:36 And the whole thing the whole time was so weird because it’s like, wow, like if the mind control works so well, like why don’t we have triple the ad rates on selling toothpaste?
0:07:38 Why does it only work for Trump?
0:07:38 Yeah, exactly.
0:07:41 A few hundred thousand dollars can shift a whole entire election.
0:07:41 Yeah, right.
0:07:42 Exactly.
0:07:42 That’s the thing.
0:07:43 The Russians can spend.
0:07:48 By the way, I think the result of it was I think it was a result of $80,000 of ad spend on the Russians in the relevant period of the election.
0:07:50 It was like a total of like 140,000.
0:07:52 But during the actual run of the election, it was $80,000.
0:07:57 And so the theory was $80,000 of ads channeled into this magic mind control device.
0:07:58 About bang for the buck.
0:07:58 Yeah.
0:08:01 That literally swung an election that Hillary Clinton spent $3 billion on.
0:08:02 Right.
0:08:04 And the whole time we’re just sitting there.
0:08:06 I’m just sitting there just like I can’t even believe.
0:08:07 Like it doesn’t make any sense.
0:08:10 I went to Hillary’s first big speech after she lost at Stanford.
0:08:15 And she literally said on stage, Donald Trump is only president today because Vladimir Putin hacked Facebook.
0:08:18 And I’m like, Vladimir Putin hacked Facebook?
0:08:20 What the F are you talking about?
0:08:24 Anyway, and so literally it went from 2008 to this is useless to 2012.
0:08:26 This is still useless.
0:08:30 However, it does get some credit for the Arab Spring, right, and for getting Obama elected.
0:08:35 And there were lots of headlines at that time of social media saves democracy because of the Arab Spring.
0:08:37 And then to 2016, it’s the evil mind controlling death machine.
0:08:44 It just, it turned out that the method that was supposedly used by the Russians slash, you know, the Trump campaign to do the mind control, you know, basically like that method.
0:08:46 I mean, we now know basically it never worked.
0:08:50 Like the whole psychometric thing that they were doing, the Cambridge Analytica was supposedly doing.
0:08:51 It’s not something people do today.
0:08:55 Like this is the other part of the narrative you’re told to believe is it was magic mind control, but only for that election.
0:08:56 And then nobody ever tried it again.
0:08:57 Yeah, exactly.
0:09:01 It’s fascinating to imagine sort of alternative tech history.
0:09:03 Like what if Yahoo had actually been able to buy Facebook?
0:09:05 Obviously, there would have been a massive blow for Facebook.
0:09:08 But sometimes it works the other way of maybe Snap should have sold to Facebook.
0:09:09 Maybe it would have been better for everyone else.
0:09:11 It’s just fascinating to explore sort of tech alternative.
0:09:24 In my view, it’s so hard to redo the counterfactuals because this is like the classic debate of sort of historians, which is like how much has history guided like these big impersonal trends, you know, these big kind of impersonal forces, these tides or waves that swamp everything versus how much is based on sort of individual action.
0:09:26 And I just think these things are so contingent.
0:09:28 I have endless stories like Netscape.
0:09:28 We almost bought Yahoo.
0:09:31 There was like a bit-ass spread between $3 million and $5 million.
0:09:31 Oh, my God.
0:09:33 Yahoo almost bought Google.
0:09:35 And there was a very low price deal at the time.
0:09:37 Netflix almost sold a blockbuster early on.
0:09:38 Yeah.
0:09:42 Every one of these companies that end up being a global world beater always has one of these stories of the path not taken.
0:09:42 And so.
0:09:44 Uber and Lyft almost merged at one point.
0:09:45 Yeah, exactly.
0:09:49 And so my view, just having been through it, I mean, look, the forces means something.
0:09:50 Like the smartphone was going to happen.
0:09:52 There were going to be killer apps on the phone.
0:09:54 There was going to be something like this.
0:09:55 Somebody was going to do it.
0:09:58 And like had, I don’t know, in the counterfactual Facebook sold Yahoo and Yahoo let it languish.
0:10:00 Somebody else probably would have figured it out.
0:10:02 But in a sense, some of these things were bound to happen.
0:10:07 But the specific companies involved is just that there are so many kind of twists and turns.
0:10:07 Yeah.
0:10:11 It’s so contingent on very specific people doing very specific things at each point.
0:10:12 Totally.
0:10:16 That I think it’s just, it’s extremely sensitive to the micro level decisions that are made along the way.
0:10:16 Yeah.
0:10:20 Speaking of twists and turns, let’s go back to the firm because the first fund is $300 million, correct?
0:10:23 And we didn’t have a sense for how big it would become.
0:10:25 But you wrote Software Zating the World.
0:10:28 So you had a sort of hypothesis that these companies were going to get bigger.
