To maintain high-fidelity conversations necessary for good investment decisions, a16z intentionally split the firm into small groups. A group of 30 is a presentation, not a discussion. Horowitz believes the optimal size for a complex, truth-seeking conversation is seven or fewer people.
To win in a competitive market, companies cannot function as democracies. A single leader must have the authority to break ties and make final decisions, even if unpopular. Democratic decision-making is too slow and inefficient for a fast-moving startup environment where decisiveness is essential for survival.
Public markets are short-term 'voting machines' driven by powerful narratives, not underlying facts. This is why entire sectors, like SaaS, can be mispriced. An investor's opportunity lies in waiting for the long-term 'weighing machine' of actual results to correct the flawed story.
a16z's key innovation was separating economic partnership from control. Centralized decision-making enabled rapid reorganization and expansion into new categories, a feat difficult in traditional, consensus-driven firms where partners can veto changes that might reduce their power.
All sorts of business challenges and pivots are survivable. The single terminal failure is running out of cash. Horowitz cites Slack, which was near death after its initial game product failed, as an example. As long as a great founder has capital, they should not be counted out, regardless of current momentum.
When a16z introduced novel, entrepreneur-focused services, established VCs dismissed them as mere marketing gimmicks. This 'immune response' from incumbents prevented them from copying a16z's successful strategies, giving the new firm a significant and protected competitive advantage.
Don't start by trying to build a massive company. The most successful founders, from Dropbox to Meta, often began by solving a small, tangible problem they personally faced. This process of solving a real problem is the most reliable way to uncover a much bigger, more significant opportunity.
Effective company culture isn't defined by vague values like 'integrity' but by specific, agreed-upon actions—like response times or work location. An explicit standard of behavior prevents ambiguity and political infighting when the team faces challenges, because it's clear what is expected.
For decades, you couldn't catch a competitor with a two-year lead just by hiring more engineers. AI changes this. Access to massive capital for compute (GPUs) and data now allows teams to solve problems and close gaps quickly, making capital itself a primary competitive moat.
To rapidly build a powerful corporate network, a16z used a clever hack. Leveraging connections from their previous company's sale to HP, they got the weekly list of visitors to HP's briefing center and invited those same executives to their own. This asymmetric tactic allowed them to quickly surpass established VCs.