I’m very excited to announce that Balaji S. Srinivasan is joining Andreessen Horowitz as our newest General Partner.
Balaji is both an entrepreneur and an academic. He was the cofounder and CTO of Counsyl, where he developed a new pre-pregnancy genomic test for a variety of heritable diseases.
Counsyl’s test won the Wall Street Journal’s Innovation Award for Medicine, was named one of Scientific American’s Top 10 World Changing Ideas, and was the basis for Balaji’s recent MIT TR35 award. Needless to say, genomics is a very technically challenging area; his acceptance speech discusses some of the many issues they needed to tackle, from DNA sequencing to robotics to insurance claims processing. Counsyl has quickly become one of the largest clinical genome centers in the world, with their technology now used in ~4% of American pregnancies. Widely adopted by women’s health groups, their assay has made it much more affordable for minorities to do preventive screening for diseases like Sickle-Cell Anemia and Beta Thalassemia.
Prior to Counsyl, Balaji obtained BS, MS and PhD degrees in Electrical Engineering and an MS in Chemical Engineering, all from Stanford. He then taught data mining, statistics, and computational biology in the Department of Statistics at Stanford before founding Counsyl. Recently, he taught an online Stanford course on the theory and practice of startups that reached over 125,000 students. He also runs the Stanford Bitcoin Group and advises a number of early stage companies.
Balaji is a big thinker. He recently penned an editorial piece titled Software is Reorganizing the World that discusses how social network relationships formed in the cloud are beginning to catalyze physical migrations and gatherings of increasing scale, thereby reorganizing the world.
As a General Partner, Balaji will be leading investments and joining boards on behalf of a16z. While broadly interested in technology in general, he’s particularly enthusiastic about “real world” applications where digital bits interface with physical atoms and substantive problems, such as quantified self (healthcare), MOOCs/edtech (education), Bitcoin (finance), drones, and 3D printing.
This is a guest post by our newest board partner, Steven Sinofsky.
In much of the world’s urban areas, it can seem like there are more cars than people. In the U.S., there are nearly 800 cars per 1,000 people. With that comes increasing congestion, pollution, and resource consumption. Yet, surprisingly, the utilization of vehicles is at an all-time low—to put it simply, the more vehicles there are, the harder it is to keep them all in use. That’s a lot of waste.
Throughout government and private business, tens of millions of passenger cars are part of vehicle fleets used on-demand by employees. Making vehicles available when and where needed and keeping track of them is a surprisingly manual process today. Not surprisingly as a result, it’s fraught with high costs and low efficiency. In an effort to meet demand, managers of these fleets simply add vehicles to meet the highest peak demand. This results in more cars to own, manage, insure, store, and so on. But maddeningly, most of these cars end up either sitting idle, parked in the wrong place, or awaiting replacement of lost keys.
John Stanfield and Clement Gires had an idea for a better way to tackle the fleet problem. They shared a vision for reducing the number of cars on the road and increasing the amount any given car is used, while also making it easier than any other program existing to use a shared car.
John has a physics degree from Central Washington University and a Master’s degree in Mechanical Engineering from Stanford. He’s a conservationist at heart, having spent his years just after college as a forest firefighter. Along the way he invented an engine that processed vegetable oil into biodiesel. At Stanford, he began implementing an idea for a new type of vehicle—an electric car for urban areas that would be a resource shared among people, not owned by a single person. It would be a car that you jump in and use when needed, on demand.
About the same time, Clement Gires was studying behavioral economics at École Polytechnique when he wasn’t also working as part of a high-altitude Alpine rescue unit. Clement worked on the famed Vélib’ bicycle sharing program in Paris which encompasses over 18,000 bicycles in 1,200 locations providing well over 100,000 daily rides. Clement brought novel approaches to improve the distribution and utilization of bikes to the program before coming to the U.S. to study Management Science and Engineering at Stanford.
While climbing in Yosemite, John and Clement got to know each other. Initially, they spent time pursuing the electric vehicle John began, but soon realized that the real value of their work was in the underlying technology for sharing, which could be applied to any car.
Local Motion is bringing to market a unique combination of hardware, software, and services that redefine the way fleets of vehicles can be deployed, used, and managed. There are three unique aspects of the business, which come together in an incredible offering:
- Simple design. Open the app on your mobile device, locate a car or just go out to the designated spots and locate a car with a green light visible in the windshield—no reservations required. Walk up to the car, swipe your card key (same one you use for the office) or use your Bluetooth connected phone and the car unlocks and you’re in control. Forget to plug in your electric car and you’ll even get a text message. When you’re done, swipe your key to lock the car and let the system know the car is free.