0:10:29 There’s going to be more of them.
0:10:34 Take us through when you realized that scale was going to be a strategic asset for venture
0:10:36 and that the future of venture was going to look like this barbell.
0:10:36 Yeah.
0:10:41 So I actually remember a conversation with John Doerr in the mid-90s because KP was an investor in Netscape at the time.
0:10:44 You know, when I was young, basically the model was very straightforward at the time,
0:10:46 which was basically series A, series B.
0:10:49 And there wasn’t even really seed that much in the mid-90s.
0:10:52 It was mostly you just raised like a venture A round, which would be like a $3 or $4 or $5 million round,
0:10:54 maybe $6 or $7 if you were super ambitious.
0:10:56 And then there’d be like a B round of 20 or 30.
0:10:59 And then there was what was called the mezzanine round, which was the C round.
0:11:00 And that basically is the pre-IPO round.
0:11:04 And so you kind of raise a total of three rounds and maybe $30 or $40 million.
0:11:05 And then you go public.
0:11:07 And then if you needed money, you would go public.
0:11:09 Basically, there were no follow-on rounds after the C round.
0:11:10 And so you would go public.
0:11:17 And you could go public in those days at like, it was sort of $50 million in revenue and then a 10x revenue multiple meant a $500 million market cap was the bar to go public.
0:11:23 By the way, as an example, Amazon went public in 97 and I think it was $400 million valuation.
0:11:24 So right in line with that model.
0:11:25 Netscape was similar in 95.
0:11:28 And so venture had this very specific role.
0:11:32 But what was becoming clear even in the 90s that actually, I think it was a conversation John and I had about Cisco originally,
0:11:34 which is just like some of these companies are really going to rip.
0:11:35 They’re really going to run.
0:11:38 At the time, it was like they’re going to run to $100 billion, which at the time was like the big ceiling.
0:11:41 It’s just like, all right, like all of a sudden the venture B round looks great.
0:11:43 All of a sudden, by the way, the mezzanine round looks great.
0:11:45 Like maybe the VCs should basically just keep re-upping.
0:11:46 Yeah.
0:11:47 Is it a mistake?
0:11:53 If you can make as much absolute money investing $50 million in Cisco at their Series C as you could five in their Series A.
0:11:53 Right.
0:11:57 In those days, it was like a big statement to say maybe the venture firms should do that.
0:12:00 And then, of course, what’s become clear since then is the ceiling isn’t $100 billion.
0:12:01 It’s much larger than that.
0:12:01 Yeah.
0:12:02 It’s much higher than that.
0:12:04 And that’s just a consequence of tech proliferating.
0:12:06 It’s becoming more important.
0:12:07 So anyway, so we had that sense.
0:12:08 And some of that had started.
0:12:10 And Facebook actually was raising larger rounds by that point.
0:12:11 Yeah.
0:12:11 You know, DST.
0:12:15 DST kind of redefines growth investing when they did the Facebook round.
0:12:19 So basically, this idea of sort of venture growth investing was starting to really materialize.
0:12:21 And so we did define the firm right up front.
0:12:22 We said we want to be stage agnostic.
0:12:24 We want to be seed venture and growth.
0:12:25 That was in the original pitch deck.
0:12:29 It wasn’t enough money to do a lot of growth investing, but we could start to get underway.
0:12:32 Basically, this is our argument to the LPs was, look, it’s not about being in a certain stage.
0:12:34 It’s about the total aggregate opportunity.
0:12:39 If you’re going to get into one of these world-beating companies, you can still do it at the B, C, or D, and you’ll still have venture scale returns.
0:12:42 And so, yeah, we defined that right up front.
0:12:49 And when did we figure out, because our approach of sort of specialized funds is different than some of these other partnerships that, hey, we’re just all generalists.
0:12:50 We’re a small team.
0:12:51 We all do everything.
0:12:52 When did that model originate?
0:12:53 What was that journey like?
0:12:54 Yeah.
0:12:54 So, we started that way.
0:12:56 So, we started as generalists.
0:12:59 And Ben and I had both worked in both consumer and enterprise, which are kind of the two big categories.
0:13:03 At the time, it was basically consumer software VC, enterprise software VC, and then sort of biohealth tech.
0:13:09 The older venture firms actually did both what they called digital or IT investing, software investing, and then they also did biotech.
0:13:15 And actually, a lot of those firms, they got, like, internal divorces and spun their groups off because those industries at the time were going in different directions.
0:13:17 But Ben and I had done consumer and enterprise.
0:13:21 And so, you know, we just said, look, we’ll just be a generalist firm, sort of modeled after the benchmark model.
0:13:32 And a big part of this is just industry evolution, which is around the time we started the firm, it was also the time that I would say the tech industry fundamentally changed from primarily building tools to actually going, like, directly into industry.
