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I am more bullish about the future of the news industry over the next 20 years than almost anyone I know. You are going to see it grow 10X to 100X from where it is today. That is my starting point for any discussion about the future of journalism. Here’s why I believe it, and how we will get there.

Journalism has changed

There has been a fascinating change in the traditional journalistic press over the last several years. Take corrections as an example. It used to be that corrections to printed news stories were a really big deal. There was a high bar to get a correction accepted in a newspaper or magazine. The story as printed was the permanent record.

That was then.

Now, even top print newspapers and magazines frequently revise stories online, sometimes dozens of times, often without tracking changes or acknowledging a change has been made. There are two ways to view this. The glass-half-full-view is that stories get better and better over time, vectoring ever closer to the truth. As a result, overall accuracy goes up over time. That is good for publications and journalists, and also good for their subjects.

The glass-half-empty-view is that the quality bar for an initial post can be lower. Sloppy stories get published since they can always be corrected later, as much or as often as needed. This gets us into deterministic “truth” versus probabilistic “truth” territory. In other words, from: Here it is, take it or leave it, to: Here it is, subject to arbitrary ongoing revision.

For better or worse (and maybe both), print journalism is converging in technique and quality towards blogs and Wikipedia. Ed Bott fully decoded this with his original NSA PRISM news stories. Given that change, and the easy slide into probabilistic “truth,” I am very interested to see how Journalism with a capital J can maintain its reputation for truth and accuracy versus upstart blogs and Wikipedia. For Journalism  – big J – the stakes  are very high if that reputation is lost.

But it may be that all journalism wins. Maybe we are entering into a new golden age of journalism, and we just haven’t recognized it yet.  We can have the best of all worlds, with both accuracy rising, and stories that hew closer to truth.

The news business should be run like a business

The news business is a business like any business. It can and should be analyzed and run like a business. Thinking of news as a business is not only NOT bad for quality, objective journalism, but is PRO quality, objective journalism. A healthy business is the foundation for being able to build high quality products, and to do so sustainably. That includes journalism. Analyzed as a business, the news industry is going through a fundamental restructuring and transformation, for worse and for better.

The main change is that news businesses from 1946-2005 were mostly monopolies and oligopolies. Now they aren’t. The monopoly/oligopoly structure of newspapers, magazines, and broadcast TV news pre-‘05 meant restricted choice and overly high prices. In other words, the key to the old businesses was control of distribution, way more than anyone ever wanted to admit. That’s wonderful while it lasts, but wrenching when that control goes away.

The end of monopolistic control doesn’t mean that great news businesses can’t get built in highly competitive markets. They just get built differently than before.

Now, with everyone on Internet, three things are happening simultaneously:

1. Distribution is going from locked down to completely open, anyone can create and distribute. There is no monetary premium for control of distribution.

2. Formerly separate industries are colliding on the Internet. It’s newspaper vs. magazine vs. broadcast TV vs. cable TV vs. wire service. Now they all compete.

Both No. 1 and No. 2 drive prices down.

3. At the same time, the market size is dramatically expanding—many more people consume news now vs. 10 or 20 years ago. Many more still will consume news in the next 10 to 20 years. Volume is being driven up, and that is a big, big deal.

Right now everyone is obsessed with slumping prices, but ultimately, the most important dynamic is No. 3 – increasing volume. Here’s why: Market size equals destiny. The big opportunity for the news industry in the next five to 10 years is to increase its market size 100x AND drop prices 10X. Become larger and much more important in the process.

How to make money

Some of the best news about the news business is the gigantic expansion of the addressable market, a function of the rise of the developing world plus the Internet. So how big is it? If you extrapolate from the number of smartphones globally, the total addressable market for news by 2020 is around 5 billion people worldwide. However, we all have to get more sophisticated about defining and segmenting markets. It is critical to really understand the who, where, when, and why to serve that massive market effectively.

For example, many evolving markets are seeing the “death of the middle.” The winners in these markets either offer the broadest breadth or the deepest depth. In evolving markets neither the broadest nor deepest is in trouble, but the middle market is withering. So it is logical to expect the big winners in the news business to either be the broadest or the deepest: To go maximum mass, or maximum specific.

