Time to Build: a16z takes on Los Angeles by Partap Singh
This past week, I was very fortunate to participate in “Time to Build: Los Angeles”, an invite-only event hosted by Andreessen Horowitz (or “a16z”), one of the world’s premier venture capital firms with $35 Billion+ in assets under management and notable past investments such as Stripe, Okta, GitHub, Instacart, Lyft, AirBnB, Roblox among many others. This event was part of “LA Tech Week”, a weeklong gathering organized by VCs and startups to celebrate the growing LA Tech ecosystem. As many know, a16z takes a hands-on approach to investing, modeled after the Hollywood talent agency Creative Artists Agency, and helps portfolio companies with everything from sourcing top talent to facilitating relationships with key partners and customers in order to maximize the chances of success.
There were many representatives from a16z at the event including Marc Andreessen (Co-founder of a16z and previous Co-founder of Netscape), Andrew Chen (GP for the games team and author of “The Cold Start Problem: How to Start and Scale Network Effects”), Sriram Krishnan (GP for the crypto team and co-host of the widely acclaimed “Good Time Show”), Chris Lyons (GP for the crypto team and Co-founder of the firm’s Cultural Leadership Fund) and Connie Chan (GP for the consumer team). The host, Katia Ameri (investment partner for the consumer team), did an excellent job providing an overview of the LA investment landscape as well as organizing meetups throughout the week. There were a number of notable guest speakers such as Ari Emanuel (CEO of the entertainment firm Endeavor and the character whom “Ari Gold” from the HBO hit television show “Entourage” is based upon), Turner Novak (Founder, Banana Capital), David Banks (CEO, Elodie Games) and Minnie Ingersoll (Investor at TenOneTen Ventures and Host of the LA Venture podcast) as well as of celebrity guests in attendance such as Javale McGee (Three-time NBA champion and Olympic gold medalist). Given that the event was limited to a relatively small in-person audience, I wanted to share a few key takeaways.
First off, according to a16z, things are not going back to the way they were before the pandemic. “For hundreds of years, ambitious young people have had to move to immediate geographic colocation with employers to have access to the best jobs for their skills and talents…That is suddenly no longer true”, Marc shared in a recent blog post. Top talent will not go back into the office five days a week and will find new and creative ways to work. The growth of remote and hybrid work is why a16z recently migrated their headquarters “to the cloud”. “It doesn’t mean we are uploading our consciousness into the Metaverse, that comes later”, Andrew Chen quipped, but that they will be expanding their presence beyond the Bay Area. In the last few months, a16z has built up new satellite offices across New York, Miami and LA among other growing tech hubs across the country to meet with ambitious founders irrespective of location. The density of talent is no longer just in San Francisco, which has seen an exodus of sorts over the past two years. In LA alone, a16z just opened a new 30,000 square foot location with the hopes of fully tapping into the intersection of Technology, Media and Entertainment. LA was a natural choice and has long been known as a center for creativity and innovation, as the birthplace for modern cinema starting with the phenomenal rise of Hollywood at the turn of the 20th century. More recently, major tech companies such as Snap Inc. and SpaceX have made their bets on the city of angels, choosing LA for their headquarters over Silicon Valley. Today, a16z has over 40+ investments in the LA area ranging from seed to late stage (a few examples included below).
One of the first speakers of the day was Andrew Chen. Given challenging current macro conditions, he acknowledged that investors are no longer just looking for “high growth” opportunities that are also “high burn”, but instead focusing on more efficient businesses with strong unit economics that can weather the downturn. In terms of investment opportunities, Andrew shared how every generation of consumers has their own new social network. At one point, this was Aol and MySpace, then came along Friendster and Facebook, now Snapchat and Instagram, but for an even younger generation this means virtual worlds such as Minecraft, Roblox and Fortnite (each world with their own social graph) where users spend most of their time with friends. This trend in user behavior was part of the impetus behind the launch of Games Fund One, where Andrew focuses his time today and why he decided to move to Los Angeles. The fund was founded on the belief that games will play a pivotal role in defining how we socialize, play, and work over the next century. Moreover, that games infrastructure and technologies will be key building blocks of the metaverse.
