1) Like any great knowledge based firm - which strives to differentiate over and above its people - they have invested in tools. While the inspiration maybe CAA, firms like Mckinsey (knowledge management system) and Goldman (SecDB / Slang on the trading side and a detailed CRM system for the banking side) used the software / infra layer to develop a sustainable advantage which did not just depend on hiring the "smartest people" I.e. if people quit Goldman / Mckinsey - suddenly they were not able to outperform. On wall street - they call it seat value (how much value are you adding versus the seat/organization)
2) As a complete outsider - one can still easily see how the CRM software + sales connectors capability translates to $$$ for portfolio companies. For e.g. Box's recent deal with GE.
3) Therefore, on the enterprise side , if AH acts like a sales force (led by Mark Cranney) - then how does an enterprise company that is not backed by AH compete? In other words, over and above the prestige factor of being backed by a top tier VC firm- will NOT raising money from AH in the enterprise side put you at a disadvantage?
4) How much of this sales force / business development muscle applies to the consumer side? AH partners have referred to consumer startups as fruit fly experiments and will invest with a strong offer post-traction/ series B? But is there value in the consumer side as well in BD deals like how Moritz/Doerr helped Google power yahoo search and collect valuable search engine user behavior which was used to refine and test thier algorithms.
5) The article did mention in passing about recruiting support. But - I have read about a detailed software + people capability on talent hiring.
6) So, if sales + recruiting + strategy/advise are three value adds by VC firms (not counting money!) - does AH have a lock on 2 of the three?
Right, but the real question is: what are their returns? (And: how do they compare to VC as a whole?, how do they compare to long-term US treasury bonds?, how do they compare to the S&P 500?
Besides the fact that Skype was an exceptional insider deal these numbers can be misleading ("twice over" for a 10 year fund is about 7% a year and IRRs are distorted when money is returned early because you are not getting that return for the remaining period of investment).
As linked, AH's first fund had an IRR in the 30% range for 3 years which blows away pretty much every other asset class. I'm sure Accel, Founders, Sequoia, Benchmark, etc are doing even better.
You can't look at venture averages because the best firms are easy to identify and perform much better than average.
Three years is a very short timespan from which to make claims about asset classes. In most cases, seven years is considered the minimum for a true sampling of baseline performance; ten years is better, and more than ten is better still. Obviously a16z hasn't been around for ten years, so metrics like three-year IRR are the best we have. That said, it's silly to take a three-year IRR and benchmark that confidently against something like the S&P 500.
On the other hand, I would strongly suspect that the top VC firms massively outperform the VC industry as a whole, due to any number of factors, including deal access, ability to secure favorable terms, ability to make new rounds or exits happen, etc. In time, a16z's longitudinal performance may well beat the market. But it's way too early to call the ball.
I agree that you can't really look at the aggregate performance of the entire VC industry. It's probably a highly skewed distribution, with almost all the big returns going to a handful of funds.
I don't know about that. Over that time period, post 2008 crisis, many funds (PE, fixed income focused HF's and equity funds) did very high returns as most asset classes bounced back from the crisis depths. Helped along, of course, by unprecedented money printing and credit expansion by the Fed.
1) Like any great knowledge based firm - which strives to differentiate over and above its people - they have invested in tools. While the inspiration maybe CAA, firms like Mckinsey (knowledge management system) and Goldman (SecDB / Slang on the trading side and a detailed CRM system for the banking side) used the software / infra layer to develop a sustainable advantage which did not just depend on hiring the "smartest people" I.e. if people quit Goldman / Mckinsey - suddenly they were not able to outperform. On wall street - they call it seat value (how much value are you adding versus the seat/organization)
2) As a complete outsider - one can still easily see how the CRM software + sales connectors capability translates to $$$ for portfolio companies. For e.g. Box's recent deal with GE.
3) Therefore, on the enterprise side , if AH acts like a sales force (led by Mark Cranney) - then how does an enterprise company that is not backed by AH compete? In other words, over and above the prestige factor of being backed by a top tier VC firm- will NOT raising money from AH in the enterprise side put you at a disadvantage?
4) How much of this sales force / business development muscle applies to the consumer side? AH partners have referred to consumer startups as fruit fly experiments and will invest with a strong offer post-traction/ series B? But is there value in the consumer side as well in BD deals like how Moritz/Doerr helped Google power yahoo search and collect valuable search engine user behavior which was used to refine and test thier algorithms.
5) The article did mention in passing about recruiting support. But - I have read about a detailed software + people capability on talent hiring.
6) So, if sales + recruiting + strategy/advise are three value adds by VC firms (not counting money!) - does AH have a lock on 2 of the three?