With that as a backdrop, here are eight obvious business models for news now, and in the future. This isn’t a pick one model and stick with it prospect, news businesses should mix and match as relevant.

Advertising: Advertising is still central for many news businesses. But they need to get out of the “race to bottom” dynamic of bad content, bad advertisers, and bad ads. Quality journalism businesses need to either take responsibility for their own high-quality advertisers and ads, or work with partners who do. There is no excuse for crappy network-served teeth whitening come-ons and one weird trick ads served against high quality content. Disastrous.

Subscriptions: Many consumers pay money for things they value much of the time. If they’re unwilling to pay for a news product, it begs the question, are they really valuing it?

Premium content: A paid tier on top of free, ad-supported content. This goes after the high-end news junkies reading the likes of Bloomberg & Reuters. It will work for more and more new outlets. Again, value equals people paying money for something.

Conferences and events: Bits are increasingly abundant, and human presence is becoming scarce. So charge for that scarcity, and use bits to drive demand for human presence.

Cross-media: Tina Brown was right but too early with Talk. News is a key source of material for books, TV, and film—which happen also to be growth businesses.

Crowdfunding: This is a GIGANTIC opportunity especially for investigative journalism. Match people with interest in a topic to the reporters on the ground telling the stories. Click = vote = $. (Helpful hint: Start today with Crowdtilt. Easy-as-pie.)

Bitcoin for micropayments: Easy to get started now (checkout Coinbase). As the consumer use of Bitcoin scales up for transactions, it becomes easy to ask for small amounts of money on a per-story or per-view basis with low or no fees. (A lot more of my thinking on the subject of Bitcoin here.)

Philanthropy: Today the examples are Pro Publica and First Look Media, tomorrow the could be many more examples. There is around $300 billion per year in philanthropic activity in the U.S. alone. It’s WAY underutilized in the news business.

If we look at the specific example of investigative journalism, believed to be least commercially viable type or news, you start to see how these models can play together. The so-called “investigative journalism problem” is straightforward: How does it get funded in this new world? I have two responses.

The first is that the total global expense budget of all investigative journalism is tiny —  in the neighborhood of tens of millions of dollars annually. That’s the good news, small money problems are easier to solve than big money nightmares.

How we might solve this small money problem is via a combination of crowdfunding, philanthropy and subsidization by otherwise healthy news businesses. The combination should easily cover the global tab of investigative journalism, and even increase the money available.  The same solution can address the “Baghdad bureau problem.” Conflict-zone reporting of all kinds is super-important, and relative to other kinds of reporting, expensive, but again, it’s not much money in total.

A last thought on business models. As my friend Jim Barksdale says, “There are two ways to make money in business: You can unbundle, or you can bundle.” Or, rebundle. We already see the rise of new kinds of news aggregators in the wake of the great unbundling of newspapers and magazines. This is another thread to pull on.

As business models get re-engineered and this brave new world of news comes to pass, there is this fear that oceans of crap will drive out quality content. I don’t think that happens. In fact, I believe the opposite will occur.

On the Internet, there is no limitation to the number of outlets or voices in the news chorus. Therefore, quality can easily coexist with crap. All can thrive in their respective markets. And, the more noise, confusion, and crap — the more there is an increase of, and corresponding need for, trusted guides, respected experts, and quality brands. Remember: Most great businesses are not big businesses. This market is plenty big enough for thousands of high-margin, small to medium-sized businesses.

Growing fast with quality. People and companies that are doing it right.

The following are some examples (in alphabetical order). There are many others, and I would encourage additions. Not every experiment will work, and maybe even some of these won’t work. That’s not the point. Experiments are needed for creation, and ultimately success – especially in the news business.

AnandTech: Monstrously competent technical coverage of the computing industry. Anand’s team provides unprecedented depth and detail. As a result, it wields big influence in industry.

The Atlantic: Bob Cohn is taking a long-lived and respected brand, and blowing it out worldwide. The Atlantic is a daily presence now, and has a growing audience thanks to digital distribution.

