Betting the Firm

A16Z is realizing that innovation is becoming even more important and that it’s becoming much harder to figure out what to build and who to build it with.

The convergence of corporations and venture funds is not just an amusing analogy. It points to a fundamental shift in the nature of business and employment.

In a recent interview, Marc Andreessen used the term “HP 2.0” to describe his vision for A16Z, one of the world’s largest venture capital funds. Andreessen wants his venture firm to provide portfolio companies with all the services and resources that HP’s head office used to provide to its own divisions and bets: money, talent, government relations... See more

Later, when HP was already a big company, the founders maintained their open-minded approach. The company innovated and grew by making what Hewlett called “small bets” on products and markets that didn’t exist yet. The company’s centralized management layer allocated people and resources between these bets to ensure the promising ones would continu... See more

But Google didn’t know that asking Paul Buchheit to tinker with email would end up producing Gmail or that hiring Krishna Bharat would ultimately lead to the invention and development of Google News. Hiring X more engineers and setting up Y more workstations would not necessarily increase the company’s revenue.

Consider the difference between early 20th Century Ford Motors and early 21st Century Google. Ford knew that adding an X number of employees and building Y more production lines could (reasonably) predictably produce and sell an additional Z number of cars.

But in the 21st Century, the biggest challenge is not how to get things done more efficiently; instead, the challenge is figuring out what to do. And the relationship between economic inputs and outputs is no longer linear.