Disrupted

by Dan Lyons

  When it comes to getting publicity, Doerr is a piker compared to Andreessen. Think of Rodney Dangerfield’s character in Caddyshack—big and loud, throwing money around—and you get the idea of how Andreessen has elbowed his way into the clubby world of venture capital: by paying more than everyone else and drawing a lot of attention to himself. In 2009 Andreessen was just another guy with a new venture fund, albeit a guy with a famous name. Six years later he is probably the best known and arguably the most influential investor in Silicon Valley. “Guys running start-ups love him. They all want to meet him,” one Boston-based venture capitalist says. “Every time I meet with a start-up, the first question they ask me is, ‘Do you know Marc Andreessen? Can you introduce us to him?’ He’s like a rock star.” Says another venture capitalist: “If you take money from Andreessen Horowitz, your valuation doubles or triples just because they’re involved. Why? Because they’re Andreessen Horowitz.”

  Andreessen is a physically imposing man: six feet, four inches tall and heavyset, with an enormous shaved head. He’s an avid Twitter user, sometimes posting more than one hundred tweets a day, pontificating and picking fights. When Warren Buffett expressed skepticism of Bitcoin, a technology in which Andreessen has invested heavily, Andreessen called Buffet “an old white man crapping on tech he doesn’t understand.”

  Andreessen was quite literally the poster boy for the first dotcom bubble, posing for a February 1996 Time cover sitting barefoot on a throne, a millionaire boy king, twenty-four years old. The first bubble, I believe, became a formative experience for Andreessen and shaped his behavior when he entered the venture capital business. As an entrepreneur, Andreessen had a mixed record. Netscape got crushed by Microsoft and started losing money but nevertheless was acquired by AOL for $10 billion. After Netscape, Andreessen founded Loudcloud, which went public when it was only eighteen months old and had barely any revenues. Later, Loudcloud became Opsware, was split into two pieces, and sold for $1.6 billion, despite never reporting an annual profit. In 2005 Andreessen co-founded Ning, a social network that fizzled out.

  At some point it seems to have dawned on Andreessen that the people who make the most money in Silicon Valley are not the ones who found companies or run them, but rather the ones who put up the capital. (At Netscape, he reportedly made as much as $100 million, while his investor and co-founder, Jim Clark, made $2 billion.) In 2009 Andreessen and his friend and former business partner Ben Horowitz launched Andreessen Horowitz, or a16z, as it is known. (The name is a “numeronym,” a way of shortening a word or phrase by using a number to represent the number of letters that have been left out. A, then sixteen letters, then Z. Tech geeks love stuff like this.)

  Andreessen and Horowitz developed a reputation for overpaying to get into deals, offering valuations that I’ve been told were 30 percent higher than what other venture capitalists would pay. They also recognized the value of publicity. One of the first partners they hired was Margit Wennmachers, a veteran Silicon Valley public relations specialist known for her sharp elbows. They’ve since hired more PR people, as well as journalists and researchers who produce blog posts, podcasts, and market analysis reports—their own little content factory.

  Horowitz wrote a book about his experience as an entrepreneur and posed for a Fortune magazine cover with his hands wrapped like a boxer, though he apparently does not actually box. He hangs out with rappers and spouts rap lyrics, cultivating a streetwise image—though in fact he was born in London and grew up in Berkeley, and his father is David Horowitz, a well-known author and conservative commentator. As the tech blog Valleywag summed it up, “Ben Horowitz Is Desperate for You to Think He’s Cool.”

  Andreessen and Wennmachers assiduously court the press. Andreessen has even invested in online publications that cover the tech industry, like Business Insider and Pando Daily. The result has been mostly favorable coverage for Andreessen Horowitz and the start-ups in its investment portfolio. When Andreessen put money into Rockmelt, a middling start-up with the lame idea of developing a new kind of web browser, the tech press went into a frenzy; a few years later, when Rockmelt was sold for scrap to Yahoo, nobody held Andreessen’s feet to the fire. When Andreessen Horowitz piled money into Bitcoin-related companies, the tech press began writing that Bitcoin was the next big thing.