Buzzfeed: Jonah Peretti built the Buzzfeed fire hose with listicles. He’s leveraging that to do amazing in-depth long-form journalism. And growing like a banshee.

The Guardian: The Guardian is a  particularly great example of print crossing into online. Thanks to digital the Guardian brand is more global and reaches more readers than ever before.

Politico: The political junkie’s favorite place on the Internet. Politico has taken over as the first thing D.C. reads every morning. It demonstrates the virtues of aggressive focus online.

Search Engine Land: Danny Sullivan has created a place for all the search news, all the time. He’s leveraged all those interesting bits into live events and even lead generation. It’s  a new model for a digital news business.

The Verge: Josh Topolsky and his crew provide full coverage of tech industry news. It’s become a daily must-read for both in-the weeds tech folks and consumer audiences. Expect Verge and its parent Vox to be 10X larger in the next five years.

Vice: From online Do’s and Don’ts, and now to the Vice media empire. Vice shifted from print to rapid growth and increasing presence via online stories and especially video.

Wirecutter: A mini gadget news empire skippered by Brian Lam from various beachside locales. Lam is pioneering a new style of tech journalism, a side effect of which is great data.

Wired: Scott Dadich and the Wired gang are blending print and digital with amazing breadth and depth. More than half of revenue comes from digital, and it’s growing.

I’ll also highlight three personal investments of mine, all growing fast with quality:

Talking Points Memo led by Josh Marshall. Henry Blodget and Business Insider. Sarah Lacy and PandoDaily.

A hat tip to the new entrants from tech and their massive investment in the future of news.

Jeff Bezos and his $250 million purchase of The Washington Post. Pierre Omidyar and his $250 million commitment First Look Media, and their first digital magazine The Intercept.

And finally, The New York Times.

It’s great to great to see The Times has evidently cracked code on the transition from print to digital after extremely hard effort.

What’s holding the future of news back

There are some artifacts and ideas in the journalism business that arguably are  counterproductive to the growth of both quality journalism and quality businesses. It’s why some organizations are finding it so hard to move forward.

An obvious one is the bloated cost structure left over from the news industry’s monopoly/oligopoly days. Nobody promised every news outfit a shiny headquarters tower, big expense accounts, and lots of secretaries!

Unions and pensions are another holdover. Both were useful once, but now impose a structural rigidity in a rapidly changing environment. They make it hard to respond to a changing financial environment and to nimbler competition. The better model for incentivizing employees is sharing equity in the company.

Those are the key structural issues holding some news businesses back, but there is an approach to how the news is created that also prevents progress. It’s the notion that “objectivity” is the only model worth pursuing.

The practice of  gathering all sides of an issue, and keeping an editorial voice out of it is still relevant for some, but the broad journalism opportunity includes many variations of subjectivity. Pre-World War II, subjectivity was the dominant model in the news business – lots of points of view battling it out in marketplace of ideas. As with people and opinions, there were many approaches to writing or broadcasting  on the same topic.

My take is that the rise of objectivity journalism post-World War II was an artifact of the new monopoly/oligopoly structures news organizations had constructed for themselves. Introducing so-called objective news coverage was necessary to ward off antitrust allegations, and ultimately, reporters embraced it. So it stuck.

But the objective approach is only one way to tell stories and get at truth. Many stories don’t have “two sides.” Indeed, presenting an event or an issue with a point of view can have even more impact, and reach an audience otherwise left out of the conversation.

The good news

The opportunity for leadership in the journalism business, just happens to be same leadership opportunity as in all businesses. Leaders just need to start leading.

One start would be to tear down, or at least modify the “Chinese wall” between content and the business side. No other non-monopoly industry lets product creators off the hook on how the business works.

Before the journalistic purists burst a fountain pen, consider that there are intermediate points between “holier than holy” and “hopelessly corrupt” when it comes to editorial content. Paying attention to the business doesn’t equal warped coverage. It does equal a growing business. There are many businesses that balance incentives and conflicts all day long. Those businesses are able to hold the line on quality, and make great products. The point is, there isn’t just one way, but ought to be many ways to skin the cat in news.

