So, scott cooper, what does a Venture Capitalist do . Basically what we do is we provide money to companies that are trying to grow and hopefully arbecome very Big Companies like facebook or google or apple someday and then if we are doing our jobs correctly we are also helping them grow the company so we dont work in the businesses but hopefully we can provide introductions to them and help them navigate new challenges as they go through the business so we like to think of ourselves as a money provider and hopefully a supporter as the business grows. Why cant a company such as a the one you describe go through a bank and do traditional avenues. Good question. The problem is most of the businesses we reinvest in our ricky businesses and lose money for a long period of time as they invest in banks are just not in the business of doing that or taking risk of losing their capitals so we are willing to take that risk and in fact half of what we invest in will lose our money and any bank who you proposed that idea to probably would not be too excited about being back in that center. Host where does the original money come from that you give to these companies . The business works that we raise money from and University Endowments are big if you look at Stanford University or at Yale University the alarms endowments and they earn a return that money goes to turn with subsidize the cost of supporting the university and large foundations and nonprofits and its another example and the companies are trying to use venture as a way to they are looking at looking at generate 30, return annual returns as a broad portfolio they will have Venture Capital andio mike of stock and this is a highrisk but hopefully the high reward portion of their portfolio. Host what is a normal pitch like . Guest its fun and its usually a few members of the Founding Team who come in and often they have a Powerpoint Presentation and they have often not build a product at this point in time and its an opportunity for them to tell us about their expansive vision for the companyns and how big and te Market Opportunity could be and kaat could this thing look like an scale if it gets there and ultimately why is this team the right team to go after that so its very fun, quite frequent, quite intellectually process by which we had to learn new interesting things and ultimately be able to make a decision about whether this is a team we should back for that particular opportunity. Host mr. Kupor, is this unique to this techworld . Guest you know, its definitely the case that not all Venture Backed Companies are Tech Companies but its also the case that many of this companies, say Venture Capital, our Tech Companies. Is not completely unique but it does require a type of financing like venture which is the willingness of somebody too, as i mentioned, take a chance on something where the odds of success are extremely low and hopefully if it works the payoffs are high so in our business one or two companies in our portfolio will drive probably the lions share of return and the rest of the portfolio does not contribute that meaningfully so you have to have that level of Risk Appetite to be interested in this business. Host your new book is called secrets of sandhill road. Where is sandhill road and why is it significant . Guest yes, sandhill road is in the middle of california which would otherwise not know except for the fact that about 1 mile or two east down sandhill road is this more payment neighborhood called Stanford University. You can think of sandhill road as if you are a music fan its a music row in nashville or wall street in new york and its a bit of a mythical place where it happens to be a lot of the Venture Capitalists congregates but its not anything that exciting to write home about but a bunch of drab, twostory buildings but happens to be a confluence of loss of capital an. Pportunity for entrepreneurs host why is it drab . Guest well, its a bit of an Old Industrial park. [laughter] its land thats been known since the beginning by Stanford University and its never there arent any fancy highrises there and a lot of twostory buildings and i think maybe partly there may have been zoning restrictions that cause it but also its upstaged by much more famous neighborhood which is Stanford University and maybe the university always a hd the intentions to make sure that sandhill road was left glamorous than the University Campus itself. Host you are the managing partner of [inaudible] which was Andreesen Horwitz guest yes, were a Venture Capital firm so we do the things were talking aboutut in the interview so we invest in very Early Stage Target Companies and hope that over time can help them grow in a large business. We are about a 10 billiondollar business which means we have raised about 10 billion over our ten year history from the limited partners that we talked about and again our job is to be on top of all the most interesting things happening in tech and entrepreneurship and particularly those businesses that have software as a foundational component to them. Host what is the technical or legal explanation of what a limited partner is . Guest sure, a limited partner is someone whose investor in a fund like ours and the Legal Definition means they are truly limited in the sense that they dont have control over the investment and control over when or if we sell those investments so they are essentially think of them as a path investor they give us monea and we have an obligation to be a fiduciary and hopefully earn a good return for them but the decisions about what companies we invest in, when we choose to sell them, those types of things are 100 in our purview. Guest what. Day for was a typical