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Andrew Chen's angel investing rules: run toward the heat
a16z partner Andrew Chen gave Sam his rules of thumb for angel investing: only invest in Bay Area or Bay-Area-connected companies, only if it's growing 3x a year, and run toward hot/overvalued deals rather than away from them.
“And he told me his rules and those were only invest if it's Bay Area or Bay Area connected, which is interesting. The second one was only do it if it's growing 3x a year. If it's hot, like a lot of people see something like Clubhouse or something else that's hot and trendy and they run away from it. And he said, no, run towards it and don't care if it's overvalued. Don't care if it's expensive. Run towards the heat. Don't run away from it.”
Steal thisWhen angel investing, run toward hot, overvalued deals growing 3x a year instead of away from them.
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How a16z bought its way into top deals to build a track record
Shaan recounts a16z's early playbook: hiring a 50-person services/PR/recruiting staff for portfolio companies, and overpaying late-stage to buy into hot deals (GitHub and others) purely to add winning logos to their page.
“We're going to offer top dollar. We're going to buy in kind of late stage if we have to. We're not going to try to be making money on all these deals necessarily. We're doing these to like add the logos to our page. And a lot of investors do this, but they did it at like a pretty big scale.”
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VCs fought over Clubhouse by hosting shows to win the deal
Shaan describes how funds courted the hot Clubhouse round by hanging out on the app after work; a16z's Andrew Chen won the deal partly by agreeing that Marc Andreessen and Ben Horowitz would host public shows and open their celebrity Rolodex.
“Andrew Chen, who you were, you know, hanging out with, actually was the one who ended up winning the deal. And I think as part of it, I'm sure they agreed to host some shows. So they have like They have the Good Times show, which, uh, that's the one that Elon Musk came on the other day.”
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He left the office assuming the company was dead, then woke up to $400K in a day
When the Family Guy game got a weak App Store feature, Ali concluded the company was over, went home and slept. The next morning the stats showed $400,000 in revenue the prior day — it was working.
“I immediately go to look at our stats and I'm like, oh. We just generated $400,000 in revenue yesterday. So this is working. Holy fuck, this is actually working. We're winning. I run to the office and like rally the team and say, wow, this is working. We did it, guys.”