0:13:34 So, we call it full-stack companies.
0:13:43 And so, I think the reason the generalist model worked well for as long as it did is because, like, fundamentally, a database company, a router company, a word processor company, an operating systems company, like, they’re all fundamentally tools.
0:13:48 And so, they’re different if they sell to consumer or enterprise, but, you know, a router is a piece of software in a box.
0:13:52 Chips are a little different, but a database and an operating system are similar.
0:13:56 The technical challenges, the form of the company, the organizational model for the company is similar.
0:14:02 Word processors and video games at the time both got 50 bucks, both sold in a box on retail store shelves, you know, kind of similar.
0:14:05 And so, the generalist model, I think, worked really well when the industry was that earlier model.
0:14:12 And then 2009-2010 was a pivot, we now know, which was the rise of Uber and Lyft, the rise of Airbnb, the rise of Tesla, the rise of SpaceX.
0:14:19 The world-beating companies of the 2010s in many cases were companies that were full-stack, direct insertion and markets.
0:14:25 And then we, therefore, started investing in the, you know, everything from these e-commerce marketplaces to these new kinds of defense companies.
0:14:30 And then we decided to take on biotech because we thought biotech was becoming much more based on software and IT and data and AI.
0:14:39 And then basically what we realized is, okay, the generalist model doesn’t work anymore because each of those things now is actually a very deep domain in and of itself, right, with like very specific domain knowledge.
0:14:46 And then the specific problem that a generalist has is that a generalist can sense heat, but a generalist has a very hard time getting into the specifics.
0:14:54 And the reason the specifics really matter is because so much of venture, because the way venture works is if you invest in one company in a space, you can’t invest in the other.
0:14:59 So, if you pick the space correctly and invest in the wrong company, you’re screwed, right, because you can’t fix your mistake.
0:15:02 You can’t then invest in a successful company because of the conflict issue.
0:15:12 And so, what we realized was the thing that was becoming very important in this new world was understanding deep in the vertical what was going on, specifically for the purpose of being able to tell which company was actually the one that was most likely to win.
0:15:16 And that’s just really hard to do if you don’t have domain knowledge.
0:15:18 And so, that catalyzed us to verticalize.
0:15:19 And then we did that in two steps.
0:15:22 We did a partial verticalization early, probably, I don’t know, 2013 or something.
0:15:25 And then by 2017, I think we did the full, you know, the one we have now.
0:15:29 It’s fascinating because 15, 20 years ago, things like Y Combinator were getting off the ground.
0:15:31 And you were this yourself.
0:15:39 People said there was an arbitrage around young technical founders and this idea that you could teach them the business elements and they could be successful.
0:15:41 You don’t need to go to MBA to be a successful founder.
0:15:42 That’s accurate.
0:15:50 And yet, today, maybe there’s a similar arbitrage around domain experts where the tech has gotten easier and it’s easier to get sort of things off the ground.
0:15:55 And domain expertise values more and distribution is valued more maybe than it was 15 years ago.
0:15:57 And maybe that’s true on the founder’s side and on the investor’s side.
0:16:00 Yeah, although at least until now, I think the question is whether AI is going to change this.
0:16:04 But at least until now, it still was the case the founders also needed to be very deep in the tech.
0:16:07 And even the founders that would go out and there was this wave of like design founders, right?
0:16:09 And it’s like, okay, that’s great.
0:16:09 The design founders are great.
0:16:12 It just turns out the successful design founders are also very strong technologists.
0:16:12 Right.
0:16:16 And they maybe pretended sometimes that they weren’t because they wanted the design cred.
0:16:18 But like it turned out, they were actually very deep and substantive.
0:16:18 Yeah, interested.
0:16:20 Yeah, these are Ben Silberman and Brian Chesky.
0:16:23 These guys are like top end technical founders in addition to being great designers.
0:16:27 And so, yeah, like I would argue, there’s really no escape from deep domain knowledge.
0:16:35 To your point, I think the question is, okay, if AI makes deep domain knowledge distantly accessible to anybody, you know, if you have 03 deep research or it’s equivalent at your fingertips.
0:16:40 And if you’re a generalist or a person wearing many hats, like can AI give you the depth when you need it?
0:16:41 And I don’t know.
0:16:43 I’m excited to see people try that.
0:16:44 Yeah.
0:16:48 It’s a little bit like the debate happening around coding right now, which is, okay, is vibe coding a substitute for like actual coding?
0:16:48 Right.
0:16:53 And sitting here today, like vibe coding is like super exciting for casual development.
0:16:59 But at least right now, all of the really sharp technologists I know don’t think that you can vibe code a top end like software company today.
0:17:03 But like the coding capabilities of these models are getting really good.
0:17:05 And so the agents are starting to work.
