Andreessen Horowitz’s Media Empire, Trump vs. Kimmel, Klarna’s $15B IPO Lessons

0:00Newcovers had a crazy week of stories. Madeline Renbarger took a look at the winners and losers in the Klarna IPO. This was not your traditional venture capital overnight success story. It had a$46 billion valuation. Would have been a good time to go public then. Sequoia Capital built in a major position, but there was a lot of money trading hands along the way. I'm sure Tom Doton, who's here on the podcast with us, will have a lot to say about Jimmy Kimmel's temporary ouster from ABC and the pressure from the FCC chair. Quoting from his social media post, I can't believe ABC fake news gave Jimmy Kimmel his job back.

0:38And then this week I published a story on Andreessen Horowitz's financial performance. We're going to start the show with that. They've returned a ton of money secretly to limited partners, thanks in part to their savvy crypto investments. And so we'll have a lot of analysis on how Andreessen Horowitz has raised its many, many billions, returned some to investors. Without further ado, this is the Newcomer Podcast. All right. This was the white whale to pat myself on the back of venture capital journalism. I think lots of VCs over the years have been trying to figure out how well does Andreessen Horowitz perform?

1:17You know, it's a firm, fantastic at getting itself a lot of attention and controversy. It certainly made a ton of unicorn investments, but it spins out money like it's shooting out of a bazooka. And so really wanted to get an answer. How's it doing? Madeline, I mean, you followed Andreessen for a long time. What was your reaction to our story? Yeah, well, first up, congratulations, Eric. I think that's been our most requested, you know, look behind the hood. What's going on in Andreessen? What are they really doing? And one thing that struck me from the piece, honestly, is I didn't expect them to be doing as well as they are.

1:56Is that kind of how you felt in your analysis, too? I think everyone talks about how their rounds are so inflated and they buy out everyone else and their whole game is just management fees. But it seems like a lot of their investments, especially some of their 2010s vintages, are doing quite well. Yeah, just to tick through, the headline is the firm returned$25 billion net to its backers. So after Andreessen takes its cut,$25 billion back. Obviously, this is a firm that's raised a lot of money. So it's like, OK, makes sense. Some of it would come back to you. But they have returned a significant amount.

2:35And importantly, a huge chunk of it, some$12 billion, was in 2021. And if you're someone who followed tech stocks in 2021, that was madness. That was everybody's investing at terrible prices, at high watermarks. It's like, what's going on? And I think part of what this story reveals is that in the background, investors were cashing in their winners. So it's like, oh, they were able to raise a bunch of money. A lot of stuff was happening because they're like, we're geniuses. We're rich. We're selling everything at such high prices. And Andreessen, you know, in particular, was able to see a massive amount of liquidity to its limited partners, to its backers in 2021.

3:19Right. I mean, I think, you know, venture funds, we are kind of roughly on a 10 year cycle, right? So 2021 for those vintages, at least per your deck, the 2011-2012 vintages looked super high performing. It was about 10 years exit during the boom. Amazing. And of course, I'm sure the companies were good, but it was also a timing game. It's funny, actually, Eric. I remember the last time I think that Andreessen's returns were leaked or were in a story was our buddy Rolf Winkler at the Journal had a story that showed that they were pretty good. And I think for some reason, initially, people were skeptical about it at the time.

3:58And maybe it wasn't as good as people had thought, but they were solid. And this one, I think, only reaffirms that point. But like a lot of time has passed between then and now. What were like the big winners? We don't we don't know all the specifics fun to fun. I mean, Coinbase is a key winner for Andreessen. And then flipping, I think, crypto tokens has been very lucrative for them, like Uniswap. And there are a lot of stuff. I mean, one of the things I revealed in this story, which you can read the full thing at newcomer.co, but Andreessen has made$422.7 million from crypto staking. So supporting these crypto projects along the way, besides flipping tokens and selling equity in crypto companies.

4:41So this is a firm that's found a lot of creative ways to make money from crypto. They're huge investors in Databricks. I think Databricks is still private. My sense is they still own a lot of it. But I think when you think about why is Andreessen so successful, I do think the success of Databricks is certainly one of the key companies that should come to the top of your mind. GitHub and Slack are two that they've sold out of that did well for them as well. And what's interesting is that you look at the different trends, like tech hype cycles that have happened in the 10 years. Okay, Databricks, I get it.

