Andreessen Horowitz Part I

[0] What do you think about playing the full Who Got the Truth song at the end?

[1] At the end, I like that.

[2] Yeah, it's so good.

[3] Who got the truth?

[4] Who got the truth?

[5] Is it you?

[6] Is it you?

[7] Is it you?

[8] Is it you?

[9] Is it you?

[10] Is it you?

[11] Sit me down.

[12] Say it straight.

[13] Another story.

[14] Who got the truth.

[15] Welcome to season nine, episode one.

[16] of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

[17] I'm Ben Gilbert, and I'm the co -founder and managing director of Seattle -based Pioneer Square Labs in our venture fund, PSL Ventures.

[18] And I'm David Rosenthal, and I am an angel investor based in San Francisco.

[19] And we are your hosts.

[20] Well, listeners, David and I decided to open this season with the complete story of the firm that totally upended the entire venture capital ecosystem a decade ago, Andresen Horowitz.

[21] But as we started researching, of course, that meant telling the journeys of Andresen and Horowitz themselves before founding the firm, which of course means telling the history of the web browser, the creation of Mosaic, the founding and eventual IPO of Netscape, which was the first real internet tech startup, and of course the tumultuous story of LoudCloud and Opsware.

[22] And so much more than that that you don't even know Ben.

[23] Well, this is great.

[24] This is the first time I've literally not opened your notes at all.

[25] Like, normally we don't trade notes, but I have no idea what you've prepared.

[26] And listeners, the impetus for that is that this was going to be a one -part episode until last night when David texted me and said, how about we do a two -parter?

[27] So there are early things about Mark and Ben that I did zero research on, and I'm excited to learn from David along with you all today.

[28] I'm like the old the legendary Chicago Cubs shortstop, Bernie Banks.

[29] Let's play two.

[30] Well, I'm really pumped to do this one as a two -parter.

[31] I think the history of Mark and Ben is really important to understand the worldviews of both of them and how they were shaped by it.

[32] And I think for all of us working in a startup ecosystem that was so shaped by the 2009 creation of the firm Andresan Horowitz, I think it's paramount to understand the things that shaped them because they have shaped us all.

[33] And I don't know, I'm really excited because I feel like my investor psychology has already changed since starting the research into Mark and Ben.

[34] Totally.

[35] Can't wait to dive in.

[36] Yep.

[37] Well, listeners, two things to be aware of if you like the show.

[38] One is our Slack.

[39] There is awesome discussion that takes place on not just our episodes, but also the tech news of the day going on there.

[40] There we're now 8 ,000 strong, so you can come and join us at Acquired .fm slash slack.

[41] And two is the limited partner program.

[42] And this is where we drop subscriber -only content, like our library of over 50 interviews and deep dives on company building topics like venture capital fundamentals.

[43] And you'll also get access to our LP Zoom calls with David and I. So you can click the link in the show notes or go to Acquired .fm slash LP.

[44] Okay, listeners now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[45] Yes, ServiceNow is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

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[47] And, just like them, Service Now has AI baked in everywhere in their platform.

[48] They are also a major partner of both Microsoft and Nvidia.

[49] I was at Nvidia's GTC earlier this year, and Jensen brought up ServiceNow and their partnership many times throughout the keynote.

[50] So why is ServiceNow so important to both Nvidia and Microsoft companies we've explored deeply in the last year on the show?

[51] Well, AI in the real world is only as good as the bedrock platform it's built into.

[52] So whether you're looking for AI to supercharge developers and IT, empower and streamline customer service or enable HR to deliver better employee experiences.

[53] Service Now is the platform that can make it possible.

[54] Interestingly, employees can not only get answers to their questions, but they're offered actions that they can take immediately.

[55] For example, smarter self -service for changing 401k contributions directly through AI -powered chat, or developers building apps faster with AI -powered code generation, or service agents that can use AI to notify you of a product that needs replacement before people even chat with you.

[56] With ServiceNow's platform, your business can put AI to work today.

[57] It's pretty incredible that ServiceNow built AI directly into their platform.

[58] So all the integration work to prepare for it that otherwise would have taken you years is already done.

[59] So if you want to learn more about the ServiceNow platform and how it can turbocharge the time to deploy AI for your business, go over to ServiceNow .com slash acquired.

[60] And when you get in touch, just tell them Ben and David sent you.

[61] thanks service now well david take us in and listeners you know normally this is where i would warn you that this show is not investment advice david and i may have investments in the companies we discuss and the show is for informational and entertainment purposes only but this episode all this stuff's pretty old like good luck investing in any of this defunct technology we're going to be talking about a lot of dead companies on this episode next time we'll be talking about a lot of live companies.

[62] One disclosure before we jump in here.

[63] I think this is the first time I at least have done this on this show.

[64] I have a new investing vehicle that I'm not quite ready to talk about just yet, but I'm doing it with my buddy Nat Manning, who's the COO of Kettle and should tell everybody that a couple of the GPs at Andreessen Horowitz are LPs in that vehicle.

[65] I don't think it has affected my telling of the history, but everybody should just know that.

[66] Go again.

[67] Congratulations, David.

[68] Thanks.

[69] Super excited.

[70] Can't wait to talk more about it soon.

[71] All right.

[72] So, we start history and facts in 1966, in London, England.

[73] Not what you expected, was it, Ben?

[74] So this is not Mark.

[75] No, not Mark that we're talking about here.

[76] We are talking about Ben.

[77] who was born in 1966, in London, England.

[78] I did not know that.

[79] It was the 60s.

[80] The counterculture is in full swing.

[81] In London, you've got the mods and the rockers, the Who, the Rolling Stones, all that.

[82] And Ben's family that he is born into, a young family, is living in London at the time.

[83] They're American expats.

[84] The husband of Ben's father had come.

[85] to London to work for Bertrand Russell, the philosopher, philosopher, polymath, a logician, mathematician.

[86] Oh, wow.

[87] So the family already had either one or two children.

[88] I'm not sure if Ben is the second child or third child.

[89] But nonetheless, in 1966, Benjamin Abraham Horowitz is born, of course, would grow up to become the Ben Horowitz.

[90] So usually, on this show on most episodes, we would just kind of like stop there with the family.

[91] Like, oh, yeah, this is the like millia that our protagonists were born into.

[92] We can now move on to the people themselves.

[93] This time we're going to spend a little more time on Ben's family.

[94] His mom's name is Alyssa, then Horowitz, and now Krauthammer.

[95] And his dad is David, David Horowitz.

[96] Now that name may not mean, mean much to probably most people listening, but some of you listening are saying, wait, David Horowitz, that David Horowitz?

[97] Yeah, I have no idea what you're talking about.

[98] Yeah.

[99] Well, so David was and is a radical political activist and very much a large and still active part of American history, even though I think most people these days are not aware of it.

[100] So at this time, the reason he was in London is he was one of the leading young intellectual radicals that was championing the new left at the time and the counterculture.

[101] And they were in London.

