You may not immediately think of Marc Andreessen and Ben Horowitz as venture capitalists. But the two have raised nearly a billion dollars since starting their venture capital firm, Andreessen Horowitz, roughly 18 months ago.
Of course it helps that both have fantastically successful track records as tech entrepreneurs. Andreessen co-founded Netscape, and later hired Horowitz as a product manager. Both founded another software company, Opsware Inc., and later sold it to Hewlett-Packard Co. for $1.6 billion, according to a story in the Wall Street Journal.
But as newly-minted venture capitalists, they have chosen an unusual model as a guide for their firm. They are aiming to function more like a Hollywood talent agency, similar to Creative Artists Agency (CAA) founded by Michael Ovitz. Andreessen and Horowitz met Ovitz when he served on the Opsware board of directors from 2000 to 2007, and have adapted many of CAA’s strategies for running Andreessen Horowitz.
For example, Andreessen Horowitz employees focus on directly helping the entrepreneurs in their portfolio companies, much the way CAA talent agents serve their clients. This means each partner in the firm is a specialist in the portfolio company’s industry, and works to find engineers, designers, product managers, and the best marketing communications talent available for their investments. They research suppliers and even check references.
Another big difference picked up from CAA is distilling one’s mission statement down to a “story” that is easily communicated and remembered by employees. “In a company, hundreds of decisions get made, but objectives and goals are thin,” says Horowitz. “I emphasize to CEOs, you have to have a story in the minds of the employees. It’s hard to memorize objectives, but it’s easy to remember a story.”
Andreessen Horowitz is working to invest $650 million raised from university endowments, foundations and funds of funds. The firm’s principals, along with John O’Farrell, who joined from Silver Spring Networks Inc., are reportedly taking a low salary and plan to be compensated on the success of their investments. So far the team has reviewed 1,200 companies, choosing just 28 for investment, including the social gaming company Zynga Inc., mobile social network Foursquare Inc., and Internet communications service Skype Technologies S.A.
What’s your take? Will more venture capital firms be following the talent agency model and playing a bigger supporting role in their portfolio companies’ operations? Add your comments below.
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