I dunno about this. From his postings, cdixon seems like a reasonable and thoughtful investor and business builder. Can you really see him pouring $15M into rap genius? Or $100M into github? Or $40M into Fab? Seems like a bad mix. Or perhaps, a16z has lost its way amongst the hype machine it has helped resurrect. Perhaps, cdixon can bring a16z back to the thought processes and valuations that drove some of their earlier plays.
Out of anyone I've met personally in NYC, Rap Genius dudes seem by far the smartest investment. Hard to make sweeping calls like that until you see numbers, meet the founders, and hear about the vision.
It's not really a sweeping call. I'm not criticizing AH's picks, just their outrageous valuations. Anecdotally, I've heard they've outbid others by multiples in some cases. When you pump too much money into a growing business, Fab, or a largely built out one, Github, you create unrealistic goals for further growth. Managers at these shops no longer go after high ROI projects, but instead feel pressured to hit the home runs that can justify their valuations. At more reasonable valuations, these companies leaders would be better decision makers and thus increase the probability of long term success for their respective businesses.
Make no mistake about it, I believe AH and the unrealistic valuations they have imposed upon the sector is bad for tech in the medium and long term.
As far as their high early returns go, one could argue any growing fund (be it VC, PE, or HF) has high early returns. It's called survivorship bias.
As for the Skype exit, these sales may become much more difficult with the impending tax reform. Companies will be under a lot of pressure to pay out big dividends in 2012, rather than risk higher taxes in 2013. Reducing the tech sectors internal cash hoards could put a lid of exit prices paid by GOOG,MSFT,AMZN,AAPL,CSCO (and other giants).
The flip side of less cash in corporate coffers means more cash in investor hands that could be put to work in the IPO market. Now if we can only IPO solid companies at reasonable valuations, there is some long term hope to avoid boom/bust.
People seem to make fun of lots of a16z's investments; however, their returns have been excellent.. I seem to recall people ridiculing/questioning their skype investment as well.
I think another thing that people forget when they talk about a16z is the fact that they seem to be quite hands on and they make a point out of turning technical founders into CEOs. Chris Dixon makes a point of the former fact in his blog post, and Ben Horowitz makes mention of the latter point in his interview with Kevin Rose on the last Foundation podcast.
Rather than 'picking winners' I think part of their success probably stems from the fact that they actually had a material effect in helping to create winners with something more than just providing capital - I wouldn't be surprised if some of their more dubious investments pivot into something else and find success. Definitely happened with their investment in Burbn which pivoted into Instagram, and Rap Genius has already announced that there are a number of directions they will probably move in.