0:17:10 And so, you know, the sort of famous Dilbert, which is Dilbert’s boss pitches Dilbert on, they’re going to go start a company together.
0:17:13 And the boss is like, I’m going to bring the idea and be the manager and you’re going to do the coding.
0:17:15 And Dilbert’s like, and so what you’re saying is you’re going to contribute nothing.
0:17:16 Right.
0:17:23 And so does the existence of like really state of the art AI coding actually change that to Dilbert’s boss all of a sudden can have the AI write the code?
0:17:24 Yeah.
0:17:26 And then you get these very entertaining thought experiments.
0:17:27 Are agents going to get really good writing code?
0:17:31 And then are you going to be able to have a non-technical person supervising a thousand AI coders?
0:17:32 Yeah.
0:17:32 Right.
0:17:36 And outracing a top end technical person who’s supervising a hundred great coders.
0:17:36 Right.
0:17:37 It’s possible.
0:17:37 We’ll see.
0:17:39 It’s the era of the ideas guy.
0:17:39 Yeah.
0:17:40 Yeah.
0:17:43 I want to talk about areas where we’ve chosen to play and areas where we haven’t chosen to play.
0:17:45 So let’s look at internationally.
0:17:50 We talked about how we pressionally didn’t enter China in ways that other firms did.
0:17:52 We’re a U.S. firm, American dynamism.
0:17:58 Europe, when it’s not shooting itself in the foot regulation wise, they’re increasing their defense spend.
0:17:59 Could you imagine Europe dynamism?
0:18:07 How have we thought about, and I know there’s big things on the horizon, which we can’t exactly get into right now, but how have we thought about internationally, historically, and how do you think about it going forward?
0:18:09 The good news is, look, the world is globalizing.
0:18:11 There’s incredible activity and interest all over the world.
0:18:13 Like everywhere we go, people want to talk about tech.
0:18:14 They want to learn about tech.
0:18:20 Ben saw this more than me, but like when Ben wrote his book and went on a tour, it didn’t matter what country he went to, thousands of kids show up and they want to learn how to do this.
0:18:26 And look, the internet had a big impact there, which is every kid anywhere in the world now can watch Peter Thiel talks and our podcast and everything else.
0:18:31 And so I would say global knowledge is way up, global enthusiasm is way up, relevance to societies is way up.
0:18:33 As you mentioned, like defense, Europe needs to rearm.
0:18:37 Presumably, they’d be better off rearming with the new systems as opposed to the old systems.
0:18:40 Drones forms instead of aircraft carriers, right?
0:18:40 That kind of thing.
0:18:41 We’ll see.
0:18:44 And then just the reality, there’s just smart people all over the place.
0:18:45 And so there’s human capital everywhere.
0:18:50 I think historians will look back and they’ll just say, wow, the 21st century is really primitive society.
0:18:54 They had all these smart people all over the world and they never figured out how to actually utilize them, right?
0:18:56 They never figured out how to identify them and use them.
0:19:00 And so the startup process is a way to especially get smart young people to do ambitious things.
0:19:02 So that’s great.
0:19:02 It’s all fantastic.
0:19:06 Against that is just this incredible drag by bad governments and bad policies.
0:19:13 As you mentioned, Europe, you’re persistent shooting itself, not just in the foot, but in the other foot and in the ankle and in the knee and in the gut.
0:19:18 And they’re just on this absolute frenzy to regulate and kill tech in Europe, the UK.
0:19:19 And they’re proud of it.
0:19:19 And they’re proud of it.
0:19:20 Like they’re very proud of it.
0:19:25 Yes, the actual European line now is we quote, this is in the FT, this is an actual quote from a European senior politician.
0:19:30 We know we cannot be the global leader in tech innovation, so therefore we will be the global leader in tech regulation.
0:19:39 And so you just imagine being like a German or French tech founder and reading that, just being like, oh, God, to get to the U.S. embassy and apply for a visa as fast as possible, right?
0:19:40 And in fact, that’s what’s happened.
0:19:44 As a consequence, a lot of these really curious, bright people basically end up moving to the U.S.
0:19:47 And so we’ve been an enormous beneficiary as a country and as a firm of that.
0:19:49 And so that remains a really big challenge.
0:19:55 It’s interesting to watch in the U.K. right now because I thought under the previous government they were going to become enlightened and bring in.
0:19:56 And they did the opposite.
0:19:58 Like they tried to ban AI and they said they were going to liberalize crypto.
0:19:59 They never did.
0:20:01 But the new government, they say they’re going to open up some of this stuff.
0:20:03 They still want to keep all the regulations.
0:20:04 But they say that they want economic growth.
0:20:06 So we’ll see the defense stuff.
0:20:06 Yeah.
0:20:07 I mean, there’s already a dispute.
0:20:09 This is just in the headlines.
