Curious about the journey of a venture capitalist who was once a communist? Ever wondered how a shy nursery school dropout navigated his way to the top of Silicon Valley? Want to know how he managed to steer a tech startup through the dot-com crash and emerge stronger? Dive in to explore these captivating narratives and more!

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

Ben Horowitz once hosted a massive barbecue at his house, drawing a hundred of his closest friends. His African American friends even dubbed him the "Jackie Robinson of Barbecue" for his grilling prowess. 

During the party, a conversation about the rapper Nas led his young entrepreneur friend, Tristan Walker, to proudly mention Nas's roots in Queensbridge. Horowitz's father surprisingly chimed in, recalling his own childhood visits to Queensbridge—handing out communist literature at age eleven. Horowitz's grandparents were staunch Communists, and his father grew up as a "red-diaper baby."

In 1968, the family moved to Berkeley, California, where Horowitz's father edited the New Left magazine Ramparts. Horowitz grew up in what they fondly called the "People's Republic of Berkeley." As a child, he was painfully shy. His first day at nursery school ended in tears—an episode that got him kicked out. But his mother's patience helped him slowly adjust to the world.

One formative incident involved an older boy named Roger daring Horowitz to confront an African American kid for his red wagon. Terrified, he simply asked the kid, Joel Clark Jr., if he could ride in his wagon. Joel said yes, and they became best friends. Eighteen years later, Joel was the best man at Horowitz's wedding. This experience taught him that fear doesn’t define courage—actions do.

In high school, Horowitz defied expectations by joining the football team, coached by the unforgettable Chico Mendoza. Chico's fiery speeches, urging the team to "turn your shit in" if they weren't serious, instilled in Horowitz valuable lessons about leadership.

Fast forward to his sophomore year at Columbia University, Horowitz found himself on a blind date with Felicia Wiley, thanks to his friend Claude. Despite a rocky start, involving a last-minute cancellation and a visible bruise from a basketball scuffle, the date turned out well. Horowitz and Felicia have been happily married for nearly twenty-five years now.

Horowitz's professional journey began at Silicon Graphics (SGI), a company at the forefront of computer graphics technology. After a stint at NetLabs that taught him the importance of having visionary founders, he joined Netscape. Interviewing with Marc Andreessen was a revelation—Marc's deep knowledge and insights were unparalleled. Netscape's IPO was historic, setting the stage for the "new economy." However, competition from Microsoft was fierce, forcing them to innovate rapidly.

When Netscape sold to America Online (AOL), Marc and Horowitz realized AOL’s media-centric strategy didn’t align with their tech aspirations. Along with two other visionaries, Tim Howes and In Sik Rhee, they conceptualized Loudcloud—a company offering cloud computing before the term was widely used. Their idea was to simplify computing complexities, allowing developers to focus on innovation.

From a shy kid in Berkeley to a venture capitalist, Horowitz's journey has been one of constant learning and adaptation. It taught him to embrace fear, value diverse perspectives, and prioritize the people who matter most.

From Communism to Venture Capitalism: How Did He Become a Tech Tycoon?

Marc Andreessen, fresh off his Netscape success, teamed up with Ben Horowitz to launch Loudcloud, a cloud infrastructure company. With Andy Rachleff of Benchmark Capital investing $15 million, Marc himself contributing $6 million, Loudcloud had a roaring start, quickly booking $10 million in contracts within seven months.

The excitement was palpable; a rapid hiring spree ensued, and the team ballooned to nearly 200 employees in just six months. Loudcloud’s momentum was undeniable, even earning them a Wired cover story. However, the dot-com crash of 2000 hit hard, slashing the NASDAQ by 80%. Loudcloud's customers, many of them dot-com startups, were evaporating overnight, turning the company’s future from promising to precarious.

Amidst this chaos, Horowitz faced the daunting task of raising more capital. A failed pitch to Softbank Capital left him with a harsh reality check. Despite this, Horowitz managed to secure a series C round at a stunning $700 million valuation, raising $120 million. But this was a temporary respite; the sales forecasts were wildly off, and the company faced another round of desperate fundraising. 

