Marc Andreessen on two ways startups shouldn't spend money
Just want to ask you about two different areas.
One has to do with [UNKNOWN] and one has to do with [UNKNOWN].
And what's going on in that stuff today.
So let's talk about San Francisco first.
You and I have talked about this in the past.
The culture around tech here in San Francisco and how welcoming it is to the tech community or not.
Yeah so I mean look.
I I think it's primarily still a good news story like I actually don't think there's a huge backlash.
I think there is a small backlash.
And I think it's a backlash worth acknowledging and worth dealing with and I think it's great you see people like Marc Benioff really stepping up and doing just like miraculous things for the city.
I think there's a lot of ways that the tech industry and the tech community can give back and can help kind of bolster the social infrastructure of the valley but I think it's primarily good news story.
I think there's a whole broad cross section of very thriving, very happy tech companies in San Francisco.
I would go long personally if I were in real estate.
I would probably go long Berkley and Oakland.
And then I would also go long I think the East Bay.
I think well for sure Pleasanton.
But I would also go long like Hayward and Fremont.
I think their value is gonna build out to the east over the next 10 or 20 years in a really dramatic way.
I think also over time that will relieve some of the pressures in San Francisco.
But your latest tweet-storm was about the fact that startups need to be a little more cautious about how they're spending their money.
And I guess my question to you is since you're an enabler of startups, or one of the enablers of startups, what is the takeaway we should be taking from that?
That they're not listening to management advice about how to be prudent.
And how to grow successfully from their advisors, who I imagine are representatives of your firm and others that are on there.
Or are you backing the wrong people who don't have the experience?
What is the takeaway from that?
Time will tell.
What I will tell you is the conversation that I brought into the public is the same conversation that we've been having with our companies in private.
And so, it, it, literally it's exactly the same.
If you ask any of the CEOs we've been talking to in our portfolio.
They'll all tell you that's what we've been telling them for the last, at least the last several months, if not the last, few years.
And it really, I actually agree with Bill Gurley a lot.
It really is a, discussion about risk and discipline.
So the general theory of how startups are supposed to spend money, is that as you spend money, you reduce risk.
And basically you spend a certain amount of money, you take a certain amount of risk out.
And then you spend more money, take a certain amount of risk out.
And what's just happened is the amount of money in the environment is just now so big.
And by the way, a big part is so much money has now arrived from outside of venture capital.
So, so many hedge funds, private equity firms, and sovereign wealth funds has shown up in the Valley with huge checkbooks and are writing giant checks to a lot of these companies.
The good news is many of these companies are growing and doing very well.
We just feel generally there's, it's just an attitude that has been developing, that basically says we can spend ahead of the reduction of risk.
And not in every company, right?
It is a very, you know, situation is, is very specific for every company.
But just in general, we feel that the discipline about risk is being lost.
Problem with that I mean one is just cash burn we think is just too high e e e e e at a fairly large number of companies but part of that is as a consequence companies are hiring too many people too fast the problem with that is it's not like you don't get a high quality company out the other side if you hire too many people too fast right because you **** up the culture if you hire too many people you can't assimilate them and then by the way some time you have to do a layoff.
One of the things I am completely convinced of is layoffs are always the fault of the people who did the hiring.
It, it's like you, you shouldn't have done the hiring.
Then you don't have to do the lay off.
And so the way to prevent the lay off is to not over hire.
Why do you think you have to make that conversation public?
If you were advising your companies as an advisor that's kind of a secret sauce message that you wanna.
Share with your your group of companies that you're taking successful, that's very nice of the PFA to the tech industry, but I'm just curious why you felt you had to do that kind of a PFA and not keep it within the
Well, it's an industry wide issue it's not anything that's confined to our companies or any particular set of companies.
It's an industry wide issue and it's sort of, it's a race, right.
Like for example, an example would be the fancy offices, right?
So, if the expectation gets set that in order to recruit you need to have the world's fanciest office than every company is going to need to raise money to go build a fancy office.
If, on the other hand, the expectation is, no we're not in this for the fancy offices, we are in this to build real substance and real technology, and you know, go back to the Amazon model, it doesn't matter if our desk is, you know, a used door on a couple of sawhorses.
The the burn rate across the entire industry is gonna naturally be lower.
And so there's kinda ration, there's a rationing effect that happens.
So I, I just felt like just talking to our companies was not going to have the same effect as taking the conversation more broad.
So too much cucumber water, that's what you're saying.
[LAUGH] Way, way too much cucumber water.
Well, thank you so much for your time.
I really appreciate it.
Sure, no problem.
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