5:20That's about the growth of databases. That's big data and that whole industry. So you can see them capitalizing on that. The Uber for X and on-demand world, I guess really Uber is the only big winner. They didn't get anything from that. They were in Airbnb and they were in Lyft. Lyft ended up not. Lyft wasn't great. That's right. They were the Lyft company. But Airbnb was good. Yeah. Yes. So that was a solid return. What else, though? I mean, what other trends were there that matter? Well, you mentioned crypto and they kind of won at the biggest company there. Andreessen's first crypto fund is being held at 7.1 TVPI now after peaking at like 11 TVPI, which I mean, in the weeds of, you know, venture jargon.

6:05It's very good. Define the terms, which are complicated even to us. So TVPI is total value to paid in capital. So that's like the value of, you know, okay, how does venture work? We raise a venture capital firm, say it's a billion dollars. We deploy that money. We invest in startups. Those startups get marked up. We haven't actually exited the position. We still own these illiquid shares, but the value goes way up. We invest in Databricks. Investors say those shares are now worth a bazillion dollars. We say, oh man, our TVPI has gone up by a ton because we've seen the value skyrocket. That is in contrast to another word that venture capitalists like to throw around, DPI, distributed to paid in capital.

6:52And that's actual money your investors have gone back. DPI is, I feel like, really one of the most important metrics, right? Because that's actually money back in the bank, money to LPs. That is the cash metric. DPI takes longer to deliver. You have to exit. And so these are the numbers I got from source. They're from two different decks. It's clearly like one was a quarterly update, two limited partners. So it seems like they are even to sort of the savvy insiders relying on this TVPI number, which again, leans heavily on markups rather than exits alone. But it's sort of paired with the fact that Andreessen has returned a lot of money to investors.

7:36So I think their strategy seems to be, hey, we've given you a lot of money. Therefore, our sense of what these companies are worth is pretty reasonable. Trust us that you should pay attention to the total value rather than just the money you've gotten back. because like, why should we rush to get out of like good companies at high, high valuation? So, so yeah, the Andreessen skeptics, and I've gotten some emails from them. We'll say DPI, DPI, tell me what exits they've actually had. Not like what markups, you know, because, you know, they mark up their own companies, all the VC firms, you know, want to sort of keep these valuations up to the extent possible.

8:13So if you're a real venture skeptic. They can always double down on another investment, right? They can always, you know, do another follow-up round at a crazy even higher valuation and then it's like great our numbers are doing so well because we keep back in the same company so it is still all paper just to tick off you know some of the big takeaways so i said 25 billion net to backers since the firm was founded in 2009 um i think the second big takeaway is yeah that their top fund their third fund was at 9.4 x net total value to paid in capital. So it's been marked up sort of an enormous amount.

8:47So clearly they have some great funds. Crypto was really strong for them. Bio has been pretty weak and those funds keep getting marked down. Growth, growth is a little hard to assess. I mean, it seems good. I mean, you sort of need to benchmark them to other ones. But yeah, I think pretty strong. But overall, and then I think just this amazing, the other bullet that stood out to me is just how large crypto looms for Andreessen, including making revenue from staking cryptocurrencies and that they're like telling investors like, man, I never even heard of Sui. Had you guys heard of this Sui thing?

9:27I don't even follow it, but like it's driving like they marked it down by a billion dollars in a quarter. Andresen is swinging. Their assets are swinging dramatically on obscure crypto products that people are not tracking. The last thing, we won't tick through all of them, but if you read the story, I list, they have companies that they think might go public, which is obviously interesting to a certain set of investors. So I don't know. If you're that invested, go subscribe to Newcomer and read the story. Okay. So you look at the partners that are responsible for some of their big victories. You've got Databricks, which is Ben Horowitz, and he made a pretty prescient and impressive early bet on Ali Gozi.

10:08And helped the company sort of navigate. I think, yeah, Andreessen gets a lot of credit to me. Yeah, yeah. And I did a story at the journal about Ali and Databricks, and Ben actually made their introduction to Microsoft, which was the first moment where they kind of catapulted outside of just being another startup, and they had this huge Azure partnership. And that was all Ben making that connection. So he totally deserves credit for a lot of their success. Airbnb from a couple of years earlier, that's Jeff Jordan, who's not there anymore. Yeah. At least if he's there, he's not one of the listed investors in their slide deck.

