Andreessen Horowitz Part I

Transcript from https://podmenti.com/t/b8ee39d3c1d7308c

What do you think about playing the full Who Got the Truth song at the end?
At the end, I like that.
Yeah, it's so good.
Who got the truth?
Ha ha
Who got the truth?
Is it you, is it you, is it you
Who got the truth now?
Is it you, is it you, is it you
Me down
Another story

Welcome to Season 9, Episode 1 of Acquired, the podcast about great technology companies and the stories and playbooks behind them.
I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle based Pioneer Square Labs in our venture fund, PSL Ventures.
And I'm David Rosenthal and I am an angel investor.
Based in San Francisco.
And we
Are your hosts.
Listeners, David and I decided to open this season with the complete story of the firm that
totally upended the entire venture capital ecosystem a decade ago.
Andreessen Horowitz.
But as we started researching, of course, that meant telling the journeys of Andreessen and Horowitz themselves before founding the firm.
Which of course means telling the history of the web browser, the creation of Mosaic, the founding and eventual IPO of Netscape, which was the first real
Internet tech startup.
And of course the tumultuous story of LoudCloud and Opsware.
And
So much more than that that you don't even know, Ben.
Well this is great. This is the first time I've literally not opened your notes at all. Like normally we don't trade notes, but I have no idea what you've prepared.
And
Listeners the uh
Impetus for that is that this was going to be a one part episode until last night.
when David texted me and said, How about we do a two parter? So there are early things about Mark and Ben that I did zero research on and I'm excited to learn from David along with you all today. I'm like the old uh the legendary um
Chicago Cubs shortstop, Ernie Banks. Let's play two.
Well
I'm really pumped to do this one as a two parter. I think the history
of Mark and Ben is really important to understand the world views of both of them and how they were shaped by it. And I think for all of us,
working in a startup ecosystem that
was so shaped by the two thousand nine creation of the firm Andreas and Horowitz.
I think it's
Paramount to understand the things that shaped them because they have shaped us all. And I don't know, I'm I'm really excited because I feel like my investor psychology has already changed since starting the research into Mark and Ben.
Totally.
Can't wait to dive in.
Yep.
Well, listeners, two things to be aware of if you like the show. One is our Slack.
There is
awesome discussion that takes place on not just our episodes, but also the tech news of the day going on there.
There were now eight thousand strong, so you can come and join us at acquire.fm slash slack.
And two is the limited partner program. And this is where we drop subscriber only content, like our library of
over fifty interviews and deep dives on company building topics.
like venture capital fundamentals.
And you'll also get access to our LP Zoom calls with David and I. So you can click the link in the show notes.
or go to acquired.fm slash LP.
All right listeners.
Now is a great time to talk about a new partner of ours here on Acquired, Lagora.
The agentic operating system that is redefining how the world's best legal teams work.
Yep. It's sort of obvious that AI is gonna completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Ligora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?
So the founders did exactly what great founders do.
operate with obsessive customer focus.
They embedded inside a massive law firm.
For months.
They sat with the lawyers just watching how the work really gets done.
And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legor's Bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work.
And do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Lagora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product.
Legal teams get to maintain full control and transparency since they're still involved where judgment is required.
And Lagora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Lagora numbers essentially
speak for themselves. When they have a head to head pilot with their top competitor, they win 70% of the time. Lagora now has over a hundred thousand lawyers on the platform from twelve hundred legal teams in fifty countries.
And crazily, they went from one million
to a hundred million in ARR.

Eighteen months.
Mm.
truly insane numbers. And that is the real test.
Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client.
If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at Lagora.com slash acquired.
And just tell'em that Ben and David sent you.
Well, David, take us in and listeners, you know, normally this is where I would warn you that this show is not investment advice. David and I may have investments in the companies we discuss and the show is for informational and entertainment purposes only.
But this episode
All this stuff's pretty old. Like good luck investing in any of this defunct technology. We're gonna be talking about a lot of dead companies on this episode. Next time we'll be talking about a lot of live companies.
One.
Disclosure before we jump in here. I think this is the first time
I at least have done this on this show.
I have a new investing
vehicle that I'm not quite ready to talk about just yet, but I'm doing it with my buddy
Nat Manning, who's the COO of Kettle.
And should tell everybody that
A couple of the GPs at Andre Son Horowitz are
L Ps in that vehicle.
I don't think it has affected
my telling of the history, but everybody should just know that.
Go again.
Congratulations, David.
Thanks.
Super excited. Can't wait to talk more about it soon.
All right.
So
We start history and facts.
In
Nineteen sixty six.
In London.
England.
Not what you expected.
What's it been?
So this is not Mark.
Nope, not Mark.
That we're talking about here.
We are talking about Ben.
Who was born in
Nineteen sixty six.
In London.
England.
Ah, I did not know that. It was the sixties, the counterculture is in full swing.
In London you've got the mods and the rockers, the who, the rolling stones.
All that.
And
Ben's family that he was born into, young family.
Is living in
London.
At the time.
They're
American
Expats.
The husband of Ben's father.
Had come to London.
To work for Bertrand Russell.
The
Philosopher?
Philosopher, polymath, uh logician, mathematician. Oh wow.
So
The family.
Already had either one or two children. I'm not sure if Ben is the
Second child or third child.
But nonetheless.
In nineteen sixty six.
Benjamin Abraham Horowitz is born, of course, wouldn't grow up to become.
V.
Ben Horowitz.
So usually.
On this show on most episodes.
We were just kinda like
stop there with the family. Like, Oh yeah, this is the like milia that
Her protagonists were
Born into we can now move on to the people themselves.
This time we're gonna spend a little more time on
Ben's family.
His mom's name is Alyssa, then Horowitz and now Crowhamer.
And his dad is David.
David.
Horowitz.

may not mean much to probably most people listening
But some of you listening are saying, Wait, David Horowitz.
That
David Horowitz?
Yeah, I have no idea what you're talking about.
Yeah, well so
David was and is a radical political activist and very much a large
And still active part.
of American history.
Even though I think most people these days
Are not aware of it.
So at this time.
The reason he was in London is he was one of the leading young intellectual radicals
that was championing the new left at the time and the counterculture.
And they were in London. He was working with Bertram Russell.
protesting the Vietnam War and advocating for like world peace and
Worldwide nuclear disarmament. Oh wow.
So he was working with not only Russell, but
Jean Paul Sart.
Simone de Beauvoir, James Baldwin, Stokely Carmichael. Oh he is in the middle of the
Of
Everything happening in
The sixties.
So
This continues for a couple years, and then in nineteen sixty eight
David gets an opportunity he can't refuse, which is to move
Back to America.
and become the co editor of the magazine Ramparts.
Which was like
one of the leading publications of The Hippies in the Counterculture
They originally published Che Guevara's diaries.
It's crazy. And ramparts
Was based
In Berkeley.
California.
Which is how?
Ben Horowitz ends up growing up.
In Berkeley, California.
It's funny, I knew Ben grew up in Berkeley and I just didn't make the connection that like
Anytime you hear that someone was in Berkeley in the late sixties
you should ask like, Well what were they doing in the counterculture movement? Like what role were they playing and and how did they end up there rather than just being like
the way you would today, which is like, yeah, it's a little bit of a hippie dippy town, but you know, it's part of the Bay Area. It's part of technology. Nice suburb. You got the college campus there. Better weather than San Francisco. It was a little different back in the day.
Okay, so speaking of different
We know David's sort of already part of the counterculture.
When they get back to Berkeley.
Get this. He
Intersex with Huey Newton.
The leader of the Black Panthers.
And

very close with him and with the Panthers. And when I say very close, I mean like
Very close.
So he writes about them and ramparts all the time, helps bring them to national prominence.
The whole family, including of course young Ben, would go to the Black Panther church every Sunday in Oakland, the Son of Man temple.
Wow.
Crazy.
And you know, this is like a little bit certainly outside the scope of acquired, but just to paint the picture of like where Ben came from
The Black Panther party. Like if you're not
American or from the US and studied American history, like
It was one of the most powerful
Forces for
blackened civil rights in America's history and the whole family is right in the middle of it.
But
Unlike
Martin Luther King and the
Civil rights movement.
The Panthers did not advocate for nonviolence, shall we say.
Less about the civil disobedience, more about the disobedience. More about the disobedience. I didn't know this, but
It was actually
originally founded as the Black Panther party for self defense,
Oh wow. And the whole purpose of it was to resist
Police brutality against black people in Oakland.
That was the origin of the Black Panthers.
Wow.
I mean this was like wild time. So in nineteen sixty nine
FBI director J. Edgar Hoover
described the Black Panthers as the greatest threat to the internal security of America. That's how wild this was.
So
They're like right in the middle of it, including young Ben.
The Patty Hearst kidnapping, like everything.
So then in nineteen seventy four, when Ben is
Eight.
An incident happens which changes things.
Dramatically.
Very dramatically.
So
The Panthers
needed help with their bookkeeping.
And so Huey turns to David, who's sort of running this organization, Ramparts, says like
Hey, can you help me like we need bookkeeping though. If only they had pilot, like history would have taken a very, a very different course.
So David introduces them to Rampart's bookkeeper, a woman named Betty Van Patter. The Panthers bring her on.
Six months later.
Betty.
Disappears.
And a few weeks after that
Her body washes up.
A sure.
Across the bay in San Francisco.
Oh.
Wild. So the crime was never solved. No one was ever charged, but David and many, many others believed that she found out too much and uh Panthers had ordered her.
Killed.
Wow. So
You know, later Ben of course would write the hard thing about hard things and uh you know, live through all this crazy technology stuff. You just gotta imagine
He was eight and his family went through this. Wow. You know, a busted IPO doesn't seem so hard after stuff like this.
So
Anyway, we will move on and get to Mark and Netscape and Loud Cloud and Andrews and Horowitz now. But yeah, it's crazy and for
David. He does a
complete one eighty and ends up
Becoming an arch conservativist, he was one of the primary strategists behind
Trump's
political strategy for defeating Hillary Clinton.
in twenty sixteen.
Jeff Sessions and Stephen Miller were like proteges of his. Oh, I had no idea. David Horowitz Freedom Center is
One of the biggest
funders of Trump leading political ideology in America.
And crazy enough they still talk, uh, Ben and and David, they apparently they still have a great
Relationship.
There is a wonderful
New York Times piece that
We'll link to in the show notes, I recommend everybody go read about all this.
that came out a few years ago by David Straitfield about it.
But yeah, this family history is just wild.
That's fascinating. And it's so cool that family bonds can transcend
And not just political beliefs, but like
deeply seated ideological beliefs about the way the world should be.
Totally.
And yeah, that out of all of this, fifty years later comes Andreessen Horowitz.
Uh.
Okay, so back to Ben. Obviously
He like
Soaks all this in, it has a huge influence on him.
But he also wants to blaze his own path and get out of his dad's shadow, and he gets turned on to this other
revolution that is happening in the Bay Area.
In the seventies, which is
The computer revolution.
He ends up going to Columbia in New York for undergrad and studying computer science there, probably
wanted to get sort of uh away from everything happening in the the family life at that point in time.
He then goes to UCLA afterwards and gets a master's in computer science.
And
While he's there, he interns
At the legendary
Silicon Graphics.
Otherwise known as S G I
Led by
Tim Clark.
Jim Clark, who will come up later many times.
Oh, it's definitely gonna come up in the story.
And SDI is just legendary.
I don't think we've talked about them as much.
On
acquire, but
They were
you know, right alongside Intel and Microsoft and Apple
one of the big early computing companies in Silicon Valley
The current Google campus was originally Yeah, that's crazy. The SGI campus.
It's wild.
They did the
Not just graphical computing, but three D graphical computing. So they did the
Effects for tons of Hollywood movies like Terminator, Jurassic Park, the N sixty four, Nintendo
Video game console, which is gonna come back up later in the story. SGI made that.
They made the processors for the N sixty four. Really?
Yeah, so if you played Mario Kart back in the day.
You have STI to think.
Uh okay, the thing that I know that we're gonna talk about later about N sixty four coming back up makes way more sense with Jim Clark having the SGI background and SGI making the
Shit for that now.
So
Is there any ties between
Lucasfilm and SGI.
Oh that's a good question.
the University of Utah folks that ultimately became industrial light and magic.
So
Jim Clark was one of those Utah folks.
Uh along with of course Nolan Bushnell and Alan K.
I think that's right. I think that's right.
I don't know if there are any direct ties between Lucasfilm and SGI, although I'm sure they were using SGI's hardware for the effects at ILM at Industrial Light and Magic.
It was. It was uh Alan Kay went to the University of Utah
And graduated
with his masters in sixty eight. So it would have been that same time as Nolan Bushnell
All this stuff going on. So
Later.
We're now in the very early nineties.
Young man.
coming out of school, coming out of his master's program, he joins
S G I
He doesn't stay that long though.
After about a year, he leaves and he joins a startup that's coming out of STI.
And that startup kinda
Fails, but it's his first startup experience.
And then he moves on and he joins Lotus.
Ah yes, what should have been the way that we all processed words and numbers, but alas, Microsoft crushed them.
Yeah, what was it? Lotus one two three, I think.
Yep, and and Lotus Notes.
Lotus notes, yep.
So it's while Ben is at
Lotus.
That he hears about this new
Exciting paradigm.
Development. New piece of software.
Coming out of not Silicon Valley.
But the middle of the country, the Midwest, the heartland of America.
Illinois, we are talking about
Mosaic.
The mosaic web browser.
The N C S A mosaic.
In
Indeed.
Wasn't it originally X mosaic?
Ooh, I don't know that.
Yeah, it was originally released as a sort of
prototype piece of software originally only for Unix systems and use the X Window system.
And it was
sort of a common thing to denote it with an X in the name of the piece of software.
Uh
Well.
Well, we're gonna get into the name more in a minute here. But Ben here's about mosaic and of course it's
Celebrity Wonder Kind
Young
Brash founder?
I guess.
Question mark? Mark Andreessen.
So who was Mark Anderson, a man who
Needs no introduction, but
His background was, let's just say, pretty different than the uh
Million that Ben was growing up in.
So
He was born in Cedar Falls, Iowa.
Which is not a super, super small town, but he was raised in New Lisbon, Wisconsin.
Do you know what the population of New Lisbon Wisconsin is today, then?
Ten thousand?
Two thousand five hundred and fifty four people.
Wow. So Mark's father Lowell
was a sales manager for a seed company called the Pioneer Hybrid
international seed company.
And his mother, Pat, worked in customer service at Land's End.
Hank Land.
I think they would go on to become a sizable
customer of Loud Cloud, but that is in the future to come.
So
Mark you know, he talks about this all the time. Listen if you've heard Mark talk about his background.
He could not wait.
Yeah.
and the Midwest and computers and the internet were the vehicle he was gonna do it.
He says of his family, which he rarely, rarely talks about.
The one quote I was able to find is he says they were
Scandinavian hardcore
very self denying people who go through life never expecting to be.
Happy.
Wow.
Yeah.
Well,
Well, and it's worth pointing out too that like when you say this non traditional background, you alluded to him as this wonder kind.
And
That was just not true yet.
At this point in history, and we have uh Brian McCullough from the Internet History Podcast to thank for this. I binged like the first ten episodes of that podcast.
to prep for this.
But he brings up the point that
Mark was like an hourly worker at NCSA.
Oh yeah.
Who's getting paid six twenty five an hour?
Yeah, like no one recognizes his genius yet and the
innovation of creating mosaic, of actually mobilizing people to work on this thing was like
Hey
We have a lot of fallow resource here. We have some smart people. I have no authority, but I'm gonna wrangle the troops to try and do this with me.
Well, and I think if there's one thing that's
Young Mark Andreessen. And now
older Mark Anderson is very good at.
It is uh putting himself in the right
Environment.
To meet the right people and two.
Succeed.
So
You know we're referring to
the University of Illinois where he would end up going to college.
He was very intentional about
Deciding that.
he decided that he wanted to go to school A to study computer science.
And so he wanted to go to school with a great C S program.
That his family could afford.
And
B, he also wanted a place where he would have the opportunity not just to study CS, but to actually like work while he's in school on like cool stuff that's going on.
And of course.
Urban champagne.
Had
Not just great C S school.
But what we refer to a few times now, the National Center for Supercomputing Applications.
Was attached.
To it.
The NCSA.
So
Mark, when he gets to
Illinois.