Bill Campbell, an influential board member and mentor to tech giants like Steve Jobs and Jeff Bezos, became a crucial advisor. Campbell’s sage advice was essential as Horowitz navigated the turbulent waters, including deciding to go public amidst an unforgiving market. The IPO process was grueling, with the offering ultimately priced at $6 per share, raising $162.5 million, but it was far from a victory lap. 

Horowitz’s struggles didn’t end there. The company had to reset guidance and lay off 15% of its workforce, a demoralizing move that saw the stock price tumble to $2. In the midst of this turmoil, the 9/11 attacks added another layer of uncertainty, nearly derailing a crucial deal with the British government.

Desperation led to a pivotal decision: pivoting from cloud services to software, specifically their in-house developed Opsware. This shift required selling the Loudcloud business and its associated liabilities. After intense negotiations, EDS agreed to purchase Loudcloud for $63.5 million and license Opsware for $20 million annually.

Bill Campbell’s advice to immediately inform employees of their status post-sale proved invaluable. It ensured the remaining team’s trust and set the stage for the next chapter. This move from cloud services to a software company marked a critical survival strategy for Loudcloud, exemplifying resilience and strategic pivoting in Silicon Valley’s volatile landscape.

From Loudcloud to Opsware: Marc Andreessen's Tale of Survival and Resilience in Silicon Valley

After selling to EDS, Horowitz thought his company was in good shape, but the shareholders disagreed. The stock plummeted to $0.35, so he took their 80 remaining employees to a low-end motel in Santa Cruz to resell them on Opsware's future. He was blunt: Wall Street didn't believe in Opsware, but he did. He asked anyone planning to quit to do so immediately; two left, but the rest stayed on until they sold the company to Hewlett-Packard five years later.

Their stock needed to rise above a dollar to avoid NASDAQ delisting. Instead of financial maneuvers, Horowitz chose to share their story: a strong team, $60 million in the bank, and valuable intellectual property. The stock rose above a dollar, and they shipped Opsware, despite its early shortcomings.

Then came the EDS crisis. EDS, which accounted for 90% of their revenue, was unhappy with Opsware and wanted out. Horowitz sent Jason Rosenthal and Anthony Wright to salvage the relationship. They met with Frank Johnson, EDS’s decisive leader who despised their product. Anthony secured a critical 60-day extension to fix the issues, during which they held relentless daily troubleshooting meetings.

Anthony discovered that Frank loved Tangram, a small software company, but EDS was switching to a product he hated. They bought Tangram, integrated it with Opsware, and Frank was thrilled. They survived the crisis, saved their biggest account, and even found profitability in Tangram beyond EDS.

Next, BladeLogic emerged as a formidable competitor, and their stock dropped again. Horowitz rallied the team with a speech: they had six months to create a winning product. Everyone committed, working tirelessly. They launched the Darwin Project, and their product began to win deals.

They then tackled the question, “What Are We Not Doing?” and realized they needed network automation. Instead of building it from scratch, they bought Rendition Networks. This acquisition led to a lucrative $30 million deal with Cisco, covering most of their costs.

Their stock rose to $8, but the fast-changing tech landscape, especially virtualization, posed new challenges. Despite eleven acquisition offers, Horowitz wasn’t ready to sell until BMC offered $14 per share. Hewlett-Packard eventually topped it with $14.25 per share, and they sold for $1.65 billion.

The sale was bittersweet. They had built, lost, and rebuilt Opsware into a billion-dollar company. Exhausted but wiser, Horowitz contemplated his next venture, hinting at a new kind of venture capital firm. The journey was grueling but immensely rewarding.

Can a Company Bounce Back from a Stock Price Crisis and NASDAQ Delisting Threat?

In the complex world of startups, the debate between determinate and indeterminate frameworks is crucial. Determinate scenarios, like sending a rocket to the moon, rely on precise calculations—calculus. In contrast, indeterminate futures, influenced by probability and statistics, require adaptable strategies. Peter Thiel argues for integrating statistics into education to better prepare for an uncertain future.

