Nothing beats a hands-on experience. Even better if such an experience comes from having sat at both sides of the table. Ben Horowitz started in Silicon Graphics and Netscape, then served as a CEO of Loudcloud where he managed its transformation into Opsware and subsequent sale to Hewlett-Packard. For the last 15 years as a founding partner of Andreessen Horowitz he has been investing in early-stage companies. There’s no doubt that the man knows his stuff.
Here are my 3 takeaways after watching several conversations with him on YouTube:
Lesson #1
Culture is one of Ben’s favourite topics (more on that in his book “What You Do Is Who You Are: How To Create Your Business Culture”; and no, I am not earning affiliate income from this). Culture has a differentiating potential even for the smallest firm or even for an angel investor. Along with some general common-sense things, like being on time for the meetings, returning phone calls promptly etc., it is important to learn to say “no” to entrepreneurs explicitly and to explain in detail why you are saying so. It is guaranteed to pay off later. At Andreessen Horowitz the rejected entrepreneurs have become their #1 source for new referrals.
Lesson #2
Provided that AI overcomes the current bottleneck of chip shortages, 2 major issues have to be addressed — power and cooling. It is estimated that AI could account for up to 10% of global energy consumption. And the cooling process may literally boil an ocean. Both these areas are screaming for innovation.
Nvidia and IBM are doing quite a good job already in working to address the chip shortages issue. The chipmaking startups will have to come up with some kind of a new angle to be competitive.
Lesson #3
Hardware companies are much harder investment cases than software businesses. There are far too many things that can go wrong, including product design and supply chain issues, for example. But, if you get it right and the product works, there is much less competition.
With software businesses it is fairly straightforward — if the software works the company will get funded in the next round. It is not so easy with hardware — investors might think that, although it is working, it is not working well enough yet. The CEO of a hardware startup must be a world-class fund raiser to make it work. And a world-class recruiter, too.
And a final comment about one of the most frequent pieces of advice given by self-improvement advisers. Their suggested approach of “fake it till you make it” is a bad idea, says Ben. It will never fly with the Silicon Valley venture capitalists. Or, with any experienced investor.
For those willing to watch the full interviews and select their own top 3 lessons here are the links — https://www.youtube.com/watch?v=sU7l6se-z1A&list=WL&index=2&t=19s and https://www.youtube.com/watch?v=QyyWsr1NMt8&list=WL&index=1
This note was first published on Medium.com on 6 September 2024.