In turning doing like work study.
At the NCSA.
And while he's there, so how do you like how does this kid, as you mentioned, you know, who like he's not yet
Mark Andreessen, how does he end up
Coming up with mosaic.
So
Well he's at N CSA.
They're
interfacing with all of the other supercomputing centers around the world, including like academic research, like particle accelerators.
Particularly
With Cern.
Over in Switzerland, the particle accelerator.
Which is where Tim Berners Lee is.
And that's where
Tim Berners Lee comes up with a set of standards like HTTP and all that stuff that
Yeah, he dubs.
The worldwide.
Web
And all the way across the world, like halfway across the world in Illinois
This kid working there.
Mark Andreessen, he hears about it and he's like, Oh well
That sounds very interesting.
Totally.
It's cool thinking about how this came to be'cause you got Tim Berners Lee there on one of the few
next workstations like the next cube that actually
shipped and was actually used by people'cause it was this crazy expensive thing that only went to
people working in academia, and of course this is sort of Steve Jobs' company before returning to Apple. And
It says so much about
Tim and the environment in which the internet and the world wide web was
sort of started that
It was on a next machine because it

Academia.
corner of the world.
frankly, so different than a lot of the startup innovation that is happening today. I mean a lot of the like
the frontier tech stuff comes out of academic labs, but
I think we often forget
Especially with how
Sort of
countercultural a lot of uh new things on the internet have become that it started in a very
A very closed way, honestly. You know, the original intention behind
all these set of protocols and the world wide web. Like it was supposed to be just for universities and research. So they could share research notes. Yeah. And it was very controversial what Mark

