E336: Chris Dixon, General Partner at Andreessen Horowitz -TWiST

watch

listen

about this episode

Never miss an episode! Subscribe in iTunes: Audio (http://bit.ly/TwiStA) || Video (http://bit.ly/TwiStV)

ShareFile by Citrix: Secure file transfer, built for business. Visit http://ShareFile.com, click the microphone and enter the code TWIST to get a FULL 30 day FREE trial.

When I say “beautiful website”, you say “Squarespace!” visit http://squarespace.com/twist and enter the promo code TWIST3 to save 10%.

==========================

Filmed at WeWork in San Francisco, Jason talks with Chris Dixon, General Partner at Andreessen Horowitz

Full Transcript

NARRATOR: Distribution provided by CloudSigma. The cloud that adapts to you. Visit CloudSigma.com/ThisWeekIn for free two hundred dollar credit. Today’s episode of “This Weekend in Startups” is brought to you by ShareFile from Citrix. Secure file transfer, built for business. Visit ShareFile.com, click the microphone, and enter TWIST for a free thirty-day trial. And by Squarespace. An all-in-one platform that makes it fast and easy to create a professional website, and, now, an online store. For a free trial and ten percent off your first purchase on new accounts go to Squarespace.com/twist and use offer code TWIST3.JASON: Hey, everybody. Hey, everybody. It is Jason Calacanis. Today on the program Chris Dixon, the legendary entrepreneur. He is laughing. The legendary entrepreneur, angel investor, and, now, venture capitalist has joined Andreessen Horowitz. This is the first interview, which he has done since joining. It is going to be an amazing program. Stick with us.

JASON’S AD: Hey, everybody. What a wonderful episode of “This Week in Startups,” and what a wonderful product ShareFile is, which is made by Citrix. Our friends at Citrix have made a wonderful, industrial strength file-sharing tool for businesses. It is secure, it is awesome, and it is industrial strength, as I said. Most businesses use attachments, when they email, but we do not want you to do that. You want to know, when stuff gets received. And you want in the right hands, you want to be confident that it is secure, and that is why you use Sharefile. It is important for every business. What can you do with them? With Sharefile? You can send your files of almost any size with the highest degree of security. Track the progress on your files. So you can see people changing them, whose opening them. Access the files from anywhere, any mobile device, any computer. How do we use it? We request files here, at the program, so we will request from our sponsors, request stuff from guests, and it sends them an email alert, and then, they upload to a secure file, and we get it. They do not even have to have an account. We can just have them put them in a quick little folder for us. You can share very large video clips and all that kind of stuff. Great! E-mail alerts, when somebody uploads or downloads. I love that stuff. I highly recommend you sign up for the thirty-day free trial. No credit card is required. Just go to Sharefile.com, click the radio microphone button, and use the promo code TWIST. So go to Sharefile, click the radio microphone button, and use a promo code TWIST. And you get a thirty-day free trial. And hey, we got a special treat for you. The Sharefile TWIST club. You can join right now, and get access to the top ten questions that I have ever been asked and answered on the program. We had our researchers go spend weeks, and weeks, and weeks looking into the archives over three hundred episodes. They found the ten most important questions for you as an entrepreneur. And how do you get this video file? This huge, HD, beautiful, gorgeous video file with the most important questions that you need to ask yourself, and you need to hear the answers from the people like Chamath Palihapitiya and Ev Williams, and the best people, who’ve ever been on the program. How do you get it? You sign up for Sharefile, use the promo code TWIST. Step one. You sign up for Sharefile, you use the promo code T-W-I-S-T. Then you request a file link by emailing Sharefile@launch.co. That is it. You just say “Request the file Sharefile@launch.co” And we will send you the beautiful, gorgeous, huge file into your Sharefile. You are the only people, who are going to get these ten answers and ten questions that are critical for your business. What a great promotion! What a great file, video, great interviews! You can only get it by joining the Sharefile TWIST club. So step one, sign up for Sharefile, use the promo code TWIST. Step two. Request a file link and email that to Sharfile@launch.co. And one of our people is going to go, “Boop! Here you go! Here the top ten answers to the top ten questions that you need for running your business.” These are critically important questions that you need answers to, and you are only going to get them by using Sharefile by Citrix. Thank you so much for sponsoring the program, Sharefile. Let us get back to this very important episode.

JASON: Hey, everybody. Welcome back to the program. I am Jason Calacanis. This is “This Week in Startups” and we are here at WeWork in San Francisco. I am up here a couple of weeks before the big Launch festival, March 4, 5, and 6. You may have read the Chris Dixon left New York to come out west and join Andreessen Horowitz, the incredibly successful, yet, very young venture capital firm, that has raised billions of dollars, run by Ben Horowitz and Marc Andreessen. So, Chris, welcome back to the program.
CHRIS: Thanks for having me.

JASON: Why did you decide to join them? That is the question, right? You were an angel investor, entrepreneur, doing pretty well. You sold Hunch to eBay. That seems to turn out well for you. You just continue being a solo angel investor, or you have Founder Collective going. It is a pretty big jump joining a venture firm, I would imagine. Why did you make that decision?
CHRIS: So I guess for me there are two things to think about. One was, you know, start another company, or doing more investing. I think, you, probably, do, because you do both as well, and I am sure you have thought about the trade-offs. I really enjoy building stuff, doing an actual startup. I think I have done enough times. I have done two venture-backed startups and some stuff before that. As you may notice, it can be a roller coaster. I was not sure if I could take it again, basically.

JASON: When you are an entrepreneur, and you work with VCs at venture-backed startup, you start looking across the table, and, God, those guys have a pretty good life.
CHRIS: Yeah. The nice thing about investing is that you get to ride along with some of the excitement without having to have to deal with it directly and everything. The reality is, if you are a VC and you get sick one day, the company does not fall apart. Right?

JASON: Yeah.
CHRIS: When as an entrepreneur, it does. So for me that was one thing I thought a lot about. I think, if you knew your next thing would be super successful and a runaway hit, that was different, than the reality, which is you do not know. And so I think I thought a lot about that. This was like from my personal career point of view, and I thought, maybe, I would go. I had sort of ideas. I think every serial entrepreneur has little fantasies about doing like BetaWorks type things. I have built three things, and it will be kind of building stuff, but have a little more skill. I think that rarely works in practice. I think you know.

JASON: Yeah. What would you call it? It is like an incubator. Bill Gross did it.
CHRIS: Yeah. In some ways, like, Ev Williams did it. I think he did it in a very smart way.

JASON: Obvious [Corp.]
CHRIS: Kevin Ryan with Gilt Groupe and 10gen.

JASON: And now Science [Inc], Peter Pham.
CHRIS: Science [Inc]. It is hard to pull off. That was something I thought a lot about.

JASON: But that means that you are having to originate the ideas largely, having to recruit a bunch of entrepreneurs. That is a lot different from being a VC, right?
CHRIS: Yes. So I am just saying, I am just in the things that I might have been done, could have been done. I thought about starting something, maybe, something in between, like BetaWorks type thing. And I honestly had not particularly thought about joining an established institution, VC firm. And I started talking to the people at Andreessen Horowitz. And I just think what they have done is really interesting. They are kind of a model for a VC firm. The way, through which we describe it, is building the VC firm that we wish we had as entrepreneurs.

JASON: Right. It is an entrepreneur driven venture firm. It seems like they have taken this approach. They made a lot of VCs, other VCs nervous. Why do you think that is? Why a lot of VCs are nervous? Andreessen Horowitz is making them nervous.
CHRIS: Well, you know, there has historically been this top-tier set of VCs, who are with the really hot deals.

JASON: Yeah. Sequoia [Capital], Kleiner [Perkins Caufield & Byers], whatever, Accel [Partners].
CHRIS: Exactly.