[102] He was working with Bertrand Russell, protesting the Vietnam War, and advocating for like world peace and worldwide nuclear disarmament.

[103] Oh, wow.

[104] So he was working with not only Russell, but Jean -Bal Sart, Simone de Beauvoir, James Baldwin, Stokely Carmichael.

[105] Whoa.

[106] He is in the.

[107] middle of everything happening in the 60s.

[108] So this continues for a couple years.

[109] And then in 1968, David gets an opportunity he can't refuse, which is to move back to America and become the co -editor of the magazine Ramparts, which was like one of the leading publications of the hippies and the counterculture.

[110] They originally published Che Guevara's diaries.

[111] It's crazy.

[112] And Ramparts was based in Berkeley, California, which is how Ben Horowitz ends up growing up in Berkeley, California.

[113] It's funny.

[114] I knew Ben grew up in Berkeley, and I just didn't make the connection that, like, anytime you hear that someone was in Berkeley in the late 60s, you should ask the question, like, well, what were they doing in the counterculture movement?

[115] Like, what role were they playing?

[116] And how did they end up there rather than just being like the way you would today, which is like, yeah, it's a little bit of a hippie -dippy town, but, you know, it's part of the Bay Area.

[117] It's part of technology.

[118] Nice suburb.

[119] You get the college campus there, better weather than San Francisco.

[120] It was a little different back in the day.

[121] Okay, so speaking of different, we know David's sort of already part of the counterculture.

[122] When they get back to Berkeley, get this, he intersects with Huey Newton, the leader of the Black Panthers and becomes very close with him and with the Panthers.

[123] And when I say very close, I mean like very close.

[124] So he writes about them.

[125] in ramparts all the time helps bring them to national prominence.

[126] The whole family, including, of course, young Ben, would go to the Black Panther Church every Sunday in Oakland, the son of man temple.

[127] Wow.

[128] Crazy.

[129] And, you know, this is like a little bit, certainly outside the scope of acquired, but just to paint the picture of like where Ben came from, the Black Panther Party, like, if you're not American or from the U .S. and studied American history, like, it was one of the most powerful forces for black and civil rights in America's history.

[130] And the whole family is right in the middle of it.

[131] But unlike Martin Luther King and the civil rights movement, the Panthers did not advocate for nonviolence, shall we say.

[132] Less about the civil disobedience, more about the disobedience.

[133] More about the disobedience.

[134] I didn't know this, but it was actually originally founded as the Black Panther Party for Self -Defense.

[135] Oh, wow.

[136] And the whole purpose of it was to resist police brutality against black people in Oakland.

[137] That was the origin of the Black Panthers.

[138] Wow.

[139] I mean, this was like wild times.

[140] So in 1969, FBI director Jay Edgar Hoover described the Black Panthers as the greatest threat to the internal security of America.

[141] That's how wild this was.

[142] So they're like right in the middle of it, including young Ben, the Patty Hurst kidnapping, like everything.

[143] So then in 1974, when Ben is Eight, an incident happens with changes things dramatically, very dramatically.

[144] So the Panthers needed help with their bookkeeping.

[145] And so Huey turns to David, who's sort of running this organization, Ramparts, it says like, hey, can you help me?

[146] Like, we need bookkeeping.

[147] Now, if only they had pilot, like history would have taken a very, a very different course.

[148] So David introduces them to Ramparts bookkeeper, a woman named Betty Van Patter.

[149] The Panthers bring her on.

[150] Six months later, Betty disappears.

[151] And a few weeks after that, her body washes up ashore across the bay in San Francisco.

[152] Oh, wild.

[153] So the crime was never solved.

[154] No one was ever charged.

[155] But David and many, many others believe that she found out too much and the Panthers had ordered her killed.

[156] Wow.

[157] So, you know, later, Ben, of course, would write the hard thing about hard things and, you know, live through all this crazy technology stuff.

[158] You just got to imagine he was eight.

[159] and his family went through this.

[160] Wow.

[161] You know, a busted IPO doesn't seem so hard after stuff like this.

[162] So anyway, we will move on and get to Mark and Netscape and Loud Cloud and Andrews and Horowitz now.

[163] But yeah, it's crazy.

[164] And for David, he does a complete 180 and ends up becoming an arch -conservativist.

[165] He was one of the primary strategists behind Trump's political strategy for defeating Hillary Clinton in 2016.

[166] Jeff Sessions and Stephen Miller were I like protegees of his.

[167] Oh, I had no idea.

[168] David Horowitz Freedom Center is one of the biggest funders of Trump -leading political ideology in America.

[169] And crazy enough, they still talk, Ben and David.

[170] They apparently still have a great relationship.

[171] There is a wonderful New York Times piece that we'll link to in the show notes.

[172] I recommend everybody go read about all of this that came out a few years ago by David Straitfield about it.

[173] But yeah, this family history is just wild.

[174] That's fascinating.

[175] And it's so cool that family bonds can transcend and not just political beliefs, but like deeply seated ideological beliefs about the way the world should be.

[176] Totally.

[177] And yeah, that out of all of this, 50 years later comes Andrews and Horowitz.

[178] Okay, so back to Ben.

[179] Obviously, he like soaks all this in and has a huge influence on him.

[180] But he also wants to blaze his own path and get out of his dad's shadow.

[181] And he gets turned on to this other revolution that is happening in the Bay Area in the 70s, which is the computer revolution.

[182] He ends up going to Columbia in New York for undergrad and studying computer science there, probably wanted to get sort of away from everything happening in the family life at that point in time.

[183] He then goes to UCLA afterwards and gets a master's in computer science.

[184] And while he's there, he interns at the legendary Silicon Graphics, otherwise known as SGI, led by Jim Clark.

[185] Jim Clark, who will come up later many times.

[186] Oh, he's definitely going to come up in the story.

[187] And SGI is just legendary.

[188] I don't think we've talked about them as much on Acquired, but they were, you know, right alongside Intel and Microsoft and Apple.

[189] One of the big early computing companies in Silicon Valley, the current Google campus was originally...

[190] Yeah, that's crazy.

[191] The SGI campus.

[192] It's wild.

[193] They did the, not just graphical computing, but 3D graphical computing.

[194] So they did the effects for tons of Hollywood movies like Terminator, Jurassic Park, the N64 Nintendo video game console, which is going to come back up later in the story.

[195] SGI made that.

[196] They made the processors for the N64.

[197] Really?

[198] Yeah.

[199] So if you played Mario Kart back in the day, you have SGI.

[200] Okay.

[201] The thing that I know that we're going to talk about later about N64 coming back up makes way more sense with Jim Clark having the SGI background and SGI making the ship for that now.

[202] So is there any ties between Lucasfilm and SGI?

[203] Oh, that's a good question.

[204] The University of Utah folks that ultimately became industrial light and magic.

[205] So Jim Clark was one of those Utah folks.

[206] Along with, of course, Nolan Bushnell and Alan Kaye.