you . Guest so, usually we will be seen a couple different pitches on a day and that means we might have a couple hour long meetings with entrepreneurs and if we are working on deals then we will do diligence so someone we met earlier and now getting closer to thinking about a deal so we dig into their business in greater detail to understand the product in more detail in the financials in more detail and then we spent time building relationshipsim so huge part of this business is being wellconnected into the entrepreneurial ecosystem, understanding what professors are doing at different universities that might be relevant for some companies so we spent a lot of time on what we have called outbound relations. Host what is your expertise that you bring to this position . Guest yeah, ive been in tech for about 25 years and was a banker in my early days and i was at a Startup Committee for about nine years that ultimately got sold to hewlettpackard and now i been in the business for ten years so i think what i i bring is really an appreciation for both the Capital Markets and financing side of businesses but also a real appreciation fort what it means to be in a start up and go through the start up companies process and i hope what that means is not only does it provide empathy and incredible amount of respect for the entrepreneurial process but i think it allows us to be better investors and more patient investors and understand and organize that these things just dont go up into the right all the time in starting a company is ais serious ups and downs and i think we bring a discipline and patience to that investing process. Host mr. Scott kupor, often there isnt a product necessarily associated with the pitch and is that correct . Guest rightparenthesis is a product idea usually i but ofn the case that in the early stages there is no product that you have been billed. What we are trying to understand from the entrepreneur is not necessarily what is the final product but tell us about what we call the idea of maize. How did you think of the idea offor this product and how do yu believe its responsive to what the market needs are but we recognize that companies prevent witches they will change over time as they get products into market and thats the Company Building products. The discerning data points and being responsive to what the needs are. Host what is your one lost record . Guest we dont think of it that way and the honest answer is its [inaudible] which is we generally on about 40, 50 of the things we invest in and o theres a polite way of calling them in. Capital which means we lose our money and then typically at about 20, 30 of Companies Make money in the real difference between success or failure in this business is what happens with that remaining ten, 20 of companies and to the become a facebook or google where you might make 25, 50, 100 times your money and that is the way this business works. The way we measure success is based upon total returns for those returns will be driven by a very small number of compani companies. Host mr. Kupor, if youre a 10 milliondollar company and you had some successes what is one that you can tell us about. Guest weve had some nice successes and i will give you great example that we have a company today called oct a, enterprise space and we invested in the company for the first time back in 2009 and was one of the very First Investments when we started the business and it was what we call a seed investment. We put a halfmillion dollar and in to give the two founders an opportunity to build out their idea and their product and over the years we invested more money but it went public about a year and half ago and its a ten, toppling down markets cap so thats a great example of a success case where you have something that weve been working with them from inception and the Founding Team there just has done an incredible job in building up what is now sustainable freestanding business. Host i apologize if i missed this but what is it that oct a does . Or makes . Guest octet is a softwaree company and the way to think about what they do is if you are a business you may have cloud based applications which means applications that you are not running on your premises but are running in the cloud so you might have gmail for example for email or use salesforce. Com to manager salesforce and he might have a software called marquette which manages your marketing and all of those software because they run the cloud, every user has to log into those and have security controls around their ability to access those applications for what octa does it essentially provide a single signon into those applications so instead of having to know your passwords for those applications you log into octa and they directly manages your access into those so its a tool that the it debarment will use to manage security in their shop and manage user access and administration of this when we hire somebody what applications do we give them access to and if someone needs of the firm how do we make sure they remove access and its a tool to manage security and User Administration for a variety of applications v. Host for those of us of a certain age names like General Electric and ibm, ford, those are names that we are familiar with and where did the name octa come from . Guest is a very good question but i dont know the origin story of octa. Ive looked that up for you and drop you a note on it but i wish i had a better answer and r,unfortunately you stumped me speak. Host is Silicon Valley successful because of venturecapital . Guest no, Silicon Valley is successful because of entrepreneurs who built these businesses and are willing to take the kinds of risks