People didn't want to let the riffraff in. They thought it would dilute the quality of like this is supposed to be a pure thing about like conducting research and
I got this great quote from Mark. So that he gave this uh an interview in two thousand three that's talking about on starting Mosaic.
And he says, but the internet community back then, the key technical people didn't want the internet to become easy to use or graphical because that would pollute the environment. Only smart people could use the internet was the theory. So we needed to keep it hard to use. We fundamentally disagreed with that. We thought it should be easy to use and graphical. So you should be able to point and click.
Totally. Oh, it's so great. And like
It's really just because of my like he doesn't give a crap. He's getting paid six twenty five an hour over it. So he's like, Well, what's the worst that can happen? You know, I'll just code this thing up. He convinces uh Eric Bina, who's a a full time employee there to work with him and
code up a easy to use graphical browser to sort of open this up to everybody. It's like Yeah.
They'll fire me if it doesn't work. Who cares?
Totally. And this is the first playbook theme that I want to pull forward. And listeners are trying something a little new today, interspersing more of the playbook throughout the story, but
This is the very first time.
Mark runs the playbook of there's something right now that's only for some small closed group of people that's in an inaccessible way.
I think there's something very interesting to be done by opening up to the masses. And of course, there's no business model behind this yet. It's it's just let's let everyone use the internet.
And let's make that possible. And when you think about uh Andre Synhorowitz all these years later funding things like Clubhouse.
And investing in social media platforms like Twitter, like Mark did very early. Or hell, Coinbase.
Absolutely. It is very much this
Let's take something very esoteric and make it very available to everyone, and then we will figure it out later.
Uh this is the very first time he runs that playbook.
Totally.
And
The other sort of
Counterintuitive
thing or or going against the grain element of
Building a
You know, mass market browser for the web.
Was that this was not
How most people thought the internet was gonna go.
At the time.
At the time.
This is you know in the ear nineties, people are talking about the information superhighway. And and actually SGI was a big part of this. SGI was working with the cable companies.
To build like these
Internet enabled set top boxes to
Everyone thought it was gonna be TVs.
It was gonna be TVs and
Even worse.
It was gonna be the cable companies and the government in like private public partnership that owned all these pipes. Could you imagine? And that they were gonna control
the stuff that was gonna go on there and Americans were gonna access it through their televisions. This was a big platform with the Clinton administration when they were campaigning for the ninety four election was that we're going to be a big part of the information superhighway from the federal government.
And
It's fascinating to like zoom out a little bit. It makes sense that you have these like
big screens and you have fat bandwidth that's able to send perfect not choppy
uh high fidelity audio and video to TVs. And then you look over at this internet thing, which is only a thing for academic institutions. There's like 40 nodes or something at all. Like there's 40 servers period on the whole internet. And all it can do is send text back and forth like
No, you're not going to bet on that platform to be the way that this ends up coming to market.
Yeah.
Totally. Now to be fair.
To
the soon to be Clinton administration and in particular to
Al Gore, who uh would become Vice President Gore.
in the
Nineteen ninety one Gorbil.
which is allocating funding for all these various internet projects that are
Yeah.
They actually specifically allocate funding to the mosaic project.
At the
And C S A. So this is how
They get the resources to pay Mark six twenty five an hour salary for all the hours that he and Eric are gonna work on coding this thing up. So you're telling me Al Gorn did invent the internet. He did. Sort of. I guess he was kinda like
Mm.
DC who funded the internet?
Wow, Al Gore was Mark Andreessen's VC. You heard it here first. You heard it here first.
So
They do this. They create
Mosaic.
And in nineteen ninety three they open it up for anyone to download and use for free.
But importantly, and this is gonna come up again later.
They do not open source.
The code.
So the N C S A
Routines.
The code behind mosaic.
It's not free and available and open source, but anybody can download it and use it.
And of course people
Go nuts and do. In nineteen ninety four, Wired would write
The second phase of the revolution has begun. Don't look now.
But Prodigy, AOL, and CompuServe all are suddenly obsolete.
and mosaic is well on its way to becoming the world's standard.
interface.
Well,'cause those were all these walled gardens. I mean AOL like everyone should remember AOL was not the internet.
It was AOL keywords. It was pay to play. It was you could only publish the content on AOL if you did a deal with AOL, which is of course how they had this incredible
revenues that they were reporting and everyone thought this was the most unbelievable company ever. But
the internet was fundamentally something different. The world wide web was f something completely different that was
Open is probably not the right word yet, but used standard protocols.
And so
When you mentioned that it grew like crazy, I grabbed some stats on that.
In February of ninety three, when they released the first version,
And this is like super prototypey. There's some great comments from Mark Andreessen out on the
N CSA ex Mosaic listserve when they release version point five in January of ninety three that say things like
I'm looking more for feedback on design and functionality than bug reports right now.
Don't take the current code too seriously.
New releases will probably come out every seven to fourteen days until one point oh arrives.
The bulk of the program will be rewritten in C plus plus anyway. So there's like disclaimers all over the mailing list that he's distributing this thing out to. But the stats are crazy. It's like the early Ethereum.
Totally. So the next month there's twelve users in February of ninety three.
Within three to four weeks.
There's a thousand.
And by spring.
So like you got
January is that listserv, February is twelve users.
A month later it's a thousand by spring, so two months later after that, it had ten thousand users.
And then nine months later, in early ninety four, it has a million users. So like the very first thing that Mark Andreessen shipped is
had insane growth and perfect product market fit right out the gate.
Those are still pretty good numbers.
Today? Sure. Oh absolutely.
And this is in an era when
People maybe have a dial up connection.
Probably
People have PCs, but like not that many people.
Oh yeah, the TAM of the internet was super small. Like if you had a million people by early ninety four using your software on the internet, like I I don't know what percent of internet users that is, but it's meaningful.
You had like ten percent of all internet users.
Totally.
It was the killer app for the internet.
So
This is funny, right? So we're talking about it's nineteen ninety three.
This is also
Marks.
Senior year.
At Illinois.
So he graduates in spring of ninety three.
Probably when Mosaic is at the like, I don't know, ten thousand, twenty thousand ish.
User adoption curb.
He doesn't think that this is gonna be a thing.
He's like, Oh, this is like a cool thing I did during my uh as a internship during my uh college years. I want to move out.
to Silicon Valley, move out to California and get a job, you know, at like a
Real computing company.
And famously he talks about this. He felt like he already missed it.
He felt like Silicon Valley had happened.
Absolutely. I got the quote from this too. So Mark did a great interview on the Tim Ferris show a few years ago and he says, When I got to the valley in ninety three and ninety four, I thought I had missed the whole thing.
The great PC companies had gotten built during the seventies and eighties, and by the time the nineties arrive,
P C was done. It was finished. You could go buy one and it was great, but it was done.
People in the valley thought there was nothing else left to do.
And then there was this moment where I and various people wrapped our heads around the implication of the internet, which today seems obvious, but at the time it was very contrarian. If you said the internet would become a mainstream consumer medium that three billion people are gonna use worldwide for all forms of human activity,
You would have been laughed at, you would have been institutionalized.
Spoken only as Mark Anderson can.
To insert a playbook theme here. I mean.
This is
Always true. There is like no moment.
In
Silicon Valley.
Writ large.
in tech where this is not true. I mean, I remember graduating from GSP in twenty fourteen and commiserating with all my friends being like
We missed it. It's over. Like the valuations are so high. It's crazy.
I felt like this after shipping apps to the app store and now and then IOS five or six hit and suddenly there were a million apps and I was like
Shoot.
It's over. And meanwhile, machine learning had yet to arrive, crypto had yet to arrive.
There's actually a really, really great uh Mike Meritz at Sequoia has a
wonderful saying of this. I perhaps I don't know that this is actually like publicly written anywhere, but
That this is the biggest lesson that he took from Sequoia's Cisco investment, which he was like looking at the returns on Cisco and he was like, How are we ever gonna?
Top this. This is the top. We'll never do better. And I think he was talking with Don Valentine about it.
And Tom was like
It's always gonna be bigger. Like as long as Moore's Law continues.
Then just like
The
number and scale of industries that computing and technology can address.
is always gonna grow.
As long as that is happening.
So the next generation
is always gonna be an order of magnitude bigger than this generation.
That has played out time and time and time.
Again.
And of course, Moore's Law technically didn't continue, but like the number of cores for the same price that you can put on a single system on a chip has
sort of followed the same trajectory as Moore's Law. So even when we hit the upper limit on certain things in physics, the industry seems to figure out a way to continue to have the spirit of Moore's Law and the sort of price and power of compute continues such that
And this is another Andreessen saying, but
At some point.
the hardware limitations go away and compute becomes free. And then it's really all about
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That Ben and David sent you.
So okay.
Back to Mark. He can't even get a job.
At like a
big respected, you know, PC or software company.
He moves out to Palo Alto and he gets a job at
Enterprise integration technologies, which I think
was a
tech like implementation consulting firm like doing like people soft installations for companies. Sweet. You can imagine Mark Andrewson's fit with an environment like this.
So of course, but as this is happening, this is when Mosaic is rocketing up this adoption curve. So he kinda
It's this weird thing where he's this kid out of school working a
No name job, but he's kind of a celebrity.
And he's gotten kind of shoved out. And there's two sides of the story. I think the folks at NCSA would say that Mosaic was an official project, and Mark says they sort of self organized.
It became
very clear to him.
that the sort of bureaucratic leadership at the NCSA was gonna sort of take the lead on this and start doing the press interviews and they did own the license to the source code and so they
You know?
He was an employee, and it became NCSA's thing, not Mark Andreessen's thing.
Yep. Oh boy is that gonna come back.
So
Enter Jim Clark.
Of course.
Jim Clark.
Founder of Silicon Graphics, S T I
Utah, you know, mafia alumni.
He had just been
Left.
S T I You've been feuding with the board and he's out.
He's looking for his next thing.
But he has a non solicit.
From STI, so he can't take any of his people with him.
But he knows he wants to start a new thing. He's got a chip on his shoulder. He's like, I got another act.
I'm gonna prove all these people wrong.
He needs to go find new blood.
He hears about mosaic, he tries it out, he's like, Oh, this is amazing. This is the future.
I gotta look up.
This Mark Andreessen guy who's there on the about page is like mosaic by Mark Andreessen. So he he calls him up. He just call calls him.
And they get together, they have breakfast. Uh I think Mark would famously say this is like the one and only time he got up at seven AM in uh in his twenties.
So here's how it goes down.
They have breakfast.
And Jim is like Mark.
You should commercialise this thing that
You're doing with
Mosaic, like you gotta get out of this job and I think we should do it together. And Mark is like, Uh, I don't know, you know, I'm really enjoying this consulting lifestyle, doing software implementation it's people soft, I'm like, Hell no, let me get out of here. Let's go do this damn thing. Yeah, yeah, yeah.
No, that's not how it went down at all. Uh, you probably know this, Ben from the research, but you would think that that would be the now in retrospect obvious thing.
No
Jim.
does take a shine to Mark and uh he's like, Okay, great, I want you on my team on this new
Team I'm assembling.
I want some young blood.
But
The idea I have is this N sixty four Nintendo console.
that we've been working with uh Nintendo over at Silicon Graphics.
This is gonna be the perfect information super highway.
Node into living rooms.
This is how we're gonna win the internet. We're gonna build an online service
For the N sixty four console.
It makes sense. I mean, given the background, given the
the hype that was going on around N sixty four at the time. I I see why that was the belief.
I mean, I remember being a twelve, like
reading every single gaming magazine that would come out just trying to get details on
The N sixty four. I got mine on launch day.
I would have convinced my parents to pay.
Any amount of money for an online service.
For that console.
Which is so interesting that this was what they conceived of instead of the browser because
This would go on to become a huge business. You look at Xbox Live.
three, four decades later, this becomes an enormous opportunity. But at the time
This would have been absolutely the wrong move. And there's a another playbook theme.
Mark has a quote that says, If they had shipped a year earlier, referring to the N sixty four, we probably would have done that instead of Netscape.
Yeah. So this is the
History turns on a knife point.
The console gets delayed.
For a year.
And
Because of that they're never able to reach a deal with Nintendo and it's unclear that anything's
Gonna happen.
Meanwhile, they're both itching to
Get a company going.
So
They have a kind of brainstorming session.
Where they're thinking of other ideas for stuff to do. And eventually Mark is like well
You know this mosaic thing, like I did build that.
Um and uh all my buddies that I kinda did it with back in Illinois.
They're about to graduate too, or they already have graduated.
We could just go hire all them and recreate it and
Commercialise it.
And Jim's like Huh.
Okay, fine, let's do it.
So they incorporate
And they start the
World renowned.
Go on to be history making.
Mosaic Communications Corporation.
To commercialize mosaic.
I love that they were like, yeah, we'll just use the same name. We'll name our company Mosaic, even though that's a thing that's owned by that lab at the university.
Yep.
So obviously
N CSA was none too happy with this.
They threaten lawsuits, it's all back and forth. Eventually they
Change the name to
Netscape.
Communications.
And that is how it comes to be. It was actually Greg Sands who was the first PM that they hired.
Greg Sands of Costa Noa?
Greg Sands of Costanoa. Previously of Sutter Hill. Oh, awesome.
And
Greg Sand's little sister, Emily, was uh at Princeton with me and Jenny and was uh I think she was salutatorian of Jen's class. Uh
One of the
Absolute like top five most brilliant people I've ever met in my life.
So
They changed the name of the company to Netscape.
But the internal code name I was gonna ask you if you knew this. Yes. Yes. The internal code name that they use.
And they continue to refer to the actual
Browser code itself.
Is Mozilla.
Which stands
For mosaic killer.
Oh it's so good. It's so good.
It's so good. So
If you are wondering where Mozilla came from.
That's it.
Yeah.
So
As they're getting going, Clark
At this point in time.
His net worth from STI is he would say around like fifteen million or so. He puts in four million bucks. He finances the whole thing himself, hiring all these people, great people like Greg.
Which by the way, his net worth was fifteen million from SGI, not because that was a little company, but because
he had to take on a colossal amount of financing on very onerous terms in order to make that company succeed.
Totally. Yeah. That he would walk away with
Fifteen million from SGI after decades and fifteen million and a chip on his shoulder. And a huge chip on his shoulder. So he's wary of all these VCs.
that financed SGI. I think NEA was the big uh V C behind them and

So he puts in four million, but then he's worried about like well, yeah, this is really
Getting a lot of buzz starting to take off. We're gonna need more capital.
I don't have enough to finance it myself.
I guess I will bring on some venture capitalists. He goes and he talks to his old buddies at NEA.
But
Enter.
Kleiner Perkins.
And John Doer.
Here's about the deal.
And
Outbids any A.
Invest five milyen dollars.
in the fledgling Netscape Communications Corporation.
For twenty five percent of the company.
So twenty post.
Yep.
Wow.
Times are different back then.
So not too long after that.
Then

Steeped in
Happy
Berkeley
True.
Bay Area counterculture DNA friend Ben.
He's over working at Lotus at the time.
And he had heard about Mosaic, of course, been using it. He thinks this is
The future.
He hears about all this going on in Netscape and he's like
I gotta get in there. I gotta make it happen.
So he has a friend, get him in a connection.
He goes and he interviews and he gets a job and he gets put in charge.
of the enterprise web server.
Product line.
Uh.
Netscape.
And this is because there aren't web servers yet, right? What's the point of having a browser to load web pages if there's no software that can sit on servers that can create web pages?
Exactly.
So
This is gonna become like really big. But at the time
I don't know how Ben was feeling whether he was excited about this or not, but
Yeah.
Okay. I mean like this is how we're gonna like make money. We're gonna sell licenses for
the server business so that companies can create
websites and have commercial websites, but the big sexy thing is this browser that is getting millions of people
Using it.
So it was kind of this part of the company that was like, Yeah, like necessary. This is how we're gonna make money. And it is a beautiful time tested business model. Like give away the consumer thing for free, get as many people on that as you possibly can. It's actually kinda the first
real example of aggregation theory.
Netscape ends up becoming
powerful in the ecosystem because they're able to get all the internet users using it and thus then
uh sort of apply pressure to businesses that if you want to create great websites, you can do so and we promise it'll be compatible with Netscape, the browser that everyone uses. So you should buy these tools from us.
It makes a lot of sense.
Yeah. And really I think only came about because of the
history of mosaic being part of N CSA, like if
I don't know, some company like Microsoft say were to otherwise have gone out and created a new piece of software like they did with Word or Excel or PowerPoint that they bought.
Consumer licenses.
Yeah, natural thing you do. You put it in a box, you put it on a C D, you shrink wrap it, you get it into Comp USA, and you would sell that sucker for
fifty, a hundred bucks to every consumer that walked in the door.
Not
The route.
That the browser took to its great advantage.
Which is fascinating,'cause that affected
Everything henceforth.
I've never paid for a web browser.
you could make an argument people are paying for Brave in different ways or I'm sort of people pay for specialized Bowser, but like it set the trend that you do not pay to get access to the web.
Yeah.
Totally.
So famously.
People at Netscape would talk about how we invented internet time and that it was this parallel universe that was accelerating faster than
Than reality time.
By August
Nineteen ninety five.
So we're just sixteen months after the company starts. In April ninety four. In April ninety four.
Netscape hasn't
Eighty percent.
Market share.
Of
web browsers in the world.
And they decide.
Jim Clark pushes them that they're gonna go public.
And they've successfully killed Mosaic.
At this point.
Right.
I don't know, twelve months ago.
The other thing that Mark Andreessen created had
Close to one hundred percent of the market share. Which is wild.
All right. Well, it turns out they haven't totally killed Mozilla. Okay, so sixteen months you're talking from founding to IPO, like any good tech company, you know? Right.