10:44Yeah. Right. And then Coinbase, which is Chris Dixon, I think. Yeah. Yeah. So I mean, I know this is not uncommon, but for a firm that has like, I think at last count, 200 ,000 listed partners at Andreessen Horowitz. It really comes down to like three guys, more or less, that are like powering all their success. Yeah, I mean, Mark Andreessen, obviously, it's like the brand and the vision. And I think he's certainly close to some of these deals. And there are like crypto tokens. There was a Slack deal early. Honestly, they had this whole Skype investment early on that was sort of important to them.

11:26So there have been others. But yeah, I mean, it's even at this scale where they're investing and they're raising, you know,$3 billion funds. It's home runs, but it's not just home runs where you lead the Series A. It's like you lead the Series A and you say, oh, man, this is the good one. Like, back up the truck. And that's why I think with like General Catalyst and Stripe, you know, Andreessen and Coinbase and Databricks, You see these firms that are raising massive war chests, like really gobble up a lot of these companies. I mean, we published their terms of Lightspeed a couple of months ago and like they were a little more diversified.

12:04Like I actually had the tables of like how each fund broke down. But, you know, there were companies like Rubric where that would be like a huge section of the returns for the fund. Yeah. I mean, even in the decks, they'll like make the graphic just like this is the companies, you know, These are the companies that have built the big returns. They're a friend about that as well. And when they're pitching their investors. On the crypto side and to connect it to Marc Andreessen, I think I was debating this with another reporter a couple of months back. But I think one of the impressive things that Andreessen has done in terms of like infiltrating the Trump administration is basically setting policy for crypto.

12:43and you look at what they managed to do with the SEC. And I don't know if any of their, well, Coinbase, were they ever under SEC investigation? Yes. Yeah. In any event, it's obviously a much friendlier administration to crypto than Biden was. And policy-wise, this was a huge victory for Andreessen and probably drove some of the accumulation and value of their crypto holdings is the fact that they seem to play a major role in setting policy. It was very crypto-friendly and now their stakes are worth a lot more. So that to me is maybe the Marc Andreessen. And they're going to run the whole playbook again on AI, which I guess I'm more supportive on the AI front.

13:19I mean, to me on crypto, the Biden administration, with the benefit of hindsight, clearly fumbled by having their regulatory approach to crypto be like, we're going to make you afraid, but we're not going to actually tell you whether it's legal or not. And that just created this terrible situation where it felt like the lawbreakers almost performed better than the rule followers because you were sort of, if you were willing to ignore regulators, you survived. If you followed the rules, you got hammered. So I think that was bad. And, you know, now it seems like we're in a world where like crypto A-OK and like crypto is allowing like the biggest public corruption of all time with Trump like in his meme coin.

14:00Like, I just feel like we cannot lose sight of that. You don't have to swing from too strict to free for all. There is a ground in there. The worst, like there's so many bad things going on in Trump. We're going to talk about more of them on this episode. But the public corruption of Trump's crypto holdings is egregious. And the crypto world's regulatory work certainly laid the groundwork for what's happening with Trump coins. So I'm certainly frustrated about that, even if I think there's some valuable things to come out of crypto. If you look at their job as a VC firm, though, they're about returning to investors.

14:37They're all about TVPI. Destroy the honesty of the American government. Yeah, it means that Melania gets a meme coin. Like, great. Well, one piece also that I think we haven't touched on from your story is how much Andreessen's media ambitions loom in the future of the fund. I mean, they were kind of the classic, you know, fund that's going to turn into a media company. And they've had so many different media arms that they've tried to do over time. But it does seem like that's a big focus for the firm, right? in what you were going in the text. They literally call it a media company that monetizes through venture capital.

15:10Exactly. Like, man, every media company should be jealous. That's one. And then they talk about the compounding value of content. So at once, it's very affirming to what we in the media classes do. On the other hand, clearly, Andreessen Horowitz has a much better business model than any of us in the media business. So kudos to them. But what do you guys make of just how seriously they profess to take editorial content and media. Well, look, like you said it in your initial piece on it, it didn't work. You know, they don't really have this direct line. They don't really have this direct line to the public, to the customers that obviates us.

15:50And I'm not even saying this defensively. Like I would have, you know, there are certain examples of, I think, successful media arms within VC firms. Like I think Pirate Wires, they're getting a little weird these days, but like I give them credit. I don't think a lot of the, yeah. They had some shit about donating blood. You have to donate all your blood. I'd love to talk about it with Mike, your buddy. But listen, on the Andreessen stuff, it's one of those things where if you were successful, you can claim any rationale for the reason you were successful. So the numbers that you have prove they've returned money or they have prospective money they can return to investors.