  Nobody blinked when two companies in Andreessen’s portfolio, Instagram and Oculus, were acquired by Facebook, where Andreessen sits on the board of directors. These deals were even more remarkable than the Netscape and Loudcloud acquisitions, since while those earlier companies were sold for billions while not turning a profit, Instagram and Oculus were sold for billions without even generating revenue. Andreessen has made it clear that he recused himself in the Instagram and Oculus deals because of his conflicts of interest. To be sure, such conflicts are probably unavoidable for someone as well connected as Andreessen.

  Andreessen did take heat for a deal involving eBay, where he also once was a director. In 2009, during Andreessen’s tenure on the board, eBay decided to sell Skype, the messaging service, which it had acquired in 2005; eBay paid $2.6 billion for Skype and sold it four years later in a deal that valued the company at $2.75 billion, not much of a gain. The investors who bought Skype included a private equity firm called Silver Lake Partners—and Andreessen Horowitz.

  As with Instagram and Oculus, Andreessen found himself on both sides of a deal, working as both buyer and seller. Eighteen months after buying Skype, Andreessen and his partners sold the company to Microsoft for $8.5 billion—three times what they paid. To some, Andreessen’s role as both an eBay director and an investor acquiring an asset from eBay seemed like a problem. “Andreessen, he’s screwed more people than Casanova, for Christ’s sake, and yet he goes and takes this attitude that he’s on the high moral ground,” activist investor Carl Icahn said on CNBC. Icahn complained that eBay had sold Skype for less than what it was worth and that eBay’s investors had been shortchanged. Andreessen said Icahn was “making up a fake conspiracy theory out of thin air.” The tech press sided with Andreessen. The story went nowhere.

  Andreessen is relentlessly optimistic and pounds away on the same message, which is that no matter how high the valuations of start-ups might go, this all makes sense. In May 2015 Andreessen explained to Tad Friend of the New Yorker that there was nothing to worry about. Sure, things got out of hand in the first dotcom bubble, and we had a crash, and now we were on the upswing again, but that didn’t mean another crash was coming. The crash of 2000 was an “isolated event,” Andreessen said, and the economy was heading into a “sustained boom,” almost the same phrase Doerr would use in Bloomberg a month later.

  Andreessen Horowitz has invested in some of the Valley’s most highly valued companies, including Pinterest, Airbnb, and Box, and enlists its publicity machine (both its own internal operation and its friends in the tech press) to further its interests. In the spring of 2014, when “software as a service” (SaaS) stocks went into a slump, and when Box was still hoping to go public but had started to look wobbly, Andreessen’s content factory sprang into action.

  The firm produced blog posts and podcasts explaining that SaaS companies were misunderstood. Investors failed to understand how profitable these companies were going to be. The podcast was loaded up with a dizzying barrage of jargon and acronyms and metrics that SaaS companies have invented to measure their own performance. Software as a service is still something of a new business, and it is difficult if not impossible to compare the performance of any one SaaS company to the others.

  The bottom line from pro-SaaS believers is that because SaaS companies use a subscription model, they will eventually become enormously profitable, despite incurring big losses in their early years. Whether that theory will be proven true remains to be seen.

  By June, shares in SaaS companies stopped plunging and started to claw their way back up, along with the rest of the market. This was good news for HubSpot, which by the summer of 2014 was borrowing money to p
ay its bills. The market wasn’t on fire. Shares in Salesforce.com, our rival and the best-known SaaS company, were still well below the levels they had reached in February. It was far from certain that HubSpot could actually pull off a successful IPO. But the company didn’t have much choice. Its funds were running low. Perhaps it could raise another round of venture funding, but the terms might be onerous.

  On August 25 HubSpot announced it was making a run at the public markets. When that happened, HubSpot published its prospectus, the document that contained all of its financial information. Things were not pretty.

