Ben Horowitz argues that waiting a decade for fund outcomes is too slow. Instead, a16z judges investors "at the point of attack"—how good they are at finding and winning deals with exceptional founders. This focuses on decision quality in the present, not lagging indicators.
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In venture capital, an investor's reputation is constantly on the line. A successful exit in one fund doesn't satisfy the LPs of a subsequent fund. This creates relentless pressure to consistently perform, as you're only as good as your last hit and can never rest on past achievements.
a16z's investment philosophy is to assess founders on how world-class they are at their core strengths. Horowitz warns it's a mistake to pass on a uniquely talented founder due to fixable weaknesses (e.g., no go-to-market plan) and an equal mistake to back a less talented founder just because they lack obvious flaws.
A simple framework to evaluate a VC's skill is the four 'D's'. They need proprietary Deal Flow, the ability to make good Decisions (initial investment), the conviction to Double Down on winners, and the discipline to generate Distributions (returns) for LPs.
Venture capital returns materialize over a decade, making short-term outputs like markups unreliable 'mirages.' Sequoia instead measures partners on tangible inputs. They are reviewed semi-annually on the quality of their decision-making process (e.g., investment memos) and their adherence to core team values, not on premature financial metrics.
Horowitz claims a VC firm's ability to win access to the most sought-after deals is more critical to success than its genius for picking winners. A strong brand that ensures access to competitive rounds can generate top-tier returns even with average picking ability.
Horowitz categorizes VCs into two types. The all-time greats are "disagreeable" because their independent thinking is crucial. "Agreeable" VCs, who want to be liked, can thrive in boom markets as "heat seekers" by following hot trends, but they often disappear in downturns.
Horowitz claims that winning competitive deals is a much larger component of VC success than simply picking the right companies. A firm with a brand and platform that can consistently win the best deals will automatically generate top-tier returns, even with average picking ability. This attracts the best pickers over time, creating a flywheel.
To manage performance despite long feedback cycles, Greylock developed an "inputs-based" model. They assess partners on 18 specific actions, like seeing 75% of competitive deals, believing that consistently strong inputs are the best predictor of long-term success.
Horowitz instructs his team to focus on how exceptionally good a founder is at their core competency. He warns against two common errors: passing on a world-class individual due to fixable weaknesses, and investing in a founder with no glaring flaws but no world-class strengths.
Relying on an established VC's past performance creates a false sense of security. The critical diligence question for any manager, emerging or established, is whether they are positioned to win *now*. Factors like increased fund size, team changes, and evolving market dynamics mean a great track record from 5-10 years ago has limited predictive power today.