- Powerful hardware. Underneath the dash is a small box that takes about 20 minutes to install. In the corner of the windshield is an indicator light that lets you know from a distance if the car is free or in use. The hardware works in all cars and offers a range of telemetry for the fleet manager beyond just location. In modern electric cars, the integration is just as easy but even deeper and more full-featured.
- Elegant software. Local Motion brings “consumerization of IT” to fleet management. For the fleet manager, the telematics are presented in a friendly user experience that integrates with your required backend infrastructure.
The folks at Local Motion share a vision for creating the largest network of shared vehicles. Today, customers are already using the product in business and government, but it’s easy to imagine a future where their technology could be used with any car.
Today, we are excited to announce that Andreessen Horowitz is leading a $6M Series A investment in Local Motion. I’m thrilled to join the board of Local Motion with John and Clement as part of my first board partner role with Andreessen Horowitz (see Joining a16z on my Learning by Shipping blog).
Today I am delighted to help unveil the best robotics startup I have ever seen — Anki.
Andreessen Horowitz has been the main venture investor in Anki, which has been operating in stealth mode until today, since February 2012. Keeping my mouth shut about this company for 16 months has been one of the hardest things I have had to do since we started our firm!
Anki is one of those companies that has an exciting story on top and then a profound story underneath.
The exciting story is melding robotics, AI, hardware, and software into a new kind of entertainment experience. Playing Anki Drive, their first product, is a delight for people of any age — it’s amazing to see fully autonomous robot cars in high-speed races, making thousands of independent decisions per second, maneuvering and competing, in ways never before possible. Your jaw drops.
The profound story is that it is finally time to bring robotics and AI out of the lab and into everyday life. The Anki team brings the kind of engineering and science normally focused on multi-million-dollar industrial and military robots into the home — controlled by your iPhone. There is no limit to the kind of real-world robots and AI that the Anki platform will enable in the years to come.
We are thrilled to work with Boris, Hanns, Mark, and Patrick to help them realize their vision of ubiquitous robotics and AI. This is why we became venture capitalists.
I am tickled pink to announce Andreessen Horowitz’s participation in a new project called the Glass Collective.
Along with our friends at Google Ventures and our old partners in crime at Kleiner Perkins, we are working with Google to encourage a new generation of startup entrepreneurs to build applications for Google’s new breakthrough Glass platform.
First, Google Glass itself: Glass is a new wearable computing product and platform being developed by Google.
The thesis of Glass is profoundly transformational — to integrate connectivity and information directly into your field of vision and into your normal daily life. Instead of having a phone in your pocket or a tablet in your briefcase, why not have the Internet in your field of vision when you want it — and why not feed the Internet with live video and audio that matches what you see and hear at any time.
This provocative idea has already inspired a huge explosion of speculation and debate in the technology industry. In situations like this, I always look to history for analogies to try to understand how people are going to come to grips with new technology. One obvious historical analogy is the web browser, which is 20 years old this year — both the browser and Google Glass are windows into the Internet that everyone will be able to use.
But I’d rather reference another transformational technology that is also 20 years old this year. At the same time we were introducing the browser in 1993, Steven Spielberg released his magnum opus, the film Jurassic Park. For those of us who had worked in 3D computer graphics in the years prior, Jurassic Park was a stupendous breakthrough — the dream of computer graphics truly come to life in a stunningly visceral and emotionally overwhelming way.
In a newly published oral history of Jurassic Park, Spielberg and his producing partner Kathleen Kennedy tell this delightful story:
KENNEDY: I remember getting the phone call where Dennis [their animation genius] said, “I think I have something you and Steven should take a look at.” We saw this wire-frame model of a dinosaur running across the screen, and it caused five or six of us to literally leap to our feet –because it was so extraordinary and –significantly beyond anything we had seen in [animation] up to that point.
SPIELBERG: The last time my jaw dropped like that was when George Lucas showed me the shot of the Imperial cruiser [in Star Wars]. I showed it to [stop-motion effects legend] Ray Harryhausen. He was absolutely enthralled and very –positive about the paradigm changing. He looked at the test and said, “Well, that’s the future.”