JASON: And post Facebook.
CHRIS: Anytime you have new entrants into that group, you know, there is a competitive aspect. There is that aspect, which is one lens to look at it through, the other one is…

JASON: Marc is a big presence. Ben is a big presence. So now, you have got another top-tier firm, which means, if there are ten great deals a year, Andreessen is going to get a couple of them.
CHRIS: That is right. But I think a more radical way to look at it, which is how I kind of look at it, is to think it’s not just that, but it’s also the proposing a brand new model.

JASON: Yes. That is the thing that is interesting. What is that model?
CHRIS: So I think the thing with the language we are using, when we talk about VC, they say things like, “He’s great at picking companies.” Do we say that about lawyers or accountants? Like, “That lawyer, he’s really good at picking clients.” No, you do not say that. You say, “He’s really good at helping his clients.” Right? So it is a different model. Do you think of it as the VCs picking the entrepreneurs, or do you think of it as entrepreneurs picking the VCs? And so what has happened over time, since the beginning to venture capital forty years ago, whatever, back then, capital was scarce, VCs were scarce. They became abundant and to some extent commoditized, and entrepreneurs got much savvier about sort of sharing information.

JASON: Yeah. The old term-sheets were shared now.
CHRIS: Yeah. Remember, when we started off, to even understand what the term in the term-sheet was like this dark magic. You need to go to consult, find someone of the ten people in the world, who understood it. It was all mysterious. Now it is all wide-open. That stuff is on HackerNews, and people are chatting.

JASON: These kids coming up know how to negotiate term-sheet much better than you and I.
CHRIS: They are very sophisticated. Yeah.

JASON: When they are doing… Like, “I did a waterfall model of how this work out at forty million, eighty million, and a hundred and fifty million dollar exits.” You and I never did a waterfall model how the exit would work.
CHRIS: No. And the pitch decks are all incredibly well done. It is just a lot more information flow. I think, given those changes in the world, the startup idea behind Andreessen Horowitz is that the world has changed in that way, let us make a venture capital firm that looks more like how we describe service firms in other parts of the economy, like a law firm. It would not be, “Oh! They are so good at picking.” I think about the Midas list. It is so wrong. You would not have the Midas list of lawyers. You would have another list. Look, how well they serviced them. This is how we think about it, and that is actually an attitude we have inside of the firm. The high-fives are typically around, “Wow! We got those guys as a great customer, versus, wow, we won this deal.” It is a different mindset for thinking about how the firm works. It is a different economic model by the way. So the vast majority of management fees for most VCs goes to the general partners’ salaries. Here it does not. It goes to the sixty operating partners we have, who do all these things to help.

JASON: Sixty operatives! This is the thing.
CHRIS: There are seven investors. You walk in there. There are sixty-eight people, whatever the number, something like that, and only seven of them do the investing.

JASON: Are you the seventh [General] Partner?
CHRIS: Yeah.

JASON: So this is the thing, that I have had specifically, multiple VCs tell me, “Ah!” You know it. There are sixty people there, servicing entrepreneurs doing what?
CHRIS: So there are five groups. There is a marketing group, which helps them with PR and things like that. There is a technical recruiting group, which helps with the programmers and designers. I get sometimes from angels, “Hey, do you know a graphic designer?” Maybe, you do, but everyone is looking for. We have a guy, whose job it is to find graphic designers for our companies. That is all he does. And he has Salesforce, and he is finding people, he is like vetting leads, and doing all sorts of things. So we have the technical recruiting, we have executive recruiting, and then, we have this group, called the Market Development Group, which, literally, every… There is a whole separate floor in our firm, where every day we bring in corporate customers, like Citibank, whatever, and then, we have ten portfolio companies come in and pitch the CTO, like, every single day. Most of the firms have their CTO conference once a year. We have it every single day. And there is a research group. Actually, we just started a new group, called Corporate Development Group, which is helping you with an M&A, strategic investments, venture debt, that all sorts of other stuff. That is our group. That is like five people, who were like professional bankers, who, now, work for these companies.

JASON: This is sort of “very inside baseball,” but from what I have heard, people are taking this kind of personal, because the management fees, when people are getting two or three percent dough, every year on a billion-dollar fund or something. It is a lot of money. And Marc Andreessen has basically may have said, “We do not care about that short-term money, put that into the business, and let us play the long game. Let us get our startups put all that money into startups essentially. Which means, when you went to work there, I am guessing that the salary, the cash compensation upfront every year, every month is much lower, than what you had offered at other places.
CHRIS: That is right.

JASON: You had a couple of people going after you.
CHRIS: I have.

JASON: One can assume you did.
CHRIS: It is like an order of magnitude lower.

JASON: Order of magnitude?
CHRIS: I do not know quite yet, but about right.

JASON: OK. It is much lower. What was your thinking on that? I mean, you can work at a firm that was as prestigious, but with some multiple on the salary. What was your thinking on that?
CHRIS: I think, first, I am not necessarily optimizing for money right now in my life, but I am doing it for like interesting stuff, but I think that, if you just think about money, that the theory is, if you win the best deals and you have the best returns, you are more than make up for in the carry.

JASON: So it’s, “Go long.” What do you think about ‘strategics’ (strategic investments) today? Because the thinking, at least when you and I were coming up as entrepreneurs for the last twenty years, was, “Do not take strategic money! This is a huge mistake.” But, now, we see that Samsung starts a billion dollar fund. It is not just like Intel Capital. All the ‘strategics’ are getting much more involved and want to invest. Is that still holding true today? Would you advise startups doing their A or B round do not take Samsung’s money? Would you not take a big company’s money?
CHRIS: I think there are a few issues. Like, one is, it is a high-class problem, which money to choose. A lot of people think, if you need money, and that is the only money you can get, then take what you get. Number two. I think, generally, it is better at a later stage, like C round. If you are selling equipment to wireless carriers, you see very frequently in the series C to have AT&T and Verizon, and a bunch of others will come in. Often they are wanted as part of a big B2B (?) deal or something. I think that the other thing is the key thing to the terms. You do not give them the right of refusal on acquisition, that basically kills you. That will kill you. Or right of notifications, which means, basically, had a good advice, when you construct that deal. Have a good lawyer or a good investor. Someone, who has done it before. So you got to be careful, but it could be helpful. And some of this is just required to get the big deals done, especially, at later stages.

JASON: Yeah. So keeping them to minority of information, to minority of less option.
CHRIS: It also depends on their competitor. For example, we are doing a bunch of security investing. And if Citibank wants to invest, great! You know, because they are just a customer. They are not going to compete.

JASON: Not McAfee, or somebody, who is in the security space, or whatever. Maybe, they are here to go fishing for information.
CHRIS: Exactly.

JASON: What is it like for a guy like you? How do you wind up getting a phone call from Marc and Ben, “Hey, we want…,” maybe? What did they say on the phone when they call you? Did they call you as a headhunter calls you? How does this go down? What was the moment when they called?
CHRIS: I knew them through the angel investing world.

JASON: OK
CHRIS: So I have bumped into them.

JASON: So take me to the exact moment. What moment did this start to happen? I am always interested in that and the audience too. Were you at Davos or something? And he says, “Hey, maybe you should think about…”
CHRIS: This is a long story to join. You know, this is a big deal to join as a partner. So it was like a six-month or three-month process, or something.

JASON: Long process.
CHRIS: And I spent a lot of time in person. Because I blogged a lot of stuff that was perceived to be antiVC. It was not antiVC, it was more like…

JASON: Just honest.
CHRIS: I think it was just honest. I think you would agree with me.

JASON: Yeah. You are kind of blunt entrepreneur-on-entrepreneur.
CHRIS: Frankly, I was little surprised to have the quote, establishment. You know, I sort of thought of myself as more a kind of iconoclastic or something, but…

JASON: Yeah. You were kind of the entrepreneurs-on-angel-investors, that kind of your brand is…
CHRIS: Yeah. It was funny, because I was like, “God, if they read all that…” When they first started talking, I was like, “Did they really read everything I have written?” Because I have written some stuff that, you know, to make sure they realize I am sort of this antiVC guy.