0:20:09 There’s already a dispute.
0:20:15 If Europe cranks their defense spending up to 5% of GDP, which they’re supposed to, will they buy any of that from U.S.?
0:20:17 Will it only be purchased from indigenous European defense vendors?
0:20:19 So it’s already becoming part of the whole trade war.
0:20:20 Yeah.
0:20:26 I mean, look, I think most of the state of the world is very, at least for what we do, it’s high caliber people being held back by being in bad systems.
0:20:26 Yeah.
0:20:31 And what is our criteria for opening up offices in other places more generally?
0:20:31 Yeah.
0:20:35 So basically there’s two kinds of activities that make sense for a firm like us to do internationally, I think.
0:20:36 Maybe three.
0:20:38 One is just sales is the crude term.
0:20:40 We dress it up with fancy words.
0:20:40 Business development.
0:20:41 Yeah.
0:20:41 Go to market.
0:20:43 A lot of the market is global for all of our companies.
0:20:46 And so helping our companies succeed and build up businesses globally.
0:20:47 And we’ve been doing that from the beginning.
0:20:49 And that’s always an important thing.
0:20:50 Two is investing.
0:20:51 And look, we’ve invested.
0:20:53 We’ve always been, I would say, other than China.
0:20:55 Generally, we’ve been open investing in many places in the world.
0:20:57 And we have investments in a lot of places.
0:20:58 Very recently, a withdrawal in France.
0:20:59 Yeah, exactly.
0:21:02 But we’ve made investments in the past in Vietnam and lots of other interesting places.
0:21:03 We’ll go where the flow is.
0:21:13 You know, having said that, again, just because of this kind of political dynamic has just been striking over the last 30 years, how many great founders who could have stayed in country X and started a company there have just moved to the U.S. instead.
0:21:13 Yeah.
0:21:19 And so we just, from a practical standpoint, have tended to emphasize U.S. investing because we figure we’ll get most of the best of the global founders anyway.
0:21:19 Yeah.
0:21:23 And then maybe the third thing, we’re not really active on this right now, but we’re very active now in U.S. policy.
0:21:26 But, you know, there are these policy issues all over the world.
0:21:32 Do we need to go get more, insert ourselves more into God help us European politics or whatever?
0:21:34 And then there’s a question, you know, can we, as Americans, are we allowed to?
0:21:35 Yeah.
0:21:37 Well, I know we’ve only done this sort of kicking and screaming.
0:21:39 This was not our intent, even on the U.S. side.
0:21:45 But talk a little bit about how just a little tech concept, is this sort of different from big tech, sort of emerged in our thinking.
0:21:46 Yeah.
0:21:49 So basically, this also goes right back to this thing of the tech industry kind of changing around 2010.
0:22:00 So in the era between, call it 1950 to 2010, when the industry was in what was called tool phase, chips and word processors and routers and spreadsheets and things like that, startup tech particularly was never really a salient political topic.
0:22:03 Really, the only time I would ever enter politics really was with antitrust.
0:22:03 Yeah.
0:22:13 And so it was like a really big deal in the 90s when the government dug into Microsoft because that case was a big deal, but also because it was a very rare case of the government actually caring about tech and wanting to become involved.
0:22:17 And so there was sort of a state of sort of, I would say, I don’t know, benign neglect or something up until 2010.
0:22:21 And by the way, in both directions, like the Valley companies never thought it was important to go to D.C.
0:22:23 The D.C. companies didn’t really think the Valley companies mattered.
0:22:27 And then, yeah, that all started changing in around, I don’t know, probably 2012, 2013.
0:22:32 You had this sort of increasing political, I would call, I don’t know, energizing happening just, you know, in general.
0:22:38 And you started getting this anti-tech narrative, started getting more political, got wrapped up in the Occupy Wall Street 1% thing.
0:22:40 And one of these tech people is just as bad as the finance people.
0:22:44 The FT just ran a big story saying the tech people are now definitively worse than the finance people.
0:22:46 I read this story twice and I still don’t understand it.
0:22:50 But the gist of it was something like at least the finance people you can have dinner with and it’s fun.
0:22:50 Right.
0:22:52 Whereas the tech people are just like all.
0:22:56 Or sometimes they say at least the finance people know that they’re money motivated or something, whereas the tech people have the delusion.
0:22:58 Yeah, they’re saying sanctimonious and insufferable, which, you know.
0:23:00 Sometimes.
0:23:01 Maybe there’s a little bit of truth to that.
0:23:03 But yeah, it started to kind of energize then.
0:23:06 And then really, you know, the takeoff was 2015, 2016.
0:23:07 And it was really Trump.
0:23:12 It was really Trump’s nomination and election that really radicalized a pretty big block of political actors in the country against tech.