[207] I think that's right.

[208] I think that's right.

[209] I don't know if there were any direct ties between Lucasfilm and SGI, although I'm sure they were using SGI's hardware for the effects at ILM at Industrial Light and Magic.

[210] That was.

[211] It was Alan Kay went to the University of Utah and graduated with his master's in 68.

[212] So it would have been that same time as Nolan Bushnell.

[213] All this stuff going on.

[214] So later, we're now in the very early 90s, young Ben coming out of school, coming out of his master's program.

[215] He joins SGI.

[216] He doesn't say that long, though.

[217] After about a year, he leaves and he joins a startup that's coming out of SGI, and that startup kind of fails, but it's his first startup experience.

[218] And then he moves on and he joins Lotus.

[219] Ah, yes, what should have been the way that we all processed words and numbers, but alas, Microsoft crushed them.

[220] Yeah, what was it, Lotus 1 ,2, 3, I think?

[221] Yep, and Lotus Notes.

[222] Lotus Notes, yep.

[223] So it's while, Well, Ben is at Lotus that he hears about this new, exciting paradigm development, new piece of software coming out of not Silicon Valley, but the middle of the country, the Midwest, the heartland of America, Illinois, we are talking about mosaic, the mosaic web browser.

[224] The NCSA mosaic.

[225] Indeed.

[226] Wasn't it originally XMosaic?

[227] Ooh, I don't know that.

[228] Yeah, it was originally released as a sort of prototype piece of software, originally only for Unix systems, and use the X window system.

[229] And it was sort of a common thing to denote it with an X in the name of the piece of software.

[230] Ah, wow.

[231] Well, we're going to get into the name more in a minute here.

[232] But Ben here's about Mosaic.

[233] And of course, it's celebrity, wonderkind, young, brash founder, I guess, question mark.

[234] Mark Andreessen.

[235] So who was Mark Andreessen, a man who needs no introduction.

[236] But his background was, let's just say, pretty different than the milieu that Ben was growing up in.

[237] So he was born in Cedar Falls, Iowa, which is not a super, super small town, but he was raised in New Lisbon, Wisconsin.

[238] Do you know what the population of New Lisbon, Wisconsin is today, Ben?

[239] 10 ,000?

[240] 2 ,554 people.

[241] Wow.

[242] So Mark's father, Lowell, was a sales manager for a seed company called the Pioneer Hybrid International Seed Company, and his mother, Pat, worked in customer service at Land's End.

[243] I think Land's end, I think they would go on to become a sizable customer of Loud Cloud, but that is in the future to come.

[244] So Mark, he talks about this all the time.

[245] If you've heard Mark talk about his background, he could not wait to get out of this small town and the Midwest and computers in the internet were the vehicle he was going to do it.

[246] He says of his family, which he rarely, rarely talks about, the one quote I was able to find is he says they were Scandinavian, hardcore, very self -denying people who go through life, never expecting to be happy.

[247] Wow.

[248] Yeah.

[249] Wow.

[250] Well, and it's worth pointing out, too, that like when you say this non -traditional background, you alluded to him as this wonderkind.

[251] And that was just not true yet.

[252] At this point in history, and we have Brian McCullough from the Internet History podcast to thank for this.

[253] I binge like the first 10 episodes of that podcast to prep for this.

[254] But he brings up the point that Mark was like an hourly worker at NCSA.

[255] Oh, yeah.

[256] He was getting paid $6 .25 an hour.

[257] Yeah, like no one recognizes his genius yet.

[258] And the innovation of creating Mosaic of actually mobilizing people to work on this thing was like, hey, we have a lot of fallow resource here.

[259] We have some smart people.

[260] I have no authority, but I'm going to wrangle the troops to try and do this with me. Well, and I think if there's one thing that's young Mark Andreessen and now older Mark Andreessen is very good at, it is putting himself in the right environment to meet the right people and to.

[261] succeed.

[262] So, you know, we're referring to the University of Illinois, where he would end up going to college.

[263] He was very intentional about deciding that.

[264] He decided that he wanted to go to school, A, to study computer science.

[265] So he wanted to go to school with a great CS program that his family could afford.

[266] And B, he also wanted a place where he would have the opportunity, not just to study CS, but to actually, like, work while he's in school on, like, cool stuff that's going on.

[267] And of course, Urbana Champagne had not just a great CS school, but what we were referred to a few times now, the National Center for Super Computing Applications was attached to it, the NCSA.

[268] So Mark, when he gets to Illinois, he immediately starts interning, doing like work study at the NCSA.

[269] And while he's there, so how does this kid, as you mentioned, you know, who like, he's not yet Mark Andreessen, how does he end up?

[270] coming up with Mosaic.

[271] So while he's at NCSA, they're interfacing with all of the other supercomputing centers around the world, including academic research, like particle accelerators, particularly with CERN over in Switzerland, the particle accelerator, which is where Tim Berners -Lee is.

[272] And that's where Tim Berners -Lee comes up with the set of standards like HTTP and all that stuff that he dubs the worldwide web.

[273] And all the way across the world, like halfway across the world in Illinois, this kid working there, Mark Andreessen, he hears about it.

[274] And he's like, oh, well, that sounds very interesting.

[275] Totally.

[276] It's cool thinking about how this came to be, because you got Tim Bernersley there on one of the few next workstations, like the next cube, that actually shipped and was actually used by people because it was this crazy, expensive thing that only went to people working in academia.

[277] And of course, this is sort of Steve Jobs' company before returning to Apple.

[278] And it says so much about Tim and the environment in which the internet and the World Wide Web was sort of started that it was on a next machine because it came out of this rigorous academia corner of the world, which is frankly so different than a lot of the startup innovation that is happening today.

[279] I mean, a lot of the like the frontier tech stuff comes out of academic labs.

[280] But I think we often forget, especially with how sort of countercultural, a lot of new things on the internet have become that it started in a very...

[281] A very closed way, honestly.

[282] You know, the original intention behind all these set of protocols and the worldwide web, like, it was supposed to be just for universities and research.

[283] So they could share research notes.

[284] Yeah.

[285] And it was very controversial what Mark was doing because people didn't want to let the riffraff in.

[286] They thought it would dilute the quality of, like, this is supposed to be a pure thing about, like, conducting research.

[287] I got this great quote from Mark.

[288] So he gave this an interview in 2003 that's talking about on starting mosaic.

[289] And he says, but the internet community back then, the key technical people didn't want the internet to become easy to use or graphical because that would pollute the environment.

[290] Only smart people could use the internet was the theory.

[291] So we needed to keep it hard to use.

[292] We fundamentally disagreed with that.

[293] We thought it should be easy to use and graphical.

[294] So you should be able to point and click.

[295] Totally.

[296] Oh, it's so great.

[297] And like, it's really just because of my, like, he doesn't give a crap.

[298] He's getting paid $6 .25 an hour over at NSA.

[299] So he's like, well, it's the worst that can happen.