JASON: Yeah. An independent freethinker, turned entrepreneur.
CHRIS: Yes. It turns out, yes, they have read everything, and they liked it. So they were like, “That’s actually why we liked you. Let us go do that stuff.” Which was like, “This is a good fit.”

JASON: Something has changed, hasn’t it? It used to be that people like us did not get the VC shot as much. That was like the MBA slot, who you knew at Harvard or Stanford. And now it seems like everybody wants Dixon, or [Michael] Arrington, or a journalist even, e.g. Om Malik.
CHRIS: I think this is the thing we talked about earlier, which is this shift. I think venture used to be modeled after hedge funds. It was, “Who’s the best stock picker?” Now, it is modeled after other service, like a talent agency, or something, where you are, “Who’s the person that entrepreneurs want to work with?” Right? That is the shift, I think. The way they think of it, we do not know, if Dixon can pick companies, that is great, but we know that. Everyone, if you kind of one of the plugged-in VCs, you know who is good.

JASON: Yeah. It becomes pretty apparent that Instagram, or Pinterest, or whoever is hitting a certain curve.
CHRIS: It becomes more about, “Do the entrepreneurs want to work with this person?”

JASON: Ah! And you are affable, liked, out-there person, who is built tons of the credibility through your blog. If you did not have your blog, do you think you had the opportunity, if you were not so out there writing?
CHRIS: I think that blogging is the most underrated. I mean, I know it is, because people talk about it, but I am actually surprised that more people in tech, especially, investors, and other people do not do more of it. If you are starting off in your career and want to do tech, it is by far the fastest and most effective way to build a sort of personal reputation, I think.

JASON: I agree.
CHRIS: And I am surprised that you do it, I do it, Fred Wilson, Mark Suster do it. That is like ten.

JASON: Yes.
CHRIS: That is it, really.

JASON: [Michael] Arrington, Om Malik.
CHRIS: By the way, it tends to that people that are not in Northern California.

JASON: Because we have to!
CHRIS: Exactly. Like, we were forced to.

JASON: Yeah. Hey, pay attention to us. Fred Wilson is, “Hey. This stuff is going on in Boulder.”
CHRIS: That is true. It is true. Yeah, I think that blogging was huge for me, and I think it is just huge in general. I am surprised. That was the period about four years ago, when it seemed everyone would do it, and that fizzled out. I am sort of surprised.

JASON: It is kind of hard. And I think you also have to have an opinion. Right? I think so many people are afraid to write about the subject that is in any way controversial, or this whole idea I might bump into somebody, and somebody might get offended by what I wrote. I was going to write a whole thing about Skout, which was actually the Andreessen Horowitz investment, where they had this terrible stuff happened with the kids meeting, when underage kids getting meeting predators on it. I did not wind up writing it, because I was, “Ah!” I just feel bad for the entrepreneur, because I know he did not go into this to have that happen. And I just censored myself, but, I mean, that is part of like, “What do you write, what you do not write.” You have probably canned a couple of pieces in your career.
CHRIS: I have very few rules. One of the rules that I do not ever say negative things about any early stage startups, because I’d having been there, and I know what it’s like. Having some dude say… I just do not do that. I just think it is uncool.

JASON: I agree. I did it a couple of times earlier, when I was not successful. Like, I write something, I think it is a bad idea or that will not work. I stop doing it for the exact reason.
CHRIS: You just know it. It is so hard.

JASON: It is hard already.
CHRIS: When we get the negative stuff about us, it is already so hard, and then you have your employees read it to explain it to them. Why is this person doing this? There is so much nefarious activity in this world, including…, let us say Wall Street, for example. I just do not understand when people are like, “Oh! The tech world needs more critical stuff.” It is like, “Not really.” We were one of the few areas of the economy, where we actually are trying to make things better and work hard.

JASON: Innovate, dream, and create jobs.
CHRIS: Yeah, I do not really see why we need criticism. I think there are plenty of other things that need criticism in this world.

JASON: It is funny. I was just having dinner in Boston. This was very nice. Dharmesh [Shah] from HubSpot sets up this dinner for me. And they were introducing everybody, and they introduced somebody, he was like, “Yeah. I am from BzzAgent.” I was like, “BzzAgent? I know that.” He is like, “Yeah. You wrote this incredible horrible piece about how our company should die, because we’re doing deceptive marketing.” I was like, “Oh! Yeah. I remember that you are the guys were doing deceptive marketing, and FTC went after you. How that worked out?” They were like, “Well, you were right, but it was really brutal and ruin my life for years.” I was like, “I am sorry.” I was a different person back then. Have you ever spited? What story has the spite? You must have said, “I am not going to publish this, or canned it, or you have shown it to another person and said, “Hey! Should I publish this or not?””
CHRIS: That is a good question. I did a few that were criticizing VCs for particular activities, like one that was about this firm that backed out of a signed term-sheet.

JASON: Oh. I know about this. Yeah. And do not worry, I am not going to go there.
CHRIS: I have suffered much for this, so I do not want to suffer again.

JASON: But that is pretty much the worst thing a VC could ever do? I cannot think of any worse.
CHRIS: So do you know a TA (?) summit model? They called it TA, whatever. That is the private equity guys used to do that, what they have backed at due diligence, so what you do is a competitive deal, this is the later staged up, a competitive deal you are coming with the really high price. You lock in a deal. The other guys go away. And then, you have a signed term-sheet. Right? And then you are starting to say, “Oh! Wait. That customer is not a really good customer. I am going to back out unless you lower the price.” That was like an established model in the private equity world. And what happened in the private equity world that people starting adding break up fees and things like this to protect the startup. Because the promise is that, once you signed the term-sheet, the investor has all the leverage. And if the investor backs out, everyone thinks they must have discovered some kind of malfeasance or something, right? And so the entrepreneurs are kind of screwed. So in the venture world, the way we force this is just through reputation. So if you back out on the signed term-sheet without… You are allowed to, if you discover that they materially misrepresented something. It should be like confirmatory diligence, not dispository, or whatever you call it, not…

JASON: You are not auditing to look for problems, to negotiate the price down.
CHRIS: No. You are making sure they are not criminal, that they did not lie about…

JASON: It is not a fraud.
CHRIS: Yes. That is the kind of stuff you investigate in term-sheet.

JASON: If you lied about your graduate degree, you can back out.
CHRIS: Yeah. Sure. That, or you have misrepresented revenues, or users, or… If you just have a few bad phone calls with customers, they do not sound lukewarm, and that is not grounds. And so, you know, that is a very important uh…

JASON: So you canned that piece, because you thought, “Oh! It’s going to be too expensive.”
CHRIS: No, I did not. I did not can it, actually.

JASON: Oh! That was you did do. Did you ever say the name of the firm? You did not say the name of the firm.
CHRIS: No. I do not want to go into that.

JASON: Yes. The only other the worse thing, I can think of, a venture firm could do it to stop a sale. And that happens pretty frequently. I mean, I have a list of entrepreneurs, who…
CHRIS: Yeah. That is always the thing. You see the HackerNews and they always like, “The company sells, like the VCs made themselves a lot of money.” It actually is never the case, it is almost always the opposite case, which is the VC want them to go for it. If it is ever tension, it is the opposite, right?

JASON: Why is that?
CHRIS: Because of the VCs have a portfolio, and they want to have big wins. They’d rather have a few more lottery tickets, whether for the entrepreneurs, it’s their whole life, and let us say you raised five million bucks, and you have a fifty million dollar offer, and the entrepreneurs are, “Look, I make whatever millions of dollars. I’ll be able to start another company.” And the VCs are, “Wait! You are going… We invested in two billions of dollars.” That is usually where tension comes.

JASON: Right. Not the other way around.
CHRIS: I do not know if I have ever seen a VC actually stop a sale. I have heard stories of it; I have never personally witnessed them.

JASON: I see the couple, where they are, “We are going to go longer.” And they had control of the company and…
CHRIS: Did you see when they actually stop a sale?

