Andreessen Horowitz is one of the most well-regarded Silicon Valley VCs, and one of its general partners, Jeff Jordan, has quite a track record. In addition to serving on the boards of two repeat Disruptor 50 companies, Airbnb and Pinterest, he's also a director of mobile marketplace OfferUp and past Disruptor Instacart. He was a CEO himself — taking OpenTable public — and now he has an investing strategy that's focused on leaders.
Here's what he believes are the three key factors to observe before deciding to invest in a start-up.
Entrepreneurial drive. "The biggest thing you're investing in is the entrepreneur. It turns out early stage, middle stage, late stage — you're investing in the entrepreneur," says Jordan. "So you're looking for someone who is passionate, can tell a story and, most of all, is persistent. And brave and courageous. Because the one constant in a start-up is things go wrong all the time, and you need someone who can power through them."
Jordan points out that business models evolve, as do companies' vision, so the key is having someone who's willing to adapt to the market and shift focus with the opportunities. The entrepreneur has to be better than the idea, because ideas change, Jordan says, adding, "I remember the first time I heard both Airbnb and Pinterest. I was like, I'm not sure I get it — you know, sharing your home with a stranger, a digital pinboard — then you see what the entrepreneur can do with it and turn it into, and that's where the magic happens."
A dependable, hardworking team. The focus on people extends to the advice Jordan gives to his portfolio company, based on his own experience at OpenTable and eBay before that: Success hinges on hiring a good team.
"It's the quality of people working on the problem. You quickly figure out you cannot make every decision. Then, as the business scales, you quickly figure out how you can make very few of the decisions. So the execution of the company is dependent on who your team is, how well they're organized, do they understand the vision, the North Star of decision making, and it's all about the team."
"The one constant in a start-up is things go wrong all the time, and you need someone who can power through them."
Timing. This, Jordan says, is crucial to a start-up's success. The underlying technology needs to be accessible and affordable. He cited a number of great ideas that failed because they were too early — his partners Marc Andreessen and Ben Horowitz' cloud business didn't work, because the cloud wasn't yet affordable.
And now the explosion of mobile technology is enabling all sorts of previously impossible business models. "The most interesting thing to happen in the consumer space in the last half decade is the smartphone, because it just opened up all kinds of new-use cases and actually threatened a bunch of web incumbents with mobile upstarts," says Jordan, pointing to his portfolio company OfferUp 'disrupting' the local classified business that moved to Craigslist.