20VC: a16z's $15BN Fundraise with Alex Rampell | The Best Companies Have Hostages Not Customers | The Best Founders Materialise Capital, Customers and Labour | Mid-Sized Funds with Die and The Future of Venture Capital
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this engaging episode, Alex Rampell, General Partner at Andreessen Horowitz leading their $1.7B apps fund, discusses the firm's recent $15B fundraise and the evolving venture capital landscape. (04:55) Rampell argues that in today's venture environment, firms must either go very big as generalists or remain small as specialists, with the "death of the middle" being inevitable. He outlines his investment philosophy centered on finding high-agency founders who can "materialize labor, capital, and customers" and shares insights on the challenges of maintaining performance at scale. (09:39) The conversation covers three core investment themes: greenfield systems of record, software that replaces labor, and walled garden data advantages, while exploring the implications of AI on traditional SaaS models.
- Core themes include venture fund scaling strategies, founder evaluation frameworks, the impact of AI on software categories, and the evolution of deal-making in an increasingly competitive market
Speakers
Alex Rampell
Alex Rampell is a General Partner at Andreessen Horowitz, where he leads their $1.7 billion apps fund. He has led investments in notable companies including Plaid, Mercury, and Opendoor. Prior to joining a16z, Rampell was an entrepreneur himself, founding companies including TrialPay, which was acquired by Visa. He brings extensive experience in fintech and payments, having worked in online credit card acceptance since 1997, which was considered early-stage for internet payments at the time.
Key Takeaways
Focus on High-Agency Founders Who Study History
Rampell emphasizes investing in founders with exceptional agency - those who won't be told what to do and take matters into their own hands. (14:49) These founders must have studied the complete history of their space, meeting previous entrepreneurs and understanding past attempts. He cites examples like Patrick Collison studying payment systems history and meeting Dee Hock (Visa's founder), or Brian Chesky researching the bed and breakfast industry back to the 1800s. (20:30) This deep historical knowledge prevents founders from repeating past mistakes and demonstrates the obsessive preparation necessary for success.
The "Count of Monte Cristo" Motivation Factor
The best entrepreneurs need motivation beyond financial gain - they need a drive for revenge or redemption that sustains them through inevitable challenges. (21:37) Rampell references Alexandre Dumas' novel where Edmund Dantes is wronged and seeks revenge, explaining that founders need similar fire when offered life-changing money. Examples include Dave Duffield starting Workday after the hostile takeover of PeopleSoft, naming his new company as a direct challenge to Larry Ellison. This intrinsic motivation becomes crucial when $100M offers could easily derail a founder's long-term vision.
Best Companies Have Hostages, Not Customers
Successful software companies create switching costs so high that customers become "hostages" who cannot easily leave. (24:10) Rampell contrasts this with companies that have easily replaceable products. Workday exemplifies this - despite potential competition, established companies won't switch HR systems for marginal improvements. However, new companies will choose the best product, creating a "Greenfield Bingo" opportunity where startups can capture new market entrants while avoiding expensive customer acquisition from incumbents. (24:52)
The Two-Deal Framework: Working vs. Could Work
Rampell advocates for a binary investment approach: either buy any percentage of something that is "absolutely working" (like Facebook's explosive growth) or demand high ownership of something that "could work" but isn't proven yet. (50:18) This framework helps navigate ownership versus opportunity trade-offs. For consensus deals with clear traction, lower ownership is acceptable because the probability of success is high. For earlier-stage or riskier bets, higher ownership is essential to compensate for increased risk and justify the potential for fund-returning outcomes.
Selling Requires Years of Relationship Building
Successful company exits require 1-2 years of advance relationship building with potential acquirers, treating it as a "background process" consuming 5% of CEO time. (59:13) The key is building relationships with actual business unit leaders who would use your product, not just corporate development teams who only execute transactions. Rampell learned this selling TrialPay to Visa, where he spent years building partnerships that eventually led to acquisition conversations. The process requires "incepting" the idea that the acquirer needs your company, similar to the movie Inception but over 18+ months.
Statistics & Facts
- Andreessen Horowitz raised $15 billion in their latest fundraise, representing over 20% of all capital raised by venture firms. (00:32) This massive scale reflects the firm's belief that technology opportunities have grown exponentially, with almost $7 billion allocated specifically to their growth fund.
- Only approximately 5% of current unicorn companies will ever be able to go public, according to Rampell's estimate. (31:59) This shocking statistic highlights the challenge of companies staying private longer while facing increased competition and potentially unsustainable valuations.
- Amazon went public with approximately a $600 million market cap, compared to today's much later IPOs. (05:55) This historical context shows how dramatically the venture landscape has changed, with companies now requiring significantly more capital and achieving much larger scales before going public.