JASON: Yeah. They stopped it. In this case, it was a founder, who had given the CEO slot to somebody else, he was on the board.
CHRIS: I see. Yes. That is usually the thing, if the VC does try to block it, then you lose the CEO-founder, but if they have already replaced the CEO-founder…

JASON: Yeah. You have lost a little bit of leverage. Let us talk about M&A. Amazon, Google, Apple with a hundred forty billion dollars, the largest hedge fund in the world, it is insane. Marissa [Ann Mayer], now at Yahoo, is starting to buy a bunch of small companies, it seems like acqui-hire style. What is an M&A outlook is going to look like in 2013 forward with all this huge cash, and these companies are operating in such a high level?
CHRIS: I do not have a crystal ball, but I do think what is happening is that mobile is obviously big. I would say, in the last six weeks, I have done my job talking to entrepreneurs, I would say it is bigger, than I even would have thought from reading the press. If I think about investing and it is not long mobile, something is wrong. I mean, it is so important. And what’s happening, I think, with the big incumbents like Microsoft, Apple, Google, Amazon, and, probably, Samsung, they seem to be moving to a model, where they want to control a whole vertical stack, meaning the retail experience, the handset manufacturing and design, the OS, the apps, everyone is doing maps, email, and cloud services, and…

JASON: This is the direct result of Apple and Steve Jobs.
CHRIS: That is right. I think Apple proved the vertical model was vastly superior and, now, Google, of course, bought Motorola, and Amazon’s making their own tablets, and everyone’s going to move into all these different things. It looks like everyone is moving into doing all these different things. Either through very strong alliances or through building it themselves.

JASON: We did hear that Google was going to have stores, and Google launched this Cromebook Pixel, an incredible laptop with the best resolution of any laptop.
CHRIS: No. That is right. And if you look at these markets, typically, historically, probably, two companies survive. So you have got five companies with hundreds of billions of dollars in market cap and cash. All of them are directly colliding, and two will survive. I think it is going to be an epic battle, and if you are a startup, usually, startups benefit from that from the M&A point of view.

JASON: Why of that?
CHRIS: Because, if everyone wants the whole stack, and if you have a piece of the stack, and these guys say, “How are we going to get that?” And also the competency, so like, Apple is amazing company, but they have always been weak at web services and data services. And so at some point, presumably, they are going to figure out that they have to acquire for that. And if you are web services, if you are in mapping, or storage, or whatever, you just are really good at that stuff, you are, probably, pretty interesting to them.

JASON: Yeah. Absolutely.
CHRIS: And every each of these companies tends to have their kind of weaknesses. Although, Google is executing so incredibly well.

JASON: Yeah. Let us go through each of them. Let us talk about each one. What are your thoughts on Google?
CHRIS: I think the execution, in the last week, since Larry came back, I do not know when it was, just unbelievable.

JASON: Phenomenal!
CHRIS: They are hitting it. I mean, their core business on advertising, they are completely dominant on that. The search, all that stuff. People report seventy-five percent share, it is really ninety something percent. Everyone, who has a website, will tell you that.

JASON: Yeah. When you look at the traffic refers, that is pretty clear that they own that.
CHRIS: They own that. And then, the amazing thing is, when they are doing all this core business stuff so well, but they are also doing all this crazy interesting futuristic stuff. The cars, the glasses, and mobile. Did you remember when they bought Android in 2004?

JASON: Yeah.
CHRIS: Everyone was head-scratching. Look how visionary these guys are! And they are not doing the technology, but, now, that seems they begin to design well. The Maps app and all these other things are just super well done.

JASON: Yeah. When you go into Apple’s ecosystem on their home turf, and you absolutely slaughter them app by app, like Gmail.
CHRIS: And look, if you think about, Microsoft is not even in this game. For a search company, to be crushing the biggest OS company is pretty remarkable, right?

JASON: That is amazing. Does Microsoft have any chance? Have you played with Windows 8? What are your thoughts?
CHRIS: I have used it a little. I think it is nice. It is the problem with these markets. It has driven by the developers. Right? I mean, whoever has the developers wins. A consumer walks into a store, and they say, “What do you care on your phone?” You care how it looks and this map. They are all looking pretty good now. And hardware, you know, it is pretty standardized these days.

JASON: The new Blackberry looks exactly like an iPhone. You cannot tell them apart.
CHRIS: No. Everyone would get that. Microsoft did that fine. And then people care about what? You care about, “Does it have Google Maps and this…? And then, does it have all these other games in the long tail stuff, right? The only people, who have that and probably have a shot at it, are Android and iOS.

JASON: Uphill battle.
CHRIS: Microsoft is trying to pay their way into it. They are paying developers and things, but it is tough, I mean.

JASON: The market seems to move faster now, than it ever has. What impact does it have on startups? What do you think?
CHRIS: I think it has mixed, because, on the one hand, you see these amazing companies, Pinterest and SnapChat, whatever.

JASON: Uber, Airbnb.
CHRIS: Yeah. They just come out of nowhere and they go. I mean this. The pace of scaling is unprecedented. On the other hand, especially in the mobile apps world, this concern about sort of hit-driven business. It almost starts looking like Hollywood. When you see like, “Oh! This is, you know…” I do not want to name startups names, but you can go through a whole bunch that raised venture money, where they had this graph going up and, suddenly, the graph went down, because they were fetish or whatever.

JASON: Yeah. I mean people might think Foursquare would be one of those or something, which had huge boom and then went sideways. It is almost like that, what they call it, “travel sadness” or something. Where you have this huge boom, it seemed very pronounced in mobile, where everybody goes, rushes in and checks out the new club, and then, maybe, it doesn’t have sustainability.
CHRIS: Yeah. I think it is part of it. The most extreme examples are games. And those are just naturally kind of fad. It is as if you have been there. But it does seem to be beyond games.

JASON: What does it mean for an entrepreneur? If it does not hit, quit, and start again.
CHRIS: Well, one is what is your financing strategy. That model can be phenomenal, if you are a sole developer making a game, and it is a minor hit, you can do extremely well. It means, maybe, it is not right for venture markets, for VC markets. I think that is a part of this.

JASON’S AD: Ah, yes. Squarespace! Squarespace, what a wonderful product. We have been using it here forever. It is great. It is stable. And I have recommended it to literally dozens of people, not on the program, like one-on-one. How do I get an industrial strength website? What would I do? I need to get a website up and running today. It is going to look gorgeous. I have a small budget. I cannot afford it. Listen. Do not go to Craigslist. Do not go to one of these, like, freelance sites, because you are going to wind up being a hostage to somebody charging you seventy-five dollars an hour to break your website. You are never going to know, what the passwords are. It is going to be broke. It is going to be outdated, before even get up and running. So, listen to Jason. Get Squarespace. They charge very reasonable fees. Twenty-four dollars a month, when you sign up for a year. And you get gorgeous amazing templates and the latest state-of-art features. So when something new comes out, whether it Pinterest, or StumbleUpon, or Facebook, or Twitter, or iPad Mini comes out, whatever it is. They are thinking about you as their customer, they make that innovation, and it goes out to their thousands and tens of thousands of customers, instantly. Their safety is in numbers. How do I say it more clearly? Squarespace is awesome Software-as-a-service. And they have a new feature. You can instantly create an online store. Sell digital and physical goods. Accept payments immediately. I mean this is a very revolutionary thing. It starts at only twenty-four dollars a month. Beautiful stuff. Hey, look at this person here. This is a famous designer, here are all their prints, and you can go in here, and say, “Oh! I love this Wonder Woman one.” I am going to take that for twenty-five dollars and just buy it. And you can set that up in moments, now, with Squarespace and their beautiful online stores. Look at this! Beautiful hidexstitch. Gorgeous iPad Mini cover. Huh? Look at that! Maybe, I need to shop, and I click on that beautiful shop button, and, hey, now, I can pick my Envelope Clutch, Travel Pocket, Large Pouch, Mini Reader Sleeve, a hundred twenty-five beans. That will go nice in my Mercedes-Benz. It is a very complimentary, satchel type thing. I am going to get that for a hundred forty-five beans. Very good, hidexstitch. And here is one more. Oh! The Tavern Vinegar Co. You know that is a very big foodie thing. Lemon beer vinegar sounds good. Eighteen bucks. Boom. Tavern Vinegar Co. I just go buy that instantly. And oh! It is sold out. Probably, because they are using Squarespace. Go to squarespace.com/twist, and try it out free, no credit card is required. Squarespace.com/twist and use the offer code TWIST3. After you decide to keep going after the trial runs out. Everything you need to create an exceptional website is Squarespace. I say, “A beautiful website,” you say, “Squarespace.” I say, “A beautiful website with commerce,” you think, “Squarespace.” You are at a party, you are at a cocktail party, and somebody says, “I need a website,” you say, “Squarespace.” You are at a dinner, and somebody says, “Hey, I need e-commerce sites set up quickly,” you say, “Squarespace.” That is it. I am hypnotizing you, right now, as you listen to me. Beautiful website – Squarespace. E-commerce – Squarespace. Beautiful website with e-commerce – Squarespace. That is it. Thank you @squarespace for sponsoring the program. Thank you for making great products. We use them here. We love them here. We are going to start selling our Launch merchandise on the show, on the site. So, thank you so much, and let us get back to the program. Thank you, Squarespace.

