How Andreessen Horowitz Fumbled An Instagram Investment
bits.blogs.nytimes.com
bits.blogs.nytimes.com
I saw the market first, I created picplz, and I went for it. I was a huge believe in the mobile photo sharing opportunity, and I went for it with all of my heart. Clearly, picplz didn't win, but I have ZERO shame or regret for doing my best.
When I read articles like these, which are about myself, my company and people that I know well, I can't help but feel vitriol aimed at me for DARING to create, launch and raise funding for picplz. I am not clear on what exactly people want, an apology for trying?
The fact is, I saw the writing on the wall that we wouldn't win early and pivoted out of photo sharing which I had ~90% of my series A cash still in the bank. It certainly seems like that was the right move, but all of this press makes it look like pivoting was the wrong call(?) The press I read is written in such a way that it assumed that the A16Z investment is dead and my entire company should just be written off to zero today. That is bullshit. If I started to take press like this too seriously I might as well just dissolve my company and stop coming into work.
I say this to the hn comminity: never be afraid of failure. No one knows what will happen. All of this arm-chair quarterbacking is a waste of time. Stop reading this kind of crap and instead put your energy into doing your best work. Sometimes you win, and sometimes you lose, but if you give yourself the opportunity to win enough times, you WILL be successful.
Journalists, especially those writing for the NY Times, choose their words very carefully and are 100% deliberate in their conclusions, even if only implied through artful diction and innuendo.
This is techcrunch-style gossip writ large and it names names. You think NYT isn't doing this on purpose? We all read it didn't we?
As to what the article said, I think you may be taking this too personally (although it sounds like you're referencing the media in general, and I don't know how much vitriol you may have had to absorb).
"Picplz has languished. After shopping the product around for possible cash deals last year, its founders finally ditched Picplz in July, choosing instead to spin it off to Sporcle, a maker of online trivia quizzes."
To me it sounds like basically saying "they did a pivot", but in language that an average reader can digest. Probably using a word other than 'ditched' would be more tactful though. I guess when one aims high taking punches now and then is part of the game, but in the end it doesn't mean a whole lot; other than well, you aimed high :) Haters gonna hate and all that jazz.
The "vitriol" is mainly things that I read on Twitter inspired by articles like these. I am not going to link to them, but folks can choose to believe me or not.
It's an important lesson. So important that a prestigious fee-paying girls school in England is having lessons in failing, and avoiding the fear of failure.
(http://www.bbc.co.uk/news/education-16879336)
EDIT: This post is in no way an insult to the parent comment. This post is meant to show that fear of failure is a problem, and it is being tackled at a very good school. Normally I ignore the downvotes, but this post is toggling up and down a fair bit. Reading my original post I guess I understand that it could be seen as being an insult. I apologise for that.
Interesting side note about the article is VC funds tracking 'developers' early, for me at least.
History is written by the winners...I hope you can focus on being the winner in your market, and then tell your story the way you would want ;-)
It's a weird, twisted reality we live where 6 months is considered too long to reach 100,000 users.
When I read articles such as these written by the media, I always keep in mind that we entrepreneurs are the men in the arena. It's easy to second guess, and criticize when you're sitting comfortably with zero financial, and emotional risk.
I think it's not so much considered too long as considered too long when a direct competitor does it in a week.
If one platform is growing at an explosive rate and the other one is struggling to get users, there's not much you can say beyond "second platform is struggling (comparatively)"
Amazing that you can turn $250k into (possibly) $100,000,000 and in the eyes of a NYT writer you have fallen short.
The writer will make a great parent.
By all means, make your point about the headline and story. Nicole is, presumably, an adult. But so are Andreessen Horowitz, and comparing them to a vulnerable child is not particularly convincing.
Of course in the end it's about selling newspapers or page views so she was just doing her job.
Just because this is a journalist you are unlikely to meet doesn't mean you should so cavalierly impugn her morals. You can criticize an article without making it into an attack on the author.
How would you feel if I replied to one of your comments with a sarcastic, "Gee, you'll sure make a GREAT parent some day"?
If I bought $1MM worth of AAPL in 2003 at $10/share, I'd have $57MM. But if I bought it in December 97, at $3.30/share, I could have $150MM! What an idiot am I!
AH made out like bandits here; I'm sure they feel just fine about it.
There is a saying in news business "if it bleeds it leads".
The negative angle draws in viewers and readers on certain topics and in certain situations. My guess is that that she decided this angle would get more views and interest.
For his next hit piece, that NYT "journalist" should write how Andreeson Horowitz are losers because they failed to buy enough Apple stock at $8 a share.
This helps explain why they'll plow money into shoot-the-moon me-too startups that have no discernable chance of success, but might turn you down even if you have steadily growing revenue.
As a matter of fact, Fred Wilson on his blog the day after the deal was announced was asked this by a commenter:
"I was looking for a lively discussion of the FB/Instagram deal today"
To which Fred replied:
"i'm not interested in that discussion really. somehow that takes energy from me. i am not inspired."
As you said "obvious missed opportunities are going to sting"
http://www.avc.com/a_vc/2012/04/life-liberty-and-blazing-bro...
But furthermore, I'd rather have the decision to fund actually mean something more than "This is just barely convincing enough that there's a slight chance I might look like an idiot if I don't throw a bit of money at it'.
I'm painting a picture of extremes, but you get the idea. Fine, a16z made X on this investment when they could have made Y, where Y > X. But look at X itself - is that a respectable rate of return? And if not, do they make up for it by getting good returns on the other investments that they've also invested money (and time!) into?
The VC game is about identifying enough companies - not all companies - that will be successful. Errors of the first kind and errors of the second kind are not equally noteworthy, and it seems we're focusing too much on the wrong one. There are valid reasons for turning down a company even if you think it may be successful - if you feel that your limited time/money/effort will be more valuable other companies.
Nobody can maximize every investment. How often does it happen that anybody maximizes their investment potential on any given deal? I wish I would have bought Apple stock in 1998 instead of 2005, but I wouldn't say I "fumbled an investment opportunity." When I first saw this headline, not knowing the backstory, I thought this meant that they did something to piss off the Instagram founders and lost out on the chance to put anything into the company at all.
The piece describes how Andreessen Horowitz invested in both Burbn & Picplz. After Burbn pivoted to Instagram, Andreessen Horowitz had to choose between the two - since they competed directly. Andreessen Horowitz chose to go with the company that they put money for photo sharing.
Besides, it looks like they did the most ethical/default thing they could - back the company they had already funded for photo sharing and avoid a conflict.
Curious: To what extent can you avoid disclosing information to your investors, once it becomes clear that they are competing against you.
But Mr. Systrom’s experience with Andreessen Horowitz taught him to choose his investors warily.
Why? It seems like A16Z did the most ethical thing, which was support the company that the original founded for this idea. When Instagram pivoted into a competing position, why would they expect A16Z to back them and bury picplz?
By the time Facebook acquired Instagram for $1 billion in a cash-stock deal a week ago, Andreessen Horowitz’s stake in the company had fallen to less than 10 percent.
If A16Z had half the seed round, then that means that the seed investors owned 20%, diluted. If Benchmark own 30% at the sale, that means that the seed angels must have took >30% of the company at the $500K seeding. Is this correct?
In the end, I'd say the win goes to AH - they made a mistake, but also didn't exactly lose either.
"moral reasons" ... Give me a break.