Last year when we invested in a listed asset management firm in India, our analysts produced data showing that there is little or no impact of investment performance on fund flows in the Indian mutual fund industry. What matters far more than performance is the extent to which the public trusts the brand of the mutual fund firm. It appears that the same holds true in Silicon Valley – the sexiness of the brand of a VC firm now appears to matter more than performance. This article by Valley journalist, Eric Newcomer, contends that one firm more than any other has driven this phenomenon – Andreessen Horowitz.
Newcomer begins his story with the recruitment of Communications guru Margit Wennmachers in 2010 by Andreessen Horowtiz. He says that alongside Andreessen and Horowitz, it was Wenchmachers who used her media management skills to build the firm’s legend between 2010-2015: “With Wennmachers’ press savvy, Marc Andreessen’s idea-a-second patter, and Ben Horowitz’s gravitas, the trio took Silicon Valley by storm. The firm outbid competitors for sought-after companies, spun up a slew of services for founders, and pitched its story relentlessly to the press.
With Wennmachers’ encouragement Andreessen penned a now historic Op-Ed in the Wall Street Journal in 2011, titled, “Why Software is Eating the World.” The phrase became so ubiquitous that it can seem like everything eats the world these days.
“Margit is really a hidden founder of this firm,” a startup founder who has raised money from the firm told me. “The power dynamics there is, Marc, Ben, and Margit.”
Communications executives and reporters alike are in awe of Wennmachers for her sway with the media….
Wennmachers deployed industry gossip and access to her firm’s partners to stay in the good favor of many reporters….A high-powered rival PR executive described Wennmachers as an enforcer: “You don’t cross us and if you do, we shut off the information flow.””
The tide turned in 2016 as journalists started digging up negative stories on the investments of VC firms. Soon Andreessen Horowitz had a problem on its hands with one of its portfolio companies: “Andreessen Horowitz found itself with a troubled portfolio company of its own. In May 2016, I reported in Businessweek about Zenefit’s self-disruption. Many other tech reporters also dug into the company’s failings.
Behind the scenes, Kim Milosevich, then Wennmachers’ top lieutenant, went to task pointing much of the blame for the company’s implosion on its co-founder Parker Conrad – who certainly deserved a big portion of the credit for the company’s problems.
But Andreessen Horowitz partner Lars Dalgaard had cheered Conrad on, telling Conrad to double the company’s revenue growth target, I reported back then. Zenefits was the company Andreessen Horowitz wanted to grow, grow, grow. Years earlier, Ben Horowitz himself had penned an essay making the case for “fat startups,” ones that spend aggressively to block out their competitors. Zenefits seemed to be running that playbook.
But as the company’s business started to falter and with mounting regulatory risk, Horowitz stepped in to help push Conrad to step aside. The firm laid the blame at Conrad’s feet. And David Sacks, who had been the company’s chief operating officer, was sold to the world as a turnaround CEO.
That same year, the press started to turn its attention to Andreessen Horowitz itself, wondering if this firm really lived up to all the hype we’d been fed over the years.
My occasional bridge partner, Wall Street Journal reporter Rolfe Winkler, wrote in September 2016 that the firm’s returns trailed firms like Benchmark and Sequoia.”
What is remarkable is that Andreessen Horowitz seemed to have been ready for this sort of media backlash. The steps that it has taken to create publicity for itself for the last five years has put it in a class of one in the VC industry: “As the relationship between Silicon Valley and the media was breaking down, Andreessen Horowitz pursued an alternative marketing strategy. The firm had been building up a media operation of it own. In 2014, Andreessen Horowitz hired Sonal Chokshi who was an opinion editor at Wired magazine. Chokshi serves as the firm’s editor-in-chief, running an expanding fleet of popular podcasts.
Today, roughly 10% of the 200-person firm works on its marketing team. The company is expanding its editorial operation.
Talk to anyone around the firm and Chokshi’s in-house media strategy is the future of the firm. One communications person remarked to me, “They’ve become a media company basically.”
Companies and venture firms have long tried their hands at content … The thing that’s unique about Wennmachers’ and Chokshi’s operation is simply that they do it well and at a greater scale. Their podcasts are actually interesting….At the same time, the firm has largely stopped cooperating with the media. I’ve talked to a number of reporters at top outlets and that’s the consensus.”
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Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
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