JASON: OK. We talked a little bit about Google, talked about a hit-driven business for apps, and let us talk about Apple. What do you think? A hundred forty billion dollars, obviously, best products in the market, but it feels like some of the hardware is not great. Android has reached parity. Do you think that Android’s on par, now, with Apple iOS offering?
CHRIS: I am an iOS user. Personally, I have no Android device to try it out. I do not find it as intuitive, but I hear more and more sort of chatter from smart friends that the hardware as good or even, possibly, better. And the OS is getting better.

JASON: It feels like eighty percent way there.
CHRIS: Yeah. You know, these markets, if you believe in the Clayton M. Christensen’s theory on these things, like, what happens is, they start off vertically integrated, and then, over time as competitors come in, and the hardware and software get better, the less vertically integrated guys are able to compete just as well. And over time, those people will eventually win, like, the stratified non-vertically integrated companies. That is the theory. That is what happened, if you look at the history of desktops. That is sort of what happens.

JASON: Microsoft. Will that hold true this, though? Because it happened previously.
CHRIS: That is the sixty-four million-dollar question, or trillion-dollar question, or whatever billions.

JASON: It is a six hundred and forty billion dollar evaluation question.
CHRIS: That is literally the most important question for the tech economy in next five-ten years. What will the structure of industry in mobile be?

JASON: Right. Is it going to be all Apple versus Android? Or other people are going to play?
CHRIS: Yeah. How many people are in the market? How is it structured? How is the stack? Is it one company owning the stack or multiple ones? Where do the profits flow? Do they flow to the iOS and their apps, like the way they did with the desktop? Or is it Google making money on advertising and subsidizing the OS?

JASON: Yeah. Or Amazon is making money on the content and subsidizing the hardware. What do you think of…? Before we leave the Apple subject. Can Apple succeed in this OS space, if they do not build world-class apps themselves, because it feels like their cluster of great apps have now been just absolutely thrones by Google? The Maps app. The Gmail app is so much better than Mail. You know. Right down the line. It feels like Apple does not know how to make great apps. Do they need to be a great app company or buy them?
CHRIS: That is true. They are an amazing company. They are, I think, the most innovative company in technology in the last thirty years.

JASON: Clearly.
CHRIS: But they have had this Achilles’ heel of web services and data services. I would put maps in the data services versus their search or other things. And iCloud and all this stuff…

JASON: iCloud is a disaster.
CHRIS: I know it is no good. And frankly, iTunes and all of that is no good. They did a good job in the media deals, but no one likes the software. I have an Apple TV and it is not reliable in the way that like Dropbox is or something. And so, that has always been their Achilles’ heel. So if they are going to get that together. Then, will they pull another rabbit of the hat with, I do not know, TV or something?

JASON: Watch TV.
CHRIS: The watch TV, you know, because at some point, the iPhone and the iPad will sort of run their course, but the competition will be good enough.

JASON: And if you were running it, when you were on the board or something, would your advice be like, “Just go buy the top ten apps out there, buy Evernote, buy Twitter?” It seems like somebody has to buy Evernote and Twitter at some point. I mean they have a hundred forty billion dollars. If it is me, maybe, just go buy those things.
CHRIS: I had a super interesting moment, which was when Apple Maps came out, and then Google had a choice, “Do they release Maps for the iOS or do they not.” And they could have said, “No.” I personally might switch to the Android to get the Maps. The Apple Maps did not work.

JASON: Yeah. Its key feature.
CHRIS: They decided to go for that, and that is interesting, because they can always change that in three years. And if Apple does not have a decent Maps app, or someone doesn’t have a decent Maps app, that’s a big issue. So, on the other hand, maybe, what they are trying to do is, you know what, people won’t even care about iOS anymore, because we’ll have so many good apps. When people walk into the store, all they say is, “Does it have Google Maps, Gmail, and Google Calendar?” Then, they are like, “OK, now, get the one that has the coolest form factor or something.” Maybe, that is that Google’s strategy. It seems that the strategy is to have people care about the apps, and not the OS. I think, at some point, there is going to be a battle over those apps, and people will buy those companies, and I think every big company has own M&A philosophy. Therefore, there are people like the Cisco’s or Oracle’s of the world, who view themselves as distributors, not as R&D labs, for the most part, anymore. They are very happy to buy some companies.

JASON: Linksys or whatever.
CHRIS: Yeah. Or some enterprises, like SuccessFactors. They get to hundreds of millions in revenue. “We buy them, we plug them into our stack, we can now up sale in 5X.” They immediately raised the price in 5X and they can sell it, because they are distributors, and they are happy buying. You know, like securities, like Symantec might buy companies everyday for big premiums, because they can plug them in a channel. Where companies like Apple, who have said “No.” They rarely do acquisitions, right?

JASON: No, really no.
CHRIS: Or what they do is like talented, small firm acquisitions. And the question is, now, they are in a different strategic point, and they do not have Steve Jobs, will they be forced to change their attitude toward that? Microsoft, for example, for a long time, they have never made an acquisition. Now, they do. Obviously, Skype [Technologies], Avenue A [/Razorfish], Yammer, that have changed that.

JASON: And those seemed to work really well. Skype seems to be flourishing. Yammer seems to be flourishing. I mean, it seems to be a pretty good strategy.
CHRIS: Yeah. At some point, will Apple make that shift as well? It is going to be a really interesting question.

JASON: That is interesting. I think they need to at some point.
CHRIS: I think especially around the web services and data.

JASON: It is such a disaster. Have you had your phone to have to be restored and everything from the iCloud? It is so kludgy.
CHRIS: I do not even use iCloud. I just find it such a mess.

JASON: Oh! I have paid a hundred dollars for it. It is never-ending thinking. It doesn’t tell you even simple thing, telling you the percentage that it’s completed. It doesn’t do stupid, silly stuff like that.
CHRIS: I love Apple, you know. All I own are Apple devices, and I have always loved them, but that stuff is just terrible.

JASON: All right. Let us move on to Amazon. What an amazing company, this has been, right? One company takes over retail, and, concurrently, cloud computing.
CHRIS: And, importantly, they still have their founder-CEO visionary, right? He is running it.

JASON: Yeah. Bezos is kind of… Is he under-appreciated, maybe?
CHRIS: I think people are starting to see him as the main visionary. I guess, Larry Page, back at Google, also has it too. You know that is important. If you look at the history of these really innovative companies, like Sony with [Akio] Morita, or whatever. It was always, when you had the founder-CEO, that was the golden age. So Amazon has that. I think, their commerce position is just very strong. And it might be really interesting leverage into… This is really fascinating, because they’re able to use that, to subsidize the Kindle and everything else. In the same way, Google is able to use the advertising. One thing interesting to it, is a strategic battle, you got not only different competencies, but also actually totally different business models. And which one would end up dominating there?

