• Most of a16z employees focus on that ‘something more,’ spending their days building relationships with people and institutions that can help improve the likelihood of our founder CEOs building enduring and valuable companies
• Loans are best suited for businesses that are likely going to be generating near-term positive cash flow sufficient to pay interest and, ultimately, the principal amount of the loan
• recently as 2017, the median ten-year returns in VC were a 160 basis points below those of Nasdaq.
• returns in the top end of VC funds can often be as much as 3000 basis points higher than at the bottom end; dispersion of returns is huge when you have power-law distributions
• Over time, funds that generate 2.5-3x net returns to their investors will be in the good portion of the power-law curve distribution and continue to have access to institutional capital.
• To achieve 2.5-3x net returns (after all fees), VCs probably need to generate 3-4x gross returns. That means if a VC has a $100M fund, she needs to realise a total of $300-400M in proceeds from her investment in order to give $250-300m in net returns to the institutional investors
• Using the 1974 data cutoff, 42% of public companies re venture backed, representing 63% of total market capitalisation. These companies account for 35% of total employment and 85% of total research and development spend. That’s pretty good for an industry that invests about 0.4% of the US GDP!
• Many VCs delve deeply into the background of the founders for clues about their effectiveness in executing this particular idea.
• In the product-first company, the founder identified or experienced some particular problem that led her to develop a product to solve that problem, which ultimately compelled her to build a company as the vehicle by which to bring that product to the market. A company-first company is one in which the founder first decides that she wants to start a company and then brainstorms products that might be interesting around which to build one.
• Sometimes familiarity can breed contempt - and conversely, the distance from the problem that comes from having a completely different professional background might actually make one a better founder
• When Marc and Ben first started a17z, they described this founder leadership capability as ‘ecomaniacal’. Their theory - notwithstanding the choice of words - was that to make the decision to be a founder (a job fraught with likely failure) an individual needed to be so confident in her abilities to succeed that she would border on being so self-absorbed to be truly ecomaniacal.
• This leaves good VCs to invest in good ideas that look like bad ideas - hidden gems that probably take a slightly delusional or unconventional founder to pursue. For if they were obviously good ideas, they would never produce venture returns.
• Assuming that the product will in fact change many times over the course of discerning product-market fit, it’s the process of the idea maze that is the better predictor of the founder’s success than the actual product idea itself.
• Andy Rachleff, a founder of Benchmark Capital, has said that companies can succeed in great markets even with mediocre teams but great teams will always lose to a bad market.
• The ROFR agreement means that if someone (in this case, a cofounder) is trying to sell her stock, the company has a right to match any offers received and effect the purchase
• Tesla generally provides small stock option grants to its employees upon hiring and, for top-performing employees, grants increasingly larger amounts of options as part of their refresher program.
• John Doerr famously compared fundraising to attending a cocktail party. When the waiter comes around with the tray of mini hot dogs, you should always take one. The reason being that you never know when in the course of the remainder of the cocktail party the waiter will make it back to you.
• You should be able to convince yourself that the market opportunity for your business is sufficiently large to be able to generate a profitable, high-growth, several hundred million dollar revenue business over a seven-to-ten year period
• Raise as much money as you can that enables you to safely achieve the key milestones you will need for the next fundraising
• If you allow yourself or a VC to overvalue the company at the current round, then you have just raised the stakes for what it will take to clear that valuation bar for the next round and get paid for the progress you have made