Andreesen Horowitz (a16z for short) has accomplished what few can claim: a meteoric rise to the apex of venture capital. To put it in a context many of us can relate to—it’s as if a new American university had been created less than a decade ago and in that short time is now competing head to head with Harvard, Yale and Stanford. Shouldn’t it be impossible to attract the same caliber of talent as the firmly established industry juggernauts after only a few years? a16z has approached venture capital so differently that they’ve fundamentally altered the relationship between entrepreneurs and VCs.
I’m reminded of a snippet from the documentary “Something Ventured,” (a great documentary for the next time you are flipping through Netflix trying to find something worthwhile to watch) from the early days of venture capital, where Arthur Rock is working with a team he has backed… a time when VCs were nearly indistinguishable from full-time business operators, and when they meaningfully moved the needle of the businesses they backed.
Recently I had the pleasure of getting to know one of a16z’s operating partners, Mark Cranney, who shared with me one aspect of the firm’s model: augmenting the sales of its portfolio companies. I was captivated, and asked Mark if I could bring some of our Peak Ventures portfolio companies to a16z’s Go-to-Market Bootcamp (a regular event that they put on for their portfolio companies’ leadership teams), and he graciously welcomed us to attend. That full-day event was incredible, and so obviously useful to the teams who attended. It inspired me to share the experience with you all here in this forum, and so I’ve added a bit of context on Mark’s work at a16z, as well as a page from the firm’s playbook, through some Q&As with Mark. So if you find yourself asking, “what has my VC done for me lately?” then read on, you’re going to like this:
Sid Krommenhoek: How did you meet Ben Horowitz?
Mark Cranney: I was in Boston and got repeated calls from a head hunter for Opsware to join as its VP of Sales. It was interesting because I had just left PTC, New England’s largest software company, where I was the VP of Sales for the Americas and I was familiar with their main competitor who was Boston based. However, I had no desire to head back out West and I probably told the head hunter ‘No’ five or six times before I happened to be heading out to California and agreed to meet with Ben. I was skeptical because Opsware wasn’t in the best shape at the time. Referencing Ben’s book, “The Hard Thing About Hard Things,” they had just gone through the near death experience. However, I ended up really hitting it off with Ben in that first meeting, one thing led to another, and they recruited me. We grew Opsware to $150 million in sales and sold it for $1.6 billion to HP. Following the acquisition, Ben ran product and I began running the Americas’ sales group for HP software, and then Ben and Marc Andreessen began angel investing together, which was the runup to the beginnings of the firm.
SK: How did your role at a16z emerge?
MC: After leaving HP and ramping up another startup, I spent time with Ben in an Executive-in-Residence type of position. Ben started sending me out to help some of the a16z portfolio companies with their go-to-market plans, and one thing led to another. Marc and Ben had already begun shaping their operating partner model, with Jeff Stump leading the executive talent team, Shannon Schiltz leading technical talent and Margit Wennmachers leading marketing. A lot of these early investments needed help with sales, so it made sense for me to help. The overarching thesis of the firm was to invest in extremely technical, product-centric founders, and then help them build out their networks via the operating partners to assist them in domains in which they didn’t have a lot of experience. My role was not initially defined, but it didn’t take more than forty-five days before the lightbulb went on.
I was working with portfolio companies giving Go-To-Market counsel and advice. What a lot of these portfolio companies wanted from me was: “Hey, this is great. Thanks for spending an hour or two with me and helping me think through the strategy and tactics, but can you get me in front of XYZ company, or this CIO or that CIO?” It was easy to say, “Yeah, I can get you an e-mail. I can make a call for you.” But it was like birds in a nest: Everybody wanted a worm. It started to pile up. So I thought, one way to just knock this out is to tear a page out of the enterprise sales playbook and create an executive briefing motion. The briefings is where we brings in C-level executives from large companies and allow them see whats coming next in the form of startups and entreprenuers.
Holding these briefings is a big differentiator and I’ve done it frequently in my career. It dawned on me to put this at the front of the process for new portfolio companies that might not have or were early in their development of any sales or marketing muscle. I started inviting some CIOs to take a look at what we were investing in, and shared a little bit of our investment thesis. In those days, we were pretty small and hadn’t done a lot, but we were starting to become the point of the spear from an innovation standpoint. And that was my pitch to the CIOs. I said, “Hey, I know you’re coming out once or twice a year to go see your big technology partners, but there’s not a lot of innovation going on with them. Instead of spending two days there, peel off a day for me and I’ll show you some of the new, cool stuff that they’re not thinking about yet.”
In that first quarter, I did about eight of these briefings. We were small, with one conference room. Halfway through the next quarter we had thirty briefings lined up. We needed to move to a bigger space, so I went to Ben, Marc, and Scott Kupor, the managing director, and said, “Give me a bunch of conference rooms and I’ll fill them up and at the same time give the portfolio companies an instant sales pipeline.” So we executed that lease and lined up fifty the following quarter. Ninety days later we did one hundred for the quarter. That was the first year of the program.
SK: How did the operating partner model evolve over time to help your portfolio companies?