So
You know, the bankers Morgan Stanley and Frank Quatreone and Mary Meeker on the analyst side are taking them public.
Absolute killers.
Killer superstar tier. Frank Quatron of the Amazon IPO. Mary Meeker of Bond Capital and famously the Kleiner Perkins State of the Internet.
Yep.
Yep. The people who would go on to do unbelievable things took this company public.
Totally.
So they're not quite sure how to price that. I mean, nothing like this has ever happened before. So
They decide they're supposed to price at
Fourteen dollars a share.
Which I didn't do the exact math, but that would be
Roughly like, I don't know, five, six hundred million dollar market cap, shall we say?
So like
Astronomical at the time, I mean
twelve months ago this was like a twenty post uh series A that Kleiner did.
So they're thinking fourteen dollars a share the night before.
Clark, remember he's like he's pretty salty from what he walked away with at STI.
He pushes them to up the IPO price what they end up pricing at the night before to twenty eight dollars a share.
The next day, the stock
Doesn't open.
Because there is so much buzz.
about this company. Like obviously the institutional demand is, you know, high.
And famously.
Institutional investors.
were kicking themselves for having missed out on Microsoft a decade earlier and how big that became. And so the hype is like this can be the next platform. This can be the next
Microsoft.
But meanwhile they've got millions of
People like
Moms and pops and kids.
using this thing on their home PCs
They all hear, you know, in the news that
Netscape is going public. They're using Netscape. They want retail wants it on the IPO. So famously You're telling me there's gonna be a pop?
This is like the origin of the pop, the IPO pop, uh or at least the extreme IPO pop.
So famously Charles
Schwab.
Yeah.
Brokerage.
They had to change their phone systems leading up
to the IPO.'Cause remember, there's no like internet brokerages at this point. You can't
Place orders online.
E Netscape.
So they change their
phone system that when you called your broker at Charles Schwab
You would get a message in the couple days leading up to the Netscape IPO that said, Welcome to Charles Schwab. If you're interested in the Netscape IPO, press one. Press one.
One. Oh my goodness.
So there is so much demand, it takes hours to open up the stock on the day the IPO. It opens at seventy five dollars a share.
Wow. Remember the bankers were like, I don't know that we can go up to twenty eight the night before. So they thought they were gonna price at fourteen. The bankers reluctantly IPO'd it at twenty eight.
And then
the first retail trade happens at seventy five.
Seventy five, yep.
It falls a little bit during the day, but it closes at fifty eight dollars a share.
Giving
the company a three
Billion dollar.
Market cap.
Just insane.
Totally insane. I think Microsoft was about ten billion at this point in time.
I remember right.
And it's worth saying a few things. One, this absolutely kicked off the dot com bubble.
This was the moment that it started.
There were a couple of internet IPOs before this, but this is the one that blew the doors wide open, made valuations not matter, and created four and a half years of absolute
madness from this point forward.
But
Let's keep
had an unbelievable growth trajectory, not just in users, but in revenue. Like in the Ben Horowitz corner of the business, revenues were doubling every quarter.
Which means
They were 16Xing revenue year over year.
Well, they'd only been around for five quarters. Sure. But that a sixteen X year over year run rate.
On revenue? They did seventeen million in revenue in the first six months of nineteen ninety five alone.
Which like, you know, for a company that
Entered nineteen ninety five being what, eight, nine months old?
And then

what call it run rate fifty, sixty million revenue in that first
Full year of existence.
That is very impressive.
Yeah, for sure.
The other thing that's worth mentioning here is
that it was unusual for companies at this point in time to IPO without being profitable.
And so people were sort of like bankers were making this exception of like
Well, this one's gonna be hot, even though the company's not profitable. Whereas now you look around and it's
absolutely the minority of the time that a company is profitable before the public is willing to uh take on the risk of continuing to finance that company. So it's just funny how how much things have changed. I mean it really the Netscape IPO, this was like a cultural
Moment.
For tech for
The world, for finance, for everything.
Funny story, this was
Only six days before
the launch of Windows ninety five. So this is the most like interesting month ever in the tech industry to this point.
And if there's I I mean, this must have been in the risk factors of the IPO perspectus, I didn't look it up. But if there is one
bare narrative on the Netscape
IPO
It's Microsoft.
Totally. Like everybody knows Microsoft is you know they control Windows, they control the operating system of ninety-five percent of the install base of
PCs in in America, you know, in the world at that point in time.
You know, what are they gonna do?
But nobody pays too much attention to it and famously shout out to Brian McCullough for finding this and calling it out.
Around the IPO, and Dresson gives an interview, Mark gives an interview.
And says.
famously that uh you know ask for these worried about Microsoft and competing.
And he says I'm not worried about it.
Netscape can become a company that will turn Windows into a quote
Mundane collection of not entirely debugged device drivers.

Uh oh. Well, pride comes before the fall, as we all know.
Obviously, you know, this is Microsoft in the nineties, which is like absolute killers. Pre DOJ. Pre DOJ, which happens because of all this.
So in May of that year, you know, Bill Gates
saw this happening. He saw Netscape. He saw
where this was gonna go and in May of ninety five he had written
The internal
Internet Tidal Wave Memo.
Oh, and for anybody who hasn't read that, it is just worth reading in its entirety to
understand one the genius of Bill Gates, but two
To understand the context of that time
even Bill Gates, like even Microsoft who was so steeped in this stuff
Their strategy was the information super highway.
They were long all this stuff, interactive TV, but
They, just like most other people, did not predict that this low end disruptor, the internet, based on text being sent over HTTP and ooh, images in line that Mark Andreessen managed to get into the browser too, that that actually was going to be the thing. And it's not until early 95 when he pens that memo
where it becomes obvious to even the smartest, most well positioned people in the whole tech industry to react to this.
But once he realizes
And writes that memo.
Oh boy, is it ever game on.
Guns out.
It says you know this is
Strategic priority like number one of
Company.
We're gonna
Compete here and we're gonna
We're gonna win.
So
Turns out.
They actually have the perfect
Strategy.
To kill Netscape.
Already
In progress.
Within Microsoft.
Which is that back in nineteen ninety four
Thomas Reardon.
Famous.
Microsoft employee and then would go on to be founder of Control Labs, which Facebook acquired a couple of years ago.
He had actually licensed he was playing around with, you know, he thought browsers were interesting. This was gonna be a thing.
He had licensed for Microsoft.
Some code for a browser from a little company.
Called Spy Glass Inc.

In Illinois, in Urbana.
Champagne.
Why was it located in Urbana Champagne?
Because it was the commercial entity.
Started by the university to spin out
And commercialize the IP.
they developed at the NCSA. Including
The mosaic web browser.
Mm.
So
Microsoft's got a license.
To the mosaic.
Web browser.
They're like well.
Mm.
We've got this license.
we could use it and and the terms of the license actually are that we pay spyglass, you know, a a portion of the revenues that we make from distributing this thing.
Well what if we just bundle it into Windows and we give it to everybody for free?
Oh my God.
Cold.
Killers.
There actually ends up being a big lawsuit about this, a spyglass who's Microsoft and it's like, Hey, you're giving this away to like hundreds of millions of people and you're not paying us anything'cause you're not charging for it.
And classic Microsoft legally they're like, Hey, look, like we savily negotiated an agreement with you and you know, sorry, it's your fault that you didn't anticipate the way that we would go on to distribute this thing.
Famously.
They run this playbook and done the same thing with DOS.
Back in the day.
This is worth a quick sidebar, because this is absolutely unbelievable and is part of the reason Microsoft got sued. But Microsoft had a deal in place
Where
In order to
use DOS at all to license DOS from them. If you're uh an OEM, you know, making computers.
You
had to pay them
Whether or not
You chose
to use DOS as the operating system on that PC.
It was a
Huh.
CPU shipped license. So if you're a PC manufacturer, in order to get access to DOS,
Microsoft's like sure we'll license it to you, but
we're not tying the amount of money that you owe us to the amount of computers with windows on it. It's the amount of CPUs you ship period. So then of course the incentive there is for the OEM to say, well, we're gotta make the most of this license since we're getting charged for it anyway.
They put Windows on everything they ship, and that is how Microsoft became the dominant platform with DOS.
where then every application became written on top of DOS because every CPU had DOS on it.
Yeah. Well, and famously the Microsoft did not develop to us.
They did a very similar deal. They licensed it.
From another Seattle company.
Yeah.
Another story for another day.
God, they were killers. So
The net of it is even after the lawsuit, they pay a grand total, Microsoft does.
Of eight million dollars to spyglass, which will go back to the University of Illinois.
The N C S A in Illinois get eight million dollars.
For mosaic.
Which becomes
Internet Explorer. That's right. Mosaic.
Which you know, Mark and Jason and Eric Bina wrote at NCSA.
The IP stays
at NCSA in Illinois, spun out into spyglass.
Licensed from Microsoft, that is Internet Explorer.
And for anyone who was thinking, geez, how did Internet Explorer launch so quickly after Microsoft needed to catch up and create a browser
This is how they did it.
Yeah.
So people know that this is happening and Netscape knows.
That all this is going on.
Meanwhile, Netscape at this point is helmed joining before the the IPO was uh a new CEO, Jim Barksdale. They brought in sort of a professional CEO operator. He was the former COO of FedEx. He came actually from McCaw Cellular and ATT before that. They have this sort of grizzled industry veteran at this point because
Even Jim Clark, for all of his executiveness from SGI for the IPO, Netscape actually did want this sort of like robust professional public markets CEO.
So
Everybody knows this is going on.
But
Netscape thinks and the market.
Thinks that
Okay, you know, Microsoft's now they they've got this Internet Explorer thing, they licensed Mosaic, they're gonna run the Office Playbook here.
They're gonna sell this at Comp USA and you know, you're gonna buy it and blah blah blah.
And then as you said, Ben, two weeks after the Netscape IPO.
They launched.
Windows ninety five.
And
Not fully bundled in then, but they say that there's the uh Windows ninety five plus
Pack.
An Internet Explorer is
Bundled.
Into it.
For free.
And of course
This would eventually very quickly
Internet Explorer would just be bundled.
For free directly into every copy of Windows ninety five.
And then Windows XP.
All of a sudden Netscape.
is now forced to compete with free.
And bundled.
Brutal. Every operating system, basically, on the planet.
Absolutely brutal.
Totally brutal.
So
Now.
This little division that Ben Horowitz is running, the Enterprise Server Division. That becomes
Hugely more important. This is the only part of the company where they can even like conceivably compete.
Against
Microsoft and this becomes like major strategic initiative at Netscape.
We're gonna focus on selling.
Enterprise server products.
And of course the enterprise server products have to produce
web pages that are compatible with Internet Explorer, because that's now what everybody is using. It sucks. Oh, it's so so brutal.
So
Famously they start scrambling, Ben and the team start scrambling.
They're gonna
make the product way better than Microsoft server product.
They're working on a bunch of new features. They
Line up a big
announcement event in New York City.
For March.
of nineteen ninety six.
Uh about the new version of the product.
And famously, two weeks before the event,
Mark.
ends up giving an interview to
Computer reseller news.
Of all publications.
Where he just reveals the whole thing. And Ben sends an email to Mark and uh the email says
one line, I guess we're not gonna wait until
The fifth to
Launch the strategy.
Mark responds. The email was just to from Ben just to Mark. Mark responds, copies in Jim Clark, copies in Jim Barksdale.
And says quote, Apparently you do not understand how serious the situation is. We are getting killed, killed, killed out there. Our current product is radically worse than the competition. Competition being Microsoft. We've had nothing to say for months.
As a result, we've lost over three billion in market capitalization. We are now in danger losing the entire company and it's all
Server product management's fault.
Next time, do the effing interview yourself.
F you
Mark.

