
How Andreessen Horowitz Fumbled An Instagram Investment - joao
http://bits.blogs.nytimes.com/2012/04/20/how-andreessen-horowitz-fumbled-an-instagram-investment/
======
dalton
Anyone reading this article needs to remember to never be afraid of putting
yourself out there because you are afraid of failure.

I saw the market first, I created picplz, and I went for it. I was a huge
believe in the mobile photo sharing opportunity, and I went for it with all of
my heart. Clearly, picplz didn't win, but I have ZERO shame or regret for
doing my best.

When I read articles like these, which are about myself, my company and people
that I know well, I can't help but feel vitriol aimed at me for DARING to
create, launch and raise funding for picplz. I am not clear on what exactly
people want, an apology for trying?

The fact is, I saw the writing on the wall that we wouldn't win _early_ and
pivoted out of photo sharing which I had ~90% of my series A cash still in the
bank. It certainly seems like that was the right move, but all of this press
makes it look like pivoting was the wrong call(?) The press I read is written
in such a way that it assumed that the A16Z investment is dead and my entire
company should just be written off to zero today. That is bullshit. If I
started to take press like this too seriously I might as well just dissolve my
company and stop coming into work.

I say this to the hn comminity: never be afraid of failure. No one knows what
will happen. All of this arm-chair quarterbacking is a waste of time. Stop
reading this kind of crap and instead put your energy into doing your best
work. Sometimes you win, and sometimes you lose, but if you give yourself the
opportunity to win enough times, you WILL be successful.

~~~
michael_nielsen
I think you're reading something into the article that isn't there. I saw no
vitriol aimed at picplz.

~~~
sachingulaya
I read the article as being unnecessarily harsh towards picplz to bolster the
'fumble' that was Andreesen Horowitz's 4,000% return on instagram. This
article is definitely a non-article and could easily be changed around to say
"Andreesen Horowitz has done it again!".

------
larrys
"At that market capitalization, Andreessen Horowitz’s stake would be worth
$100 million — not bad for a $250,000 investment, but $200 million short of
the return it could have earned had it stayed the course."

Amazing that you can turn $250k into (possibly) $100,000,000 and in the eyes
of a NYT writer you have fallen short.

The writer will make a great parent.

~~~
redthrowaway
I'm really not sure I get her beef.

If I bought $1MM worth of AAPL in 2003 at $10/share, I'd have $57MM. But if I
bought it in December 97, at $3.30/share, I could have _$150MM!_ What an idiot
am I!

AH made out like bandits here; I'm sure they feel just fine about it.

~~~
larrys
"not sure I get her beef"

There is a saying in news business "if it bleeds it leads".

The negative angle draws in viewers and readers on certain topics and in
certain situations. My guess is that that she decided this angle would get
more views and interest.

~~~
redthrowaway
Given how the page fared on HN, she's probably right.

------
ianterrell
Extra, extra, read all about it! Firm makes wrong bet in high risk industry
and still comes out with 40000% return! Epic fail!

~~~
fruchtose
What a tragedy! Andreeson Horowitz only earned $100 million on a $250 thousand
investment. What amateurs! They might as well go work at McDonalds.

~~~
droithomme
I know, right?

For his next hit piece, that NYT "journalist" should write how Andreeson
Horowitz are losers because they failed to buy enough Apple stock at $8 a
share.

~~~
fruchtose
If Andreeson Horowitz invested in a company that produced a time machine, the
New York Times would criticize them for not using the time machine to go back
in time and invest in an earlier funding round.

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tptacek
It's helpful to know as an entrepreneur that, whatever "A16Z" (heh) thinks
about this particular instance, venture capitalists are, allegedly, as a
species, _way more motivated_ by fear of stories like this than they are of
the fear that their investment in you will come to nothing. When they need to
raise money for their next fund, nobody is going to hear about the investments
that came to nothing, but the obvious missed opportunities are going to sting.