that itt entails and building something that as we talked about might have a ten, 20 chance of success. Venturecapital is an enabler of thatat entrepreneurial activityo we are a financing source and hopefully we can add value to these comedies but we should not get ourselves at the end of the day and the innovation and develop meant of these companies calms 99 from the hard work and efforts that they put in. What are the things, mr. Kupor, he talked about in secrets of sandhill road is that products or ideas are off rightdoublequote, ten years ahead of their time and what do you mean by that . Spirit yeah, its funny. We see this recurring theme is that businesses that do not work at some point in time later it will work so let me give you a ivmple example. You may recall the Company Called wed web fans where we had the tech bubble in 98 and they were trying to do grocery delivery and the way they were doing it at that time was they were building massive warehouses ck order to stock all the produce and materials they needed and then they would use vans as the name implies to deliver that to people and provide delivery. It was a Wonderful Service for people but it was a small Market Opportunity because the number of people who thought about the idea of Home Delivery for groceries or who were willing to use their computers at the time because cell phones did not exist to be able to do that ordering was not that big and the company ultimately was not successful. If you fastforward to today we are in an investor in a comedy called insta cart which is basically doing the same idea but executing it in a different way. Executing it with a workforce that is in many cases part of what we called the gig economy, people who are independent contractors on their own doing this and they are not staffing and supermarkets themselves but partnering with supermarkets to get access to the produce of the things they need and again they have the benefit of the iphone revolution which now means that a lot of things that people would not have otherwise would do it on their mobile phone and those examples where t the new technology can create a market and expand the market in a way that cannot exist in a prior timeframe. Host when it comes to an insta cart or in octa number n one, do they go to other Venture Capitalists as well w besides yourselves . Guest yeah, they do. The weight this business works is people raise money in different rounds and rounds typically correspond to the scale and development of the company some often people will raise a first round of financing and that will last them 18, 24 months on average and then they will go raise another round of financing and if they are doing well the evaluation will be higher on that second round of financing. In general for each round of financing at the early stage there tends to be one major investor and if we are lucky enough too have that opportunity we will be the major investor but when they go out and raise subsequent rounds of financing is often the case that additional Venture Investors will now join and be a part of the company so we got an interesting relationship with our other Venture Capital firms in the industry and partly competitors in that there are deals and rounds that we will directly compete against but many times we are partnering with our other Venture Capitalist firms because weep ae investing alongside either in earlier rounds or later rounds in the same company. Do you have a say so in how the business operates during that first round of financing . Spirit yes, the way our business works is we have a set of governance rights that typically ree attached to the financial interest we invest in the company. So often we will sit on the board of a company and we will have obviously a right and duties that a board member may have to make decisions about whether the ceo is appropriate or strategy the companys and then we also tend to have stock that allows us to vote for things like will the company raise more money or try to sell elthemselves so those types of things we have a say in. We dont govern them completely and the founders of the company and other shareholders but there is a balance of power that comes from that type of structure. Host do you have a say so in a company like octa or insta cart to date now that they are freestanding companies . Or had they pay back their money so youre gone . Ass. Guest they dont pay back their money so the way they work is we own equity and stock in the companies so in a case of an octa when they go public we have wthe option if we so choose to sell that stock and that is how we would make a return on our investments. In octas case we have one member of the board and our founder is on the board and our typical memo is that we will stay on the board for someri period of time after the companies go public but over time look to exit the boards as these companies become more mature. Today are only saying the company is as one of many Board Members and of course we have stock so like any other stock we can vote through a proxy for other Corporate Activities that would require a type of vote. Host mr. Kupor, ben horwitz and our relative legends who are they . Guest yeah, he originally made his fame in netscape back in 1993 which is the First Company to commercialize the web browser and netscape famously went public in august 1995 and it heralded what many people believe as the first real techeo revolution for the modern internet era that started in the early 90s and theyve gone on to other companies and he was on the board of ebay and hewlettpackard and its very important adventure and now we have him [inaudible] a they became Close Friends and colleagues to that in the ultimate