Yeah.
Uh
Reading this email is uh like in print. And of course we're being family friendly here on the air.
Yeah, he didn't say it.
F U comma Mark.
I I just can't imagine signing an email that way.
Here's the best part.
That email was written.
The very same day that the Time magazine cover.
Came out. The barefoot no the barefoot Mark Andreessen on the cover of Time Magazine, barefoot on a throne as the throne of the next new Silicon Valley King.
Wow. Mark would later say about this whole uh
Escapade quote, This is why I should not run a company. Yeah. No kidding. No kidding. Maybe you should be a venture capitalist instead.
Oh boy.
Wow.
That's actually a good question. In Mark's entire career, including the Loud Cloud story that we're gonna go on to tell later, has Mark ever been the CEO of a company?
I don't know. Was he the CO of Ning?
He was the CEO of Ning, you're right.
Okay, so once.
We'll get to that. But c it's very interesting that all the biggest successes he was either effectively the co founding CTO or a board member or the venture capitalist behind it.
And you know.
Not the CEO of uh
Any of the most successful stuff he's done.
Well, this is gonna be the great
I don't want to say lie'cause it's not a lie, but the sort of um
Posturing uh from one of the key elements of the beginning of Andrews and Horowitz, uh, which was their motto that, you know, all the general partners here need to have been
See us.
Like half of the first like five or six general partners had never been CEOs. Right. There's a lot of credibility behind that they were strong operational leaders and executives, but
Yeah.
Absolutely, like Jeff Jordan led the PayPal acquisition and ran PayPal within eBay.
He was not the CEO of eBay, but like I I would take him on my board. But yeah, that's funny.
Well, I think this is a good point before we get into like the ninety six, ninety seven, ninety eight continuation of the browser wars, what happens to Netscape.
And I'll leave it there for the moment.
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All right, well, David, so we're in the browser wars, Microsoft just blew Netscape out of the water.
What's going on for Netscape now?
Uh such a tragedy. I mean
That year of the IPO in nineteen ninety five.
This is the thing, like this actually is a really great company. It did eighty five million in revenue, Netscape did in
Nineteen ninety five.
And then in nineteen ninety six it did three hundred and forty six million in revenue. Wow. And then five thirty four the next year.
In nineteen ninety seven. Like
People like love to dunk on this now as like
Mania, you know, IPO Mia, unprofitable, blah, blah, blah, tech bubble, like
It was for real.
But
The stock
once Microsoft strategy, bundling strategy became obvious here.
in December ninety five, I think which is when they announced that it was gonna be bundled into all copies of Windows ninety five going forward.
The stock had peaked.
Then at a hundred and seventy one dollars a share.
Which is, you know, even hugely up from where the IPO was.
But uh it it never got above that. It was just kind of straight downhill from there.
uh unfortunately. And then in nineteen ninety nine, finally, uh famously Netscape
sells itself to AOL for four point two
billion dollars.
But it's an all stock deal with AOL.
Yikes and uh that's pre uh Time Warner merger.
So who knows by the time shareholders actually ultimately got liquid on that, what they were able to get out.
So Mark and Treeson.

become CTO of AOL. I love this. You can imagine
How well that's gonna work out.
The funny thing is like he's not actually responsible for any day to day operations. He's kind of like chief futurist at AOL.
I think his role is forward looking technologies or something like that. He only lasts until like September of ninety nine.
When they
Like right ahead of the of the Time Warner deal. He's like, Yeah, I am I want no part of this and leaves before that.
Yeah. Oh wow, I didn't realize he didn't even stay a year. No.
So I wonder if you forfeited some
Ernest Elm, or maybe he was just like the stock is gonna be worthless soon anyway. Probably.
I'm out. Wow.
So
Ben, though.
This is gonna become very interesting. Actually
This
Deal.
Becomes
huge for the next chapter and ultimately for Andreessen Horowitz, the firm.
So Ben becomes the VP of AOL's
E commerce.
Division.
And
What?
He ends up doing is
Him and and
Pretty much the whole old server team from Netscape.
What he figures out that they
ultimately are tasked with doing
Is
That all of the brands that are selling
Trying to sell on
A O L within the A O L word walled garden.
Yeah, this is
Nike, this is L L B and this is Land's End, like we're talking about, you know, all these
Retailers.
And CPT companies.
They want to sell but
They're not internet companies.
They don't have like
E commerce.
apps and servers and all the infrastructure that they need to make this happen. So AOL can help them.
But
They gotta go stand up like surfers and
Data centers for all of these.
Customers. And that's what
Ben's team.
ends up doing.
Quickly.
He realizes like
There's actually an opportunity here. Like AOL's gonna do this.
for their partners selling on AOL.
Which again is not the internet. Or at least is not the web.
It's not the web, yeah. It's the internet, but not the web.
The web is
You know, I I I know that this is where the
the whole market is and is going to be in the future.
These companies, Nike, et cetera.
They're gonna need help.
Doing the same thing for their web applications.
Why don't we go
Start.
A company
Where we can operate this infrastructure.
for all these companies that are not technology companies.
And then they can just host their websites and their web applications.
on our infrastructure. It's kinda like a cloud. Like a cloud of internet infrastructure that you can just
deploy your applications to. You can dynamically spin up and spin down these like virtual machines, David. So not even like owning your own server, but like having virtualization across multiple servers that scale elastically as you need them.
Yeah, I mean that's kind of a big idea, right, Ben?
Wow, at in ninety nine, that feels a little ahead of their time.
Yeah, maybe a little ahead of their time.
But
They like the idea so much.
That they move back to Silicon Valley, they leave
D C where A O L was based. Actually I don't know if they ever
move there if they stayed in Silicon Valley.
But they leave AOL and they start the company.
They call it
They really want to embrace this cloud concept that they're pioneering. They call
Loud cloud.
Ooh yeah, I can't wait to get into this. I do want to close the loop on a couple of Netscape things, though, before we move into the LoudCloud chapter.
So I was wondering
First of all, why did AOL buy Netscape? Like if they're getting wrecked by Microsoft, why are they
giving four point two billion dollars of their stock.
Is it A?
'Cause they knew their stock was wildly overvalued and let's say it's 10x overvalued. Eh, what's four hundred million dollars of actual value to go and pick this company up?
Which what we now know about the way that they were motivated to do the Time Warner deal to basically do a stock swap for a company whose stock they felt actually had real intrinsic value is
It makes a lot of sense that they would wildly overpay for this sort of pseudo defunct Netscape, even if all they got was the people and some technology behind it.
So that's one explanation.
The other would be
Basically to get a bargaining chip against Microsoft in case it
became relevant for them to try and be less dependent on IE to have a browser of their own that they could bundle in and distribute.
There are other people who believe that AOL was interested in NetCenter, which is basically Netscape's web properties, which drew a lot of the traffic. It's sort of the like MSN play that Microsoft had.
to be the destination website.
So that's sort of the reasons why AOL could have
been willing to part with four point two billion dollars of their stock to do this.
Now if you trace it all the way through to today
I really have been trying to figure out well.
What happened to like
the Netscape brand and what happened to the Netscape IP.
Well the brand is an easy one to trace.
That
Stayed with AOL.
until they ultimately were bought by Verizon.
So uh the
Big red check mark Verizon owns the Netscape brand today.
But somewhere along the line, the brand actually got separated from the technology, the bundle of all the intellectual property and everything that Netscape was, which did need a new name, because they couldn't use the Netscape name anymore because that brand was owned by Verizon.
So that got renamed New Aurora Corporation.
Which
A well
Sold.
To Microsoft.

Sold them again.
To wait for it, David.
To Facebook.
Oh yes.
Oh my gosh. I'm so glad you found this. So this is from Jamie Zwinski or JWZ, who was a an early employee pseudo founder.
I think it many credited him with being a founder of Netscape. He has this great blog and crazy sort of bar and concert venue in San Francisco called the DNA Lounge. He writes
The former Netscape company is currently a non operating subsidiary of
Facebook, still known as the new Aurora Corporation.
The Netscape brand remained with AOL.
Wow.
How crazy is that?
That's so crazy. I'm so glad you paused us because
There's another.
thing we gotta talk about coming out of the Netscape ash.
Mozilla, of course. Yeah. So I didn't realize this actually happened
Before the AOL
acquisition. They open sourced in nineteen ninety eight, I believe. But yeah, you're right, before AOL, they open sourced all the browser code.
Ironically, like it's so interesting that Mozilla, the codename of the mosaic killer is
ended up becoming the name of the foundation who ended up stewarding the open source code project, which of course then created Firefox.
So out of the ashes of the
Sort of uh
Duplicated without ever looking at the code.
Netscape, which kinda came from Mosaic. You then have Mozilla.
And they did name the browser Mozilla for a while and had a separate browser called Mozilla, which was compiled from similar source code.
And then Firefox.
Which was a whole new thing, right?
There was some code in common with the original Netscape browser. But it was very different.
Firefox, when it first launched, I remember this, had the search bar
in the browser, which was a concept they borrowed from opera.
But that was not
In
Netscave.
Correct.
And it was in the top right, it wasn't the omnibar that Chrome pioneer, it was sort of that separate
Search window.
to me now knowing all this lineage why user agents have always been such a mess.
This is gonna date me. But if you've ever written
raw HTML code and needed to do a user agent check because you need to figure out if
it's I and you need to account for some three stupid pixel offset that they have that shouldn't actually be in there, but the rendering engine sucks'cause it's licensed from whatever old mosaic thing.
That's actually that's an unfair criticism. The real reason why it sucks is because they had such dominant market share that Microsoft could do whatever they wanted, deviate from spec, and just say, eh, everybody's using our stuff anyway, so who cares what the World Wide Web Consortium says it should do. The truth is what we say it is.
So anyway.
If you ever do these user agent checks on the strings
It has like every browser name under the sun listed. So if you're doing like a string search.
You're looking and you're like
What is this Mozilla slash Firefox slash Netscape slash blah blah blah? And it's because it all freaking comes from the same original branch.
And all these different browsers are competing against each other, but
There's kind of only
Two major lineages.
There is the mosaic lineage and then all those engineers left and without
looking back at the old code, they wrote new code called Mozilla, and everything is basically either from Mosaic or Mozilla.
And there's been different stuff over the years with WebKit and with whatever
other yeah, I don't know where opera is derive from, but
It's amazing how much of the browser market share over time really just comes from those two.
Yeah.
And it all
Still funnels through to
Today.
Yep.
Which is
Crazy.
Yeah.
It's so fun to actually
have the right excuse now to be able to tell this whole story on acquired. Right. Like it always felt like Netscape was kinda
There was a point in Acquired's life where we would have done a whole episode on Netscape.
But now it's like Ah I don't know that we can do that and
This is the perfect vehicle.
I'm so glad to do it.
Totally. Well, thank God from the lessons of Netscape and uh Loud Cloud, which we're about to go into
Became the
the ashes upon which the phoenix of a landscape changing venture firm would come from. So we have the excuse.
The Firefox adventure firms, shall we say.
I mean, honestly though, after the financial crash when all the funding
Like it is not crazy to call it a Firefox or a Phoenix or whatever in founding a venture firm in two thousand nine and deploying capital the way they did. I know I'm jumping ahead. I know we'll get there.
Absolutely.
If you want to be really nerdy, you could call it the Thunderbird of
Better friends.
I used to use Thunderbird. I thought it was great.
Yeah.
Uh.
Okay.
So
Back.
To the story.
Ben and his server team, they've realized this market opportunity. They've got this idea for
A cloud.
Computing cloud infrastructure.
So he hooks up.
With two of his core team, Tim Howes and Sick Ree.
They leave AOL.
They go back to Silicon Valley, they're like
We're doing this. And it's still nineteen ninety nine. The bubble is still quite inflated at this point.
And there is a lot of hype.
And
Everyone's drunk. Netscape IPO'd with great revenues and great growth, but now everyone's just drunk.
Yes.
So
Immediately they want to get Mark involved, of course. Like who wouldn't want
Mark Andreessen involved in something like this.
Mark totally gets it. He's like yep, this is a
Big idea.
And actually this is amazing. At the press briefing for the launch of Loud Cloud.
Mark would be there and he would
Use.
in trying to describe what this concept is, this cloud infrastructure concept.
He would use the very same electricity metaphor.
That Bezos would then use.
Eight years later describing AWS at the Y C event. And what is the metaphor?
So Bezos is a
analogy that he used.
Was German

used to produce their own electricity to
mash the hops and do what they were doing in the distilleries.
And then they hooked up to the grid.
And just used electricity from the grid.
And the innovation they realized is
The electricity doesn't make the beer taste any
Better. There's no reason why they should create the electricity.
And the whole idea of clo infrastructure is
The same.
Thing.
renting your infrastructure from Loud Cloud or Amazon or Azure or
Google.
Doesn't make your beer taste any better if you're an application provider.
Hm.
So Mark was the first one.
To use this.
So of course they want to get him involved.
But remember, Mark has learned at this point.
That he shouldn't run companies.
Although I guess he made that mistake with Ning later.
Mark says, I don't want to be an active co founder.
But I'll be chairman.
And I'll invest six million dollars. So I guess he was able to get enough money out of the AOL stock.
that he can invest six million dollars.
So they go out.
to raise Ben and team go out to raise venture money on top of this.
And they meet.
Andy Ratcliffe.
At benchmark.
Capital who they just
Love.
And
Ben in uh hard thing about hard things.