All of this requires abandoning the past, something that admittedly is very hard but necessary to move forward. Today’s news organizations are spending 90% of their effort and resources on playing defense. They are protecting the old artifacts and business model, rather than going on the offense and making the future. Even newspapers and other media outlets that are just now making it across the digital chasm would be much better off today if leadership had shifted resources and focus harder and sooner. Without a strong offense, and a view forward rather than back, a bad result is inevitable in the long run.

The best approach is to think like a 100% owner of your company with long-term time horizon. Then you work backward to the present and see what makes sense and what remains. Versus, here is what we have now, how do we carry it forward?

That is a tough exercise, and an even tougher mind shift. As we have already seen in the demise of scads of newspapers and other periodicals, not every news organization will make it. And that is OK. Further consolidation will be required. The U.S. alone has 15 full-scale national news organizations, plus more from international markets and all the online news organizations cropping up, That’s too many general news outfits.

The good news is those that would survive and thrive are in control of their own destiny. The challenges and opportunities that these news businesses face can be rethought, addressed, and fixed. It’s similar to what any successful business goes through. The guidelines and the characteristics for winning are the same.

It requires the following.

Vision: The difference between vision and hallucination is others can see vision. It is critical to articulate a bright future with clarity that everyone can see.

Scrappiness: Tough challenges call for resourcefulness and pragmatism. You need to stay close to the ground, wallowing in every detail and all over any opportunity that arises.

Experimentation: You may not have all the right answers up front, but running many experiments changes the battle for the right way forward from arguments to tests. You get data, which leads to correctness and ultimately finding the right answers.

Adaptability: Ask yourself, would you rather be right or successful? That needs to be top of mind at all times because times change and we change. You want strong views weakly held.

Focus: Once you gain clarity from experiments and adaptation, then it’s time to focus on a small number of ultra-clear goals. When those are defined then it’s all-hands-on-deck.

Deferral of gratification: You need the stomach (and resources!) to reject near-term rewards for enduring success. In journalism this means refusing to participate in the race to the bottom.

An entrepreneurial mindset: This is true both for new companies and existing companies. It’s a bit of a mantra. We own the company. We make the business. We control our future. It’s on us.

Remember, I am very bullish on the future of the news business. But as Tommy Lasorda said:  “Nobody said this fucking job would be all that fucking easy.” But while hard, it can be done, and it is worth doing.

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.

Over the last several weeks, there have been erroneous reports in the press that my partner Jeff Jordan and/or I might become an operating executive of Yahoo in some capacity.

To be crystal clear, neither Jeff, nor I, nor any of our partners at Andreessen Horowitz, are in the running for, or would accept, any operating role at Yahoo, including CEO, acting CEO, chairman, or executive chairman.

Jeff and I have high regard for Yahoo, but we are fully committed to our day jobs as general partners at Andreessen Horowitz and board members of our portfolio companies.

[This post is by Ben Horowitz.]

Fred Wilson wrote a counter post to my The Case for the Fat
Startup
that you can find here. Before countering his counter, I’d like to say
that Fred is one of my favorite VCs and has a marvelous track record of
success. Further, I’d like to thank Fred for posting his article, as it enables me to
clarify a couple of subtle but important points. 

I actually agree with Fred in the base case and never said
otherwise: entrepreneurs should build the product that everybody wants before
raising a boatload of cash to build the company. But Fred says one thing that
is confusing and another that’s just not accurate:

  • Only
    raise a boatload of cash once you’ve achieved product market fit.
    Product
    market fit isn’t a one-time, discrete point in time that announces itself with trumpet
    fanfares. Competitors arrive, markets segment and evolve, and stuff happens—all
    of which often make it hard to know you’re headed in the right direction before
    jamming down on the accelerator.
  • Only Marc
    and I could have pulled off the Loudcloud/Opsware miracle; other entrepreneurs
    shouldn’t even try.
     We
    certainly didn’t script the movie the way it turned out. I’m not recommending
    that you as an entrepreneur pattern your own startup after mine. But as an entrepreneur,
    you have to deal with adversity, as we did with Loudcloud/Opsware.
    My experiences there are highly relevant to other entrepreneurs. In fact, they
    are more relevant than Fred’s pattern matching.