MC: What you get in the traditional venture model is one guy or gal that sits on your board, and you have access to whatever network they have and whatever operationg experience they have. Some have great networks, but you’re limited to the expertise and reach of that partner…
SK: …which could have been the product guy, or the heavy tech guy, or they could have been the sales guy. It’s rare to have this bolt-on, functional expertise to help your business. That’s fundamentally different–and really cool.
MC: Yeah, some VCs try to follow what we’ve done by hiring a business development guy or two. Let me back up a bit. After the first year, about halfway through it, Marc was just hammering me, saying, “This is great for all the enterprise portfolio companies, but I’m sitting on consumer boards, and you don’t know shit about the consumer stuff. You need to help us out.” So I went out and got a consumer guy right away, Todd Lutwak, the domain expert who built the seller network at eBay. The seller network at eBay is one of the original platforms, and what a lot of consumer companies needed help with was distribution platforms. If you think back on that time period, people asked, “How do you work with Facebook or Twitter or Apple?” If you’re a board member and that is all new, you know you’re getting hammered. I hired Todd because he knows that space cold, and we started ramping up on the consumer side, as well as helping give portfolio companies access to the global 2000 brands by targeting the CMO.
Fast forward a few years, and essentially what we’ve built is a sales and marketing group that you would typically only see in a large technology company—one that owns the top five hundred accounts and leverages these relationships for all of its divisions and subsidiaries. You see this in the IBMs and HPs of the world. The portfolio companies we work with look at us as that overlay sales/marketing organization that they can leverage to get in front of these big companies to sell to, with, or thru. We systematized this — instead of dropping one hundred salespeople across the world, we reach out and get companies to come in. We’re with the young and innovative portfolio companies as the point of the spear, interacting with these big corporate potential buyers and/or partners for distribution.
SK: What kind of impact has this created for the portfolio companies?
MC: Well, on the front end, if we see a company we are interested in investing in, or a company that we would invest in, but they just don’t happen to be raising at that time, we will put them in the briefing center so they can get a taste of it.
SK: You’ll actually let them test it out before your investment. Short of investment, you’ve actually let them into your briefing center?
MC: Yes, we do that for companies we might not invest in right away, even the ones we may pass on.
SK: …because it’s value-add to the community of CIOs or whomever is coming in, it’s like they know they’re going to see the best of tech, not necessarily just the best the a16z’s portfolio.
MC: Exactly. We really want a two-sided network where both sides are getting value. Some of our more strategic companies that are in here all the time use us as their innovation partner. We can go deep in any particular area and say, “Based on what we know of the market you need to look at this, this and this.” We point them in the right direction.
SK: Talk to us about the pipeline you’ve been able to build for your portfolio. Can you share that?
MC: I’m happy to share. Everything we do is tracked in our system. Salesforce is the core of that system and it’s customized to the tilt. We track pipeline and bookings, things that started or came out of the briefing center. The last time I did the poll a month or so ago, there was about eight and a half or nine billion in pipeline created and $1.5B in actual bookings. People count it in different ways, but that’s the rough order of magnitude. It’s like our portfolio companies have big company air cover. It shaves off years of their time to market.
SK: Last topic: As you compare the investment opportunities of a seed to a series A, and later stage, what do you see in terms of what makes them great?
MC: It starts with the CEO and their appreciation of what it’s going to take to go to market and win. What I see a lot of is “I’ll build the product and they will come.” They wait too long to understand what it takes to “go to war.” You have to have boots on the ground. Big incumbents wake up and stomp down with their deep pockets because they have account control and deep relationships. If you don’t recognize this, you’ll be late and slow. Other things in a long list include the quality of the sales team and the competitive position. This is the secret sauce.
SK: So if you have the CEO who understands what it’s going to take but lacks the experience, what is learnable?
MC: One of the things that we do beyond the briefing center is our Go-to-Market boot camps with a set curriculum. We walk through the whole process of product marketing, sales, customer success, hiring, financial modeling and other things. It’s a little bit of a firehose, but it exposes the gaps of what it will take to become world class. There are so many little lessons that help shave off cycle time. We’re constantly tweaking it, building it, and using it to help our portfolio companies gain an edge.
To wrap up this experience and conclude, my time with Mark struck a real cord—an experience also shared by the founders that attended the a16z Go-to-Market Bootcamp with me. Having built sales teams in my startups, the full-day boot camp opened my eyes to how venture investors can quantify the value-add to our companies. It was an ‘ah hah!’ moment, and a revelation. Also on-point was the quality of the content and caliber of the instructors. Most important to me, the feedback from our founders was strong. One of the companies is already using the content — including a post-bootcamp download of templates and “money slides” — to build out its enterprise market penetration strategy.
The casual observer may look at the astronomical rise of Andreesen Horowitz and not understand the subtle, yet powerful, component of adding value to portfolio companies. At its core, that’s what a16z is doing- they are taking venture capital back to its earliest and most basic form by enabling innovators to more easily take their innovation to market. And don’t ventures have the best chance of winning when the lines appropriately blur and everyone with a vested interest completely leans into the needs of the business?
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