It would be gentlemen and the relationship between
Him.
And Ben and Mark.
Is deep and continues to be deep.
to this day. And Andy, of course, was
Benchmarks you know like
infrastructure guy. He started as a telecom investor.
So this is completely in his wheelhouse and he
Gets it.
So now this
is where things get a little murky. And no doubt this scene
is one of the major seeds of Andrees and Horowitz.
And
the firm's whole philosophy and it would get sewn.
Right here.
So I don't know exactly how it went down. I don't think anybody's ever
given the whole story, but this is as best
As we can.
Reconstruct it.
So we'll have to just have the protagonists on for a a Kumbaya one day.
Yep.
So
Obviously this was a super hot deal.
And yeah, Netscape had failed, quote unquote, but you know, like you said, Ben, everybody was drunk at this point in time.
Somehow I believe
That Andy and Benchmark.
Agree to do the deal.
Without a full partner meeting.
And
They agree to do it for a very high price, even at the time, but
Which was a forty five million dollar
Pre-money valuation.
And benchmark is gonna invest.
Fifteen.
Million.
In
The company. It's a big check for them.
Are they even doing their four hundred million dollar funds at this point? Probably around that.
No, and I think this was before their billion dollar fund.
Which famously they said they'll never repeat.
I think their funds were like maybe
Two hundred and fifty, three hundred million.
At this point in time. So
Big check, big valuation.
Brand new company.
And no partner meeting.
At least as far as I can tell.
So
The deal's going down.
And the benchmark partnership though.
Doesn't like it.
That Mark.
is investing so much personally.
He's not an actively involved co founder.
He's investing six million bucks.
And here's the thing.
The price of the deal is based on a pre-money valuation.
Because venture deals, you know, until the last
Five, six, seven years.
They all used to be priced on a pre money valuation.
Now the problem with a pre money valuation Nobody knows what they actually own until you specify exactly how much is being raised.
Exactly. So if more money gets raised.
Then you're gonna own less
Of the company.
Because the post money valuation goes up.
based on the amount of money raised. So benchmark is writing this huge check.
They want to get it.
Fifteen divided by sixty. They'd want to be the only money into the round. Well then they should have specified the post, David. They should have specified the post, but people didn't do that back in the day.
So here's Mark coming in now. He's
Pumping the valuation up by six million bucks and he's coming in.
So
They try to cut Mark.
out of the round. Oh yeah. So that was wrong move number one.
You don't really want to cross Mark Andreessen.
Even if we just stop the episode there and say
Let's look at this from a single turn game versus multi turn or iterated game.
Massive, massive bad idea for benchmark to contribute to create Andrews and Horowitz in the future.
Sure it could have been the most valuable thing to do for this deal in that moment.
But for the next twenty, fifty, a hundred years.
It would be great for benchmark if Andreas and Horowitz didn't exist.
Not only if Andreason Horowitz
Didn't exist.
But if
Ben and Mark were like part of the benchmark family. Totally. That's an even better point.
Oh my gosh. Oh my gosh. Yeah, creating a a little bit of a friction point here, assuming that that is
Any factor contributing to going on to create their own venture firm.
Well, that wasn't the only part, so it gets worse.
So supposedly
After the deal is done and closed,
Mark of course is like
F you. I'm gonna uh I'm putting my six million bucks in, and you think you're gonna come between me and Ben? Like we've been through this
So that'd be like you know, that'd be like benchmark trying to come between you and me. Like that's not gonna happen. Right. So
Mark invests the six million bucks. It's a sixty six million post money valuation benchmark only gets like twenty two point seven percent ownership.
After the deal's done.
Remember, and I think this is why I think
They didn't present the whole partnership before
The deal is done.
Because Ben and Mark and the whole
Leadership team.
Of Loud Cloud of this new company.
They come in to meet.
the full benchmark partnership. I think they only really knew Andy at this point.
It's supposed to be like a
Slap on the back, get to know you, like, you know, oh, this is great. You're our V C firm. Hey, that was weird with Mark, but like we'll get over it.
Right.
So supposedly in this meeting.
David Byrne, who was then one of the GPs at Benchmark, and he had been a very successful executive recruiter before.
Joining Benchmark as a GP.
Ben is presenting and the whole management team's there.
And he says to Ben in front of everyone.
Hey, just stop.
When are you gonna get a real CEO? And Ben is like
Uh
What do you mean? Like he knows what
David means here, but like he's trying to like
Hey, like this is a friendly meeting. Like uh let's not break out the knives yet. And in front of the management team. In front of the management team and Mark. Like that just pulls out the rug underneath his ability to lead these people to
Do that.
Yeah. So
Apparently then burned just like
Doubles down again and keeps attacking.
Then
And it's like you're not qualified to
Lead this company, like yeah, how are you gonna take this thing public, you know, blah blah blah, all of this.
stuff. Which also is ridiculous because of course Matt is qualified to lead this company. Even if he weren't
Why on earth would you say this?
He was doubling revenue quarter over quarter at Netscape in his division. I mean
And on top of all that, Mark Andreessen threw six million in. So I mean he kinda needs you, but he doesn't really need you, and you've already committed. Like just do the value creating activity of giving the leadership team the confidence in their leader at this point.
Totally.
So this creates, as you can imagine.
An intense
Dislike.
Between
Ben and Mark.
And
All of the benchmark partnership except for Andy,'cause you know, I guess nobody else really like stepped up to defend them here.
So we will
Later in part two, get to the
Amazing.
profile that Tad Friend did in the New Yorker of Mark Andreason in twenty fifteen.
But twenty fifteen, so sixteen years later, there are these great quotes in there.
Ben says about the whole philosophy of Andreessen, he says, we were always the anti benchmark.
Our design was not to do what they did. And he's talking about this. And then Mark says
About Bill Gurley.
Of course, the you know, most visible benchmark partner at the time.
I can't stand him.
If you've seen Seinfeld, Bill Gurley is my newman. Jerry's noir. Oh wow. This is something that you definitely have to know about Andreas and Horowitz, especially in their early days about when they were starting. They were loud about being different.
Like they wanted to position themselves as in every way we possibly can, we are the opposite of your classic venture capital firm.
personified by benchmark.
Which is totally we're gonna get into this in in part two, but
is so great because that is the exact same playbook that Benchmark took.
against Kleiner Perkins when they started. It's fascinating. It's such a good strategy.
And
Who was the architect of that strategy?
Andy Ratcliffe. And who is the one benchmark partner
That they love.
Andy Ratcliffe.
And Andy would then retire from benchmark not long after.
And the ties here end up actually running deep, like Eric Fishria, who was uh you know exec, would go on to become fantastic partner at benchmark.
Well, here's the funny thing about all of it. Like this is so great. It's such drama. And I really do think that
This experience was a
big part of what planted the seed for
Ben and Mark to start Andre Synhorowitz.
But
All of this drama is just great for everybody. It's great for Andreason. It's great for benchmark. No press is bad press. And
the more that people are talking about and writing about this as Andreessen Horowitz is getting off the ground.
The more it just increases the stature of both firms.
Well, and the twenty fifteen piece you're talking about is literally called Tomorrow's Advanced Man about Mark Andreessen.
That's the one you were mentioning, right?
Yeah.
That is the
Puff piece of puff pieces. Like it's a great analytical piece, but it's like, hey
You're the best futurist in the world. Say whatever you want. And so
having a platform to be able to kind of do any of this stuff
Mark takes full advantage. Oh, totally. It's so smart.
All of this drama around the funding aside.
Nondetheless, people are still jazzed about Loud Cloud.
Two months.
After the series A, they raise another forty five million dollars.
Wired runs an article calling Loud Cloud Mark Andresen's second coming.
But then
The clock starts to run out.
It's also crack the press can't get enough of Mark Andrees and Ben Horowitz is running the company. But Mark, it's like this
Internet King narrative that everyone just wants to keep perpetuating, which is true in many ways, but just interesting that he was not the CEO of neither of those companies.
I mean yes.
But he was on the cover of Time Magazine on a throne, so
Uh
Okay, so here's the thing though about LoudCloud.
Which is very, very different than Netscape.
It's not a software company.
It's
An infrastructure company.
And the thing about a
infrastructure company about what they're doing is that
If you wanna grow, if you wanna take on more
Customers.
You gotta go lease some more data centers and you gotta go buy some more servers and rack'em and rack'em and stack'em. Sounds like CapEx to me, David. Sounds like a lot of CapEx. So
as they're raising all this money, they're investing forward in all this capex and they're getting orders in, like, you know, Pets.com is uh like, oh yeah, thrill to get some of this infrastructure.
So
Then
in early two thousand, of course, in March two thousand, the bubble to deflate.
A lot of these orders start
Vaporizing.
But they're still
But they have forward contracts to buy all
This Cap Ex.
So they need money, even though they just raised sixty five million dollars.
They go around. This is such a great moment.
They're trying to raise money from everyone and all the VCs are
Spoot.
Uh what's going on.
So they're literally traveling around the world. They go to
Sauf.
They go. I don't know if they actually fly to Japan or if they meet with SoftBank in the US. Oh, I had no idea.
The meet with Master.
This is great. So Bill Campbell, the coach, legendary coach, is by this point in time on the board of Loud Cloud.
And
Master.
Back channels to Bill.
And
This is in hard thing about hard things.
Ben's like, Bill, how'd it go, how'd it go? Like with with Massive.
And Bill's like, honestly.
He thought you were smoking crack. So you know it's bad even when he's like, This is crazy.
So eventually
They do raise a series C
Of a hundred and twenty million dollars at a seven hundred post.
But it's like by the skin of their
Teeth.
This is in in mid two thousand.
They still burn through all of that.
quickly.
And
R
Once again on the brink by the beginning of two thousand one.
The only
crazy last ditch potential financing option available to them.