JASON: Which one would you bet on? You bet on the advertising model, the margin on the product, like Apple’s model, or the model: “We might be able to up sell you on some commerce with the Kindle.”
CHRIS: I tend to think they are both great companies. In addition, Amazon, I tend to think, will eat more out of offline commerce, than Google. Do you know what I mean? If you are going to go long Amazon, you are going to short BestBuy. I would not, probably, short Google. I think they are both really powerful and will do well. Does it make sense?

JASON: Yeah. They are not…
CHRIS: I mean, the e-commerce is still only eight percent of commerce. It is shockingly low. That number is going to go to thirty or forty.

JASON: It has to.
CHRIS: Yeah, of course. The only thing they are still going to do physically is that you are going to do showrooms. Which is like, you go to check out the new Apple thing, like “high-touch” stuff.

JASON: And you probably do not even buy it. You are, probably, like, “I saw, I order online later.”
CHRIS: Yeah. You will not keep inventory. You will get it online. And the other thing, maybe, you will do, like… You need whatever, I want to get some crackers, and in the next five minutes, maybe, I walked out to a store. There will be a corner deli or something, but otherwise, retail is dead. I cannot imagine, why do you have retail stores?

JASON: Are you an Amazon Prime customer and they deliver to your house?
CHRIS: Yeah. It is like, if I need like, toothpick or whatever. It is like, “Go to Amazon Prime and it is there.” It is awesome.

JASON: And forty-eight hours later, it is there. Therefore, where are you going to invest? I mean, it seems that the New York contingent was, “Oh, the sell-out is going to West Cost and you got a little bit of bang at that.” But you still have your place there, you are going to invest there. I would assume that one of the reasons they wanted you, because New York is booming.
CHRIS: Yeah. That is for sure. Andreessen Horowitz has a philosophy of one office, so there is not going to be Andreessen Horowitz China or something. That is not, because we do not want to invest in other places, it is because of just like old-fashioned style, team, camaraderie. That kind of thing. It is like any well-run company. You have people together, they get along, and things like that. It is not a reflection of where we want to invest. Right? Therefore, I would love it if half of my investments or, maybe, more were in places like New York. I think separately that? there is a strong argument that a lot more tech innovation will happen in places like New York and LA. If you have read historians of technological revolutions, the last five, going back to steam and automobile, the first half what they usually call the installation phase, where you are first building up the Internet and the basic things like, now, we have a search engine, now, we have optical switching, now, we’re… If you look at the nineties, the best returns were companies, which invested in optical switching, all this kind of stuff. It actually was not apps layer. And we built the apps, now, we have the social graph, now, we have the search engines. Then, the next phase of these revolutions is what they call a deployment phase, which is when you end taking it and saying, “Now, let us use this Internet to revolutionize health care, and the media, and LA, and advertising, and finance, and like…”

JASON: Magazines and publishing, whatever.
CHRIS: Exactly. So, you look at the automobile revolution, the first half was all located in Detroit. This was the Silicon Valley of its time. New cars, new engines. And the second half was highway system, McDonald’s, BestBuy, big box retail, all of these things were like “applications” of cars. They were all over.

JASON: Drive-ins.
CHRIS: Drive-ins, exactly, those are the apps of the cars.

JASON: What are those things called, when you drove in your car and got served food on the side of your car?
CHRIS: Oh… Yeah. Like, from there was from like “Happy Days” (TV series), or whatever.

JASON: Yeah. I will ask you to come up and put it on the windshield, or something, some food there.
CHRIS: I do not know that they are called. But, yeah, those were apps of that era. And those apps tend to be dispersed outside of Detroit. So, by the same token, I think that will happen in the next ten-twenty years in our industry.

JASON: How many investments, and what size are you going to do? Have you had that discussion? Was that part of it? Like, you are going to be the angel guy or…
CHRIS: No.

JASON: What did they say that Andreessen was going to be stage indifferent?
CHRIS: Yeah. We are stage indifferent. And I am stage indifferent. My job description is to be stage indifferent. Everything from seed to buyouts. I was not there, but we did the Skype buyout.

JASON: Right! I remember that. Yeah. Double the money in a year.
CHRIS: This feels more like a private equity type deal. It’s more like the classical Silver Lake [Partners] type deal, as opposed to venture deal, so it’s really literally stage agnostic. That is my job as well.

JASON: And [Michael] Ovitz is over there, now, I understand. Is he part of the firm? What is the story there? Or do you even know?
CHRIS: I do not know his official thing, but he is there all the time.

JASON: That is what I hear. Is he there all the time? Everybody knows. It has been written.
CHRIS: No. I do not know what is his official thing. I think he is an advisor.

JASON: Hanging out? Yeah.
CHRIS: Yeah. He hangs out there all the time.

JASON: What is he like? I mean, now, you have this Hollywood guy hanging out.
CHRIS: I do not know him. I have only been on this job for six weeks. He is like a super interesting nice guy. He is really engaged in tech. I think he is having a lot of fun. He seems to be excited. He sits in our partner meetings and says much stuff, and so I do not know any more.

JASON: And how big are the funds now? I mean, I lost track, because it felt like the firm is three years old, now, or something.
CHRIS: Yeah. So the current one is one and a half billion. It is the third fund.

JASON: One point five billion on anything. So you could put a hundred million dollars into a later stage thing or…
CHRIS: Yeah. We did a hundred into GitHub, for example.

JASON: But you would put a hundred thousand into something smaller even that low. Have you guys put $100000?
CHRIS: Yeah. There is a whole active seed program.

JASON: All right. You, guys, have a Sequoia [Capital’s] Scout [Seed Fund] style program.
CHRIS: It is not Scout. It is just that we…

JASON: Oh! You, the partners…
CHRIS: Yeah. We have a meeting with someone interesting, and, you know…

JASON: Interesting. And what is Marc Andreessen like? I mean, you have been there…
CHRIS: He is awesome. He is kind of as advertised, he is like incredibly smart, like supernaturally smart.

JASON: There is a word for it too. What did they call that? Predato… It is like “superhuman,” preternatural human, or something. Anyway.
CHRIS: He is very smart, overly smart. He is like a super nice guy. I do not know, you have spent time with him.

JASON: Yeah. He was going to be the investor in Weblogs, Inc. before we sold.
CHRIS: And I think he is like the whole group. I mean, he is like really charged up with how can we changed the world, and do cool stuff. The funny thing at the firm is like, every time someone has an idea, it’s always like, “How can we do that twenty times larger and more cooler?” That is the attitude.

JASON: Go big.
CHRIS: Yes. Very much. In fact, the worst thing, an entrepreneur can say, is, “Here’s the exit strategy or something.”

JASON: What? No. What is the way this takes over the world?
CHRIS: Yeah. That is, frankly, a different way thinking. As an angel investor, I did not really think that way as much. You have done angel investing. If you invested at five million dollar evaluation and they sell for a hundred million, you are like awesome, right?

JASON: Right.
CHRIS: So that is like for me at least personally like a bigger adjustment, I guess. It is just thinking about things that way. If it is going to be like a hundred million dollar exit, that’s not a good fit for us, I mean.

JASON: The goal post has moved in a big way. What is the most successful angel investment to date for you? I just want it on the pure return base, and then, just in terms of enjoyment. It is hard to pick favorites, but…
CHRIS: Well, I mean, it is like the consumers’ investments. So my consumers’ ones are like Kickstarter, Foursquare.

JASON: Oh! My God! That is incredible. Both are great.
CHRIS: I am an investor in Pinterest, but that was the later stage. So I do not know. Obviously, it is a great company. I did a later stage investment. I have a bunch of B2B stuff that does not get as much attention, but they are the great companies, that I really like.

