Archive

Companies

Marc and Ben founded Andreessen Horowitz with some very explicit beliefs.  We would invest in Information Technology companies, and not in things medical, green or clean.  We would have a preference for companies with deep technical roots and innovations.  We would have one office, in Silicon Valley, and would not seek to invest in companies being incubated in places like China or India where we lacked expertise.  We would be stage-agnostic, seeking to invest in the best companies regardless of what round they were seeking.  And we would have a preference, all else equal, for companies being built in Silicon Valley.

The Silicon Valley focus is due to a couple of factors.  First, we are all believers in the power of the Silicon Valley ecosystem to incubate and grow new technology companies.  Just this week, the New York Times referred to it as “the world’s epicenter of innovation”.  We know of few places in the world that sport Silicon Valley’s combination of financial capital, intellectual capital, entrepreneurial and engineering talent and experience, and support infrastructure.  Many of the Internet’s most highly valued companies are from the Valley—Google, eBay, Yahoo, LinkedIn, Facebook and Zynga.  And the second factor is that local companies best leverage our most precious asset as investors, which is time.

Indeed, the majority of our investments have been based in Silicon Valley.  There have been exceptions—we are or have been involved in a handful of non-Valley companies such as Skype (Luxembourg), foursquare (New York) and Groupon (Chicago)—but the majority of our investments are in the Valley and all four of my Andreessen Horowitz investments (LikeALittle, Airbnb, Lookout and Pinterest) are within a 45-minute drive of each other.

With this as background, I’ve been encountering an unexpected finding as I’ve been looking at potential e-commerce investments in the U.S. (and note that I’m considering “marketplace” businesses like eBay and Airbnb as separate from e-commerce).  It strikes me that the majority of innovative new e-commerce businesses are being started outside of Silicon Valley.  There are some innovative local ones like One Kings Lane, Tiny Prints and Plum District, but the list outside of the Valley dwarfs the local list: Groupon and Trunk Club are in Chicago, ShoeDazzle and HauteLook in L.A., LivingSocial in Washington D.C., zulily in Seattle, J. Hilburn in Dallas and Hayneedle in Omaha.  And the epicenter for e-commerce innovation right now has to be New York City with companies like Birchbox, Bonobos, Diapers.com (in nearby New Jersey), Gilt Groupe, H.BLOOM, ideeli, Lot18, OpenSky, Rent the Runway and Warby Parker.  Just five months on the job and I’m already on a first-name basis with United Airlines and Virgin America crews on the SFO-JFK route.

What has driven this blizzard in e-commerce innovation in the Big Apple?  I must admit I’m not sure.  It could be because much of the nation’s fashion business is centered there, or because of Manhattan’s world-class retail infrastructure.  But it’s extremely impressive.

Given this preamble, it’s probably not a big surprise that we’re investing in an e-commerce company in New York and that company is Fab.com, a site that features daily design inspirations and sales at up to 70% off retail.  The Fab.com site was launched in June of this year and has taken off like a rocket.

We were attracted to Fab for a number of reasons:

  • The team is great.  The founder and CEO of Fab is Jason Goldberg, a talented serial entrepreneur who also founded socialmedian and Jobster.  His co-founder is Bradford Shellhammer, a fantastic merchant with a fabulous eye for design.  Their engineering function is led by Nishith and Deepa Shah, both talented technologists.
  • Their execution has been extremely impressive.  They’ve nailed the product: both the website itself and the merchandise assortment.  The site and mobile apps are beautiful and very easy to use, and Bradford’s merchandise team constantly finds beautiful, inspiring goods to offer to consumers, typically at attractive values.  They’ve leveraged social extremely effectively, sourcing over half of their users, and they leverage data as effectively as any company I’ve ever worked with—startup or not.
  • They are playing in a big market.  The umbrella of “design” allows them to offer merchandise across a wide variety of categories (such as home products, jewelry, artwork, apparel, workplace items, toys and outdoor products) and price points.  The Fab merchants scour the world to source product from a long tail of great designers who often struggle to gain national distribution, and designers love that Fab.com sales are profitable for them.
  • Their early traction is simply phenomenal.  Jason is extremely transparent with Fab.com’s business metrics and recently revealed that the company is averaging $200,000 in sales a day.  Not bad for a company that made their first sale in June.
  • They have a very big vision for where they want to take the business.

I’ve rapidly become a big Fab.com consumer, as the UPS man and my spouse can attest.  It’s as close to addicting as anything I’ve ever experienced in e-commerce.

