Social psychologist Amy Cuddy of Harvard Business School recently produced some interesting research suggesting that people are highly likely to see someone as competent if they’ve demonstrated expertise in just one area, even if they later display incompetence elsewhere. Think of the star attorney who sails his boat into some rocks.

It’s not hard to draw a line from Cuddy’s research to the media frenzy surrounding Andreessen Horowitz, the year-and-a-half old Sand Hill Road firm that almost always garners glowing reviews from the media. When Andreessen Horowitz announced last week that it had just raised a $650 million second fund — in three weeks, no less — dozens of news outlets published splashy features about the young firm, which is now managing nearly one billion dollars. One property, VentureBeat, has already anointed Andreessen “the King of Silicon Valley.”

But there’s not much to praise – yet. It’s wildly enthusiastic by even Silicon Valley standards to place them in the “top ranks of venture capital firms,” as the New York Times did last week. 

I’m not arguing that the pair isn’t as brilliant as they’re often portrayed. But great competence as technologists doesn’t always translate into success as investors. Even Andreessen and Horowitz would probably concede that they don’t have enough exits to warrant the kind of fanboy fascination that so many esteemed pubs have afforded them.

Andreessen admits he fumbled the opportunity to invest in Facebook. (As a member of Facebook’s board, which he was asked to join in 2008, he now holds a small ownership position.) While he and Horowitz were able to acquire small stakes in both LinkedIn and Twitter as angel investors, so did a long line of other angels. And of the other 43 startups they backed together, just three have been acquired for modest amounts, including Chai Labs, which sold this year to Facebook for a reported $10 million.

It’s also not yet clear that it was smart of the partnership — which closed its inaugural $300 million fund in July 2009 — to invest it with such breathtaking speed. Earlier this year, the firm was part of a consortium that spun out Skype from eBay, paying $50 million for a roughly 2% stake in the Internet calling service. Andreesen Horowitz also invested $30 million in Kno, a company that’s producing $899 dual-screen tablets for textbooks.

One can debate whether the calling service or an also-ran iPad are good investments, but very few venture firms have succeeded over time by investing nearly a third of their first fund in just two deals.  

RockMelt – the recently launched social browser – seems to embody the media’s adoration of Andreessen. Not a few summaries of the product noted that Andreessen Horowitz’s lead investment in the company was tantamount to a blessing by the father of the browser. The fact that Google Chrome, which has been backed to stupefying extremes by its rich parent, still accounts for just 8 percent of the market receives much less attention.

Even Andressen’s uneven track record as an entrepreneur is rarely acknowledged anymore. Yet his next endeavor after Netscape, the infrastructure company LoudCloud, hobbled to a 2001 IPO. (Andreessen credits Horowitz, who was LoudCloud’s CEO, for eventually refocusing the business, renaming it Opsware, and selling it to Hewlett Packard for $1.6 billion six years later.) His third company, the late-to-the-game social networking company Ning, looks like a disastrous investment for VCs, who’ve now poured a stunning $120 million into it.

Cuddy’s research suggests it’s our human nature to think that because Andreessen and Horowitz are famous entrepreneurs, they’re also highly competent investors, but at this point, they’ve done little beyond inject some excitement into a once plodding industry. Though everyone wants to pick “the next king of Silicon Valley,” the reality is that it’s too soon to give away that crown. Maybe it will someday go to Andreessen and Horowitz, but they’ll have to generate cash-on-cash returns first – just like everybody else.

Related posts:

  1. Oops! No website for Andreessen Horowitz
  2. Andreessen & Horowitz Target $250 Million
  3. Andreessen Horowitz Adds Ex-Opsware Execs
  4. Andreessen Horowitz Seeks $650 Million for New Fund
  5. Gina Bianchini Leaving Ning, Joining Andreessen Horowitz

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