Rolfe Winkler wrote a piece in the WSJ about A16Z’s returns in which he says they “lag behind Sequoia, Benchmark and Founders Fund.”
Scott Kupor of A16Z responded with a comprehensive overview of valuation methodology in a post that, while accurate, feels more targetted at sophisticated Limited Partners (LPs) who invest in funds.
Let me offer you an insider’s take. VCs strangely never seem to weigh in on other VC funds. I have no incentive to do so other than to help those reading the WSJ piece better understand how I believe most insiders think. As an entrepreneur I never really knew what to make of VC return data. Now from Both Sides of the Table I know a thing or two.
When Andreessen Horowitz as a fund first started the industry went from “We love Ben and Marc” to “They raised how much?” to “Holy fuck, they paid WHAT for that deal I tried to get into?” to “Jeez — they sure are hiring a tonne of staff. Can that really work?” to “How can we hire more staff to keep up with the services they offer?”
In short, the VC industry is very sharp-elbowed amongst some very competitive people who are used to winning and most deals don’t have enough space to share investment rounds so people were naturally pretty quick to judge A16Z.
The word on the street now is that A16Z is truly a force to be reckoned with and has done a lot to change the dynamics in our industry. Having a huge services venture firm isn’t for everybody and it isn’t the only strategy that can succeed. But privately, most VCs I know contend that it has gone much better than they had initially expected.