Fab.com is an example of a new wave of highly innovative e-commerce companies; indeed, I believe there has been more e-commerce innovation in the past few years than at any time since the beginning of the Internet, and at Andreessen Horowitz, we need to update our assumption of Valley centricity, at least when it comes to e-commerce.  Fab.com joins my partner John O’Farrell’s investment in L.A.-based ShoeDazzle as examples in our portfolio of this trend.

Jason signs off on much of his correspondence with the phrase “smile, you’re designed to”.  We’re smiling from ear-to-ear at the prospect of partnering with Jason, Bradford and the Fab team to build a big, important e-commerce company.

OK, I’m going to date myself here.

I graduated from college in the early 1980s and entered the professional workforce. Most of you wouldn’t recognize the office I worked in: phones sat on desks, were plugged into walls and were the only way you could communicate with workers not in the office. “Spreadsheets” were largely done by hand on big sheets of paper, aided by desktop calculating machines. Our department had one personal computer that had to be shared. It sat on a desk and wasn’t connected to anything but the power supply and a printer. “Portable” computers emerged in the middle of the decade. The first one I saw was the size of a suitcase (it actually had wheels) and people said it was “luggable.”

During the 1990s, I found myself working at The Walt Disney Company in southern California. Computers were now on every desktop, becoming more powerful, and their uses were expanding. My future partner Marc Andreessen was up north leading the development of the first mass market browser. All of a sudden, email and Internet access stormed the workplace. I also distinctly remember the first time I encountered a “cellular phone”—it was the size of a lunchbox and couldn’t legitimately be characterized as “mobile”. Personal digital assistants (aka PDA) came onto the scene later in the decade, but they lacked connectivity and typically had to be synched by actually tethering the device to your computer.

At the new millennium, I was responsible for managing ebay.com. The Internet revolution was on and online commerce was simply exploding. Computing was undergoing a revolution as well—a mobile revolution. Laptops started replacing desktops. Cellular phones and PDAs essentially merged and the smartphone was born. I used to wear out BlackBerrys by answering much of my email on the go (I frequently used the Berry while on the elliptical machine in the gym, an acquired skill). Then Apple debuted the iPhone in 2007 with its touch screen, robust mobile browser, and, soon thereafter, third-party applications. Google quickly followed with Android.

Today, this mobile revolution is in full swing and is changing computing dramatically. For the first time, smartphone shipments exceeded PC shipments at the end of 2010. The iPad tablet is Apple’s fastest-growing new product ever and everyone else is scrambling to jump on the tablet bandwagon. IDC forecasts that more people will access the Internet via mobile devices than PCs by 2015. Personally, smartphones and tablets have already acquired the lion’s share of my own computing time and the PC is now relegated primarily to power email (and occasional blog composition).

Mobile applications are also proliferating. Internet incumbents such as eBay, Amazon, Yelp and OpenTable (where I’m executive chairman) are bringing their services to mobile devices with great success. New companies are also building services that subsist on mobile-specific capabilities—think foursquare, Bump and Uber—and many are investing and innovating with the goal of turning mobile devices into wallets, such as Square and PayPal.

Unfortunately, when there’s progress, there’s also peril. Wherever e-commerce happens, bad guys descend to try to steal some of the money that is being exchanged. I encountered this at both eBay and PayPal, where much of my time was spent fighting off relentlessly escalating threats from what largely was organized crime. Today, that’s starting to happen on mobile devices. There were more mobile security threats identified in July 2011 than in all of 2010, and it’s estimated that one in three smartphone users will encounter an unsafe website this year on their phone. This trend will only worsen as mobile adoption increases and mobile commerce continues to expand.

With this context, Andreessen Horowitz is delighted to announce our newest investment in Lookout Mobile Security. Lookout is pioneering a new approach to mobile security and wants to give people the confidence to do more with their phones by providing protection against mobile threats. They’ve built a number of highly innovative products:

  • The Lookout app protects against digital threats like malware, spyware and unsafe websites. It also backs up critical personal data (like contacts or photos) and can find a lost or stolen phone. Unlike many security apps, it’s both easy to use and optimizes device performance and battery life.
  • On the backend, Lookout’s Mobile Threat Network combines algorithmic analysis with a cloud-based architecture to rapidly identify new mobile security threats. They have been the first service to detect and protect against many major threats, often within minutes of the appearance of threat in app stores and before the threat reaches a user’s phone.
  • Unlike traditional security vendors, Lookout, through the Lookout API, is sharing its incredible dataset of information with the mobile community to keep people safe. The Lookout API automatically provides threat data to partners such as Verizon so that they can ensure that their app stores are safe.

