Last week we learned that Marc Andreessen and his business partner, Benjamin Horowitz, had raised a $300 million venture fund. Without question, it’s a remarkable achievement to attract that much money in what has to be one of the most inhospitable environments for raising venture capital in memory.
The size of the fund is also impressive, though on its own won’t change the world, or have a discernible impact on the valley’s start-up economy. But on a symbolic level, the fund’s success certifies Andreessen’s place as the new godfather of Silicon Valley.
Andreessen embodies so many facets of the valley. He is an innovator, an entrepreneur, investor, networker, and in some cases, kingmaker. If Andreessen accomplishes nothing more from here on out, his place in Silicon Valley history is secure.
Which is why it may sound surprising that I find this endorsement so curious. It’s not necessarily misplaced. But it does speak volumes about the career Andreessen has carved out, his philosophy, and the priorities and values of Silicon Valley.
For most people around here, Andreessen is viewed as rock star, who has moved from one success to another. My view of him is a bit more shaded. When I see Andreessen (and I’ve never met him), I see two people.
There’s Marc Andreessen, tech genius and Web visionary. He developed the first commercial browser and started Netscape to commercialize it. He understands, perhaps better than anyone, the rapidly evolving dynamics of how the Internet is changing our lives and the economy. He’s a geek’s geek, and wise, a deadly combination.
And then there’s Marc Andreessen, the businessman, who seems to me to be — how can I put this charitably? — a bit of a dud.
That failure is largely discounted by the valley. Part of that goes to the central ethic of this region which elevates failure to the level of blessed sacrament. I’m sure most people around here would probably dispute my assessment of Andreessen, and as evidence they’d point out how fantastically wealthy he is. Which is true. But enriching yourself, and building a successful business are two different things, as we’ve seen repeatedly over the past decade in the valley. Unfortunately, you can fail in spectacular fashion and still make a bundle.
I don’t want to imply he’s a failure, because he’s not. But when I look at Andreessen’s business track record, I’m less interested in his checking account than the financial statements of his companies. As far as I can tell, Andreessen has never started or operated a profitable business, with one exception: Netscape turned an annual profit, back in 1996 when it posted a $19 million profit. Of course, that was when the company still charged you $49 to buy a copy of Netscape Navigator. Once Microsoft started giving its Explorer browser away for free, that was all she wrote. Andreessen and Netscape couldn’t figure out another business model, and vanished a couple of years later in a complex deal with Sun Microsystems and AOL that was announced November 1998.
After a brief stint as chief technology officer with AOL, Andreessen re-emerged with a new start-up called Loudcloud, which sputtered after its IPO in 2001, and was re-launched as Opsware. In its six years as a publicly traded company, LoudCloud/Opsware failed to turn an annual profit. Still, it was sold for $1.6 billion to Hewlett Packard in 2007.
Andreessen’s take from that sale was $98.2 million, while Horowitz took home about $60 million. Not bad for a company that never came close to breaking even.
But does that mean it was a success or a failure?
In the eyes of Silicon Valley, it was the former. And since then, Andreessen’s reputation has only risen as he has emerged as a leading angel investor for the Web 2.0 industry, advising or investing in companies like Facebook and Twitter. These companies reflect the philosophy of service and technology over revenues and profits.
Meanwhile, Andreessen has co-founded another company, Ning. On a personal level, I’m a huge fan of Ning, which lets you build your own social network. I’ve been using Ning now for almost 18 months for a project I did on behalf of the Knight Foundation. Ning’s traffic and users are exploding. But revenues? It’s still private, but it’s safe to say it’s not profitable. And it’s unclear if it will ever be.
Of course, at some point, these priorities have to change. A company has to actually make money. Innovation can’t be sustained by creating a venture-backed Ponzi scheme where one money-losing start-up is sold to another, which is then sold to another.
Losing money indefinitely isn’t just a financial failure. It represents a failure to truly understand how a service or product is creating value for a customer, how to communicate that value, and how to persuade the customer to pay above and beyond for that value.
That, all too often, is where the valley still falls short: Failing to innovate around the business to same degree it innovates around the technology.
This isn’t Andreessen’s fault. But his ascension as the valley’s leading light embodies that ideal. And that shows the valley is no where near ready to change its ways.