When it comes to Google Glass in the context of the Internet, I’m like Ray Harryhausen: Well, that’s the future.
Now, of course, a lot of work remains to be done between today and the full realization of the Glass vision. The exciting part about today’s announcement of the Glass Collective is that just like with the Internet and smartphones, a huge amount of that work will be done by third-party developers, who are going to have in Glass a brand new platform and springboard for creativity to play with. All of us involved in the Glass Collective are absolutely certain that developers are going to create thousands of ways for millions of people to use Glass and improve their lives and the world around them.
And so with the Glass Collective, we are open for business (firstname.lastname@example.org) to seed fund startups to build the first generation of amazing Glass applications.
Ladies and gentlemen, start your compilers.
This is a guest post by Scott Kupor, managing partner, Andreessen Horowitz.
We are holding back the middle class in America. But it’s not for the reasons you think, and the culprits are not those most people think of. Rather, the US government has systematically cut the middle class out of the most important wealth creation opportunity for the next 50 years. Through a series of byzantine regulations, the government has made it virtually impossible for working Americans to enjoy the fruits of America’s greatest strength: innovation.
Over the past decade or so, regulatory changes have reduced the frequency with which the stocks of high-growth companies get offered to the public during their most dramatic phases of growth. That prevents ordinary investors from getting in on the wealth creation, and hampers the creation of middle class jobs. Fortunately, there’s a simple solution.
We’ll get to that shortly. But first let’s look at the cases of two companies founded by Harvard drop-outs.
Microsoft went public in 1986 at roughly a $500 million market cap. Today, Microsoft has a market cap of $234 billion. Thus, the public investors in Microsoft have had the opportunity to realize $233.5 billion in market cap appreciation; the private investors had only a $500 million head-start. From IPO, a single share of Microsoft stock has appreciated close to 500x.
Facebook, by contrast, went public in 2012 at roughly a $100 billion market cap. That means that, whatever public stock price appreciation Facebook has over the coming years, private investors have had a $100 billion head-start against the public investors. Even if you were prescient enough to buy Facebook at its public low of approximately a $50 billion market cap, the private investors remain way ahead. If you bought Facebook stock at its IPO, to realize a similar multiple that Microsoft’s public shareholders have earned, Facebook’s market cap would need to reach nearly $50 trillion, roughly the size of the total market capitalization of all publicly-traded companies in the world.
What accounts for the differences between these two cases?
Up until the last decade, about 300 start-up companies went public each year, with more than half of those companies raising less than $50 million in proceeds (small IPOs.) The average age of the companies at the time of IPO was just under five years old.
Fast forward to the most recent decade and fewer than 100 companies each year have gone public, with less than one-third of those being small IPOs. The average age of the companies going public has also roughly doubled to 9.4 years.
Why should we care if the world has fewer billionaire public company founders and CEOs?
Because IPOs democratize wealth creation and create jobs for the 99.9% of Americans who are unlikely to be the next Zuckerberg, fueling long-term economic growth for the country and guaranteeing access for all to the American Dream.
Indeed, we are quickly creating a two-tiered investment market—one for wealthy, accredited individuals and financial institutions and a second for the remaining 96% of Americans.
If you are an accredited investor (which the rules define as someone with annual income of at least $200,000 or a net worth of $1,000,000), you can buy or sell privately-held stock of high growth, startup companies via exchanges such as Second Market and SharesPost. If you are an accredited investor, you can become a limited partner in one of over 400 venture capital firms that invest in such companies. If you are an accredited investor, you can buy privately held stock of such companies directly from the issuing companies themselves.
However, If you are among the 96% of Americans that are not accredited investors, you can wait the 9.4 years that it takes for the average startup to go public and miss out on all of the price appreciation in the private markets that inures to the benefit of accredited investors.
Despite the many very positive changes introduced by Congress via the 2012 Jumpstart our Business Start-up Act (or the JOBS Act), the middle class remains sidelined. On the one hand, the JOBS Act potentially exacerbates the already “long time to IPO problem” by increasing to 2,000 the number of shareholders a private company may have before it is required to report as a public company.
Yet, in the same JOBS Act, we welcome “the 96%” least-wealthy Americans to invest (via crowdfunding) in the absolute riskiest stage of new company formation—early, seed-stage financings. Somehow, we have concluded that unaccredited investors should be able to likely lose their hard-earned money by investing in the most risky of asset classes. Yet precisely as the risk diminishes dramatically in the subsequent stages of a company’s development, the spoils go only to the wealthy. As veteran investor Steve Rattner pointed out recently, most Americans would have better odds of winning the lottery than of successfully investing in seed-stage companies.