Let’s talk about each point in turn.

Product Market Fit Myths

First, I agree that the best way to build a big company
would be to find product market fit and then raise a bunch of money to build a
big business. But sometimes, things aren’t so clear. Let me try to describe
some of the ways things can get messy as a series of myths about product market
fit.

Myth #1: Product market fit is always a discrete, big bang event

Some companies achieve primary product market fit in one big bang.
Most don’t, instead getting there through partial fits, a few false alarms, and
a big dollop of perseverance. By the time it got acquired, Opware had achieved
product market fit for a category of software called data center automation.
But it wasn’t at all obvious that was going to be our destination while we were getting there. We actually achieved product market fit in a number of smaller
sub-markets such Unix server automation for service providers, then Unix server
automation for enterprise data centers, then Windows server automation, and
eventually network automation and process automation. Along the way, we also built a few products that
never found product market fit. 

Similarly, Joel Spolsky of Joel on Software and
Fog Creek Software fame has an exciting new company called Stack Overflow. He has
achieved product market fit in the collaboratively edited Q&A market for audiences such as software engineers and mathematicians.
Is this the primary product market fit? Neither of those markets seem that big.
Will he need significant new features to find the big product market fit?
Probably. Should he invest or stay lean? Good question, and there’s no formulaic
answer.

Myth #2: It’s
patently obvious when you have product market fit

I am sure that Twitter knew when it
achieved product market fit, but it’s far murkier for most startups. How many customers (or site visits or
monthly active uniques or booked revenue dollars, etc.) must you have to prove
the point? As I explain above, there may be multiple sub-markets, each of which
need their own product. I show below that Fred himself didn’t realize that
Loudcloud had achieved product market fit even though we had. It’s usually not
black and white.

Or let's try a consumer products example. Apple's first iPod shipped in
November 2001. It took nearly two years (91 weeks, to be precise) to sell its first million units. In
contrast, Apple's iPhone 3GS shipped June 2009 and shipped 1M units in 3 days. At what point is it obvious to the original iPod team that they've achieved product market fit?

Myth #3: Once you achieve product market fit, you can’t lose it.

Fred implies that we raised a boatload of money for Loudcloud prior to achieving product market fit. This is not true. Four months after founding Loudcloud, we had already booked $12M in customer contracts, so we had product market fit by most measures. I’d defy any VC including Fred to point to a company with a $36M run rate 4 months after founding where the VC advised, “stay lean until you achieve product market
fit.”

But after that bolt out of the starting gate, the market for cloud
services changed dramatically. After Exodus went bankrupt in September 2001, the market for cloud
services from semi-viable companies went to zero and we lost product market
fit as a cloud services provider. We had to rebuild completely and would ultimately find product market fit in a different set of markets altogether.

Myth #4: Once
you have product-market fit, you don’t have to sweat the competition.

It’s
fine to stay lean if you are not quite sure that you have product market fit
and there are no competitors in your face every day. But usually there are. In fact, the best markets are usually the ones in which competition is fierce because the opportunity is big. How
long should you stay lean before attacking? Again, there is no formula that works in all (or even most) cases.

Exceptions that prove the rule

Now, there are some companies such as Twitter (one of Fred’s brilliant investments) for which the above myths are actual truths. However, I propose that
Twitter is more exceptional than Loudcloud or Opsware in that most
entrepreneurs are dealing with a situation that looks much more like Opsware
than Twitter.

The Marc and Ben Special

Second, let's talk about the Marc and Ben Special. Fred writes: “Ben explains that Loudcloud raised $350mm in four rounds of financing (including an IPO) in the first 15 months of
its life. Marc Andreessen and Ben Horowitz can do that. Most of you can not.”