Together, these products have resulted in Lookout assuming a global leadership position in mobile security. The company currently protects over 12 million users in 170 countries and they are adding an additional 1 million users per month. They are the top-rated and -ranked security app in the Android Market, and PC World named them the Top Product of 2010. They have also established partnerships with a number of leading carriers in the U.S. including T-Mobile, Sprint and Verizon.

The Lookout founding team includes talented hackers (in the best sense of the word): John Hering, Kevin Mahaffey and James Burgess. The trio has deep technical roots and strong DNA in the security world. While students at the University of Southern California, they found a vulnerability in mobile device Bluetooth connections, but they couldn’t get device manufacturers to take the vulnerability seriously. Determined to make their point and drive awareness of the vulnerability, the trio created a contraption called the “BlueSniper rifle” and demonstrated it with great success at the DefCon security conference. They are young, innovative and relentless—the perfect backgrounds for the folks you’d trust to keep your mobile devices safe.

As CEO of Lookout, John is a very impressive entrepreneur—one with a compelling vision, passion, talent and commitment (read more from John here). He’s rapidly assembling an excellent executive team and a strong board. We are honored he chose to partner with Andreessen Horowitz and I very much look forward to working closely with him as an investor and board member.

Andreessen Horowitz led the $40 million round, joined by current investors Khosla Ventures, Accel Partners and Index Partners. The proceeds will be used to broaden the company’s product offerings, fuel global expansion and build a world-class team.

Download Lookout! You’ll be glad you did.

Talk about a business with humble roots. Brian Chesky and Joe Gebbia met at the Rhode Island School of Design and became roommates in San Francisco in 2007. A prominent design conference was coming to town and the nearby hotels were sold out. Joe and Brian thought it might be both fun and lucrative to rent out space in their apartment to conference guests looking for lodging, but alas they lacked the requisite beds. Turns out that Joe had a few airbeds in the closet. They threw in a morning meal and “airbedandbreakfast” was born. Three lucky conference attendees enjoyed good accommodations, food and hospitality while Joe and Brian enjoyed the company of their guests and some very welcome income.

Joe and Brian resolved to make a run at transforming this experience into a business.  They were joined by a third co-founder, Nathan Blecharczyk, who brought programming expertise.  The name was shortened to “Airbnb” and they launched their website in 2009.

The Airbnb service quickly struck an extremely powerful chord with consumers. Growth has been flat-out explosive, with over two million room nights already booked. The site now features spaces in 186 countries and over 16,000 cities around the world. Hosts can earn substantial sums of money—one has even used Airbnb earnings to pay off his mortgage—and their community of users is passionate about the service, enjoying the social aspects of Airbnb travel.

The community has substantially expanded the type of spaces offered on the Airbnb platform, moving well beyond a room in a house or apartment. You can now use Airbnb to rent apartments, homes, cabins, tree houses, boats, parking spaces, castles, sublets… and even a country (for the bargain sum of $70,000 per night, you can rent out the country of Liechtenstein like rapper Snoop Dog).

I first came across Airbnb in March, when Brian presented the business at an investor conference I was attending. For me, it was a true déjà vu experience. I joined eBay in 1999, early in its life, and had the privilege of witnessing and contributing to the development of one of the most iconic e-commerce businesses. Airbnb reminds me more of eBay in its early days than any other business I have ever encountered. Both are:

  • Marketplace models, connecting buyers and sellers
  • Community-driven, populated with passionate users who evangelize the service
  • Providing economic opportunity and empowerment to their sellers/hosts, enabling them to earn meaningful income
  • Platforms upon which their community of users continually expands into new verticals
  • Helping to make inefficient commerce efficient

Not coincidentally, Brian, Joe and Nate also see these same similarities. They believe Airbnb is to spaces what eBay is to products.

We have been extremely impressed by the execution of Brian, Joe, Nate and the rest of the Airbnb team.  The website is clean and very intuitive—not surprising, I guess, when two of the founders are designers.  They have built and motivated a vibrant community of evangelist users.  They are extremely scrappy marketers, and have executed brilliantly to acquire hosts/properties and renters.  And they have been ably managing the operations amidst simply explosive growth.

And while the company has accomplished a ton in just a couple of years, we believe that they’re just scratching the surface of their potential. They have opportunities to go much deeper in their current categories, broaden into new categories of spaces, and build out their global footprint.  They are truly pioneering a new marketplace, where access to spaces is more valuable than ownership.

Andreessen Horowitz led Airbnb’s latest financing round, investing $60 million of the total raise of $112 million.  We’re thrilled to be partnering with the Airbnb team, and look forward to supporting them in building an iconic e-commerce franchise!