  Twenty-one

  Excuse Me, but Would You Please Get the Fuck Out of Our Company?

  On the same day that HubSpot files its IPO registration statement, just hours before the announcement, and without any knowledge that this is about to take place, I happen to post a very small joke online. This very small joke will lead to a huge, blown-out-of-proportion fracas, and it will mark the beginning of the end for me at HubSpot.

  It begins when I’m sitting on my deck in Topanga, drinking my morning coffee, watching hummingbirds hovering in the branches, scrolling though my news feed on Facebook, and I make a little quip that’s a veiled jab at Spinner.

  But it’s not a good day to be making jokes. Unbeknown to me, HubSpot is hours away from announcing its IPO plans. No doubt everyone in Cambridge is feeling edgy, especially Spinner and Cranium. But I have no idea. I’m three thousand miles away, sitting in the woods. It’s Monday. The Silicon Valley showrunner has given us the day off. It’s also the last day that the kids will be with me in California, and I’m planning to take them to Six Flags Magic Mountain. Tomorrow they fly home to Boston.

  The joke that I make on Facebook is a reference to something Trotsky told me a couple weeks ago. It involves a friend of mine, Barbara, a journalist who wrote a story about executives leaving HubSpot. The first to leave were David Cancel, the chief product officer, and Elias Torres, the VP of engineering, and losing them was a big deal. A week later two more people quit—one was Atticus, the creative director, and the other was the “director of user experience.” Four key people were quitting a company just as it was supposedly getting ready to go public. Barbara wrote up a story with the headline HUBSPOT TO LOSE TWO MORE EXECS AS IT PREPS ANNUAL SHINDIG AND IPO.

  Spinner was incensed. She demanded that Barbara change the headline and rewrite the story, because, strictly speaking, Atticus and the other guy were not executives. Barbara argued that they sounded pretty executive to her, and anyway, she was busy and on deadline and she didn’t have time to get into a debate about semantics with Spinner. Trotsky knew that I was friendly with Barbara, and he called me, apoplectic. “Spinner just ruined a good relationship with an important reporter. Barbara has been good to us. Now she’ll never write about us again,” he said.

  When I called Barbara and asked her about it, she just laughed. Sure, Spinner had been a pest. Maybe she figured that if she just annoyed Barbara enough, Barbara would relent and change the headline, dropping the word executive, if only to make Spinner go away and leave her alone. Barbara tends to dislike PR people in general, but especially so when they start telling her which words she can and cannot use. But to Barbara this was not a big deal.

  That’s the backstory. The news today, as I sit with my coffee in Topanga, is that Atticus has joined a new company, and the Boston Business Journal has done a story with a headline describing him as a “former HubSpot exec.” Atticus posts a link to this on his Facebook feed. That’s where I post my little wisecrack: “Atticus,” I write, “I’m happy for you, but you’re not an executive. I’m going to demand a correction!”

  It’s an inside joke, a little wink at a tiny shitstorm that only a half dozen people in the entire world even know about. In my comment I tag Barbara. Other than Atticus, she’s the only person outside of HubSpot who will get the joke.

  That’s it. That’s all it is. I post my little comment and keep scrolling down through my Facebook feed.

  Within minutes, a text message pops up on my phone. It’s from Trotsky. We need to talk. Right now.

  All of HubSpot is on red alert, he tells me. My comment is a huge deal. A grave error. Someone has seen it—he won’t say who—and alerted Spinner and now Spinner is going ballistic.

  “I’ll just delete it,” I say, and just like that, I zap my comment. It’s gone. All told, the little joke was probably online for thirty minutes at most and could not have been seen by many people. Most people who saw it wouldn’t even know what it meant.

  Yet Trotsky insists this is a terrible thing that I’ve done. Spinner is livid. She’s making a huge stink. Cranium is also furious. “He told me to tell you that as far as he’s concerned, this is strike two against you,” Trotsky says. Strike one, presumably, was when I criticized Halligan over his comment about gray hair and experience. “You’re not fired,” Trotsky says, “but you’re about as close to fired as you can get. It’s bad.”

