Marc Andreessen: evaluation

Transcript context

…Why has venture capital been so concentrated in tech, to some extent biomedical — and in the old days, whaling voyages — but not so much in many other things, like private equities? Much bigger. Why is venture capital limited? And conceptually, how do you think about these limits? This is not a value statement. It’s just a very different way of operating. Private equity comes into industries and businesses that already exist, and then it attempts to optimize them or turn them around or consolidate them or whatever it does, but always the businesses is already there that exists. I like to say we do value investing, but it’s value that doesn’t exist yet. It hasn’t been created yet. It’s blank-sheet-of-paper stuff. With some exceptions, as you said, the history basically is that computer science–based venture capital has done very well. Biomedical, biotechnology–based venture capital has done about, you might say, half as well or a quarter as well. Then everything else is a rounding error. It hasn’t really worked. Now, having said that, we’ll come back to this. It’s like Tesla — there were a few VCs, but most people in venture capital land didn’t think there was a ripe opportunity to build a new car company. I can tell you that. Nor did most VCs think there was an opportunity to build a new rocket company. I can also tell you that. You do have these very striking counter examples, which let’s come back to, but the pattern has been, as you said — it’s computer tech or it’s biotech. I think it’s Bill Janeway’s thesis that he wrote about in his book. I think the book’s called Doing Capitalism, and it’s his history. He is a legendary VC in his own right and a trained economist. He basically says it was the foundational science and advanced technology basically developed in the computer world for 50 years by DARPA and its succeeding technological agencies, and then by big industrial research labs like IBM Research and others, that created the preconditions for computer-based start-ups. There was a 50-year backstory to that by the time Silicon Valley really got going. He said, also, the reason biotech’s half successful is because there was 25 years of biotech — NIH and all these very aggressive biotech biological science–investing programs. His claim — and this is why I think he’s always been leery, for example, of clean tech, environmental tech, for example — is he’s like, “Maybe there should have been a DARPA of clean tech that started in 1950 and ran for 50 years that we were all drawing new technologies off of, but it didn’t exist. Therefore, it’s just going to be much harder in all these other fields.” I think that’s probably right. The reason I think that that’s probably right is because at least the history in the Valley is, if we have a sharp entrepreneur with the ability to attract a team, the ability to tell a story and have a vision, and then they’ve got insight into a technological dislocation — an actual change to the technology foundation of the field that they’re working in — then you have a shot for a successful start-up. If you don’t have a technological dislocation, it’s really hard to just do a cold start. he technology foundation of the field that they’re working in — then you have a shot for a successful start-up. If you don’t have a technological dislocation, it’s really hard to just do a cold start. Now, again, having said that, Elon did this in both cars and rockets and actually developed many technical breakthroughs, subsequently, in both of those companies, but at least I didn’t see that going in. I would say the case studies of Tesla and SpaceX — and this is something we’re spending a lot of time on in our firm — really leads me to wonder if the Janeway thesis is actually wrong, and if, actually, we should be much more open-minded about this. I have a set of ideas as to why that might be the case, but that’s one of the things that we’re going to try to explore.…

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