public because
Weirdly, there were still some like
Believers in the public markets, even though all the VCs and private investors at this point were like
Oh boy, we don't want to be funding any of these money burning companies.
So
In March of two thousand one
They actually
Go public.
Uh
Six dollars a share.
And the Wall Street Journal runs a piece.
Leading up to the IPO.
Where they have uh it's called the IPO from hell.
I think it might have been either referenced in the piece or the title of the piece. Everybody's calling this the IPO from hell.
They have a quote from Dick Cramlich at NEA.
Saying
Quote This is what we call a Hail Mary deal.
You throw it up in the air and you hope for the best. Oh my God.
Wow.
You know that's not good.
Immediately after the IPO, which they do get done.
They lower their guidance. It's a great thing to be doing in your first quarter as a public company.
Totally. The stock drops by two thirds to two dollars a share.
And Goldman and Morgan Stanley had bookground the IPO.
They drop research coverage on the company. No. Before even like one quarter is done.
Amazing. So what's the logic there? It's just expensive to have analysts.
covering your company and they're like, look, we just don't believe in the company anymore, even though we underwrote it, so we're gonna stop
paying analysts to do this work.
That's a good question.
It could be that, or I wonder if it's more that like
Hey, if we were to cover this company, we would say
You should not invest in this company. Yeah, you should sell.
And we don't really want to do that'cause we were
Just the book runners on the IPO. So probably easier to just
Drop coverage.
Yeah.
Wow. And the logic of why they're dropping guidance is like, look, all the companies that we thought were gonna be customers are going out of business. So like we are a picks and shovels business for an industry that is going away.
Yes.
The gold rush is
Drying up.
People are not gonna want to buy Levi's and at this point in time. No one is moving to California.
It's unclear yet that Levi's are gonna become a fashion statement.
Which of course.
They do, metaphorically speaking.
David, you're like three levels deep here. Take me back to storytelling. Exactly. Okay. So by two thousand two, like it's clear that they're running into a brick wall.
Ben
manages to engineer a deal to offload the entire infrastructure business to EDS.
Ross Perot's electronic
Data systems.
Company. Which that we need to do a company profile on at some point. That's like a fascinating one. Oh, totally.
Totally.
So they sell
Basically the entire business.
For sixty three and a half million dollars.
They lay off almost everybody at the company. That's one tenth of what they last raised at.
Or no, they when they went public for more than that, for more than seven hundred million.
I think it was actually about flat.
Uh when they went public. So ten cents on the dollar is what they're liquidating the server business.
Four.
Totally.
But
They don't want to give up. They decide, hey, you know
We've got
This
Tool.
That we've built internally.
to help us provision
The servers.
that we're racking in our data centers.
We might be able to sell that as software. It's pretty good.
And EDS is actually really interested in this. They want to own the infrastructure business because that's part of their business.
But they're like, Yeah, I mean, if you can deliver that as a software product, we'll pre sign up and we'll be a twenty million dollar a year.
Customer.
For you.
For the server automation.
Product.
Which that's twenty million dollars that
Loud cloud's like, great, we can use that to make payroll. Exactly. Exactly. So they do this, they lay off
you know, most of the company.
And they restart as this
Software firm doing.
Data center server automation.
There's only one problem, the tool that they built, which is so
Great.
It has no UI.
And it is called the Jive.
And is entirely pimp themed.
That's just one problem. That's just one problem. It's not exactly something you can really, like, deliver to EDS or
Any customer.
When this happens, the stock craters to thirty five cents, which is a twenty eight million dollar market cap. Remember, they've got sixty three and a half million in the bank.
And
A solid twenty million dollar a year customer contract.
Whoa. Talk about trading below book value. The street is valuing them at half of
The cash on the books.
But Ben is undeterred and this is you know mostly what he writes about in the hard thing about hard things.
They go to work and they rebuild
The company back up?
They claw their way up.
All the way back o over really not that long a period of time.
to five years later they sell the company to HP.
for fourteen dollars and twenty five cents a share, or one point six
Million.
Dollars. Close to two X what they went public for.
Totally. So like this is a win.
Ben would write later about this.
If I'd learned anything, it was that conventional wisdom had nothing to do with the truth.
And that the efficient market hypothesis was deceptive. How else could one explain Opsware, which is what they changed the name of the company to?
Trading at half the cash we had in the bank when we had a$20 million a year contract and 50 of the smartest engineers in the world.
No, markets weren't efficient at finding the truth.
They were just very efficient at converging on a conclusion, often the wrong conclusion.
And this experience I think would
Totally inform.
really what I think was kind of the founding thesis of Andrews and Horowitz, which was
There is no bubble and the internet is gonna keep getting bigger.
And
Y'all think we're crazy for paying these prices for these companies, but like we're not crazy.
Yeah, and what you're alluding to there for folks that don't know Andreessen Horowitz's early sort of reputation is
These guys started a brand new venture firm. They raised
too much money because in two thousand nine a three hundred million dollar fund was big and they're just giving startups these crazy valuations and overpaying and blowing everybody else out of the water. And David, you're exactly right. It's A the efficient
market hypothesis is wrong.
And also
That
Any crash we're in is a local minima. So
All it matters is can you get through this localized crash?
And
continue to ride the sort of intrinsic value wave that is the internet and software taking over everything.
Totally. And it's not easy, right? Literally the title of the book that Ben writes about this is The Hard Thing About Hard Things. Which is so good.
So good, such a good title.
It's like they had good marketing people there or something.

Oh, I mean and to your point about it not being easy, like Ben gets asked in interviews
You know, how'd you get through that when you had to lay off half the company and then get the other half to recommit to basically starting a new startup with you? And his answer is a lot of crying.
By me.
Yeah. It's brutal.
But I think the lesson
To be learned from this and I
Totally.
It totally resonates for me is
If you're in a technology market and you find yourself
early to the market like they did with you know the cloud and
Eating of AWS by seven years. By seven years.
It's not good to be in that situation.
But if you could just hang on and stay alive until the market can catch up with you
These markets will grow.
And you can become a big, big player.
Even if everybody's already written you off.
Can you stay alive long enough to become lucky?
Yeah.
Obviously better to be lucky up front.
But if you're not, like wait for luck to come to you.
Anyway, so there's one more other fun little part.
of the
Loud cloud opsware journey.
one other character that's gonna become very important later in part two.
Which is one of their other board members. So the board
Of Loud Cloud.
Pretty awesome. Mark Andreessen.
Andy Ratcliffe.
Bill Campbell the coach.
Obviously Ben.
And
The other independent board member who they had
Do you know who it is, Ben?
No.
Michael
Ovitz.
Oh, that's how they met Michael Ovitz? That's how they met.
Michael.
Ovitz.
course we're talking about super Hollywood agent, founder of Creative Artist Agency, Michael Ovitz.
later erstwile COO and president of Disney under Eisner. Briefly.
Briefly, briefly. So after the whole Disney debacle
He was like, you know, looking for
Stuff to keep him entertained.
And wanted to invest in, you know, the then hot
Internet.
Yeah.
And so he gets introduced to Ben and Mark and ends up joining the board of Loud Cloud.
Isn't that wild?
Wow, so that's how you know Mark and Ben get infected with the idea of
creating the CAA uh venture.
A venture.
Totally. It's so funny how like, you know.
We've painted hopefully the picture on this episode of all the life experiences.
Yeah, leading into
Netscape leading into Loud Cloud, leading into that moment with Benchmark.
And then
Ovit's joining. Like it's all
It all gets expressed in Andre's Norowitz.
Wow.
There's one more principle that you touched on earlier that I want to tie a little bit of a bow on that's a founding principle of the company.
When Ben Horowitz is getting dressed down in the partner meeting at Benchmark and they ask him, you know, when are you gonna hire a professional CEO?
this becomes a major tenet of entries and Horowitz about
Technical founders.
being CEOs and being armed with the resources that they need and the ability
Two
even before they would otherwise acquire those skills sort of
have a leap.
on being a professional CEO. And there's this two thousand three interview. I I love reading things from two thousand three uh about Mark and Ben because it's this really interesting perspective where it's
Post Netscape, post loud cloud, post crash.
but they're just angel investors. It's
six years before they start in Drees and Horowitz. And one of the questions in this great QA that we'll link to in the show notes is Should a founding technologist run a mature company?
And Mark's answer, you know, he's a brilliant person. He gives these long philosophical answers to every other question.
This one he just answers.
Absolutely.
It's so great. This is so brilliant.
We'll talk about this much more in in the next
Episode.
But what's so smart about this and so
Dumb about the rest of the venture capital industry.
Until Andreessen changed the game.
Which is like
Let's put aside what's right or wrong or what you believe or don't believe.
It was so
Dumb.
S
Preach and practice.
anything else except that founders should run the companies they start.
Because
If you say anything else, who are you alienating?
You're alienating founders. Right. Like so if you want to win deals.
Why on earth would you say anything other than I support my founders and I'm loyal to them to the end?
Yeah.
Just wild.
Just wild.
Okay, David.
So
Take us forward. They sell the opswear business to HP.
What's going on after that?
So we've alluded to Ning a couple times.
Along the way Mark had started
Ning.
What year is this?
What year does the opswear sale?
I can't we did the episode with Michelle Feester. Yeah, which was so great. She was at HP and bought the company.
way back in early acquired history.
So
I wanna say it was two thousand five. I think I actually don't have it written down when
Mark started Ning.
It was two thousand seven when

HP.
Okay.
So
Mark was going along with Ning and and Ning was sort of a a way for any community to launch their own
Social network.
I guess kind of in a way like what we have with our Slack campaign. It's like white label Facebook.
Yeah.
Once again, ahead of its time.
Mark, I think, was not super thrilled with how that was going, so he ended up stepping back full time, brought in
right after the acquisition, the ops wear acquisition
Brought in Jason Rosenthal.
From Opsware, who had been a Netscape guy before that, to come in and
Run Ning and Mark step back.
To just being a chairman.
So
Remember, now we're in two thousand seven.
We're now in the heyday of web.
two point oh.
Which it's so funny, like
Any other