JASON: What do you think is going to happen with Kickstarter? I was at a poker game recently, and I was talking to… There were two directors at the table. It happened to be two directors at the poker table in Hollywood, and I was trying to explain to these two gentlemen, who were pretty high profile, that you could actually fund the film on here for thirty million dollars.
CHRIS: There are three Oscar-nominated films this year, which were made on Kickstarter. I do not know which ones are there.

JASON: Beasts of the Southern Wild. I think is one of them. But, yeah, documentaries. It’s a place for documentaries. Go to for docs.
CHRIS: Yeah. There are three of them. It was one of the tech companies like Twitter two or three years ago, and like Facebook five years ago. It was a point at which, it was where Kickstarter is now. All the techies know it. And we talk about it, but Hollywood has not heard of it yet. And each of these things was at that point at one point, and some of them did not cross over, and some of them suddenly did. It usually happens like in a month. Something happens.

JASON: Like, Britney Spears and Paris Hilton started using it.
CHRIS: That is right. Or, I think, Kickstarter is like Quentin Tarantino, like some cultish…

JASON: That is what I told him, what if Quentin Tarantino put a film up there?
CHRIS: Oh! God. Not that he needed the money, but, like, if he did the Star Wars on there, you get the money like in an hour, right?

JASON: Absolutely. Not that Disney needs the money, but if you put a Boba Fett movie on there, forget it!
CHRIS: I agree. I think that could happen. I do not see why not. Not only did you get the money, you get the community, you get the engaged fans, you get the…

JASON: Wait, you get a hundred percent ownership of the IP.
CHRIS: Yeah. I think, Fred Wilson talks about this a lot of how the Internet unbundles industries. I think of Kickstarter as potentially the thing that unbundles the financing layer of the media industry. You think what traditional media companies do – financing, you know. I guess you know it better than I do, but like production, marketing, distribution.

JASON: Yeah. Marketing, distribution, finance.
CHRIS: At least in music, distribution gone now. Or, maybe, it through Spotify, I do not know what. And then, there is the finance part, which could be Kickstarter or the other kinds of crowd funding things.

JASON: Yeah. Distribution is changing. This film “Arbitrage” came out to twelve millions on the VOD (Video on demand) alone, or twenty million, or something.
CHRIS: I watched it on Apple TV.

JASON: My friend, Nick [Nicholas] Jarecki made it. He made this film, and he made it for twenty million and made twenty million on VOD. He is in the black out of the gate.
CHRIS: It is amazing. Yeah.

JASON: So, in the media space, the House of Cards (TV series) is coming out now, on Netflix. Amazon is optioning scripts. I do not know if you have read this, that’s Amazon Studios thing.
CHRIS: It is interesting.

JASON: Why is not Apple taking this hundred forty billion dollars and saying, “Let us put ten billion to work funding TV shows?”
CHRIS: What you say is super interesting, because think about Spotify. If you talk to the tech world, half of the tech world is, “They’re awesome.” And the other half is, “They are screwed, because they’re content licensing and all the profits are going to go to the content.” And people talk about that with Netflix too, but, I think, if you take a broader view, historically, there has always been a battle between content and distribution. And at various times, they have a different shifting balance of power or something. So the argument with Spotify or Netflix, once you get big enough, then you can go in the content.

JASON: I.e. iTunes.
CHRIS: Yeah, iTunes. What Netflix is doing is fascinating. And Spotify soon will do that at some point too.

JASON: You think, they actually…
CHRIS: I do not know, they have to.

JASON: Yeah. That would be an amazing thing.
CHRIS: I think so, right? I mean, maybe, it is different with music, because of the life span of music.

JASON: I think that Sean Parker would do that though. He was trying to buy one of the music labels.
CHRIS: I think, at some point, you have to get leverage against the content guys. Now, I think that the reason Apple has not done it, because they do not see that as a profit center. iTunes for them is non-profit, that they can just use to make the devices better. Therefore, they do not really care that they do not make much money on that.

JASON: But imagine if they own a studio, and they just went in the shows that the networks canceled, like Arrested Development, that people just wanted a couple more seasons, they just started funding that stuff, and it was only available on your iPad, or available for the first-year on iPad, then everywhere else, that would have been huge.
CHRIS: You might see that the future might be in video games, right now. So Kickstarter started a hundred million funding of independent video games last year. That was the biggest category, I think. Then, it is going to be distributed now through Steam (steampowered.com). And if you know, this is like the most underrated media company in the world.

JASON: Yeah. Steam is incredible.
CHRIS: A billion dollar in revenue. It is phenomenal. By the way, Steam is the most interesting company that is probably going to move into the console space, because they have this massive distribution now.

JASON: So just buy like OUYA or make one…
CHRIS: Yeah. Buy one, or make one, or whatever. They are the powerhouse. So you see it happened, you were funding on Kickstarter, you were distributing through Steam, you were playing it on any device or something. The whole thing is getting unbundled. I think, probably, video games are the most forward looking right now.

JASON: Yeah. I think that is the biggest. Actually, people are complaining about it, “Oh! It’s too many games up there.” It is like a game sewer. That is when you know, a company is doing well, when people start complaining about, “It’s too much of this. It’s too many celebrities on Twitter.”
CHRIS: Yeah.

JASON: What is your take on Facebook, and Twitter, and LinkedIn? We look at three social networks there. LinkedIn is obviously a juggernaut for revenue. Their market cap is close to exceeding Yahoo’s capitalization. Could they ever catch up to Facebook in terms of revenue thing?
CHRIS: There is one sort of the personal network, and one is the professional network. The professional one certainly seems important. They have done an amazing job.

JASON: Twitter versus Facebook. I mean, all the intelligent, powerful people are on Twitter, and everybody is on Facebook. It seems like a conversation on Twitter is the important people.
CHRIS: I think they are different. I think that Twitter is more of a publishing platform, then it’s sort of social, like you’ll add Reply Me or something, but for the most part, I do not know the numbers, but I would imagine that it would look very power-law-like, and you have a relatively small group with a lot of followers.

JASON: Which is more important in ten years.
CHRIS: I thought it sort of replaced our Access (?), didn’t it, I mean?

JASON: Yeah. Big time.
CHRIS: So it is a new web-publishing platform. I will be bullish on both.

JASON: What do you think the difference is? Is that the Twitter is for famous people to publish themselves? Or, Facebook is for everybody.
CHRIS: Yeah. I think that Facebook is essentially a photo-sharing network, isn’t it? I mean, Instagram… It is a photo-sharing network among your friends, and Twitter is a text-publishing platform, link-publishing platform, so at least to me it is. That is how I use it. I use Twitter constantly. I mean, you do probably too. Like, most tech people do. I also find that Twitter, for me, is a much more professional tool. And I use Facebook more as a personal tool.

JASON: There is that little split there.
CHRIS: There is like a thing. When I was in New York and there is a hurricane, I go on Facebook to see how friends are doing, and then, Twitter was more like people in California are talking about the iPhone, right?

JASON: It is very weird when it happens, because I made a joke about something and people were like… Peter Rojas was like, “I have no power. I have a three-year-old. It’s like hell.” You are joking about. I had no idea. Manhattan still does not have power. It is like four days in. You do not have power in Manhattan, do you?
CHRIS: Yeah. I was there.

JASON: What is like not to have power after five days in Manhattan?
CHRIS: It got a little I-am-legend-ish at some point. My place is in the East Village, I love the East Village, but when you are out of power for four days, and like…

JASON: East Village does not smell good after four days. In the nineties, it did not smell good.
CHRIS: The only sounds you would hear were sirens, and it was just like a little… you know.

JASON: This could go to hell real quick.
CHRIS: I actually thought at one point, like day four, “Yeah. It starts, there is no food, there is no…” You lived there. The whole city is optimized for delivery, and just-in-time food. No one keeps food stored.

JASON: Yeah. It can get ugly quick.
CHRIS: It could have gotten uglier. Yeah, I think so.