16:26They're a very successful firm. Also, they have this media strategy. Whether the media strategy is responsible for their success, is very debatable. And I think they can dictate the terms of that because they are successful, but I'm very skeptical. So one of my early viral stories was in January 2021. And it was about, it was the unauthorized story of Andreessen Horowitz. And it was basically arguing that Margaret Wenmacher, their chief marketing officer, was like sort of the third most important person at the firm, that she'd basically helped Ben and Mark build up this reputation in the media.

16:59You know, Mark famously penned an op-ed that said software is eating the world in the Wall Street Journal. Like that sort of using the media both through like op-eds and being quote machines and leaking and whispering like was key to Andreessen's strategy on the way up. And then sort of during the pandemic and Trump won Andreessen, Mark Andreessen's politics change, maybe Margaret's politics change. and the firm just sort of sours on the media class. And all of a sudden, they're like, they're not cooperative, they're hostile, and they're trying to build their own apparatus. And I think that's when I write the story.

17:37Then they try to launch Future, which is, I think, what Tom is referencing, which is their own publication, like, we're really going to do it. It's going to be a media property. And that thing, like, fumbled almost immediately. It felt like they had no day two strategy. They had a bunch of posts on day one, and then it's like, what's the plan, guys? The problem with media is you have to keep doing it day after day. So that failed, but like they were dominant in Clubhouse when that was cool. They have, which has failed very successful podcast. They, you know, not a top podcast though. Compared to the venture industry, they are the noisiest and most paid attention to compared to like Mr.

18:12Beast. They're smaller, but you know, their podcast is bigger than this one. So like we are a media business smaller than theirs. So they, it depends how you measure their success. And then the latest is they've hired Eric Torenberg, the founder of Turpentine Media, to be a true general partner and try and again make them successful influencers. To me, the only thing that I think they deserve credit for as a media entity is crypto policy. I just think like they spun their brand into a way that got influenced in the Trump administration, which is very responsive to podcasts, to, you know, to apparently, you know, scammy crypto schemes.

18:55But again, like going back to the things that drove most of their success, Martin Casado, sorry, you know, Ben Horowitz with OK, he's somewhat of a figure, though, although, you know, he's a little bit more like middle of the road, I think, than some of the extremer takes coming from people like Mark Andreessen. Chris Dixon, not out there all that much, not a very aggressive media attacking figure. And then Jeff Jordan, who, again, is not really in the picture all that much. So I just really want to push back on this idea that it drove their success. They made a lot of savvy bets. Yes, but a key insight of Andreessen Horowitz, to me, was that the real constituency is the founder.

19:35and that normally in like finance and old school venture capital, the people you're trying to communicate to are limited partners. And limited partners are sort of conservative. They're the investors of venture capital firms. So you have this sort of like austere, like reserved brand that sort of says like, we're the gatekeepers. And I think Andreessen realized, no, like founders are the customers because if we can get great founders to care about Andreessen Horowitz, then they'll take our money. We'll have great returns. LPs will be happy. Like forget LPs. Like, obviously, we do some, you know, they do some to make LPs happy.

20:07But like, the customer is the founder. And they hammered that message. And so while it's not like competitive with the New York Times in terms of reach, I think founders heard, I need to go to Andreessen Horowitz if I want credibility, if I want all these platform tools. And I think that message was received. And that's part of why Andreessen's been able to get sort of the exits and the investment level that they wanted. I don't know, Madeline, what do you think? Yeah, I think you're onto something there. I do think that by focusing on founders first as sort of their audience rather than the LPs, they have attracted, you know, people view them as the fund that you want to get to help build your cap table.

20:47Even if, of course, there's equal amounts of skeptics that say, oh, Andreessen will fund anyone. Like, clearly, based on these returns, they've done quite well. So founders know that. Founders want to check from Andreessen, even if it's, you know, at some inflated valuation because it adds the prestige. So they're clearly conscious of the brand. I will say, though, kind of to Tom's side, I just think it's tough given like how unsuccessful their media ventures have been. I mean, obviously, our podcast is smaller. I get that. But like it just to me seems like they shut it down. Like the clubhouses didn't work.