0:23:18 And then, by the way, the way I would describe the last decade is the left got like super angry at tech because of Trump and because of inequality and all these other things.
0:23:22 And then the right got super mad at tech because the right thought the tech was all on the left.
0:23:22 Yeah.
0:23:23 Right.
0:23:27 And so we’d go talk to Republicans and they would basically say, yeah, we agree with you, but like you’re all Democrats.
0:23:29 So, you know, F off.
0:23:30 Yeah.
0:23:31 They thought it was very entertaining.
0:23:33 Social media was the tip of the spear of that for about five years.
0:23:40 And then in the last five years, crypto became incredibly politicized and the U.S. government basically launched a full-on war against it, tried to kill it.
0:23:45 And then AI got just like incredibly politicized starting basically right around 2021, 2022.
0:23:48 And the government was moving in very hard on AI.
0:23:52 And for us, it was the combination of crypto and AI that got us like extremely alarmed.
0:23:54 And so we decided we had to become involved.
0:24:02 But like I said, there’s specific point issues in both of those domains, but there’s just this general kind of thing, which is like, all right, we always wanted to build things that matter.
0:24:03 It turns out these things matter.
0:24:09 And as a consequence, like we’re either going to show up and explain ourselves or other people who hate us are going to describe us.
0:24:13 And so what we’ve done is we’ve generalized that idea out into what we call the little tech agenda.
0:24:13 Yeah.
0:24:15 And the first part of that is the little tech.
0:24:18 And we say little tech specifically is differentiated from big tech.
0:24:19 I like that it creates a cleavage.
0:24:20 Yeah, that’s right.
0:24:21 That was another thing we discovered.
0:24:26 That was a result of kind of our early interactions like four or five years ago in D.C., which is just, they were just like, well, tech is tech.
0:24:27 You know, just meet with them on behalf of startups.
0:24:29 And they start yelling at us about Google or something.
0:24:30 And it’s like, we’re not here representing Google.
0:24:31 And it’s like, that’s tech.
0:24:33 And by the way, it was a startup 20 years ago.
0:24:33 Right.
0:24:37 And we’re just like, well, look, Google, they have 10,000 players and policy people and compliance people.
0:24:38 Like, they’ve got their own.
0:24:38 Right.
0:24:39 They can carry their own water.
0:24:40 That’s not what we’re here for.
0:24:46 And in fact, a lot of what the venture ecosystem does is it funds competitors to big tech.
0:24:47 Yeah, we’re disrupting big tech.
0:24:55 And this is the story I always tell in D.C., which is 100% true, which is the caricature of this sort of reckless Silicon Valley, is that we’re starting companies that go disrupt whatever, health care or something.
0:24:58 I said, most of what our founders are trying to disrupt is big tech.
0:24:58 Yeah.
0:25:04 And I said, frankly, big tech companies, I would say they have a love-hate, we like them, but they have a love-hate relationship with us because we’re the escape hatch.
0:25:09 If there’s somebody at a big tech company that basically gets frustrated, they come to us to raise money to start a company to compete with their former employer.
0:25:10 Right.
0:25:13 And so big tech is not always in favor of us.
0:25:16 And then look, big tech, they just have become very big companies and they have their own agendas.
0:25:22 And a lot of big companies over time try to form cartel, basically, structures to prevent new competitors and startups from emerging.
0:25:26 And so we just noticed in more and more cases, there was a divergence of interests.
0:25:28 That actually turned out to help a lot the minute we figured that out.
0:25:30 And then we sort of coined this little tech thing and kind of ran with it.
0:25:34 Like immediately, that was like the icebreaker because everybody in D.C. hates big tech.
0:25:35 They only agree on two things.
0:25:36 They only agree on big tech and China.
0:25:39 This is the only two things they agree on, but they really agree on those things.
0:25:41 And a big tech, they just all hate big tech.
0:25:44 And so the minute we say we’re not here on behalf of big tech, we’re on behalf of little tech.
0:25:46 And in fact, our companies attack big tech.
0:25:47 We get like these huge smiles.
0:25:48 Totally, yeah.
0:25:50 They’re like, oh, wow, tech startups are actually good, right?
0:25:51 It’s actually, this is actually exciting.
0:25:51 Yeah.
0:25:52 So that’s a little tech side.
0:25:55 And then the agenda side is, it’s essentially freedom to innovate, right?
0:25:55 Right.
0:26:03 So ability for companies in new fields that are not completely yet well understood that lawmakers of the past did not anticipate that they should actually be able to operate.
0:26:07 And then the other maybe important thing is we’re not like lobbying for no regulation, right?
0:26:13 So sometimes we get tagged by, you know, we’re these crazy libertarians and we want these companies to just run wild and like commit fraud and do all this crazy stuff.
0:26:15 And that’s not what we’re pushing for.
