Andreessen Horowitz has raised roughly a billion dollars since opening its doors in June 2009, so it should surprise no one that the firm — run by Marc Andreessen, Ben Horowitz, and John O’Farrell — has just brought aboard a fourth GP.
More surprising is that the firm’s newest hire, IronPort Systems cofounder Scott Weiss, doesn’t have much experience as a venture capitalist. (Neither did Andreessen and Horowitz or O’Farrell, who was most recently a vice president at Silver Spring Networks.)
“The goal is to…build a new culture, a new way of evaluating companies, and a new way to build companies,” says Horowitz. “To do that, it didn’t make sense to bring in people from the old culture. As our culture and way of doing business becomes more pronounced and stronger, we’ll absorb people from other venture capital firms, as well.”
In the meantime, entrepreneurs may be getting a pretty good champion in Weiss, a “very smart cat,” according to one investor whose firm lost out on an opportunity to fund IronPort and who asked not to be identified. (Readers may recall that IronPort was sold in 2007 to Cisco for $830 million; Weiss was also its CEO.)
I chatted with Weiss for 20 minutes yesterday in a call in which we explored more of his background, including whether he has yet made an investment for the firm yet; whether Cisco or Microsoft is better at acquisitions (Weiss was an early employee at Hotmail); and whether, like so many entrepreneurs, Weiss is also a prolific angel. (The answer: not really, though Weiss is an angel in the 11-year-old storage company Coraid, which has raised $35 million in recent years, and in the cloud company LiveOps, which has raised $51 million over the last decade).
A bit more of our conversation, edited for length, follows:
How long ago did your path cross with that of Marc and Ben?
Relatively recently. One of the guys through whom I’d practically done all of my recruiting at IronPort – Jeff Stump [a former recruiting star who now works inside Andreessen Horowitz to help their portfolio companies with hiring] – called me and told me he was thinking of going inside and gave me the scoop on the firm.
As an entrepreneur, thinking about what I’d do next, I’d pretty much scratched venture capital off the list. It’s an industry that hasn’t changed in a long time. [But] when I started talking to Marc and Ben about what they’re doing, I realized they’re really trying to think of [Andreessen Horowitz] as running a company whose customers are the entrepreneurs. It’s a different way of looking at the business.
Are you on any boards and will you stay on them (will they those pose any conflicts)?
We’re discussing it right now. I’m on the board of [email marketing startup] ReturnPath in New York. I’m also on the board of [the high-speed network forensics company] Solera Networks.
Hotmail sold to Microsoft; IronPort sold to Cisco. Which is a better acquirer?
Cisco, definitely. I just think the fact that [Hotmail] lost so much ground to Yahoo Mail and Google Mail [suggests a lot]. IronPort grew from a company with a $125 million product line to one with a $500 million product line within Cisco.
What lessons will you impart to entrepreneurs who are getting offers from competing acquirers and trying to decide what to do?
What is the experience this company brings to acquiring [is important to ask]. Also, is it local? Will an acquisition mean massive turnover? I also now know, having sold companies to large companies, that [the company being acquired] is also going to change dramatically. It’s hard to keep a culture [post transaction]. Turning the steering wheel over to someone isn’t as intellectually or mentally fulfilling, either.
My inclination is not to [sell]. If you have an opportunity to be a large independent company, go and do that.
Sounds like you regret selling to Cisco.
I don’t know if I say with regret that I sold IronPort, but there’s definitely a sense of: what might have happened?
In between Hotmail and IronPort, you briefly worked at the Bill Gross incubator Idealab as a managing director, an experience you sort of characterize as disastrous. What did you learn there that might help you now?
Well, I certainly saw a lot of failed companies. We raised a billion dollars at the peak of the boom and started investing it during the downturn. But I met a ton of talented entrepreneurs who today form a great network of folks that I still keep in touch with and [I learned] don’t get ahead of your headlights, hire good people, and raise money while you can.
You and Ben are both enterprise software veterans – how will you divide up which companies you meet with? How will your focus differ from his?
We have a lot of similar interests. I have bent more toward email and security, though, even while I also understand the consumer space well. Between Hotmail and MSN and Idealab, I’ve probably seen every consumer Web type of deal on the planet. So I’m in a situation where you can put me on any kind of deal that needs my kind of help.
[Most exciting to me] are those that have cell division going on — like FourSquare and Twitter — but haven’t figured [how to monetize that growth] yet. Hotmail was like that. We weren’t sure how to make money from it but we knew that rolling out features and keeping the service up and running were paramount, and we put off harvesting the business until later and I think that was smart.
Did Hotmail ever make money for Microsoft?
Well, if you think of Hotmail, or Gmail, or Yahoo Mail, email is fundamentally important. I’m not sure if taken alone it’s their biggest money maker. It’s not a search engine or a money maker like Google AdWords. But email tends to be the meat in the back of the supermarket and what draws people to the store every day. It’s definitely not a loss leader. It pays for itself.
When might we see you make your first deal on behalf of the firm?
I’ve made just one rejection, and I think we make one investment for every 300 rejections. So I’ve just started down my path here!