So is Andreessen Horowitz investing in consumer Series A deals or not? First, there was an article in The Wall Street Journal in which investment partner Scott Weiss compared many consumer tech companies to “fruit fly experiments” and suggested a pullback by A16Z towards consumer technologies.
Only a few hours later after Weiss’s statement hit the blogosphere, Marc Andreessen took to Hacker News to clear the air and then there was an article on TechCrunch echoing many of Andreessen’s comments from HN which reinforced the firm’s commitment to consumer tech. In Andreessen’s words:
“Consumer startups more and more have this very interesting ‘lightning in a bottle’ effect where sometimes they take off like crazy and sometimes they just don’t…In contrast, enterprise startups are much more (take your pick) tractable, execution centric, brute force, predictable (as startups go). None of this is religion — we still do plenty of consumer A’s and enterprise B’s.”
And then finally, Weiss issued a clarification / apology in the WSJ because it appears some startup entrepreneurs were offended by the fruit fly comment.
So after 3 articles about a potential change in focus that ultimately wasn’t, we wanted to look at what the data actually suggests about Andreessen Horowitz’s Series A focus areas and whether a shift to or away from consumer is happening in reality.
Is A16Z doing more or less consumer Series A deals?
The 2013 data does not show any decline in Series A consumer investments and actually marks the highest proportion of consumer Series A deals for the firm in the last 3 years. As shown below, enterprise startups took 3 of every 4 Series A deals in 2012 that A16Z participated in, but that ratio has come down to nearly 50/50 between enterprise and consumer in 2013. A couple of its most recent consumer A deals include online photo community 500px, Max Levchin’s fertility app Glow, and FiftyThree, the developer of iPad drawing app Paper.
So A16Z is clearly not shying away from consumer tech companies at the Series A stage.
What about Series B rounds?
Andreessen explained that “it often makes sense to let other firms fund the (consumer) A rounds before anything is proven…and then step in hard at the B.” If true, this would suggest a larger share of consumer Series B rounds but this has not happened as can be seen below.
So the data for A16Z suggests an increase in activity among consumer Series A deals in 2013 and Series B’s also suggest no material migration to more proven consumer companies.
Finally, it may be worth restating a comment we made on the Hacker News thread which Marc Andreessen responded to. And that is that even if Andreessen Horowitz is shifting away from consumer startups, that is not a particularly unique insight or viewpoint these days (it is old news you could say). Given that many of the largest exits in tech have been of enterprise companies as of late, many venture capital firms had already shifted towards enterprise.