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Investing in startups is messy.
Investing in startups that pivot and compete with an existing portfolio company is messier.
Starting a company that competes with a portfolio company after you sat on their Board... well
But awkward is not new.
https://techcrunch.com/2021/02/04/this-insurtech-alleges-a-venture-backer-founded-and-funded-a-copycat-a-founders-nightmare/
Investing in startups that pivot and compete with an existing portfolio company is messier.
Starting a company that competes with a portfolio company after you sat on their Board... well
But awkward is not new.
https://techcrunch.com/2021/02/04/this-insurtech-alleges-a-venture-backer-founded-and-funded-a-copycat-a-founders-nightmare/
The year was 2010.
And small company named Burbn raised 500K from @A16z and @baselineventure.
Burbn’s founder described like this their app allowed users to Check in to locations, Make plans (future check-ins), Earn points for hanging out with friends, post pictures, and more
And small company named Burbn raised 500K from @A16z and @baselineventure.
Burbn’s founder described like this their app allowed users to Check in to locations, Make plans (future check-ins), Earn points for hanging out with friends, post pictures, and more
Within a year however burbn realized this was a boil the ocean approach. They decided to focus just on taking pictures and tagging them to a location.
This cause a problem fro @A16z.
You see… the already had an investment in mobile photo’s. And that company had just raised.
This cause a problem fro @A16z.
You see… the already had an investment in mobile photo’s. And that company had just raised.
What to do?
Well they decided “because we had invested in <burnbn’s> seed round, we had both information rights and pro rata rights to the series B. These are important and valuable rights, but it seemed completely unethical to us to exercise them since we funded a competitor….
Well they decided “because we had invested in <burnbn’s> seed round, we had both information rights and pro rata rights to the series B. These are important and valuable rights, but it seemed completely unethical to us to exercise them since we funded a competitor….
As a result, we unilaterally and without compensation or consideration gave burbn back those rights and did not invest further...
Kevin burn’s founder was kinda pissed.
He’d expected @a16z to be there for follow on round. Like what’s the point of having a great name like @a16z
Kevin burn’s founder was kinda pissed.
He’d expected @a16z to be there for follow on round. Like what’s the point of having a great name like @a16z
...if they bounce on your round.
For burbn Kevin and his partner Mike hunkered down and built the best mobile photo app they could.
And eventually a small named Facebook bought them.. they also changed their name to @instagram. So you might know them as that…
For burbn Kevin and his partner Mike hunkered down and built the best mobile photo app they could.
And eventually a small named Facebook bought them.. they also changed their name to @instagram. So you might know them as that…
Don’t feel bad for @A16Z. They made $78M of the 250K they invested.
The company @A16Z chose over Instagram. @Picplz (yeah I hadn’t heard of them either.)
All to say I think A16z did the right thing - they saw a conflict and did their best to make sure no one was screwed.
The company @A16Z chose over Instagram. @Picplz (yeah I hadn’t heard of them either.)
All to say I think A16z did the right thing - they saw a conflict and did their best to make sure no one was screwed.
The lesson?
Build a better product and you win.
Don’t worry about that competition or inside information so much. Startup knowledge probably has a half-life of 12 months. So it’s not all that valuable.
Build a better product and you win.
Don’t worry about that competition or inside information so much. Startup knowledge probably has a half-life of 12 months. So it’s not all that valuable.
If you’d like to know where I got this info you can read @Kevin’s account of the early days at Instagram here: https://www.quora.com/What-is-the-genesis-of-Instagram
If you’d like to gear @16z thoughts there’s great bunch of quotes here: https://techcrunch.com/2012/04/22/andreessen-horowitz-made-78m-off-250000-investment-in-instagram/
If you’d like to gear @16z thoughts there’s great bunch of quotes here: https://techcrunch.com/2012/04/22/andreessen-horowitz-made-78m-off-250000-investment-in-instagram/
There’s also a great Book Called “no filter” which I enjoyed a lot.
Its by @sarahfrier her twitter cool too. https://www.amazon.com/No-Filter-Inside-Story-Instagram-ebook/dp/B07TFB4R2S/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1612455256&sr=8-1
Its by @sarahfrier her twitter cool too. https://www.amazon.com/No-Filter-Inside-Story-Instagram-ebook/dp/B07TFB4R2S/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1612455256&sr=8-1