Um
tech bubble and the crash and everything everybody lived through here.
The rest of the market would have been gaga over
Facebook.
LinkedIn and
Zinca and Shutterfly and
Oh, what was Story Butterfield's first flicker?
Mm-hmm.
Flicker and everything that was going on. It was so exciting.
In the valley, but because everybody still had the hangover
From
Web one dot oh.
Valuations were
minuscule for these companies. Well and in two thousand, two thousand one, two thousand two, even in two thousand three
Venture firms weren't raising new funds. So everyone's preciously holding on to the last fund they raise, parceling out each dollar to their own portfolios, trying to make sure they're only investing if it's, you know, the very next Yahoo and uh using their bullets very carefully. And so, you know, when Facebook comes along in 2004, it's like
one of the only sort of obvious ones that's growing like absolute crazy and kind of kicks off that next generation of, okay, like we're gonna start, you know, venture capitalists are gonna be able to start raising big funds again and kind of come out of the tech bubble screaming.
But even that takes a long time.
And ironically, it's Mark and Ben.
You know.
arguably people who got hammered hardest by the dot com crash.
Who recognize like, Oh wow, no, this is the time to put
Capital.
to work and embrace everything that's going on.
So they start angel investing together. Right. This is the era of super angels. If you think back to the sort of Ron Conway and Dave McClure era and
There was the famous sort of bin thirty eight scandal, but
Mark and Ben are the super angels that are individually investing tens of millions of dollars in startups.
It's easy to forget now, but they were like the prototype super angels.
Easy to forget now because of now of course they're a venture firm.
And of course Mark
made like
a hundred and fifty million bucks on the opsware sale.
From
I think it's about right,'cause he owned about ten percent.
of ops were at the sale to HP, ban owned five point five percent. So they've got cash to invest and they're
Dedicated to helping to build the next generation of startups. Yeah, and not only that.
This is where the pieces start to come together.
They also embrace
As users.
Web two. Oh and what's a big part of web two dot oh? It's blogging.
Blogging.
Ah, the P Mark A blog and Ben's blog.
This is where it all
Starts.
was so good. And it's before I mean Mark obviously became a prolific tweeter, tweeting like a hundred times a day until in twenty sixteen he stopped and we'll cover all that in the next episode. But like
very much embracing the idea that like I'm gonna be loud on the internet.
I am gonna share my thoughts with the world and very early to blogging.
Yep. So
Through all this
They end up
Angel Investing.
In
Companies like
Twitter, of course, like Zinga.
Facebook
LinkedIn.
Like LinkedIn. And Mark is still on the board of Facebook and still keeps up with Mark Zuckerberg.
I hope so.
So the Facebook story
It's super interesting.
When
Andreasen Horowitz the firm would launch.
They launch with a big piece in CNN money.
And Zuck is quoted in the piece and he says, I moved to Silicon Valley in two thousand four and I was introduced to Mark Anderson.
by Peter Thiel in two thousand five.
Mark became a sounding board about management and how to build a strong technology company. He has strong views on that, and they helped shape
Mine.
Mark homes in on important things. It's very liberating.
He has helped me not worry so much about the unimportant things. So what's Zuck talking about here?
So
Remember the Yahoo?
Yeah.
Where Zuck turned down the billion dollar offer.
When Zuck goes and vomits in the bathroom, turning down
The billion dollar Yahoo offer.
Literally.
Everybody around the table is telling him like sell.
Supposedly all the VCs.
Everybody involved with the company, all the rest of the management team are like, We gotta take this offer.
'Cause remember it's w web two.0, you know, Flickr sold to Yahoo for what, thirty million?
Something like that. Something like that.
The idea that there could be a billion dollar outcome.
Now post bubble is crazy.
Apparently the only one of the advisors who
Who told Mark not to sell.
Was Mark Anderson. Wow.
Andreason has a quote about this. He says, Every single person involved in Facebook wanted Mark to take the Yahoo offer. The psychological pressure they put on this twenty two year old was intense.
Mark and I really bonded in that period because I told him, Don't sell, don't sell, don't
Sell them.
And that
Because of that.
Is.
Andresen ends up joining the Facebook board.
In two thousand eight.
As well as the eBay board in two thousand eight.
Yeah, that's a fascinating one.
Oh, that'll come up next time for sure.
And he he stayed on the HP board, by the way, after the Loud Cloud opsware deal until twenty eighteen.
Like he was a longtime HP board member too.
Oof, yeah.
So it's pretty crazy, like
They built up this like
vehemently founder friendly.
Don't sell.
Build big companies. We're gonna finance you.
technical co founders stay as CEOs forever.
Yep. We love technical co founders. We are willing, just the two of us, to finance forty five
Different companies.
Including
Dig.com, Angel List, Foursquare, LinkedIn.
A lot of
very meaningful companies of that era. High hit rate.
I mean
They're like the most active venture capitalists in Silicon Valley at this point, but this is when Sequoia's writing the RAP Good Times memo.
And they're not even venture capitalists.
So
This is the best.
This is the best. I think this is my favorite.
Mart.
Of the whole episode.
So one day
Then
is still at H P. He becomes a V P of, you know, something or other at HP and it's clear like
This is gonna be just like the AOL situation. He's gonna stay there a year and
Then move on. Do his next thing.
He gets called.
From
Douglione.
That's cool.
Oh, interesting. This is so classic. Such a classic duck story. I love it.
Doug says.
I want to know how you did it.
And then what?
And uh Doug says in uh
Maybe not quite these words, but but but maybe actually these words knowing Doug.
I wanna know how you took a dog of a company and turned it into a billion dollar outcome. I've never seen this happen before.
And I wanna learn.
How you did it.
Mm.
Uh so great. Great because A
It's so dug.
What a learning machine.
B, it's so great because it's
Obvious what is happening here.
Oh, he's trying to get Ben to come to Sequoia. He's totally trying to get Ben to come to Sequoia. Oh.
So great.
So great.
Do you think they wanted to recruit him as a partner or as like a person to come fund next?
I'm sure they would have been happy with either.
But I I'm assuming probably as a partner. I bet they were trying to run the um
The same playbook they did with Alfred, uh, which uh when Alfred joined Sequoia after Zappos.
The
Original idea.
And
Don Valentine says this in the
Stanford GSP talk that we always recommend when he holds up Alfred's resume. He says, Yeah, Alfred's here, he's a partner at Sequoia for now, and but he'll start more companies and we can't wait for him to start companies and spin them out.
Obviously that doesn't happen with Alfred, but
I'm sure they just wanna
They want Ben and and presumably Mark as well.
To just come be part of.
Sequoia. Man, we don't do this section on episodes anymore, but in the spirit of what would have happened otherwise, you think about
If
Ben had accepted an offer to go be a partner at Sequoia and
If Benchmark hadn't made the
Cardinal mistake of
causing the executive team to potentially lose faith in their CEO right there in the boardroom, how things could have been different in the Valley.
Totally. Well, the funny thing I was thinking about through all this is uh
Obviously as we've alluded to
Andrew Snorowitz is gonna counter position against Benchmark when they launch.
Nobody ever counterpositions against Sequoia.
I think it's just'cause like
How could you?
They're so good.
Yeah.
It reminds me of the
The quote from the wire.
You come at the king, you best not miss. I I don't really want to make a run at Sequoia. I wouldn't publicly counter position against them.
I was thinking the exact same thing. So great. So great.
So Ben.
Takes this call.
I don't know the exact
Timeline here. So I'm
I'm both hypothesizing and dramatizing for a fact, but
But that's it.
Takes the call.
He knows what Doug is up to.
He hangs up with Doug.
And he shoots Mark.
An instant message.
We ought to start a venture capital firm.
And Mark replies.
I was thinking the same thing.
Boom. And that
Our friends.
It's where we're gonna leave.
Part one.
Oof.
And it's a
Perfect.
Perfect spot. I feel like I now have a really
robust understanding about the like frame of mind they're in going into starting in dreams and horror with the firm. The question is when they're
Texting is this before or whether they're on IM, is this before the financial crisis?
I am imagining this is sometime in two thousand eight.
Yeah, which is fascinating because then between the time where they have the idea to do this
And when they actually launch the firm, there's a
global recession and bank financial crisis.
That they have to fundraise during
Free wild.
Totally.
Well
I think we did a lot of great
sort of playbook themes during the episode. Are there anything we want you to highlight here?
Yeah.
There is actually one.
And we'll get into this more next time, but
It's pretty
Courageous.
Oh.
Do you choose that word carefully?
I did not. I did not. Okay. Came to mind.
It's pretty courageous what they do here, right? Like I mean
Okay, it's not courageous in that they have a lot of money. They never need to work again.
Et cetera, et cetera.
But
You know, to turn down
Douglione.
To
Say we have a lot of money, but we're gonna deploy this money and put it at risk.
While
All the rest of the world thinks everything is falling apart.
I think it's easy to look back now and be like, Oh, you guys have you know, Andrews and Horowitz has
nineteen billion dollars in capital under management and is this
massive enormous two hundred plus person firm with all of these funds and like, Yeah, yeah, yeah, you guys are moneagers like
That is not
How it started by
Any stretch of the imagination.
Yeah, it's such a good point.
And we'll get into this next episode, but from everything that I can sort of hear.
That's
still the way that Mark and Ben act today.
that they're by no means sort of like
enjoying the nineteen billion under management lifestyle. I think they're very much thinking about what is the
Next.
Not just generation, but like what is the next
epoch of Andre Tonorowitz the firm look like? Like what are we beyond and uh then a a venture capital firm? What is the sort of
Yeah, what will this institution be in the future?
And the way that you chose courage carefully.
I chose future carefully and we're gonna talk about both of those in the next episode.
I love it.
I love it.
I've got a few just to bring it back. I mean th the timing, luck and right place, right time.
is so strong here. I mean, especially in the N sixty four slipping one year.
part of the story, like Netscape wouldn't have existed if N sixty four had shipped on time. And
As crucial as it is to be brilliant.
You have to be brilliant in the right place at the right time and get lucky also.
And I think that, you know, we've seen that p people always talk about Steve Jobs and Bill Gates being born at the right time in the right place to be able to start Apple and Microsoft. Kinda the same thing with Mark being around right for the start of the internet and being able to really
jump onto the emerging web and create a huge part of it.
I also think a big playbook theme is
knowing what good feels like because you've experienced it yourself.
In launching mosaic and
Getting
a million users in the first year on a very nascent web.
for Mark's whole rest of his career.
That's the bar.
I think if you've never experienced something like that viscerally, where you've operated or founded or worked at a high level at a company that was undergoing that.
Because you don't know what the benchmark is, you don't quite know what you're chasing.
And I think it meaningfully shaped all of his future experiences and Ben's experiences and Andreessen Horowitz's experience when they knew what true product market fit and crazy growth felt like from the very first experience.
Ooh. Okay.
What I really want to add on to that. So Yeah. Totally agree.
Yes.
Everything you said.
And
What makes it really powerful
Is the contrast.
Like they also know what total failure looks like.
And I think you see a lot.
People think like
What you said, knowing the benchmark, knowing success, that's what you need. I think you need both because if you only know success
You don't know the difference between
success and failure and you don't really know
What made fur.
success and what was skill and what was luck.
But I think what's really unique here
in this story is
They have
Absolutely have both, like highest of the highs lowest of the lows.
And I think that can really help one.
Triangulate on
where you are in any given point in time and why.
Totally agree. I think it's a great point.
Well, listeners, we are gonna
hold on grading until the end of our next episode.
We'll have that conversation about
Actually the firm entries in Horowitz.
Rather than try to grade something in Mark and Ben's past.
And David, do you want to do some carve outs before we bring it home?
Yeah, let's do it.
I've got a fun one.
That is
Tangentially related.
Yeah.
At least the N sixty four aspect of the episode.
I've just been on such a like gaming and classic.
Gaming.
Kick lately.
I don't know what it is. Maybe it's like everybody you hit your mid thirties and then you just get nostalgic for
The era when you were a kid.
So my carve out is my new
Favorite podcast?
Besides acquired, of course.
The resonant arc.
YouTube channel and podcast.
These guys are so
Great.
They
Take
They what do they call themselves? They call them a selves a video game story book club. So they take old
Classic.
Video games.
RPG is like
From
This era.
Uh, so they did Final Fantasy eight, they're now doing Xenogears.
They did near the first near game, uh, which is more modern in the interim.
And then they do like a book club. They do play throughs. So they're like, We're gonna play not not a stream.
But like we're gonna play from the beginning of the game to X point.
And let's all you know, we'll go play.
You audience go play.
And then we're gonna do a podcast. We're gonna do a three hour podcast.
At each checkpoint where we're gonna dissect.
The story, the development, who was the dev team, how did this project come together?
What is the context behind all of this? That's a clever structure.
It's really, really clever. I really like it.
So it ends up for all these games like being
Ten, fifteen, twenty hours worth of podcast time.
But it's so cool. It is a really innovative format.
And you know you're talking to people who are willing to dedicate ten hours of podcast time to a single podcast.
Like a Berkshire Hathaway trilogy. So exactly.
Couldn't have found a better place to recommend it.
A podcast after mine own heart.
I love it.
Well I've uh a little bit more of like a more serious one. Serious. It's a nonfiction book called The Elephant in the Brain. And it is a psychology book that was originally
going to be this person's academic paper, and then they decided I'm just gonna get together with my friend and actually write it as a book instead and reach a much broader audience.
And just like
Publish it as a consumer facing book.
And it is
A really interesting book.
One of the main theses is
We humans are animals.
And so why do we sort of
Try and
go around pretending that we're not and trying to
Do things that are socially acceptable.
when there's sort of an elephant in the brain that we are animals and we are
subject to these very base desires that come from evolution.
And it's not saying act on those, but every chapter sort of points out a different and very observable
basic animalistic thing that exists in our brain.
the thing that I took away from it was
once you can be more mindful of the way in which your brain is not acting quote unquote logically or appropriately.
as you should present in society as it says it's acceptable to
Just like being aware of the way that your brain is working and why it is working in that way, so that you can then apply your higher functions on top of it is very interesting.
And I highly recommend it for anybody who is interested in
psychology, capitalism, how to fundraise for nonprofits, how to lead, how to organization build.
all of this stuff is sort of tied in there and they they basically
Take
Any
thing that seems like people are doing purely altruistically or purely for whatever reason, and they find the animalistic desires that
underpin that and then find the data to support
why that is often happening. Especially if you're interested in going into politics, it's a phenomenal read.
I love it.
So
Recommend that.
All right, listeners.
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All right, well, listeners, thank you for joining us on part one of this journey.
And if you want to join us and talk about
All things acquired, all things tech.
with a great community, really thought, respectful, good highbrow discussion.
Join us at acquire.fm slash slack. As always, if you want to be a deeper part of what we do on the show.
You can become an LP at acquire.fm slash LP.
Dave, anything else you want to say?
Pump for season nine.
We are underway.
I know.
Me too. And I think this next episode's gonna be really fun.
Injuries and Horowitz has played such a seminal role in the development of the tech ecosystem of the last twelve years that it's a walk down like kind of my whole adult life and career to walk through from two thousand nine to today. So I'm excited to do it. Yeah.
Should we start recording right now?
Just
Run it back. Let's play two.
No, I need a break.
Listeners.
We'll see you next time.
We'll see you next time.
And until then.
Young Spielberg, Mike Taylor.
Take us out.
Who got the truth?
Is it you, is it you, is it you Who we got
No
Is it you, is it you, is it you?
Me down

Another story on the way
No.
Everybody's talking.
What?

Everybody's fighting.


Smoke I need to know
Who got the truth?
Is it you, is it you, is it you Who we got
No.
Is it you, is it you, is it you?
Take me down

Another story

Flip flap like a
See.
What

So much to lose now.
Who got the
Is it you, is it you, is it you who we got
No.
Is it you, is it you, is it you?
Sit me down
Great.
Another story!