  I’m flabbergasted. Fired? Really? Over a Facebook comment? This makes no sense.

  “I’m going to talk to Cranium and see what he wants to do,” Trotsky says. “I’ll get back to you.”

  Later in the day Trotsky starts badgering me to get on the phone with him. I’m with my kids at Six Flags, and it’s their last day in California, and I’d really like to spend the day focusing on them but Trotsky insists on talking now. I’m still reeling from Trotsky’s earlier remark about me being as close to fired as you can get without being fired. Early in the afternoon I see the news that HubSpot has filed its IPO registration paperwork. I realize that this might have something to do with why everyone is so hyped up. We agree to talk at four o’clock my time, seven back East.

  I call Trotsky from the car, inching along on the 405 freeway in stop-and-go traffic. The kids are in the backseat, wiped out. I’m talking on earbuds so they can’t hear what Trotsky says. I figure it won’t be pleasant. For all I know he’s going to fire me, and if so, I would just as soon they didn’t hear that. I’d rather wait until tomorrow to have this chat, so I would not have to do this in front of my kids, but Trotsky won’t relent.

  He enumerates the problems my joke has caused and how it demonstrates poor judgment on my part. His tone is officious. He seems to be choosing his words carefully, as if he has written down everything he is going to say and is working his way through a list. Instead of Trotsky, my pal, the guy with the raunchy sense of humor, the one who was so friendly with me that the blog women complained about us, now there is a new Trotsky, and this one is telling me, in a very serious and solemn voice, that I have committed a grievous crime against the Cult of the Orange People, a near mortal sin as far as HubSpot is concerned.

  Maybe it’s because I’ve been spending weeks on end sitting in a room with writers who talk about huge cocks and dry vaginas, but really, honestly, my little comment on Atticus’s post does not seem like a big deal to me.

  But it is, Trotsky says. This thing I have done is very, very serious. It is very bad. This is a huge problem. It is going to take a lot of hard work for me to earn back the trust of my colleagues.

  “You’ve dug yourself into a hole,” he says. “I’m not sure you’ll ever be able to climb back out of it.”

  I don’t argue with him, or mention that it’s creepy to have people watching what I post on Facebook and then threatening to fire me over it. I’ve resolved to just hear him out, listen to everything he says, and find out what happens next. No matter what he says, I stay calm and respond with as few words as possible, remembering that my kids are in the backseat, listening to every word. “Okay,” I say. “I see. Sure. Okay. Yes, I see your point.”

  But this is incredible—literally. As in, I literally do not believe that Trotsky actually means a word of what he is saying. Hardly anyone saw the comment I posted, and I deleted it only minutes after posting it. What’s more, Trotsky is the one who called and told me how Spinner had behaved like an imbecile with Barbara in the first place. If Trots
ky were saying, Look, we both know Spinner is an idiot, but you can’t make jokes about her, I might believe he’s sincere. But that’s not what he is saying. He is saying that Spinner is right, that she has a legitimate grievance. He’s saying that he agrees with Cranium, that I probably should be fired. This is stunning. I don’t know how this has happened, but Trotsky has changed—utterly. It’s like the final scene from Invasion of the Body Snatchers, where you think Donald Sutherland is still human, but then he points and opens his mouth and you realize he’s become… one of them.

  This all feels like a pretext, as if Trotsky has been looking for any excuse, no matter how small, to make a stink and start driving me out of the company. I remember the email he sent me earlier in the month, asking me, as a friend, why I wanted to continue working at HubSpot. Trotsky had insisted otherwise, but that message had felt like a not very subtle clue that he wanted me to leave. Maybe he was hoping I would write back and say, Hey, you’re right, this isn’t working, and I’m not going to return from my leave of absence. Instead I called and told him that I wanted to keep working at HubSpot. It’s true that I have been losing heart, and I have decided to start looking for a different job, but in the meantime I’d like to keep getting a paycheck.