Reflecting on his experience at Loudcloud, Horowitz had a critical meeting with Bill Campbell about a deal that was vital for the company's survival. Bill’s advice to prepare for bankruptcy, despite Horowitz's efforts to secure a deal, felt like being told he was already dead without knowing it. However, Horowitz learned that as a startup CEO, one must ignore the odds and find the answer, no matter how slim the chances. Eventually, they secured the deal and avoided bankruptcy, teaching him to believe in calculus over statistics.

Startup journeys often face "The Struggle," where initial visions clash with harsh realities—product issues, market misalignment, and dwindling confidence. Karl Marx said, "Life is struggle," and indeed, every great entrepreneur, from Steve Jobs to Mark Zuckerberg, has faced it. The Struggle builds greatness, but it’s relentless and merciless.

To navigate The Struggle, Horowitz discovered several coping strategies: sharing burdens with the team, playing long-term strategies, and not taking setbacks personally. At Opsware, transparency about their challenges rallied the team to build a winning product, proving that open communication is vital for problem-solving.

CEOs must also master the art of delivering hard truths. Horowitz's turning point came when he stopped being overly positive. Authenticity builds trust, and sharing problems enables collective problem-solving. For instance, laying off employees must be handled with utmost respect and clarity, ensuring managers communicate personally and honestly.

Firing an executive or demoting a loyal friend is equally challenging. It requires clear reasoning, decisive language, and maintaining the individual’s respect. Root cause analysis can prevent future mistakes, and transparency with the board and the team is essential.

When facing existential threats, there are no silver bullets—only lead bullets. At Netscape, they overcame Microsoft’s superior product by focusing on performance improvements. Similarly, at Opsware, they reclaimed their market position by relentlessly enhancing their product.

In the end, nobody cares about one's struggles except oneself. Bill Parcells’ advice resonates: "Nobody cares, just coach your team." Focus on finding solutions rather than dwelling on problems. Because in the startup world, only results matter.

Navigating the Uncertain World of Startups with Lessons from Peter Thiel, Bill Campbell, and Other Titans

After Horowitz managed to lift Opsware's stock price above $1, the next challenge was rebuilding their executive team. They needed new leaders, specifically a VP of Sales and a VP of Engineering, who understood the software industry. Initially, Horowitz tried promoting internally, but when that failed, he decided to run sales himself. This hands-on approach taught him the importance of hiring for strengths, a principle emphasized by Colin Powell.

During his search, Horowitz met Mark Cranney. Mark wasn't the typical sales executive—average height, square build, and from an unknown school, Southern Utah University. However, Mark excelled in the interview, particularly when discussing training. He presented a comprehensive training manual and passionately explained his methodology, which was crucial for Opsware. 

Despite initial resistance from the team and board, including a blunt negative reference, Horowitz trusted his gut. Mark's intense focus and deep understanding of sales convinced him that Mark was their wartime general.

Convincing his co-founder Marc Andreessen was crucial. Marc voiced his concerns, but Horowitz argued that Mark's unconventional strengths were exactly what they needed. Marc agreed, and hiring Mark Cranney was pivotal in building their world-class software team.

Bill Campbell, a mentor, often said, "Take care of the people, the products, and the profits—in that order." This philosophy guided Horowitz through tough times. Ensuring Opsware was a great place to work meant regular one-on-one meetings and clear expectations. A lapse in these practices once led Horowitz to a critical conversation with a manager, underscoring the importance of direct and clear management.

Training is vital for any company. Inspired by Andy Grove’s "High Output Management," Horowitz invested heavily in training at Opsware, from functional training for new hires to management training. This investment paid off, significantly improving team performance and morale.

When recruiting, especially from friends' companies, transparency is key. Horowitz ensured to inform the candidate that he would check with their current CEO, maintaining professional integrity and relationships.

Bringing big company executives into a startup presents challenges due to different rhythms and skill sets. To mitigate this, Horowitz screened rigorously and integrated them aggressively, ensuring they contributed immediately.