[300] You know, I'll just code this thing up.

[301] He convinces Eric Beena, who's a full -time employee there to work with him and code up an easy -to -use graphical browser to sort of open this up to everybody.

[302] It's like, yeah, they'll fire me if it doesn't work.

[303] Who cares?

[304] Totally.

[305] And this is the first playbook theme that I want to pull forward.

[306] And listeners are trying something a little new today, interspersing more of the playbook throughout the story, but this is the very first time Mark runs the playbook of, there's something right now that's only for some small, closed group of people that's in an inaccessible way.

[307] I think there's something very interesting to be done by opening up to the masses.

[308] And of course, there's no business model behind this yet.

[309] It's just let's let everyone use the internet and let's make that possible.

[310] And when you think about Andreessen Horowitz, all these years later, funding things like Clubhouse and invest in social media platforms like Twitter, like Mark did very early.

[311] Or hell, Coinbase.

[312] Absolutely.

[313] It is very much this, let's take something very esoteric and make it very available to everyone.

[314] And then we will figure it out later.

[315] This is the very first time he runs that playbook.

[316] Totally.

[317] And the other sort of counterintuitive thing, or going against the grain element of building a mass market browser for the web, was that this was not how most people thought the internet was going to go at the time.

[318] At the time, this is, you know, in their early 90s, people are talking about the information superhighway.

[319] And actually, SGI was a big part of this.

[320] SGI was working with the cable companies to build like these internet enabled set top boxes.

[321] That's right.

[322] Everyone thought it was going to be TVs.

[323] It was going to be TVs.

[324] And even worse.

[325] It was going to be the cable companies and the government in, like, private -public partnership that owned all these pipes.

[326] Could you imagine?

[327] And that they were going to control the stuff that was going to go on there.

[328] And Americans were going to access it through their televisions.

[329] This was a big platform with the Clinton administration when they were campaigning for the 94 election was that we were going to be a big part of the information superhighway from the federal government.

[330] And it's fascinating to, like, zoom out a little bit.

[331] It makes sense that you have these, like, big screen.

[332] and you have fat bandwidth that's able to send perfect, not choppy, high fidelity audio and video to TVs.

[333] And then you look over at this internet thing, which is only a thing for academic institutions, there's like 40 nodes or something at all.

[334] Like, there's 40 servers, period, on the whole internet.

[335] And all it can do is send text back and forth.

[336] Like, no, you're not going to bet on that platform to be the way that this ends up coming to market.

[337] Yeah, totally.

[338] Now, to be fair, to the soon -to -be Clinton administration, And in particular to Al Gore, who would become Vice President Gore, in the 1991 Gore bill, which is allocating funding for all these various internet projects that are being built out in America, they actually specifically allocate funding to the Mosaic project at the NCSA.

[339] So this is how they get the resources to pay Mark's 625 an hour salary for all the hours that he and Eric are going to work on coding this thing up.

[340] So you're telling me Al Gore did invent the internet.

[341] He did, sort of.

[342] I guess he was kind of like the VC who funded the internet.

[343] Wow, Al Gore was Mark Andreessen's VC.

[344] You heard it here first.

[345] You heard it here first.

[346] So they do this.

[347] They create mosaic.

[348] And in 1993, they open it up for anyone to download and use for free.

[349] But importantly, and this is going to come up again later, they do not open source the code.

[350] So the NCSA retains the code behind Mosaic.

[351] It's not free and available in open source.

[352] But anybody can download it and use it.

[353] And of course, people go nuts and do.

[354] In 1994, Wired would write, the second phase of the revolution has begun.

[355] Don't look now, but Prodigy, AOL, and CompuServe all are suddenly obsolete.

[356] And Mosaic is well on its way to becoming the world's standard interface.

[357] Well, because those were all these walled gardens.

[358] I mean, AOL, like, everyone should remember.

[359] AOL was not the Internet.

[360] It was AOL keywords.

[361] It was pay -to -play.

[362] It was you could only publish the content on AOL if you did a deal with AOL, which is, of course, how they had these incredible revenues that they were reporting.

[363] And everyone thought this was the most unbelievable company ever.

[364] But the Internet was fundamentally something different.

[365] The World Wide Web was something completely different that was open is probably not the right word yet, but used to standard.

[366] protocols.

[367] And so when you mentioned that it grew like crazy, I grabbed some stats on that.

[368] In February of 93, when they released the first version, and this is like super prototypy.

[369] There's some great comments from Mark Andresen out on the NCSA X Mosaic list serve when they release version 0 .5 in January of 93 that say things like, I'm looking more for feedback on design and functionality than bug reports right now.

[370] Don't take the current code too seriously.

[371] new releases will probably come out every 7 to 14 days until 1 .0 arrives.

[372] The bulk of the program will be rewritten in C++ anyway.

[373] So there's like disclaimers all over the mailing list that he's distributing this thing out to.

[374] But the stats are crazy.

[375] It's like the early Ethereum.

[376] Totally.

[377] So the next month, there's 12 users in February of 93.

[378] Within three to four weeks, there's a thousand.

[379] And by spring, so like you got January is that.

[380] list serve.

[381] February is 12 users.

[382] A month later, it's 1 ,000 by spring.

[383] So two months later after that, it had 10 ,000 users.

[384] And then nine months later, in early 94, it has a million users.

[385] So like the very first thing that Mark Endreson shipped had insane growth and perfect product market fit right out the gate.

[386] Those are still pretty good numbers today.

[387] Sure.

[388] Oh, absolutely.

[389] And this is in an era when people maybe have a dial -up connection probably people have PCs, but like not that many people.

[390] Oh, yeah, the TAM of the internet was super small.

[391] Like, if you had a million people by early 94 using your software on the internet, I don't know what percent of internet users that is, but it's meaningful.

[392] You had like 10 % of all internet users.

[393] Totally.

[394] It was the killer app for the internet.

[395] So this is funny, right?

[396] So we're talking about it's 1993.

[397] This is also Mark's senior year at Illinois.

[398] So he graduates in spring of 93, probably when Mosaic is at the like, I don't know, 10 ,000, 20 ,000 -ish user adoption curve.

[399] He doesn't think that this is going to be a thing.

[400] He's like, oh, this is like a cool thing I did during my, as an internship during my college years.

[401] I want to move out to Silicon Valley, move out to California and get a job, you know, at like a real computing company.

[402] And famously, he talks about this.

[403] He felt like he already missed it.

[404] he felt like Silicon Valley had happened.

[405] Absolutely.

[406] I got the quote from this too.

[407] So Mark did a great interview on the Tim Ferriss show a few years ago, and he says, When I got to the Valley in 93 and 94, I thought I had missed the whole thing.

[408] The great PC companies had gotten built during the 70s and 80s, and by the time the 90s arrived, PC was done.

[409] It was finished.

[410] You could go buy one, and it was great, but it was done.

[411] People in the Valley thought there was nothing else left to do.