0:26:15 We want clarity.
0:26:16 We want clarity.
0:26:16 We want clarity.
0:26:17 We want clarity.
0:26:18 We want clear guidelines.
0:26:19 We want sensible rules.
0:26:22 We always tell these people like consumer protection regulation, go crazy.
0:26:24 Like 100%, no problem.
0:26:25 That’s all good.
0:26:27 In fact, we want that because we want our companies to be compliant.
0:26:29 We certainly don’t want our companies committing fraud.
0:26:35 By the way, the other thing we don’t want is we don’t want our compliant companies competing with non-compliant companies that aren’t getting regulated or prosecuted.
0:26:35 Yeah.
0:26:39 We are advocating on behalf of regulation as often as we’re doing anything else.
0:26:39 Yeah.
0:26:40 You know, it’s funny.
0:26:52 On Twitter, there was this sort of Paul Graham Palantir dust up the other week, which I thought was just pretty symbolic or emblematic, not to pick on Paul, but it was sort of like older Silicon Valley versus newer Silicon Valley or just like how the space has changed.
0:26:54 You know, Palantir has to work with the government.
0:26:55 They’re building hard tech.
0:26:58 It’s not just sort of put something up and talk to customers right away.
0:27:01 And Paul Graham has been in England for quite a bit.
0:27:03 You know, YC is still innovating, doing fantastic things.
0:27:11 But I just thought that was such a fascinating example of how Silicon Valley is evolving, which is just new kinds of companies, new kinds of go-to-markets, new kinds of sort of ethos.
0:27:11 That’s right.
0:27:14 And so the specific dust up, I think, was over Palantir working with ICE.
0:27:15 Yes.
0:27:16 The U.S. government immigration agency.
0:27:18 So this is a generational change.
0:27:19 I think this is a very deep and profound change.
0:27:31 And there’s a generational aspect of this, which is basically, so the U.S. tech industry and startup industry in Silicon Valley were basically deeply intertwined with the defense and intelligence, the sort of deep state defense and intelligence agencies in particular, the federal government.
0:27:36 Really, if you go all the way back, Steve Blank has these incredible videos, essays where he goes through all this all the way back.
0:27:38 Silicon Valley actually started in like the 1920s.
0:27:39 And it was like defense tech in the 1920s.
0:27:45 It was like radar, right, and like early missile guidance systems and avionic systems and things like that in like the 20s and 30s.
0:27:51 And then from that time through to like basically the 1960s, it was just assumed that there was this very deep relationship.
0:27:56 And, you know, this whole war, and of course, industry and government have to work together to build all these systems to defeat the Soviets.
0:28:03 One of the first computers literally was called SAGE, which was a U.S. government project, a giant mainframe computer for missile early warning systems.
0:28:08 So it was just assumed that this was all kind of hand in hand, and then really what happened was it was Vietnam.
0:28:16 So Vietnam was the first modern war where you had this massive protest movement, and then the college campuses went wild with this anti-war movement and all that stuff.
0:28:26 And what happened, if you talk to people who were involved back then, basically what happened was the leading edge American universities that did science and technology were doing military science and technology, and many of them just stopped.
0:28:33 So like Stanford, there’s this thing called Stanford Research Institute, SRI, that’s actually no longer associated with Stanford because it’s the remnants of what used to be Stanford’s military R&D.
0:28:36 MIT had something similar with the Lincoln Lab.
0:28:42 And so that created a culture, and the Valley was always been a mix of right and left wing, but, you know, the hippie anti-war movement, a lot of it was in California.
0:28:43 Right.
0:28:45 A lot of it was at Stanford and Berkeley specifically.
0:28:48 And so there was just this mood shift, I guess.
0:28:49 We have the vibe shift now.
0:28:52 So in those days, it was like probably the groove shift like that, right?
0:28:53 So it’s called the groove shift.
0:28:56 So the groove shift 50 years ago was no more work with the military.
0:28:57 No more—U.S. government is evil.
0:29:07 The U.S. government is an evil, colonial, oppressive power wreaking havoc overseas, and it would be better to have, like, disarmament and basically pacifism, and the U.S. should sort of give up all these foreign engagements.
0:29:10 And that was a very hot, very hot political topic because the Soviet Union was still up and running.
0:29:15 But anyway, as a result, like a lot of these universities—and then as a result, a lot of the companies just basically disengaged.
0:29:16 They just weren’t willing to do that.
0:29:19 Another topic that became very hot at the time was ROTC recruiting.
0:29:25 So the military used to just actively recruit for new officers on these campuses, and a lot of these colleges outlawed that 50 years ago.
0:29:28 Anyway, so I would say Paul is a very bright guy.
0:29:34 Paul is from that era, not the Vietnam era, but, like, the arc that followed, like, in the 80s and 90s when it was just universally assumed.
