Marc Andreessen’s much quoted tweet storm was just a starting point for his one-hour talk at last week’s DreamForce. The famous investor (founder of Netscape, now of Andreessen Horowitz) continued warning about the changing tides in tech financing and how the intersection of trends could radically re-orient the market.
Let’s paint a picture: corporate America spent ten times more on corporate stock buy-back than the whole VC industry spent last year. Startups are being encouraged to hire, spend money, and “grow” – the lessons from Amazon have been internalized by an industry that now believes a company can scale without making money.
Everyone is the exception. Despite what is said of a series A crunch, the real crunch will be high-burn companies that have no ability to fire sell (no one will add that burn to their bottom line). The weather, according to Andreessen, is changing.
- All public companies over 20 years will break up – they need to be nimble and independent to innovate and compete.
- Activist investors will continue to come in when a company is big or cheap, but are a sideshow to real questions about the future of a company.
Within this paradigm, it’s easy to see the split between what might be a true technical innovation, like cryptocurrency, and incremental innovations (like Apple Pay, which Andreessen described as innovative in a way that “fits the status quo”). If even some of these game-changing technical innovations work, they will be profound.
For others, the front-runners will be iterations for a solution or technology we haven’t seen yet. (For the record, Andreesen does believe Bitcoin will be the definitive cryptocurrency and not an early generation or soon-to-be-forgotten predecessor of an eventual winner.) However, the market is still rewarding incremental innovation with financing – there’s at least a handful of startups looking to disrupt how the Bay Area does its laundry.
In this climate, it’s only getting harder for investors and the market to spot winners – every tech company will have to reinvent itself every five years to keep pace, and startups will need lots of money to reach the public markets or any sort of liquidity.
While many companies clamour to be first to market, Andreesen wants the companies that will be last and close the door. There will only be one Microsoft, WhatsApp, Facebook…. because in the VC industry “it’s not a question of how often you’re right,” Andreessen said. “It’s a question of when you’re right – how right are you?”
If you’re keen to watch the section of his talk about Apple Pay and Bitcoin we’ve got it here for your enjoyment.
Contribution made by Melinda Jacobs – Security Expert at Lucent Sky