[412] And then there was this moment where I and various people wrapped our heads around the implication of the internet, which today seems obvious, but at the time, it was very contrarian.

[413] If you said the internet would become a mainstream consumer medium that three billion people are going to use worldwide for all forms of human activity, you would have been laughed at, you would have been institutionalized.

[414] Spoken only as Mark Andreessen can, to insert a playbook theme here, I mean, this is always true.

[415] There is like no moment in Silicon Valley writ large in tech where this is not true.

[416] I remember graduating from GSP in 2014 and commiserating with all my friends being like, we missed it.

[417] It's over.

[418] Like the valuations are so high.

[419] It's crazy.

[420] I felt like this after shipping apps to the app store.

[421] And then iOS 5 or 6 hit and suddenly there were a million apps and I was like, shoot, it's over.

[422] And meanwhile machine learning had yet to arrive.

[423] Crypto had yet to arrive.

[424] There's actually a really, really great Mike Moritz at Sequoia has a wonderful saying of this.

[425] I don't know that this is actually like publicly written anywhere, but that this is the biggest lesson that he took from Sequoia's Cisco investment, which he was like looking at the returns on Cisco and he was like, how are we ever going to top this?

[426] This is the top.

[427] We'll never do better.

[428] I think he was talking with Don Valentine's own about it.

[429] And Don was like, it's always going to be bigger.

[430] Like as long as Moore's law continues, then just like the number and scale of industries that computing and technology can address is always going to going to grow as long as that is happening.

[431] So the next generation is always going to be an order of magnitude bigger than this generation.

[432] That has played out time and time and time again.

[433] And of course, Moore's Law technically didn't continue.

[434] But like the number of course for the same price that you can put on a single system on a chip has sort of followed the same trajectory as Moore's Law.

[435] So even when we hit the upper limit on certain things in physics, the industry seems to figure out a way to continue to have the spirit of Moore's law and the sort of price and power of compute continues such that, and this is another Andreessen saying, but at some point, the hardware limitations go away and compute becomes free.

[436] And then it's really all about with an infinite and free resource of compute, what can you do with software?

[437] Yep.

[438] So, okay, back to Mark.

[439] He can't even get a job at like a big respected PC or software company.

[440] He moves out to Palo Alto and he gets a job at enterprise integration technologies, which I think was a tech like implementation consulting firm, like doing like PeopleSoft installations for companies.

[441] Sweet.

[442] You can imagine Mark Andreessen's fit with an environment like this.

[443] So of course, but as this is happening, this is when Mosaic is rocketing up this adoption curve.

[444] So he kind of, it's this weird thing where he's this kid out of school working a no name job, but he's kind of a celebrity.

[445] And he's gotten kind of shoved out.

[446] And there's two sides of this story.

[447] I think the folks at NCSA would say that Mosaic was an official project.

[448] Mark says they sort of self -organized.

[449] It became very clear to him that the sort of bureaucratic leadership at the NCSA was going to sort of take the lead on this and start doing the press interviews.

[450] And they did own the license to the source code.

[451] And so they, you know, he was an employee.

[452] And it became NCSA's thing, not Mark Endresen's thing.

[453] Yep.

[454] Oh boy.

[455] Is that going to come back?

[456] So, enter Jim Clark.

[457] Of course, Jim Clark, founder of Silicon Graphics, STI, Utah, you know, Mafia alumni.

[458] He had just left SGI.

[459] He had been feuding with the board and he's out.

[460] He's looking for his next thing.

[461] But he has a non -solicit from SGI.

[462] So he can't take any of his people with him.

[463] But he knows he wants to start a new thing.

[464] He's got a chip on his shoulder.

[465] He's like, I got another act.

[466] I'm going to prove all these people.

[467] wrong.

[468] He needs to go find new blood.

[469] He hears about Mosaic.

[470] He tries it out.

[471] He's like, oh, this is amazing.

[472] This is the future.

[473] I got to look up this Mark Andreessen guy who's there on the About page is like Mosaic by Mark Andreessen.

[474] So he calls him up.

[475] He just cold calls him.

[476] And they get together.

[477] They have breakfast.

[478] I think Mark would famously say this is like the one and only time he got up at 7 a .m. in his 20s.

[479] So here's how it goes down.

[480] They have breakfast.

[481] and Jim is like, Mark, you should commercialize this thing that you're doing with mosaic.

[482] Like, you've got to get out of this job and I think we should do it together.

[483] And Mark is like, I don't know.

[484] You know, I'm really enjoying this consulting lifestyle, doing software implementations, people soft, I'm like, hell no, let me get out of here.

[485] Let's go do this damn thing.

[486] Yeah, yeah, yeah.

[487] No, that's not how it went down at all.

[488] You probably know this Ben from the research, but you would think that that would be the now, in retrospect, obvious thing.

[489] no, Jim does take a shine to Mark and he's like, okay, great, I want you on my team on this new team I'm assembling.

[490] I want some young blood.

[491] But the idea I have is this N64 Nintendo console that we've been working with Nintendo over at Silicon Graphics.

[492] This is going to be the perfect information super highway node into living rooms.

[493] This is how we're going to win the internet.

[494] We're going to build an online service for the N64 console.

[495] it makes sense.

[496] I mean, given the background, given the hype that was going on around N64 at the time, I see why that was the belief.

[497] I mean, I remember being a 12 -year -old, like, reading every single gaming magazine that would come out just trying to get details on the N64.

[498] I got mine on launch day.

[499] I would have convinced my parents to pay any amount of money for an online service for that console.

[500] Which is so interesting that this was what they conceived of instead of the browser because this would go on to become a huge business.

[501] You look at Xbox Live, three, four decades later, this becomes an enormous opportunity.

[502] But at the time, this would have been absolutely the wrong move.

[503] And there's another playbook theme.

[504] Mark has a quote that says, if they had shipped a year earlier, referring to the N64, we probably would have done that instead of Netscape.

[505] Yeah.

[506] So this is the history turns on a knife point.

[507] The console gets to laid for a year.

[508] And because of that, they're never able to reach a deal with Nintendo, and it's unclear that anything's going to happen.

[509] Meanwhile, they're both itching to get a company going.

[510] So they have a kind of brainstorming session where they're thinking of other ideas for stuff to do.

[511] And eventually, Mark is like, well, you know, this mosaic thing?

[512] Like, I did build that.

[513] And all my buddies that I kind of did it with back in Illinois, they're about to graduate, too, or they already have graduated.

[514] We could just go hire all of them and recreate it and commercialize it.

[515] And Jim's like, huh, okay, fine, let's do it.

[516] So they incorporate and they start the world -renowned, go on to be history -making, Mosaic Communications Corporation to commercialize Mosaic.

[517] I love that they were like, yeah, we'll just use the same name.

[518] We'll name our company Mosaic, even though that's a thing that's owned by that lab at the university.

[519] Yep.

[520] So obviously, NCSA was none too happy with this.

[521] They threatened lawsuits.

[522] It's all back and forth.