This helps explain why they'll plow money into shoot-the-moon me-too startups
that have no discernable chance of success, but might turn you down even if
you have steadily growing revenue.

~~~
larrys
"fear of stories like this".

As a matter of fact, Fred Wilson on his blog the day after the deal was
announced was asked this by a commenter:

"I was looking for a lively discussion of the FB/Instagram deal today"

To which Fred replied:

"i'm not interested in that discussion really. somehow that takes energy from
me. i am not inspired."

As you said "obvious missed opportunities are going to sting"

[http://www.avc.com/a_vc/2012/04/life-liberty-and-blazing-
bro...](http://www.avc.com/a_vc/2012/04/life-liberty-and-blazing-
broadband.html)

------
dkrich
Is it just me, or does this seem like a pretty savvy investment by A/H? They
got their money into both companies, and ended up getting back (if the article
is to be believed), a 400x return on their investment. There was a time and
place where that was considered not too shabby, some might even say quite
good.

Nobody can maximize every investment. How often does it happen that anybody
maximizes their investment potential on any given deal? I wish I would have
bought Apple stock in 1998 instead of 2005, but I wouldn't say I "fumbled an
investment opportunity." When I first saw this headline, not knowing the
backstory, I thought this meant that they did something to piss off the
Instagram founders and lost out on the chance to put anything into the company
at all.

------
rexf
Was the NYT headline updated? It currently reads 'How Andreessen Horowitz
Bunted on an Instagram Investment'.

The piece describes how Andreessen Horowitz invested in both Burbn & Picplz.
After Burbn pivoted to Instagram, Andreessen Horowitz had to choose between
the two - since they competed directly. Andreessen Horowitz chose to go with
the company that they put money for photo sharing.

~~~
dkrich
Ha, it must have been, because the URL still says "fumbled."

------
sriramk
Also tells you how difficult it is to figure out who is going to make it big.
picplz had Dalton Caldwell, both an Android and an iPhone version and a
several month head start. You can't blame a16z for picking them.

Besides, it looks like they did the most ethical/default thing they could -
back the company they had already funded for photo sharing and avoid a
conflict.

------
bravura
_It was a calculated bet against Instagram and it left Mr. Systrom livid,
these people said. Instagram’s founders never discussed strategy with the firm
again._

Curious: To what extent can you avoid disclosing information to your
investors, once it becomes clear that they are competing against you.

 _But Mr. Systrom’s experience with Andreessen Horowitz taught him to choose
his investors warily._

Why? It seems like A16Z did the most ethical thing, which was support the
company that the original founded for this idea. When Instagram pivoted into a
competing position, why would they expect A16Z to back them and bury picplz?

 _By the time Facebook acquired Instagram for $1 billion in a cash-stock deal
a week ago, Andreessen Horowitz’s stake in the company had fallen to less than
10 percent._

If A16Z had half the seed round, then that means that the seed investors owned
20%, diluted. If Benchmark own 30% at the sale, that means that the seed
angels must have took >30% of the company at the $500K seeding. Is this
correct?

------
pcwalton
I'm personally sad to see what happened to picplz; they were the main option
around for Android at the time and I always preferred their low-key feel to
the more showy feel of Instagram. Competition is a good thing.

------
lpolovets
I'd hardly call a 400x return 'fumbling'.

------
droithomme
The article failed to convince me of the truth of the thesis proposed in its
headline. Seems more a hit piece than anything solid or impartial.

------
kposehn
I actually find this article rather unfair to all involved. It is quite clear
that the author seems to have it out for AH - after all, a $100m return is
freaking AMAZING for $250,000, and Benchmark made a far lower multiple for the
amount they invested.

In the end, I'd say the win goes to AH - they made a mistake, but also didn't
exactly lose either.

------
tzz
Why didn't he just invest in both?

~~~
eternalban
Because it would dilute the trust relationship between the investor and the
companies involved. ... "never discussed strategy again" ... That is not a
good vantage point to be in if you are investing in a company. How do you make
effective decisions if you are not privy to the entire picture?

"moral reasons" ... Give me a break.

------
zackattack
Marc ensured the market expanded with his wise bet. I doubt he has any
regrets. Who knows whether Instagram would have expanded unless they were
motivated to get to a point of turning their backs on A16Z. $ talks.

~~~
zackattack
oh yeah i'm sure that marc andreesen is in cahoots with paul graham and has
the extension to see your downvote..... way to curry favor there champ

~~~
zackattack
did not mean to imply that paul graham, of all people, would not respect
privacy. i was just trying to be satirical, and i guess my attempt failed.

