ANDREESSEN HOROWITZ Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

ANDREESSEN HOROWITZ Case Solution

INTRODUCTION

Andreessen and Horowitz established a 16z VC firm in 2009 by raising $300 million in Silicon Valley-based information technology (IT) start ups. They aimed to disrupt the traditional VCs model so that they could design innovative organization and governance structure for 16z VC firm.

PROBLEM STATEMENT

The co-founders,after founding it, wanted to double the company’s assets under the management over the next few or two years, therefore, they had some questions regarding the problems in it; such as would doubling the number of general partners and the size of the 16z's operating team (which is their competitive advantage) be required? As a bigger firm, would it be possible for it to sustain high-quality communication between its team members, which was crucial to the network model's success? Lastly, if 16z succeeds in doubling its assets under management, could it continue to invest solely in Silicon Valley-based information technology start-ups? Could the firm preserve its edge if it is diversifying into other geographies (e.g., China) or sectors (e.g., clean tech, biotech).

CASE ANALYSIS

ANSWER1

When 16z was founded, the venture capital industry was not doing well, as the ratio for succeeding in that industry was as such that in order to succeed in the market, the company should be among the top five firms achieving high returns and benchmarks. Andy noted that only 3%of VC firm generated 95% of the industry’s return. NVCA also noted that 40% of venture-backed companies failed; 40% returned moderate amounts of capital; and only 20% or less than this produced high returns in that industry.

Several developments were also disrupting this industry such as the cost of launching internet business had reduced, the competing sources to this industry such as seed/early stage investors, angel groups, incubators and crowd-funding were becoming popular as well. Therefore, after analyzing VC industry’s scenario, it has been noticed that the industry is not so much attractive up to this stage in finding 16z immediately however,after doing a lot of hard work and bringing changes,it would be fruitful to discover 16z in that industry.

ANSWER 2

The competitive advantage for 16z VC firm is its operating team, which comprises of technical talent, executive talent, marketing talent, the market development team, and the corporate development team.In every stage, VC firm includes this operating team however,the operationsof this 16z VC firm aredifferent such asin technical talent,they identify talent through referral engineers, onlinesources, relationships with contingency recruiters as well as they arrange events at 22 campuses of universities for those portfolio companies.

Moreover,it measures its success by measuring the size and quality of the networks, which it manages. It also monitors it by 16z-sponsered programs as well as the number of consultations it provided to the portfolio companies. The executive workings would be different in away that executives received career coaching, connections to peers which benefit all the parties and advised in hiring executives, and on-boarding practices.Moreover,it also helped the portfolio companies in anticipating their long-term hiring needs, which took a long time.

The co-founders thought marketing to be controversial,therefore they considered in-house marketing team which helped both the firm’s portfolio companies and generated the same kind of network, which harnessed the talent as well as they brought Wennmachers on-board to build relations with the business-press, marketing/PR agencies as media attention to VCs which give good returns.

The corporate development team comprised of 4-professionals who developed a network of financing, mergers and acquisitions relationships, which helped in providing guidance and contacts to the portfolio companies as well as they stayed in touch with other VCs, debt providers, investment banks, hedge-funds, mutual-funds and sovereign wealth funds. They also met with corporate development officers at technological companies. The second competitive advantage was its rule of firm governance which supported the corporate governance values, MBOs as well as team-work would be appreciated more...................

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