JASON: Man. That is crazy. There is no global warming. Hey, what do you think of AngelList?
CHRIS: I think it is awesome. First of all, I like…

JASON: It is a very surreal moment, and the audience has no idea what.
CHRIS: OK. I think it is awesome. First of all, Naval Ravikant and Babak Nivi are great. It has a super positive influence on the early stage companies. The startup world is sort of democratizing. Of all things, good things, the Internet does.

JASON: Yeah. We talked before about a marketplace. Hey, there is a marketplace.
CHRIS: Yeah. I do not know if it plans to move into the crowd funding, but, certainly, if they did, it would be interesting.

JASON: They are doing a crowd funding for accredited investors. They make one LLC (Limited Liability Company) that does a hundred and fifty thousand dollars, one thousand at a time.
CHRIS: Yeah. I think it is super interesting. In the beginning, we were talking about the future of venture capital. It is funny, because we are in the business of trying to innovate and change industries, and, yet, our industry has not changed that much. It is like, “Doctor, heal thyself!” kind of things. Why have not we done that?

JASON: Doctor is still smoking cigarettes.

CHRIS: Yeah. I think we are starting to see changes. AngelList is a great example.

JASON: Andreessen Horowitz is a great example. Sixty people there are doing services for the entrepreneurs. The entrepreneurs are coming into this like in a vaulted cathedral, “Oh! Please give me a check.” You come in and it is like, you get your nails done.
CHRIS: Yeah. I mean, I am biased, but I argue that is true.

JASON: I am an entrepreneur, I tell you it’s true.
CHRIS: I think there are also places like First Round [Capital]. There are many other firms, like First Round, US [Union Square Ventures] of Fred Wilson. A bunch of people, who are doing really interesting stuff. I think of AngelList and the whole rise of seed funds, superangels. I think it is just good that we have all this experimentation going on.

JASON: Have you invested in a company from them? Have you found one on AngelList that you remember?
CHRIS: I use it the way, I use the Crunchbase, like a check on. I cannot recall if I actually found it through there, but I certainly take a look.

JASON: You have taken the introductions from there. I am sure.
CHRIS: Yeah. Sure.

JASON: That is why I find very interesting. I am like, “That looks very interesting. Intro, intro, intro.” I do a couple of intros a week to check people out.
CHRIS: I mean it is harder. It depends, if you are doing it like angel investing out of scale, you end up having to rely on lots of filters, that are beyond just, “Is it a cool idea?” But it’s more like, “This gets sent to me from a person, who’s investing, who I trust.” You know, because, that is the challenge without it, if you are doing it at a scale, but certainly it is really interesting.

JASON: Chris Dixon, what an amazing hour, such a great advice for entrepreneurs, and great insights on the industry. Everybody, follow @cdixon on Twitter. And this is great for me, because, basically, this is it. After inside.com, that is my last startup, and then, I got recruited last year, pretty heavily, by two venture firms. That is it. I am going to Chris Dixon’s route. I am going to get recruited.
CHRIS: I can tell you all their secrets over a beer sometime.

JASON: Give me the tips, how to get recruited by a VC. It is such a great life, you look like, you are so relaxed now, comparing to running a startup.
CHRIS: It is a lot easier, than running, doing startups.

JASON: We have so much respect for founders. It is just, you sit there, grinding your teeth at night, wondering if your baby is going to make it.
CHRIS: I had a friend who said… Before I started my first company, he was an experienced entrepreneur, he said, “Get ready to feel sick to your stomach for the next five years.” And I was, “Eh, whatever.” Then later, I was, “Shoot, I should listen to the guy.”

JASON: That is pretty much the most accurate description that I ever heard. Five years of complete obnoxia. This like, waking up in the middle of the night, you have that as an entrepreneur. It is like waking up, “I forgot something. Oh! My God. I forgot something.”
CHRIS: That is why we have so much respect for them, because it’s a really hard thing to do.

JASON: I look at you, getting high at Andreessen Horowitz as a great moment in the history of venture capital, because it is like one of the good entrepreneur-angels is now at one of the top firms. It is a really big deal. That is not just another MBA getting that slot. It makes me feel, “Oh! Wow.” If I were starting a new company, Andreessen Horowitz would be one of the top three stops. I am going to go here, and here, and here. Right? Your joining specifically cements it for a lot of entrepreneurs, especially, for the New York ones.
CHRIS: Thanks.

JASON: Continued success. And see you all next time at “This Week in Startups.”

Follow On Twitter

Jason: @jason
Chris: @cdixon
ShareFile: @sharefile
S
qaureSpace: @squarespace

 

Special thanks to the members of the TWiST Backchannel Program!

Executive Producers

Producers

Associate Producers

  • Brad Pineau
  • Kat Ganesan
  • Nicholas Christian
  • Mau Frontier
  • Kyle Braatz
  • Serena Ehrlich
  • JD
  • Alex Lotoczko
  • James Kennedy
  • Benoit Curdy
  • Asher Nevins
  • Mike Kaltschnee
  • William Doom
  • David Lee
  • Jake Kerber
  • Sarp Coskun
  • Giuseppe Taibi
  • Tyrone Rubin
  • Keno Vigil
  • Paul Peters
  • Jamal Waring
  • Nick Ostroff
  • Alex Binkley
  • John MP Knox
  • Bryan McCormick
  • Marcos Trinidad
  • Allen Cordrey
  • Daniel Mich
  • Joshua Rosen
  • Grant Carlile
  • James Smith
  • Christopher Rill
  • Elliot Myhre
  • Nihon Giga
  • Nathan Gielis
  • Greg Meadows
  • Rick Cartwright
  • Jacques Struwig
  • Robert Ward
  • Adam Gering
  • Shelley Gaskin
  • Jim Shute

Supporters

  • Ryan Hoover
  • Michael Cranston
  • Josiah Thomas
  • João Fernandes
  • Petrus Theron
  • Michael Wild
  • Dale Emmons
  • Tim de Jardine
  • Alejandro Vasquez
  • Milan Babuskov
  • Chris Rowe
  • Nelson Melo
  • James Dawson
  • Toddy Mladenov
  • Daniel Torres
  • Chris Macke
  • Piotr Zuralski
  • Armand Konan
  • Brian Vogel
  • Paul D
  • Jennifer Sun
  • David Kolb
  • Sue Marrone
  • Eugene Granovksy
  • Will Blackton
  • Ryan Dodds
  • Brett Arp
  • Jason Cresswell
  • Edwin Orange
  • Daniel Bradley
  • Shawn Daniel
  • Priidu Kull
  • Patrick Desroches
  • Alex Lam
  • Paul Secor
  • Ryan Urabe
  • Madhu R.
  • Paul Ardeleanu
  • Ian Thomas
  • Manny Alarcon
  • Charlie Osmond
  • Christopher Smitley
  • Roshan H.
  • Barcy Cordrey
  • Matt Beaubien
  • Matthew Smith
  • Oscar Bueno
  • Tim Hoyt
  • Ian Gerstel
  • Taphon Maddison
  • John Bradley
  • Luigi Armogida
  • Dave Ferrara
  • Janus Lindau
  • Chris Mancil
  • TR Ludwig
  • Giles Thomas
  • Jason Cartwright
  • Michael Del Borrello
  • Joshua Rosen
  • David Karlberg
  • Marcus Schappi
  • Justin Furniss
  • Mike Hauck
  • Jess Bachman
  • Isaac Hill
  • Robert Haydock
  • Dan Sfera
  • Flaviu Simihaian
  • Kiko Cherman
  • Chandra Siva
  • Kasper Andkjaer
  • Zach Woodward
  • Chris Galasso
  • Chad Olsen
  • Michael Grabham
  • John Shiple
  • Gregory Hoffman
  • Chris Rickard
  • Eskil Steenberg
  • Jay Moran
  • Karim Sarkis
  • Michael Davidovich
  • Petru Marchidan
  • Sam Drzymala

 

more episodes