[523] Eventually, they changed the name to Netscape Communications.

[524] And that is how it comes to be.

[525] It was actually Greg Sands, who was the first PM that they hired.

[526] Greg Sands of Costa Noah?

[527] Greg Sands of Costa Noah, previously of Sutter Hill.

[528] Oh, awesome.

[529] And Greg Sands' little sister, Emily, was at Princeton with me and Jenny and was, I think she was salutatorian of Jenny's class.

[530] one of the absolute, like, top five most brilliant people I've ever met in my life.

[531] So they changed the name of the company to Netscape, but the internal code name.

[532] I was going to ask you if you knew this.

[533] Yes.

[534] The internal code name that they use and they continue to refer to the actual browser code itself is Mozilla, which stands for Mosaic Killer.

[535] Oh, it's so good.

[536] It's so good.

[537] It's so good.

[538] So if you are wondering where Mozilla came from, that's it.

[539] Yep.

[540] So as they're getting going, Clark at this point in time, his net worth from SGI is, he would say around like 15 million or so.

[541] He puts in 4 million bucks.

[542] He finances the whole thing himself hiring all these people, great people like Greg.

[543] Which, by the way, his net worth was 15 million from SGI, not because that was a little company, but because he had to take on a colossal amount of financing on very, very, very much.

[544] very onerous terms in order to make that company succeed.

[545] Totally.

[546] Yeah, that he would walk away with 15 million from SGI after decades.

[547] 15 million and a chip on his shoulder.

[548] And a huge chip on his shoulder.

[549] So he's wary of all these VCs that financed SGI.

[550] I think N .E .A was the big VC behind them and took so much the equity.

[551] So he puts him four million.

[552] But then he's worried about like, well, this is really getting a lot of buzz starting to take off.

[553] We're going to need more capital.

[554] I don't have enough to finance it myself.

[555] I guess I will bring on some venture capitalists.

[556] He goes and he talks to his old buddies at N .E .A., but enter Kleiner Perkins and John Doer, here's about the deal and outbid's N .E .A. invest $5 million in the fledgling Netscape Communications Corporation for 25 % of the company.

[557] So 20 post.

[558] Yep.

[559] Wow.

[560] Times were different back then.

[561] So not too long after that, Ben, our erstwhile, steeped -in, hippie, Berkeley, true Bay Area counterculture DNA friend, Ben, he's over working at Lotus at the time, and he had heard about Mosaic, of course, been using it, he thinks this is the future.

[562] He hears about all this going on at Netscape, and he's like, I got to get in there.

[563] I got to make it happen.

[564] So he has a friend, get him into connection.

[565] He goes in the interviews and he gets a job, and he gets put in charge.

[566] of the Enterprise Web Server product line at Netscape.

[567] And this is because there aren't web servers yet, right?

[568] What's the point of having a browser to load web pages if there's no software that can sit on servers that can create web pages?

[569] Exactly.

[570] So this is going to become like really big.

[571] But at the time, I don't know how Ben was feeling whether he was excited about this or not, but it was kind of like, okay.

[572] I mean, like this is how we're going to like make money.

[573] We're going to sell licenses for the server business so that, companies can create websites and have commercial websites.

[574] But the big sexy thing is this browser that is getting millions of people using it.

[575] So it was kind of this part of the company that was like, yeah, like necessary.

[576] This is how we're going to make money.

[577] And it is a beautiful time -tested business model.

[578] Like give away the consumer thing for free, get as many people on that as you possibly can.

[579] It's actually kind of the first real example of aggregation theory.

[580] Netscape ends up becoming powerful in the ecosystem because they're able to get all the internet users, using it and thus then sort of apply pressure to businesses that if you want to create great websites, you can do so and we promise it will be compatible with Netscape, the browser that everyone uses.

[581] So you should buy these tools from us.

[582] It makes a lot of sense.

[583] Yeah.

[584] And really, I think only came about because of the history of Mosaic being part of NCSA.

[585] Like if, I don't know, some company like Microsoft say were to otherwise have gone out and created a new piece of software, you know, like they did with Word or Excel or PowerPoint that they bought.

[586] Consumer licenses.

[587] Yeah, natural thing you do, you put it in a box, you put it on a CD, you shrink -wrap it, you get it into Comp USA, and you would sell that sucker for 50, 100 bucks to every consumer that walked in the door, not the route that the browser took to its great advantage.

[588] Which is fascinating, because that affected everything henceforth.

[589] I've never paid for a web browser.

[590] You could make an argument.

[591] people are paying for Brave in different ways, or I'm sure people pay for specialized Bowser's, but like, it's set the trend that you do not pay to get access to the web.

[592] Yeah, totally.

[593] So famously, people at Netscape would talk about how we invented internet time and that it was this parallel universe that was accelerating faster than reality time.

[594] By August 1995, so we're just 16 months after the company starts.

[595] In April 94.

[596] In April 94, Netscape has an 80 % market share of web browsers in the world, and they decide Jim Clark pushes them that they're going to go public.

[597] And they've successfully killed Mosaic at this point.

[598] Right.

[599] 80%.

[600] Just, I don't know, 12 months ago, the other thing that Mark Andreessen created had close to 100 % of the market share, which is wild.

[601] All right.

[602] Well, it turns out they haven't totally killed.

[603] old mosaic.

[604] Okay, so 16 months you're talking from founding to IPO, like any good tech company, you know?

[605] Right.

[606] Any good tech company.

[607] So, you know, the bankers, Morgan Stanley and Frank Quattron and Mary Meeker on the analyst side are taking them public.

[608] Just absolute killers.

[609] Killer, superstar team.

[610] Frank Quatron of the Amazon IPO, Mary Meeker of Bond Capital and famously the Kleiner Perkins state of the internet?

[611] Yep, yep.

[612] the people who would go on to do unbelievable things took this company public.

[613] Totally.

[614] So they're not quite sure how to price that.

[615] I mean, nothing like this has ever happened before.

[616] So they decide they're supposed to price at $14 a share, which I didn't do the exact math, but that would be roughly like, I don't know, $500 million market cap, shall we say.

[617] So like astronomical at the time, I mean, 12 months ago, this was like a 20 post series A, the Kleiner did.

[618] So they think in $14 a share the night before.

[619] Clark, remember, he's like, he's pretty salty from what he walked away with at SDI.

[620] He pushes them to up the IPO price, what they end up pricing at the night before, to $28 a share.

[621] The next day, the stock doesn't open because there is so much buzz about this company.

[622] Like, obviously, the institutional demand is, you know, high.

[623] And famously, institutional investors, were kicking themselves for having missed out on Microsoft a decade earlier and how big that became.

[624] And so the hype is like, this can be the next platform.

[625] This can be the next Microsoft.

[626] But meanwhile, they've got millions of people like moms and pops and kids using this thing on their home PCs.

[627] They all hear, you know, in the news that Netscape is going public.

[628] They're using Netscape.