It's true that we raised a lot of money, and not all first-time entrepreneurs can raise that much money. But that's not my point. The most important fund raising that we did as it relates to The Case for the Fat
Startup
was the very last round (as is very clear in the original post). We
raised that money as Opsware, long after we had lost all of our
magic fairy dust. Marc had moved on to found Ning and I was the CEO who nearly
ran Loudcloud into the wall. I am quite sure that I did not have exceptional
fund raising capabilities at that point.

In summary, let me repeat that I agree with Fred in the base case: first build
the product that everybody wants, then raise enough money to build the company. If you can build a big company that way, by all means do it.

Having said that, your story will almost certainly not be that
clean. You might achieve partial product market fit at the same time as a scary
competitor, you might not be sure that you have product market fit, you might
lose product market fit. When one or more things happen, no pattern matching will save you. You will have to figure out for your own unique situation a)
whether there is a clear and present market and b) if there is, how you can
take it.

Fred implies that what we did at Loudcloud/Opsware was
extremely difficult and while Marc and I could pull it off, other entrepreneurs
shouldn’t try it. My point is that trying it isn’t really a choice. As an entrepreneur, you will sometimes (maybe more often than you like) find yourself in a difficult situation. I hope to have provided some
insight on how you might come out alive when that happens.

These days, nearly all the entrepreneurs who come pitch at our venture firm Andreessen Horowitz highlight how little money they are raising and how "lean" they are planning to run the company. While we don't want to invest a single dollar more than a company needs, there is a case to be made for raising enough money to win the market. 

My partner Ben makes this case convincingly in his guest post on AllThingsD titled "The Case for the Fat Startup." Read it, and along the way you'll also hear the story of how Ben navigated our company Opsware through the turbulent dot-com implosion to a $1.6 billion acquisition by HP Software in July 2007. 

Hint: he didn't do it running lean.

Hot off the virtual press: my partner Ben has posted a great essay on leadership over at TechCrunch.

The post should be of particular interest to entrepreneurs who are raising money from our venture fund, as Ben articulates the three key traits we look for in the leaders of the startups we fund. 

Bonus feature: in the post, you'll learn what we like best about three Silicon Valley icons: Steve Jobs, Bill Campbell, and Andy Grove. 

My partner Ben Horowitz and I are delighted to announce the formation of our new venture capital firm, Andreessen Horowitz, and our first fund — $300 million in size — aimed purely at investing in the best new entrepreneurs, products, and companies in the technology industry.

Between the two of us, Ben and I have started three companies directly, created many new products and services, run operating businesses at high levels of scale, angel invested in 45 tech startups in the last five years, and served on a broad cross-section of company boards with some of the best entrepreneurs and investors in the industry. Through all this, we have worked closely together for 15 years, and we could not be more excited to extend our partnership into venture capital.

In undertaking this new mission, our core principles include:

  • Technology and its advancement is absolutely central to human progress. Entrepreneurs who create new technologies and technology companies are improving the standard of living of people worldwide and unlocking amazing new levels of human potential.
  •  

  • While broad investor psychology whips wildly between euphoria and depression, technology change not only continues but is accelerating. In fact, we believe that technology change cascades — each new generation of technology contains within it the seeds for even more profound advances to come. And, technology change creates continuous opportunity to build important and valuable new companies.
  •  

     

  • A technology startup is all about the entrepreneurial team and their vision. Our job as venture capitalists is primarily to support entrepreneurs by helping them build great companies around their ideas.
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  • The process of building a new technology company is changing rapidly. For example, many of the best new technology companies require far less money up front to build the first product, but far more money later to scale into today’s enormous global market, as compared to historical norms. We intend to not only embrace these changes but drive them forward as hard as we can.
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  • Building a great company is a team sport — including the selection of the best possible set of investors and advisors for a specific opportunity. We have been lucky enough to work with many of the industry’s best investors, advisors, mentors, and coaches over the last 15 years, and we look forward to continuing to be a great partner to all of them.
  •  

     

  • Trust is essential to building a great company. Trust requires the highest standard of ethical conduct, which we will strive hard to achieve and maintain.
  •  