There’s another important implication of the changes that have lengthened startups’ path to IPOs. On average, the Kaufman Foundation estimates that companies that go public increase their post-IPO employment levels by approximately 45%. More significantly, for small IPOs, that number more than triples to 156%. This makes sense—an IPO is a capital raising event for a company. That new capital, in turn, is invested by the company to increase growth, which requires more employees to achieve.
Had we not seen IPO volumes fall off of a cliff in the last decade, the Kaufman Foundation estimates that we would have created an estimated 1.9 million new jobs. Even more significantly, Professor Enrico Moretti of UC Berkeley has identified a multiplier effect with technology-related jobs. For every one new technology job, Professor Enrico estimates that five new service sector jobs are created.
To put the job numbers in context, the number of total US employees in 2001 was just shy of 138 million people; 10 years later, that number was only 139 million. Thus, the potential to add a minimum of two million jobs—and potentially more with the multiplier effect—to an otherwise stagnant employment environment is immense.
What’s the solution?
A number of policy and market changes—all with well-intentioned goals—have created a hostile environment for new IPOs and, in particular, for small IPOs. Arguably the most significant among the changes was the 2001 move to decimalization. Much has been written about the “death star” of decimalization, a phrase first coined by David Weild, former vice chairman of Nasdaq. But simply stated, decimalization eliminated all of the profits from trading small-capitalization stocks. How did this happen? Because decimalization reduced the “tick size,” the minimum increment in which stock prices can trade, to a penny (from its previous level of 25 cents). Thus, a trader who previously might have purchased a block of small-cap shares knowing that a $0.25 tick size likely represented his minimum profit potential on a trade now found his minimum profit potential reduced to a penny. Facing this uneconomic situation, small-cap traders simply abandoned the market, killing liquidity for these stocks.
The 2003 Global Research Settlement (which prohibited investment banking revenue from subsidizing investment research) proved the final death knell. Pre-decimalization and pre-Global Research Settlement, traders of small IPOs could actually make money, and profits from this trading activity subsidized the publication of investment research for small IPOs. Thus, the double whammy of these two policy changes not only sucked all of the profits out of trading the stocks of small IPOs—making it very difficult for these companies to build liquidity by attracting retail investors—but also choked off the use of trading profits to fund research on these companies. Lacking the ample liquidity that active trading desks and investment research create, newly public small IPOs simply can’t attract new, long-term shareholders, raise new capital and ultimately grow their businesses.
All hope is not lost, however.
The simple act of jettisoning decimalization would resuscitate the small-cap IPO market. And the US Securities and Exchange Commission already has the authority under the JOBS Act to make this happen. The SEC could test this change in the form of a broad, intermediate-term pilot and could even provide boards of directors of small IPO issuers the discretion to determine whether doing so would be in the best interests of the company and its shareholders.
Here’s what higher “tick sizes” will mean:
—Trading desks will commit capital to trading small-cap stocks.
—Research analysts will cover small-cap stocks.
—Institutional sales desks will market small-cap stocks to their clients.
—Retail investors will return to this market.
As a result, we will increase liquidity and reduce volatility for small-cap stocks, shocking the small-cap IPO market back to life and breaking the shackles that are holding back the middle class.
I am humbled and grateful to be a co-winner of the 2013 Queen Elizabeth Prize. Thank you to the judges, and congratulations to Robert, Vint, Louis, and Tim.
I would first like to acknowledge my partner in creating Mosaic, Eric Bina. Eric co-wrote the original code for Mosaic with me — specifically all the difficult parts.
I would also like to acknowledge Larry Smarr, Joe Hardin, and all of my colleagues at NCSA and the University of Illinois at the time.
I would further like to acknowledge the distributed group of innovators and contributors who collectively built the web as we know it today during the era in which Mosaic was created.
I will donate the prize money to charitable programs that help spread the culture and foundational knowledge of engineering — such as scholarships and summer programs for engineering students.
It is amazing to think that the consumer Internet and the World Wide Web are still only 20 years old. So much important work has been done in the last 20 years — including bringing the Internet to more than 2 billion people around the world but also so much important work has yet to be done. I firmly believe our field’s best days are still ahead of us, and I can’t wait to see what the next generation of engineers will accomplish.