[629] They want retail wants it on the IPO.

[630] So famously, you're telling me there's going to be a pop.

[631] this is like the origin of the pop the IPO pop or at least the extreme IPO pop so famously Charles Schwab the brokerage they had to change their phone systems leading up to the IPO because remember there's no like internet brokerages at this point you can't place orders online even through Netscape so they changed their phone system that when you called your broker at Charles Schwab you would get a message in the couple of days leading up to the Netscape IPO that said, welcome to Charles Schwab.

[632] If you're interested in the Netscape IPO, press one.

[633] Press one.

[634] Oh my goodness.

[635] So there is so much demand.

[636] It takes hours to open up the stock on the day of the IPO.

[637] It opens at $75 a share.

[638] Wow.

[639] Remember, the bankers were like, I don't know that we can go up to 28 the night before.

[640] So they thought they were going to price at 14.

[641] The bankers reluctantly IPOed it at 28.

[642] And then the first retail trade happens at 75.

[643] 75, yep.

[644] It falls a little bit during the day, but it closes at $58 a share giving the company a $3 billion market cap.

[645] Just insane.

[646] Totally insane.

[647] I think Microsoft was about $10 billion at this point in time, if I remember right.

[648] And it's worth saying a few things.

[649] One, this absolutely kicked off the dot -com bubble.

[650] This was the moment that it started.

[651] There were a couple of internet IPOs before this, but this is the one that blew the doors wide open, made valuations not matter, and created four and a half years of absolute madness from this point forward.

[652] But Netscape had an unbelievable growth trajectory, not just in users, but in revenue.

[653] Like in the Ben Horowitz corner of the business, revenues were doubling every quarter, which means they were 16 Xing revenue year over year.

[654] Well, they'd only been around for five quarters.

[655] Sure, but that a 16x year -over -year run rate on revenue?

[656] They did $17 million in revenue in the first six months of 1995 alone, which, like, you know, for a company that entered 1995 being what, eight, nine months old and then was doing, you know, what call it run rate, 50, 60 million revenue in that first full year of existence.

[657] That is very impressive.

[658] Yeah, for sure.

[659] the other thing that's worth mentioning here is that it was unusual for companies at this point in time to IPO without being profitable.

[660] And so people were sort of like bankers were making this exception of like, well, this one's going to be hot, even though the company's not profitable.

[661] Whereas now you look around and it's absolutely the minority of the time that a company is profitable before the public is willing to take on the risk of continuing to finance that company.

[662] So it's just funny how much things have changed.

[663] I mean, it really, the Netscape IPO, this was like a cultural moment for tech, for the world, for finance, for everything.

[664] Funny story, this was only six days before the launch of Windows 95.

[665] So this is the most like interesting month ever in the tech industry to this point.

[666] And if there's, I mean, this must have been in the risk factors of the IPO prospectus.

[667] I didn't look it up.

[668] But if there is one bare narrative on the Netscape IPO, it's micro.

[669] Like everybody knows Microsoft is, you know, they control Windows, they control the operating system of 95 % of the install base of PCs in America, you know, in the world at that point in time, you know, what are they going to do?

[670] But nobody pays too much attention to it.

[671] And famously, shout out to Brian McElla for finding this and calling it out.

[672] Around the IPO, Andresen gives an interview, Mark gives an interview and says famously that, you know, they ask for these worried about Microsoft and competing.

[673] And he says, I'm not worried about it.

[674] Netscape can become a company that will turn Windows into a, quote, mundane collection of not entirely debugged device drivers.

[675] Well, pride comes before the fall, as we all know.

[676] Obviously, you know, this is Microsoft in the 90s, which is like absolute killers.

[677] Pre -D -O -J.

[678] Pre -D -O -J, which happens because of all this.

[679] So in May of that year, you know, Bill Gates saw all this happening.

[680] He saw Netscape.

[681] He saw where this was going to go.

[682] And in May of 95, he had written the internal internet tidal wave memo.

[683] And for anybody who hasn't read that, it is just worth reading it its entirety to understand, one, the genius of Bill Gates.

[684] But two, to understand the context of that time, even Bill Gates, like even Microsoft, who was so steeped in this stuff, their strategy was the information superhighway.

[685] They were long all this stuff, interactive TV.

[686] But they, just like most other people, did not predict that this low -end disruptor, the internet, based on text being sent over HTTP and, ooh, images in line that Mark Andreessen managed to get into the browser too, that that actually was going to be the thing.

[687] And it's not until early 95 when he pens that memo where it becomes obvious to even the smartest, most well -positioned people in the whole tech industry to react to this.

[688] but once he realizes and writes that memo, oh, boy, is it ever game on?

[689] Guns out.

[690] So Gates says, you know, this is strategic priority, like number one of the company.

[691] We're going to compete here and we're going to win.

[692] So turns out they actually have the perfect strategy to kill Netscape already in progress within Microsoft, which is that back in 1994, Thomas really.

[693] a famous Microsoft employee and then would go on to be founder of Control Labs, which Facebook acquired a couple years ago.

[694] He had actually licensed.

[695] He was playing around with, you know, he thought browsers were interesting.

[696] This was going to be a thing.

[697] He had licensed for Microsoft some code for a browser from a little company called Spyglass Inc. which happened to be located in Illinois, in Urbana, Champaign.

[698] Why was it located in Urbana Champaign?

[699] Because it was the commercial entity started by the university to spin out and commercialize the IP that they developed at the NCSA, including the Mosaic Web Browser.

[700] Ooh.

[701] So Microsoft's got a license to the Mosaic Web Browser.

[702] They're like, well, hmm, we've got this license.

[703] We can use it.

[704] And the terms of the license actually are that we pay Spyglass, you know, a portion of the revenues that we make from distributing this thing.

[705] Well, what if we just bundle it into Windows and we give it to everybody for free?

[706] Oh, my God.

[707] It's stone cold killers.

[708] There actually ends up being a big lawsuit about this, a spyglass sues, Microsoft.

[709] And it's like, hey, you're giving this away to like hundreds of millions of people and you're not paying us anything because you're not charging for it.

[710] And classic Microsoft legally, they're like, hey, look, we savvily negotiated an agreement with you and, you know, sorry.

[711] Your fault that you didn't anticipate the way that we would go on to distribute this thing.

[712] Famously, they run this playbook and done the same thing with DOS back in the day.

[713] This is worth a quick sidebar because this is absolutely unbelievable and is part of the reason Microsoft got sued.

[714] But Microsoft had a deal in place where in order to use DOS at all, to license DOS from them, if you're an OEM, you know, making computers, you had to pay them whether or not you chose to use DOS as the operating system on that PC.

[715] It was a per CPU shipped license.

[716] So then, of course, the incentive there is for the OEM to say, well, we're got to make the most of this license since we're getting charged for it anyway.

[717] They put Windows on everything they ship.

[718] And that is how Microsoft became the dominant platform with DOS, where then every application became written on top of DOS because every CPU had DOS on it.