     

  • While there are many exciting new entrepreneurial opportunities in fields like energy and transportation, there continues to be gigantic opportunity in information technology — which is where we will focus.
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  • And, while there are many extremely bright and capable entrepreneurs all over the world, there continues to be a special magic to Silicon Valley — which is where we will focus.
  •  

 

We will hang our hat as a firm on the fact that both of us have extensive direct entrepreneurial and operating experience. We have built companies, from scratch, to high scale — thousands of employees and hundreds of millions of dollars of annual revenue. In short, we have done it ourselves. And we are building our firm to be the firm we would want to work with as entrepreneurs ourselves.

Here are some more specifics about how we will operate:

  • We have the ability to invest between $50 thousand and $50 million in a company, depending on the stage and the opportunity. We plan to aggressively participate in funding brand new startups with seed-stage investments that will often be in the hundreds of thousands of dollars. But we will also invest in venture stage and late stage rounds of high-growth companies.
  •  

  • We also have the ability to participate in a variety of investment structures, including but not limited to buying founder shares, investing in public stocks, and contributing to leveraged buyouts. We do not have a goal to do any of these things specifically, but rather we will be maximally flexible to suit our investing strategy to the opportunity.
  •  

     

  • Ben and I will be the only General Partners in the firm, at least to start. We may add a small number of additional General Partners in the future, but we are not assuming that will be the case. We will also build a professional staff to support us in our efforts and to help our portfolio companies in various ways. However, we will not have associates or other General Partner-track junior positions.
  •  

     

  • Ben and I will go on boards of companies in cases where we are investing serious money — generally, $5 million or more, although there could be exceptions in both directions. We will generally not go on boards of raw startups — in fact, in many cases, we don’t even think today’s raw startups should have boards.
  •  

 

Here are some more specifics about what kinds of entrepreneurs and companies we are looking for:

  • Above all else, we are looking for the brilliant and motivated entrepreneur or entrepreneurial team with a clear vision of what they want to build and how they will create or attack a big market. We cannot substitute for entrepreneurial vision and drive, but we can help such entrepreneurs build great companies around their ideas.
  •  

  • We are hugely in favor of the technical founder. We will generally focus on companies started by strong technologists who know exactly what they want to build and how they are going to build it.
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  • We are hugely in favor of the founder who intends to be CEO. Not all founders can become great CEOs, but most of the great companies in our industry were run by a founder for a long period of time, often decades, and we believe that pattern will continue. We cannot guarantee that a founder can be a great CEO, but we can help that founder develop the skills necessary to reach his or her full CEO potential.
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  • We believe that the product is the heart of any technology company. The company gets built around the product. Therefore, we believe it is critical that we as investors understand the product. We are ourselves computer scientists and information technologists by experience and training; therefore, we plan to focus on products in the domain of computer science and information technology.
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  • Here are some of the areas we consider within our investment domain today: consumer Internet, business Internet (cloud computing, “software as a service”), mobile software and services, software-powered consumer electronics, infrastructure and applications software, networking, storage, databases, and other back-end systems. Across all of these categories, we are completely unafraid of all of the new business models — we believe that many vibrant new forms of information technology are expressing themselves into markets in entirely new ways.
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  • We are almost certainly not an appropriate investor for any of the following domains: “clean”, “green”, energy, transportation, life sciences (biotech, drug design, medical devices), nanotech, movie production companies, consumer retail, electric cars, rocket ships, space elevators. We do not have the first clue about any of these fields.
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  • We are primarily but not entirely focused on investing in Silicon Valley firms. We do not think it is an accident that Google is in Mountain View, Facebook is in Palo Alto, and Twitter is in San Francisco. We also think that venture capital is a high touch activity that lends itself to geographic proximity, and our only office will be in Silicon Valley. That said, we will happily invest in exceptional companies wherever they are.
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Finally, one personal note — my role as an active Chairman of Ning will continue unchanged, along with my board roles at Facebook and eBay.

If you have read this far, thank you very much for your interest in our new firm — we will keep you updated over the months and years to come by blog!