Finally, the concept of "management debt" is crucial. Making expedient, short-term decisions without considering long-term consequences can cripple an organization. Whether it's overcompensating employees to retain them or neglecting performance management, these decisions accrue debt, payable with interest over time.

Also, Quality assurance in HR is essential. A good HR team supports, measures, and helps improve the management team, ensuring the company remains a great place to work. This involves world-class process design, diplomacy, industry knowledge, and intellectual heft.

Can Colin Powell's Strength Principle and Rigorous Training Transform Your Company's Success?

In the high-stakes world of tech startups, maintaining a dynamic workplace culture can be challenging, especially when it comes to the use of profanity. At Loudcloud & Opsware, complaints about a profane environment were essentially directed at Horowitz, the CEO, known for his frequent use of expletives. This wasn't just a bad habit; it was a strategic choice to ensure clarity and urgency. However, it had become involuntary, a kind of "CEO Tourette’s syndrome."

Faced with the dilemma of either banning or accepting profanity, Horowitz realized that top talent often came from highly profane environments like Intel and Microsoft. Banning profanity would seem old-fashioned and limit their talent pool. Instead, he clarified that while profanity was acceptable, it could not be used to intimidate or harass. This decision brought clarity and comfort, leading to a productive work environment and low attrition.

Building a great company also means minimizing corporate politics. Political behavior often starts at the top, even unintentionally. For example, handling executive compensation on a case-by-case basis can incentivize political maneuvering. A structured performance evaluation and compensation process can prevent this. Hiring ambitious people who prioritize the company’s success over personal gain is crucial.

Take Mark Cranney, the head of sales at Opsware. Unlike others, Mark was all about the team's success and radically transformed their sales, increasing their market cap twentyfold. This kind of ambition is what drives a company forward.

Managing senior hires is another challenge. They bring experience but also the risk of disrupting the culture. Demanding cultural compliance and setting high performance standards are essential. Bill Campbell’s methodology for evaluating executives—focusing on results, management, innovation, and peer collaboration—can help ensure they’re well-rounded and effective.

One-on-one meetings are a key part of the communication architecture. These meetings should be employee-driven, with the manager doing most of the listening to draw out key issues and ideas.

When it comes to company culture, it’s about designing a way of working that distinguishes the company from competitors and ensures critical values persist. Jeff Bezos’s “door desks” at Amazon emphasized frugality, while Mark Zuckerberg’s “move fast and break things” motto at Facebook encouraged innovation. These cultural elements must align with the company’s values.

Scaling a company involves tackling challenges like communication and decision-making. Specialization, thoughtful organizational design, and robust processes are essential. For instance, implementing a formal interview process can ensure quality hires across organizational boundaries.

Avoid the “scale anticipation fallacy”—don’t prejudge an executive’s ability to manage at a larger scale. Evaluate the team holistically and relatively, focusing on whether they can do the job at the current scale.

In essence, building a successful company involves a delicate balance of maintaining culture, minimizing politics, managing talent effectively, and scaling thoughtfully. These elements together create a resilient and thriving organization.

CEO Tourette’s Syndrome: Navigating Profanity, Politics, and People in the Tech Startup World

After selling Loudcloud to EDS, Horowitz faced a new crisis: their stock plummeted to $0.35 per share, signaling investor disbelief in Opsware's value. NASDAQ warned them of delisting unless they raised the price above $1 in 90 days. Faced with three options—reverse split, accepting penny stock status, or hitting the road to attract investors—Horowitz chose the latter.

Horowitz and Marc Andreessen sought advice from Ron Conway, who directed them to Herb Allen of Allen & Company. Herb’s classy, unassuming demeanor and their presentation about Opsware's potential led to a transformative partnership. Allen & Company, Herb Allen himself, and their clients invested, boosting their stock to $3 per share, avoiding delisting and restoring employee morale. Herb later revealed that his belief stemmed from their courage and determination, even amidst uncertainty.

The toughest skill as CEO is managing one's psychology. The weight of responsibility, coupled with inevitable failures, can be crushing. Every company faces moments where it feels like everything is falling apart, known as "WFIO" (We’re Fucked, It’s Over).

