The rationale behind backing Flow wasn't an oversight of past issues, but a deliberate strategy to invest in a founder with world-class, "spiking" strengths in brand building and company creation. This aligns with the firm's philosophy of prioritizing extreme strengths over a lack of weaknesses.
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A16z's foundational belief is that founders, not hired "professional CEOs," should lead their companies long-term. The firm is structured as a network of specialists to provide founders with the knowledge and connections they lack, enabling them to grow into the CEO role and succeed.
Over-diligencing for well-rounded perfection is a mistake. The best companies rarely excel in every area initially. Instead, investors should identify the one "spike"—the single dimension where the company is 5-10x better than anyone else—as this is the true indicator of outlier potential, rather than looking for a company that is A+ across the board.
A core part of a16z's growth fund strategy is to invest in companies the firm's early-stage team passed on. This acts as an internal "fix the mistake fund," providing a structured way to correct errors of omission and get a second chance at breakout companies.
Duolingo's first investors admitted they didn't believe in the education market, which they considered a bad business. They invested solely because founder Luis von Ahn had a previous successful exit to Google, demonstrating that a founder's track record can be more persuasive to early VCs than the business idea itself.
Investing in founders like Rippling's Parker Conrad or Anduril's Palmer Luckey post-controversy is a bet that the media narrative was wrong and they were unfairly 'thrown under the bus.' It's a high-conviction strategy focused on backing resilient individuals who emerge from public firestorms stronger and more focused.
While assessed during diligence, the true caliber of a founder—their passion, authenticity, and ability to "run through walls"—becomes starkly clear after the deal closes. This distinction is not subtle; the impact of a truly exceptional founder versus an average one is immediately evident in the business's trajectory.
A16Z's crypto fund prioritizes founders who have spent their careers deeply immersed in a specific sub-industry, even if it's outside crypto. This deep understanding of a problem set, like traditional finance rails or restaurant tech, is a crucial ingredient for success when applying blockchain solutions.
A truly exceptional founder is a talent magnet who will relentlessly iterate until they find a winning model. Rejecting a partnership based on a weak initial idea is a mistake; the founder's talent is the real asset. They will likely pivot to a much bigger opportunity.
Andreessen Horowitz's investment in Flow, Adam Neumann's new real estate venture, was a bet on his "extraordinary strengths" in brand building, company building, and product hiring. Despite past controversies, the firm believes these "spiking" talents are precisely what's needed to brand the rental market—the largest remaining unbranded consumer experience—and outweigh any perceived weaknesses.
Venture capital should focus on what a founder does exceptionally well, rather than penalizing them for past failures or weaknesses. Ben Horowitz uses the Adam Neumann example to illustrate their principle: judge people by their spectacular talents (like building the WeWork brand) and help them manage their flaws, which is a more effective strategy than seeking perfectly flawless individuals.
