I was at a great fireside chat recently with Marc Andreessen the founder of Andreessen Horowitz (http://www.a16z.com) at the StrictlyVC INSIDER Series in Palo Alto. He was in conversation with StrictlyVC founder Connie Loizos on the business, and culture, of Silicon Valley.

Marc is an impressive character. In person he is physically imposing and really commands the room. A16z is equally formidable with 130 staff, 85 operational executives and a truly global network.

Marc is well known for his "tweetstorms" or rants on twitter with a daily, often hourly or more twitter habit. As of late September, he decided to take a sabbatical from twitter, to the dismay of many of his followers. However he is relishing the break, saying that he feels 50 pounds lighter, and "as free as a bird” without it. Maybe he's spending the time with the latest member of his family, having just become a father to a little boy.

Some of the interesting nuggets in the course of the conversation were:

  • One measure of how to identify a breakout firm is the size and scale of revenue growth. Marc reckoned that there were probably 15 venture backed companies a year which managed to hit the $100mn revenue mark.
  • In Marc's opinion it’s “much harder to be a public company today than it was 20 years ago” due to the level of investor scrutiny and the focus on short term quarterly earnings. Some companies are able to get beyond that and invest in long term R&D, for example Apple, Amazon, Salesforce, Netflix and NVidia, but it is tough for most. In his view one way of ensuring that companies can continue to invest in innovation (and bypass investor pressure for shorter term gratification) is for founders to retain control via dual class stock so they can pursue long term goals.
  • Secondaries, where founders and employees sell stock in the course of a fundraising transaction, are good at releasing value for employees but he feels they must be controlled or it can destabilize a company.
  • There is no tenure for CEO's of their portfolio companies, it is based on performance.
  • He noted the “new phenomenon” of non-traditional buyers like Under Armor and General Motors acquiring venture-backed tech startups, and commented that there is likely to be an M&A wave coming, particularly as valuations come down from their current highs.
  • There is likely to continue to be plenty of cash in the venture system, given that government bonds are at a low or negative yield, and venture offers the potential for a better return.

We at FirstCapital are seeing some of the same M&A dynamics in terms of non-traditional tech buyers acquiring tech businesses, as more and more industries get disrupted by digital businesses. This opens up some new and interesting potential buyer groups, but as always, it's understanding the strategic fit, the level of urgency and the combined opportunity which really drives the best deals.