0:29:34 Right.
0:29:39 That, of course, you don’t try to enable the military industrial complex defense agencies.
0:29:41 I never really felt that way, and I don’t know.
0:29:43 Maybe it’s just—I don’t know where I grew up or whatever, but I never really felt that way.
0:29:45 But I knew I was swimming in those waters for a long time.
0:29:48 My company, Netscape, was always very active with defense and intelligence.
0:29:49 We always leaned hard into it.
0:29:53 It’s the only real thing that you’re—Alex Scarf, I think, is a national hero.
0:29:56 The one thing when he does is he sees Palantir as the first company that’s ever done this.
0:30:00 And I’m like, no, no, we were doing it 10 years earlier, but that’s okay.
0:30:01 He gets tons of credit.
0:30:08 And so anyway, so I would say Paul represents that, call it, I don’t know, neo-hippie 80s and 90s phase, where it’s just clearly you don’t do this.
0:30:12 And then to your point, now the Vive Shift is now more recently with, you know, Palantir and Andrel.
0:30:17 And again, to give Alex Karp huge credit, give, you know, Ryan Schiff and Palmer Luckey huge credit.
0:30:19 Peter, you know, these guys really led the way on this.
0:30:22 And so, yeah, of course you work with them because, number one, you’re a business and they’re a customer,
0:30:26 and you shouldn’t be, like, sitting there as, like, moral judge for, like, every single customer.
0:30:26 Yeah.
0:30:30 Because how are you going to do business if you’re just sitting there having these moral conversations all day long?
0:30:33 And then number two, it’s like, all right, these national missions actually matter, right?
0:30:41 And the border one is very inflammatory, but I should say most people in the history of civilization have thought that borders are an important and valid thing going back many thousands of years.
0:30:45 And then, yeah, I mean, is the world a safer place because the U.S. is in it versus not?
0:30:47 And because the U.S. military is strong versus weak?
0:30:50 And do we want to protect ourselves against terror attacks?
0:30:50 Yeah.
0:30:53 So I think there’s a lot of us that are like, oh, clearly we want to do those things.
0:30:56 I’m encouraged by it because I think things are headed in the right direction according to what I want.
0:31:00 But I also recognize that these are serious underlying moral, philosophical, ethical questions.
0:31:02 And I, like, I don’t question Paul’s intent.
0:31:06 I think when he says those things, he’s operating out of a very strong sense of ethics and morals.
0:31:06 Right.
0:31:07 Totally.
0:31:09 I disagree with him.
0:31:09 Yes.
0:31:13 Software has eaten the world and it didn’t stop at social networks or marketplaces, right?
0:31:15 It got into, or internet marketplaces, it got into everything.
0:31:15 Yeah.
0:31:19 And in fact, what happens, if you go to D.C. and if you talk to people who run the defense intelligence agencies in D.C.,
0:31:23 almost every topic that they talk about or think about has a major tech component to it.
0:31:23 Yeah.
0:31:25 Like almost every single one.
0:31:29 Just the Ukrainian battlefield is a completely new kind of battlefield because of all this new drone technology.
0:31:30 Right.
0:31:30 And all these things.
0:31:36 That’s basically true for, like, every area of, basically, national geopolitical policy has a big tech component to it.
0:31:37 Right.
0:31:39 And of course, my approach is, obviously, we should be in the middle of that.
0:31:42 And obviously, we should be investing against that and trying to help those things happen.
0:31:44 But I understand why people get uncomfortable with it.
0:31:44 Yeah.
0:31:46 That’s a perfect place to wrap our conversation at OP Summit.
0:31:47 Mark, thanks so much.
0:31:47 Thank you, Eric.
0:31:52 Thanks for listening to the A16Z podcast.
0:31:58 If you enjoyed the episode, let us know by leaving a review at ratethispodcast.com slash A16Z.
0:32:00 We’ve got more great conversations coming your way.
0:32:01 See you next time.
0:32:36 Thank you.
What does it take to build a venture firm from scratch—and scale it across multiple waves of technological and cultural change?
In this special episode recorded at the a16z LP Summit, Marc Andreessen joins Erik Torenberg for a conversation on the origins and evolution of Andreessen Horowitz. From raising Fund I during the depths of the 2008 financial crisis to shaping the firm’s multistage, multi-sector strategy, Marc reflects on how the firm was built—and rebuilt—as the tech landscape shifted.
They discuss the rise of “Little Tech,” why policy now matters to startups, how scale became a strategic advantage in venture capital, and why the move from generalists to vertical specialists was inevitable.
Along the way, Marc shares behind-the-scenes stories on Facebook’s near-sale to Yahoo, the evolution of founder archetypes, the global talent arbitrage, and what too many people still misunderstand about tech’s role in society.
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