On the topic of games, one of the ambitious founders who took the stage was Timmu Tõke (Co-founder & CEO, Ready Player Me). He asked the audience, “would you rather have a thousand identities for a thousand different games or one identity that travels with you across worlds and stays with you throughout your metaverse lifecycle?”. His company, Ready Player Me, is focused on creating avatars that people love. He believes in the importance of interoperability, whereby users can navigate freely across multiple virtual worlds and carry over skills, tools, abilities, skins and accessories across platforms. Another founder with a strong vision for the future was Grant Lafontaine (Co-founder & CEO, Whatnot). His company, Whatnot, describes itself as “a community marketplace where you can buy, sell, go live and geek out with collectors and other like-minded people.” They have created the fastest growing marketplace in the country for products from Pokeman cards to Sports memorabilia. Only a few weeks ago, an exceedingly rare Lebron James sold live on Whatnot for $2.4M. The company’s valuation recently doubled to $3.7B as livestream shopping gains popularity. His advice is to move fast and take risks. In his opinion, one of the key benefits of software startups is that the cost of making mistakes is very low and can be easily fixed.
One of the most fascinating panels was with Marc Andreessen and Ari Emanuel. The first question the moderator, Sriram Krishnan, asked was if the golden age of television and film was over. Marc suggested there is very limited original IP these days. Case in point: many top titles this year are spin-offs of older films such Top Gun, Jurassic Park and multiple Marvel releases. Two of the most anticipated series of the year are Lord of the Rings and Game of Thrones prequels. However, Ari explained the number of original scripted TV series in the United States has more than doubled in the last decade and distribution is expanding rapidly through the rise in streaming services. Looking to the future of entertainment, Marc suggested that VR is “the last frontier”, since it will be fully immersive and “there is no else where else to go”. Ari contested that indeed AR is the future. According to Marc, “All of the non-nerds think AR is the big thing and all of the nerds think VR is the big thing.” This is because “non-nerds like real life, they get up in the morning and the world is a cool place, they hang out with cool people,” while the true nerds face a very different reality and often wish to escape it. Ari still believes the “world is a really good place, even though some bad things happen” and there should be “a place for nerds and non-nerds to co-exist” in harmony.
In terms of advice for founders in the room, Marc and Ari emphasized the importance of being relentless. Success often requires exceptional emotional endurance to weather the storm. Ari shared how “Seinfeld”, one of the most famous sitcoms of all time, almost failed. At the time, a “show about nothing” wasn’t resonating with audiences, Larry David was unreceptive to notes and the network was considering canceling the show. Thankfully, they decided to put reruns on Thursday night after NBC’s hit show “Friends” and suddenly ratings went up. Marc echoed this sentiment and shared how success can be very tenuous at the beginning. “Buried in history is that for each of these Tech companies, there is often a story where they almost sold very very early.” Everyone knows the parable of Blockbuster turning down the Netflix acquisition for a sum of just $50 Million in 2000. Today, while the last remaining Blockbuster store is nothing more than a relic, Netflix is worth over $100 Billion and one of the first companies to break through from Tech to Media and Entertainment with over 220 Million subscribers and 27 Oscar nominations in 2022 alone. A less known story is how Facebook almost disappeared. Marc, who has served on the board of Facebook (now Meta Platforms) since 2009, shared how at one point the whole board wanted to sell to Yahoo. They reached a deal to sell for approx $1 Billion, then the financial crisis hit and Yahoo reduced the price, which gave Mark Zuckerberg the latitude to exit the deal. Only a few years later, Yahoo would be sold to Verizon for pennies on the dollar while today Meta is valued ~100x more at $450 Billion. At the end of the day, Marc and Ari shared that there is no substitute for sheer will power to achieve one’s goals and that an overwhelming determination is needed to succeed in any industry.
All in all, the event was a tremendous success. One thing that wasn’t quite addressed was a16z’s recent investment in Adam Neumann’s start-up, “Flow”, a community-driven rental start-up. At $350 million, this investment marks the biggest single check a16z ever written. The rise and fall of Adam’s last startup, WeWork, has been well documented, most notably in the Apple TV docu-series “WeCrashed” featuring Jared Leto and Anne Hathaway. Will this time be any different? Only time will tell. One thing is for sure: a16z will always place big bets on founders who take big bets on themselves.
For more information on LA Tech week: https://www.la-techweek.com
- Andrew Chen’s new book, “The Cold Start Problem”: https://a16z.com/book/the-cold-start-problem/
- “Good Time Show” with Sriram Krishnan and Aarthi Ramamurthy: https://www.thegoodtimeshow.club
- “Future” publication from a16z on Tech Trends: https://future.com/framework-valuation-navigating-down-markets/