Since Marc and I founded Andreessen Horowitz three years ago, we have raised $2.7 billion. That statement begs a few questions. The two most obvious are:
• Why did such a new venture capital firm raise so much money?
• How did such a new venture capital firm raise so much money?
To get to the answers, it’s useful to go back to the original motivation for starting Andreessen Horowitz.
After raising our first round of funding for Loudcloud in 1999, we went to visit our new venture capital firm and meet their full team. As founding CEO, I remember being quite excited to meet our financial backers and talk about how we could partner to build a great company. That excitement took a sharp downhill turn when one of the top partners said to me, in front of my co-founders, “When are you going to get a real CEO?”
I was completely stunned—the comment knocked the wind out of me. Our largest investor had basically called me a fake CEO in front of my team. I said, “What do you mean?”—hoping he would revise his statement and enable me to save face. Instead he pressed on: “Someone who has designed a large organization, someone who knows great senior executives and brings prebuilt customer relationships, someone who knows what they are doing.”
I could hardly breathe. It was bad enough that he undermined my standing as CEO, but to make matters worse, I knew that at some level he was right. I didn’t have those skills. I had never done those things. And I did not know those people. I was the founding CEO, not a professional CEO. I could almost hear the clock ticking in the background as my time running the company quickly ran out.
Could I learn the job and build my network fast enough or would I lose the company? That question tortured me for months.
In the years that followed, I remained CEO, for better or worse. I worked incredibly hard to close the gap between what the partner had described and where I was at the start. Thanks to a lot of effort and help from friends and mentors, especially Bill Campbell, the company survived and ultimately became quite successful and valuable.
However, not a day went by when I didn’t think about that interaction. I always wondered how long I had to grow up and how I could find help to build my skills and make the necessary connections along the way.
Marc and I discussed this often. We wondered aloud why as founders we had to prove to our investors beyond a shadow of a doubt that we could run the company, rather than our investors assuming that we would run the company we’d created. This conversation ultimately became the inspiration for Andreessen Horowitz.
Marc and I share a simple belief that became the basis for our new venture capital firm: in general, founding CEOs perform better than professional CEOs over the long term, and a venture capital firm that enables founding CEOs to succeed would help build the best companies and yield superior investment returns.
As we set out to design a venture capital firm that would enable founders to run their own companies, we began by asking: In what ways are professional CEOs superior to founder CEOs?