Marc Andreessen: Companies Should Wait Longer Before Being Acquired

Tech superstar Marc Andreessen spoke onstage at the Lean Startup conference in San Francisco with author Eric Reis. Here’s a liveblog of what he said:

Q: How were you so successful with Netscape?
Well, Netscape pivoted three times and that was back when pivots were f-kups. The project was actually de-funded by NSF who said it had to scientific applications anymore.

Q: How did you know you were onto something when you started working on the browser?
I kept myself on email for Mosaic customer service [even after I left the company] and emails started pouring in. We also go lots of licensing requests. When we released Netscape Navigator, we had product/market fit.

Q: People call me and ask if they have product/market fit. If they’re asking, it means they don’t right?
It’s sort of like saying, Did I just have sex? It’s a feeling. Someone once told me the key to being successful in life is to find a parade and jump in front of it, and it’s sort of like that. You spend a lot of time wondering is this going to work, but then when you hit product/market fit, you start to feel like Oh my God, this thing is running away from me [because there's so much demand].

Q: How do you have to change then?
It really isn’t a company until it hits product/market fit. Customers are like herd animals; they tend to move all at once. The demand feels like it arrives all at the same time. It’s at that time that the hiring has to start and international becomes really important.

Q: Were there certain predictors that you were about to get product/market fit?
There’s a small group of early adopters that really love it. Everybody else is laughing at the whole thing. It’s sort of like 3D printing; it’s going through that now. People just laughed at Twitter, people laughed at Google because it was the 35th search engine. So it’s a combination of mockery as well as a really enthusiastic group of early adopters. And when the employees at the company are really using a product and liking it.

Q: How to understand Dot Com crash?
It really affects how the Valley works today. For example, Lean Startup is a reaction to the prevailing mentality in the 1990s, which was go big or go home, which mostly meant go home. I think there’s a lot of psychological damage in people who went through it. I think all the Dot Com ideas were correct ideas, they were just early. Even the ones that were viewed as really crazy like WebVan and Pet.com. The market wasn’t ready, because still in the late 90s there were only 50 million people online, most of them on AOL dialup.

The bubble itself was only 18 months long — from the fourth Q of 1998 to the first Q of 2000. In 1998 was the Asian financial crisis. It was like a mini-version of what happened in 2008. eBay only barely got public funding during that period with what was almost at that time possibly the best business model ever invented. The Dot Com bubble was bad, but it was basically only 18 months out of 20 years [of the industry]. I get worried that it’s the boogie man that scares us away from big things. The good news is that the 20-something startup founders don’t feel this way.

Q: I hear that entrepreneurs are constantly coming into their offices, with the same old crappy pitches but with some “lean” lingo tacked on. Is that true?
Yeah, for a while “disrupt” was a big buzzword.

Q: What are some things that drive you crazy as someone who hears all these startup pitches?
First of all, not all ideas can be done lean, especially the ones that have the really audacious ideas. The obvious example is Macintosh. Workday was another a fat startup, but they’re basically going to rip all the PeopleSoft customers off. Elon Musk is everybody’s favorite entrepreneur these days, but neither Tesla or SpaceX could have possibly been done as a lean startup. I mean, you have to get the rocket into space! The lean idea shouldn’t scare us from funding the really big, ambitious projects out of the gate.

The thing that drives us crazy [at Andreessen Horowitz] is the lean mentality being used by startups to not take sales marketing seriously. It’s a field of dreams to say if we build it they will come. The theory needs to be extended to encompass sales and marketing. Facebook has a very serious sales force; Twitter is in the process of building a huge sales force.

The third thing we hear all the time is that everything is going to be viral. But the number of things that are really viral is very, very small. I mean, I’m totally in favor of the magic business model, but it ain’t easy to get there.

One of the big advantages of the startup model in the United States is that failure is acceptable on the path to success. But what we see a lot are entrepreneurs who give up too quickly. It’s sort of permission to give up, and to give up very fast. If you talk to successful entrepreneurs, even if their story has been written that they took off early, they say it was like chewing glass. If they’d quit after three or four years, they’d never have taken off.

People are a little too gleefully excited about failure. You want to preserve the good, you don’t want to have people quit too soon. I mean, Sarah Palin. She was governor of Alaska for two years during which she was nominated for vice president. Then she quit because she said it was too hard.

Q: You say Andreessen Horowitz is the long-term money in the [VC] market. How does that long-term thinking affect what you’re doing now?
Yeah, we’re 10-plus years on new stuff, and Warren Buffet is 10-plus years on old stuff, and that’s it. There are some VC firms that do take the long-term view, and I think that’s really special. Successful entrepreneurs all have in common that they feel that they’re too late, [which drives them to work hard.] Entrepreneurs really live in the future.

2012 is the year of SaaS, it’s tipped. People have finally gotten through issues of security and reliability and all that. Well, Marc Benioff started Salesforce.com in 1999 — it took 13 years! Microsoft started in 1967, but it’s real opportunity didn’t emerge until 1981 when IBM came knocking with the PC. In startups, a lot of it is timing. We see several companies come along with the same idea, and sometimes it’s the third company that’s actually going to do it and actually going to succeed.

Q: Where does the idea that lean startup means cheap startup come from, the idea that you shouldn’t raise too much money?
This goes to one of the main reasons I started Andreessen Horowitz. You see so many smart people in the Valley with such good ideas with so much potential. So many companies sell out too quickly, give up too quickly. I call it the puzzle of the missing campuses. You’ve got miles and miles and miles where there aren’t any campuses in the Valley. I think we have talent, I think we have ideas, but I think a lot of these things get taken off the table too quickly. They get taken off the table when they sell too quickly — they get product/market fit and then they sell too quickly.

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