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ANDREESSEN HOROWITZ: Here's The Magic Formula For Building Massive Companies [DECK]https://www.businessinsider.in/andreessen-horowitz-heres-the-magic-formula-for-building-massive-companies-deck/ben-horowitz-is-not-just-an-amazingly-successful-investor-he-is-also-an-entrepreneur-so-he-has-seen-this-game-from-both-sides-/slidelist/21396732.cms2017-08-20T14:36:28+05:30

ANDREESSEN HOROWITZ: Here's The Magic Formula For Building Massive Companies [DECK]

Aug 20, 2017, 14:36 IST

Ben Horowitz is not just an amazingly successful investor. He is also an entrepreneur. So he has seen this game from both sides...

Andreessen Horowitz looks at 2,400 qualified (pre-screened) investment opportunities a year. It invests in 1 in 100.

Horowitz says that four things are "knowable" about every opportunity: 1) the idea, 2) the entrepreneur, 3) the market, 4) the business model.

But don't be too obsessed with the original idea. Horowitz pointed out that the original "ideas" of many huge companies were distinctly underwhelming. Then the ideas evolved...

In other words, the original idea actually isn't that important.

Ultimately, however, the idea has to have one very important quality...

It has to be a "breakthrough" idea.

But there's a problem with breakthrough ideas...

They seem crazy.

Ben flipped through some breakthrough ideas that seemed insane at the time... PayPal

Nicira

AirBnB

So that brings us to the second part of the "magic formula..."

The entrepreneur.

Great entrepreneurs need to be brilliant, but...

They don't need to have college degrees.

In fact, Horowitz says, the single most important quality in an entrepreneur (in addition to brilliance) is this: "Courage." Why? Because when the going gets tough--which it will--only those with courage will see the project through. It takes great courage to drop out of college. That's why Ben said that Andreessen Horowitz actively looks for brilliant college dropouts.

In fact, Horowitz says, dropping out of college can be a sign of all three key characteristics: brilliance, courage, and a breakthrough idea (an idea good enough to make a smart person walk away from guaranteed success).

Next, there's the "market opportunity."

Yes, to support a huge company, the market opportunity has to be huge. However...!

It may not SEEM huge in the original incarnation. For example, which market would have seemed bigger in Facebook's early days--a "social network for college students"... or "Chinese food"? Right--Chinese food. But look at Facebook now...

And then there's the business model...

Horowitz's main message about business models? Ignore the "experts." If you can build a service that people love, you'll figure out how to monetize it.

How many people in the 1990s confidently asserted that Amazon would "never make money?" More people than you can possibly imagine...

And Facebook! It was obvious to almost everyone who looked at Facebook that Facebook was just a silly fad that would never be a business. Facebook, for example, was obviously just a poor clone of the amazing MySpace..

And Twitter! Imagine thinking that you could build a business out of 140-character blurts.

In short...

More specifically...

So that's the magic formula for building a huge company.

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