21:21I don't know. I think but they do try things. I'll give them that. They yeah, they jump. They're not wildly. You know, they're somewhere in the middle. their media efforts. Yeah, their media efforts to the middle of the road, but their branding efforts and their marketing and brand is very successful. And that has been huge for them. Of course, VC firms are brands, but I think more than anyone, Andreessen has perfected that as a business model. Yeah. All right. For our second story for this episode, we wanted to talk about Jimmy Kimmel. It's an irresistible topic. You know, newcomer, here at Newcomer, we're obviously very focused on how our business is doing.

21:57We try not to think about the government too much, but then sometimes, especially in a strongman democracy that we seem to be living in right now, the government looms too large. So we felt compelled to call out the meddling from the FCC and the Trump administration in the case of one Jimmy Kimmel. So we said business leaders dance to Trump's tune. The Trump trade is ethically bankrupt and riskier than it seems it's time to sell. This is sort of a team effort piece. So this is not my line. I think Jonathan Weber, our editor, pulled this. He said, as a matter of personal and professional ethics, we're quite surprised that people with plenty of means who have climbed to the summit of corporate power have opted to grovel at Trump's feet.

22:50He's obviously talking about, you know, Disney, basically capitulating here in Bob Iger. Like, why'd you roll over? And we write, we understand that Trump represents a real threat to their business interests, but as the prices line from billions goes, what's the point of having fuck you money if you never say fuck you? And that was the piece. And like, I do think enough people sort of shouting like, man, Iger, et cetera, why are you guys so weak here? And spineless got ABC to sort of like reverse course, bring back Jimmy Kimmel and hopefully hold the line. I don't know. Yeah. Tom, I mean, you follow media so closely, obviously you lived in LA for a long time, wrote about Hollywood.

23:33Where, where, where do you see, you know, we made this sort of a business story, but it's really a Hollywood story. What do you make about it? Make of it, uh, sort of from inside Hollywood. It's so funny how in the midst of a crisis, everyone becomes experts on the topic that just popped up. So remember when everyone was like experts on NATO after Russia invaded Ukraine and we became extremely knowledgeable about like the ins and outs of like membership countries in NATO and cross various red lines. Yeah, during COVID everyone became virologists. We were epidemiologists and virologists. So now we're all ratings experts.

24:05And, you know, the smart conservative take after Jimmy Kimmel was like, ah, this was them cutting bait. This was ABC cutting bait on a low rated show, which is just like, I understand that that was the spin that Paramount gave when they announced they were going to be shutting down Stephen Colbert's show and getting rid of the late night franchise entirely. This was completely wrongheaded and just goes to show that self-professed experts and quick studies on a business that they otherwise have no fucking clue about really leads people to very, very dumb ideas, which is like ABC has been dying to get rid of Jimmy Kimmel all of these years.

24:42And because of a controversy, they cut bait just before the recording. So they can't just like, you think it was like a well positioned show for ABC? No, I mean, it was, yes. I don't even know where to start with these things. Like late night as a genre has been in decline. If you look at the ratings, no one really watches broadcast television anymore. And these shows that air at 1130 on local affiliates are not enticing to most people that watch TV, the rating, the views on YouTube far outstrip what the live ratings are. So anyone who's trying to make a, you know, what the reach of these shows is based on its TV ratings doesn't take into account that these are basically web shows at this point.

25:20And I was listening to Bill Simmons. He's making the point. Jimmy Kimmel leads ABC Upfront. He's like a big part of the ABC brand. Like they use him for a lot of stuff. They like him. They like him. He is a huge. You're responding to the disingenuous like, oh, you know, like argument. It's a smart take. Like that was the thing that annoyed me. Right. Like that became like, yeah. Oh, I really know how the business works. some of the publications that we uh it feels like a real dylan byers take but i'm maybe he didn't write no dylan as much as i really despise the guy and i don't mind saying that on the podcast um as much as i truly dislike him and what he does as a journalist like he understands how media works so he wasn't dumb enough to really think that that's what was going on but also it's classic trump that trump keeps me like even after jimmy kimmel came back he's like no i'm trying to get rid of like jimmy kimmel and he literally like tweets out like oh i got abc i basically extorted ABC for like 19 million dollars or whatever maybe I need to do that again you know it's just like all these conservatives like you know try to come up with the most like you know fair mind intellectual speech like business rationalist reason for this and then it's just like no I did exactly what I said and I'll do it again it's this is why Trump is like maybe a uniting figure uh in other ways because he just fucking says the thing that is the most basic and like uninformed, not informed, like unenlightened version of what's going on.