Tue, Jul 07, 2009 - Page 11 News List

Netscape cofounder to invest in tech startups

VENTURE CAPITAL: The new firm, Andreessen Horowitz, would risk small sums on new ideas and expand the investment if they worked to let the firms grow globally

NY TIMES NEWS SERVICE , NEW YORK

The man who popularized the Web browser has started a venture capital fund to back the next generation of new technologies.

Marc Andreessen, who cofounded Netscape, was to announce yesterday that he and Ben Horowitz, a longtime business associate, have raised US$300 million that they intend to invest in technology companies.

The venture capital company, Andreessen Horowitz, will risk small sums, as little as US$50,000, on new ideas.

Then, if they work, they will put in more money, as much as US$50 million, for the companies to grow globally. The fund will have its offices on Sand Hill Road, the stretch in Menlo Park, California, that is home to top venture firms.

Andreessen Horowitz will be testing a theory of investing, one that has lost favor in recent years in Silicon Valley, that smaller funds making smaller investments in very young companies will yield higher returns.

Five-year returns in the venture capital industry, which reached 48 percent in 2000 at the height of the dotcom bubble, were just 6 percent through last year, the National Venture Capital Association said. Venture investors make much of their money when their startups go public, but only four have sold shares to the public this year.

Andreessen Horowitz plans to look for companies like Facebook, where Andreessen is a director. Facebook started with just US$500,000 but has since raised US$600 million to grow.

The partners, who also cofounded Opsware, a software company they sold to Hewlett-Packard, said they planned to stick with what they know. Almost all of the companies in which they invest will be in Silicon Valley, they said.

That is unusual these days, when many funds set up shop in China, India and other countries.

They will also invest only in information technology companies — “anything with a chip or anything that runs software,” Andreessen said — another rarity these days.

“We will not be doing biotech or clean tech,” he said, then added jokingly: “We probably won’t even recycle.”

Instead, they will focus on startups that do networking and storage, consumer Internet services and cloud computing. They are also excited about consumer electronics.

“Silicon Valley companies are becoming a major force in consumer electronics again. It’s sort of back to the future,” Andreessen said, pointing to the success of the Flip video camera, whose maker, Pure Digital, was sold to Cisco in May.

Andreessen and Horowitz have already been making angel investments together for four years. They have put US$4 million into 45 firms, including Twitter; Qik, a service that publishes live video from mobile phones; and Aliph, which makes the Jawbone Bluetooth headset.

Through that investing, they have a method to figure out whether to bet on a new idea.

Andreessen focuses on a new technology and the potential market, while Horowitz analyzes whether an entrepreneur is capable of executing, they said.

“In the venture capital business, 15 companies a year still deliver 97 percent of returns,” Horowitz said. “The key to success is still finding those 15.”

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