Here are some techniques to Stay Sane:
1. Build a Support Network: Seek out others who’ve faced similar challenges.
2. Document Your Thoughts: Writing down your logic can help clear your mind.
3. Focus on the Road: Like race car drivers, focus on the path ahead, not potential pitfalls.

Great CEOs don’t necessarily feel brave; they often feel terrified but proceed regardless. Courage is critical, as decisions often go against popular opinion. Hamlet, a CEO, chose not to sell his company despite board pressure and uncertainty, a decision that later proved pivotal.

Effective feedback is key for a CEO. Techniques like the "Shit Sandwich" (positive-negative-positive) can be useful but must be authentic and direct. High-frequency, honest feedback helps create a culture where bad news travels fast, fostering transparency and improvement.

Peacetime CEOs focus on growth and broad objectives, while wartime CEOs are laser-focused on survival and strict adherence to the mission. Both styles are necessary but require different management approaches.

Three ways to evaluate a CEO:
1. Know What to Do: Set the right strategy and make high-quality decisions.
2. Execute the Vision: Ensure the company can execute the strategy effectively.
3. Achieve Results: Meet or exceed objectives tailored to the company's unique opportunities.

Building a company requires both intelligence and courage. CEOs must continuously develop their skills, embrace the challenges, and lead with determination. As Jim Collins asserts, internal candidates often outperform external ones due to their deep knowledge of the company. Ultimately, great leadership is about making tough decisions and rallying the team towards a compelling vision.

Can Courage and Determination Save a Falling Company? A Tale from a CEO's Perspective

Imagine being in the thick of a high-stakes business deal when a bombshell drops, threatening everything. That's where Horowitz found himself with Opsware, a company he helped build from the ground up. HP's initial bid was a solid $14 per share, BMC countered slightly higher, and they were set on pushing it to $15. But just as things were heating up, their auditors, Ernst & Young (E&Y), threw a wrench in the works over a complicated accounting clause known as the "CA clause."

The CA clause, named after the notorious Computer Associates, was a trick to protect customers from being charged for upgrades they believed were free. Opsware had three deals with this clause, and their E&Y partner, Dave Price, had audited them, advising them to recognize revenue upfront. BMC's E&Y partner saw it differently, causing a massive uproar and threatening their entire deal.

E&Y’s national office demanded they restate their revenue within 48 hours, jeopardizing the sale and potentially tanking their stock. Horowitz and his team scrambled, working through the night to amend contracts with three major banks. By some miracle, they succeeded, but BMC got spooked and withdrew. HP lowered their offer to $13.75. Despite the chaos, Horowitz stood firm, insisting on $14.25, and after tense negotiations, HP agreed.

This ordeal taught Horowitz the unpredictable nature of business and the importance of adaptability. It also highlighted the Accountability vs. Creativity Paradox. For instance, if an engineer delays a project to fix a critical issue, should they be praised for their foresight or held accountable for the delay? Balancing accountability with creative risk-taking is crucial.

In another scenario, two of Opsware's teams, Customer Support and Sales Engineering, were at each other's throats. Inspired by the movie Freaky Friday, Horowitz decided to switch the heads of both departments. The results were transformative—they quickly understood each other's challenges and resolved their conflicts, proving that sometimes, unconventional solutions are the best.

As a CEO, maintaining a world-class team is essential. However, evaluating if an executive remains top-tier as the company scales is tricky. The standard should evolve, and sometimes tough decisions must be made for the greater good. This brings us to the emotional and logical dilemma of whether to sell your company.

When considering selling Opsware, Horowitz analyzed if they were in a large market with a chance to be number one. Initially, the answer was yes, so they didn't sell. But as the market evolved and competitors like BMC grew stronger, it made sense to consider acquisition. After extensive analysis and soul-searching, they sold Opsware to HP for $1.65 billion.

Deciding to sell is never easy. It’s deeply personal, especially after recruiting every employee and selling them on your vision. Balancing emotional ties with logical analysis is critical. Paying oneself a market salary and being transparent with the team about potential sales can help clear the mind for such tough decisions.

