Ben Horowitz & A16Z's investing themes
Great interview with Ben Horowitz by the Economist where he shares the A16Z investment themes and one area they're avoiding. See my summary below.
See the full eight minute interview here.
A16Z's investing themes
1.Cryptocurrencies
This theme includes Bitcoin and the technologies that enable digital currencies. Ben has a good, concise description of the technological breakthrough provided by Bitcoin and the potential applications:
it allows for a way to have transactions without a trusted third party...things we take for granted today - like the New York Stock Exchange - wouldn't be necessary in a world where you didn't require a trusted third party to have transactions occur.
This ability to process a transaction without a trusted third party is provided in Bitcoin via the "blockchain," a shared public ledger of all Bitcoin transactions. The disruptive potential of the "blockchain" has other investors (like Fred Wilson) excited too.
2. The "full-stack" startup
Uber is an example of the "full-stack" startup.
Uber in the old days would have been a software product that they sold to taxi and limousine companies. Today it's a "full-stack" startup - i.e., meaning they deliver the entire service underneath the software.
In the old days you had a niche, vertically focused software company. Today you have a company valued at $18.2 billion with the potential to be the next $100 billion company.
3. Consumerization of the data center
The data center is going to be disrupted:
Literally data centers will be made up of parts - memory and processors - that you find in a cell phone strung together by very sophisticated software.
Gigantic markets, both in terms of market cap and revenue, that are up for grabs in the future.
Ben's experience with Opsware gives him some serious credibility on this thesis.
One area A16Z is Avoiding
Ben prefaces this quote by saying that he certainly could be wrong.
There are a lot of kind of restaurant delivery services startups in the market right now and some of them are excellent and the services are great, but there are enough of them that the competition has us worried about pricing.
I would assume Ben is referring to everything from Spoon Rocket and Munchery to Blue Apron in this category of companies. I wholeheartedly agree with him on his issue with these services - lots of consumer demand, but very questionable economics. Kind of reminds me of the investing craze around flash sales and subscription commerce.
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TheStartup100 and this blog are a project of Frank Anderson. I'm an internet entrepreneur; former investment banker and consultant; and studied at the University of Illinois and the University of Chicago. You can email me at frank(at)thestartup100.com.