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.
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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.
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.
When making early-stage investments, avoid the common pitfall of betting on just a great idea or just a great founder. A successful investment requires deep belief in both. Every time the speaker has invested with only one of the two criteria met, they have lost money. The mandate must be 'two for two.'
VCs often pass on great deals by overweighting the fear of future competition from giants like Google. The better mental model is to invest in founders with demonstrable "strength of strengths," accepting that some weaknesses are okay, rather than seeking a flawless profile.
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.
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.
VCs often pass on great companies by over-indexing on the theoretical threat of future competition from incumbents like Google. Andreessen Horowitz's post-mortems show this is a common mistake. The better approach is to invest in a founder's unique, "spiking strengths" rather than focusing on a lack of hypothetical future threats.
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.
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.