In the end, entrepreneurship is a wild ride with no set rules. It’s about navigating through chaos, making tough calls, and sometimes, turning to unconventional wisdom—like a lesson from Freaky Friday—to find the way.

Surviving the Entrepreneurial Wild West: The Opsware Rollercoaster Ride

After selling Opsware and spending a year at HP, Horowitz found himself at a crossroads: should he start another company, become CEO elsewhere, retire, or try something new? As he pondered his next steps, he reflected on his past, especially on his encounters with Bill Campbell and the challenges of entrepreneurship. Why was it so difficult, and why hadn’t anyone documented these struggles?

In a moment of clarity, Horowitz messaged Marc Andreessen: “We ought to start a venture capital firm where some experience in founding and running companies is required to advise those who are founding and running companies.” To his surprise, Marc agreed.

Back in 1999, after raising their first funding for Loudcloud, a senior partner at their venture firm, David Beirne, asked him, “When are you going to get a real CEO?” This stung, and for months Horowitz questioned whether he could learn fast enough to save the company. Ultimately, with help from friends and mentors like Bill Campbell, he grew into the role, but the question of founder vs. professional CEO haunted him.

Marc and Horowitz often discussed why founders had to prove themselves to investors. This led to the creation of Andreessen Horowitz. They realized that technical founders are the best to run tech companies but need help acquiring CEO skills and networks. Their firm would provide the mentorship and connections founders lacked.

Inspired by Michael Ovitz’s Creative Artists Agency, they built an integrated network to connect founders with large companies, executives, engineers, press, and investors. This approach, combined with their decision to embrace PR instead of shunning it, set them apart.

They launched Andreessen Horowitz with a cover story in Fortune and a memorable nickname: “a16z.” Their mission resonated with top entrepreneurs, and in four years, they became a respected venture capital firm.

As a venture capitalist, Horowitz could share his weaknesses and fears—luxuries he didn’t have as a CEO. Back then, he had to project unrelenting confidence. But once he stopped being CEO, he found a new freedom.

He often jokes that he’s considered a better CEO now than when he actually was one. Despite growing Opsware’s value significantly, during his tenure, he wasn’t widely praised. But selling to HP and his subsequent writings changed perceptions.

The key lesson he shares with entrepreneurs today: Embrace your struggle and uniqueness. It’s within these challenges and your background that the keys to success lie. Embrace the struggle, and find peace in pursuing your dreams.

Can Founders Make the Best CEOs: Lessons from Andreessen Horowitz's Journey?

Ben Horowitz, a shy child, grew up in Berkeley, California in a family that was politically active. His journey from childhood to adulthood was marked by several learning experiences, including the understanding of courage from a childhood encounter, leadership lessons from his high school football coach, and the importance of adaptability from his experience at Columbia University. His professional journey began at Silicon Graphics and later at Netscape, where he learned the importance of rapid innovation in the face of competition.

Horowitz co-founded Loudcloud with Marc Andreessen, a company offering cloud computing before the term was widely used. Despite initial success, the company faced numerous challenges, including the dot-com crash, which almost led to its downfall. However, Horowitz managed to pivot the company's focus from cloud services to software, specifically their in-house developed Opsware. This shift was critical for the company's survival and demonstrated resilience and strategic pivoting.

Throughout his journey, Horowitz learned several valuable lessons. He discovered the importance of managing one's psychology, sharing burdens with the team, not taking setbacks personally, and focusing on finding solutions rather than dwelling on problems. He also learned the importance of authenticity, the need for clear reasoning, and the necessity of transparency with the board and the team when making difficult decisions.

Horowitz emphasizes that in the startup world, results are what matter most. Building a successful company involves maintaining culture, minimizing politics, managing talent effectively, and scaling thoughtfully. Finally, he learned that entrepreneurship is a wild ride with no set rules and requires navigating chaos, making tough calls, and sometimes turning to unconventional wisdom to find the way.

Home

Trending Books

News & Mags

Relax

Curated

Collections

Key Ideas & Notes

Insights

Highlights & Bookmarks

Listening History