[719] Well, and famously, Microsoft did not develop DOS.

[720] They did a very similar deal.

[721] They licensed it.

[722] From another Seattle company.

[723] Yeah.

[724] Another story for another day.

[725] God, they were killers.

[726] So the net of it is, even after the lawsuit, they pay a grand total, Microsoft does, of $8 million to Spyglass, which will go back to the University of Illinois.

[727] The NCSA in Illinois get $8 million for Mosaic, which becomes Internet Explorer.

[728] That's right.

[729] Mosaic, which, you know, Mark and Jason and Eric Bina wrote at NCSA, the IP stays at NCSA in Illinois, spun out into Spyglass.

[730] Licensed from Microsoft, that is Internet Explorer.

[731] And for anyone who is thinking, geez, how did Internet Explorer launch so quickly after Microsoft needed to catch up and create a browser, this is how they did it.

[732] Yeah.

[733] So people know that this is happening, and Netscape knows that all this is going on.

[734] Meanwhile, Netscape at this point is helmed.

[735] Joining before the IPO was a new CEO, Jim Barksdale.

[736] They brought in sort of a professional CEO operator.

[737] He was the former CEO of FedEx.

[738] He came actually from Macaw Cellular and AT &T before that.

[739] They have this sort of grizzled industry veteran at this point because even Jim Clark, for all of his executiveness from SGI, for the IPO, Netscape actually did want this sort of like robust professional public market CEO.

[740] So everybody knows this is going on, but Netscape thinks and the market thinks that, okay, you know, Microsoft's now, they've got this Internet Explorer thing.

[741] They're going to run the office playbook here.

[742] They're going to sell this at Comp USA and you know, you're going to buy it and blah, blah, blah.

[743] And then as he said, Ben, two weeks after the Netscape IPO, they launch Windows 95 and not fully bundled in then, but they say that there's the Windows 95 plus pack.

[744] An Internet Explorer is bundled into it for free.

[745] And, of course, this would eventually, very quickly, Internet Explorer would just be bundled for free directly into every copy of Windows 95 and then Windows XP.

[746] All of a sudden, Netscape is now forced to compete with free and bundled.

[747] Brutal.

[748] With every operating system basically on the planet.

[749] Absolutely brutal.

[750] Totally brutal.

[751] So now this little division that Ben Horowitz is running, the Enterprise Server division.

[752] that becomes hugely more important.

[753] This is the only part of the company where they can even like conceivably compete against Microsoft.

[754] And this becomes like major strategic initiative at Netscape.

[755] We're going to focus on selling enterprise server products.

[756] And of course, the enterprise server products have to produce web pages that are compatible with Internet Explorer because that's now what everybody is using.

[757] It sucks.

[758] Oh, it's so, so brutal.

[759] So famously, they start scrambling.

[760] Ben and the team start scrambling, they're going to make the product way better than Microsoft server product.

[761] They're working on a bunch of new features.

[762] They line up a big announcement event in New York City for March of 1996, about the new version of the product.

[763] And famously, two weeks before the event, Mark ends up giving an interview to computer reseller news of all publications where he just reveals the whole thing.

[764] and Ben sends an email to Mark and the email says, one line, I guess we're not going to wait until the fifth to launch the strategy.

[765] Mark responds, the email was just to, from Ben, just to Mark.

[766] Mark responds, copies in Jim Clark, copies in Jim Barksdale and says, quote, apparently you do not understand how serious the situation is.

[767] We are getting killed, killed, killed out there.

[768] Our current product is radically worse than the competition, competition being Microsoft.

[769] We've had nothing to say for months.

[770] As a result, we've lost over $3 billion in market capitalization.

[771] We are now in danger of losing the entire company and it's all server product management's fault.

[772] Next time, do the effing interview yourself, F you, Mark.

[773] Reading this email is like in print and of course we're being family friendly here on the air.

[774] But like just seeing like FU comma mark.

[775] I just can't imagine signing an email that way.

[776] Here's the best part.

[777] That email was written the very same day that the Time magazine cover came out.

[778] The barefoot, no way.

[779] The barefoot, Mark Andreessen on the cover of Time magazine, barefoot on a throne as the throne of the next new Silicon Valley King.

[780] Wow.

[781] Mark would later say about this whole escapade, quote, this is why I should not run a company.

[782] Yeah, no kidding.

[783] No kidding.

[784] Maybe you should be a venture capitalist instead.

[785] Oh, boy.

[786] Wow.

[787] That's actually a good question.

[788] In Mark's entire career, including the Loud Cloud story that we're going to go on to tell later, has Mark ever been the CEO of a company?

[789] I don't know.

[790] Was he the CEO of Ning?

[791] He was the CEO of Ning.

[792] You're right.

[793] Okay.

[794] So once.

[795] We'll get to that.

[796] But it's very interesting that all the biggest successes, he was either effectively the co -founding CTO or a board member or the venture capitalist behind it.

[797] you know, not the CEO of any of the most successful stuff he's done.

[798] Well, and this is going to be the great.

[799] I don't want to say lie because it's not a lie, but the sort of posturing from one of the key elements of the beginning of Andresen Horowitz, which was their motto that, you know, all the general partners need to have been CEOs.

[800] Like half of the first, like, five or six general partners had never been CEOs.

[801] Right.

[802] There's a lot of credibility behind that they were strong operational leaders and executives.

[803] But yeah, it's a good point.

[804] Absolutely.

[805] Like Jeff Jordan led the PayPal acquisition and ran PayPal.

[806] within eBay.

[807] He was not the CEO of eBay, but like, I would take him on my board.

[808] But yeah, that's funny.

[809] Well, I think this is a good point.

[810] Before we get into like the 96, 97, 98, continuation of the browser wars, what happens to Netscape?

[811] And I'll leave it there for the moment.

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[832] All right.

[833] Well, David, so we're in the browser wars.

[834] Microsoft just blew Netscape out of the water.

[835] What's going on for Netscape now?

[836] Such a tragedy.

[837] I mean, that year of the IPO in 1995, this is the thing.

[838] Like, this actually was a really great company.

[839] It did $85 million in revenue.

[840] Netscape did in 1995.

[841] And then in 1996, it did $346.

[842] million in revenue.

[843] Wow.

[844] And then 534 the next year in 1997.

[845] People like love to dunk on this now as like mania, you know, IPO mania, unprofitable, blah, blah, blah, tech bubble.

[846] Like it was for real.

[847] But the stock, once Microsoft strategy, bundling strategy became obvious here in December 95, I think which is when they announced that it was going to be bundled into all copies of Windows 95 going forward.

[848] The stock had peaked then at $171 a share, which is, you know, even hugely up from where the IPO was, but it never got above that.

[849] It was just kind of straight downhill from there, unfortunately.

[850] And then in 1999, finally, famously Netscape sells itself to AOL for $4 .2 billion, but it's an all -stock deal with AOL.

[851] Yikes.

[852] And that's pre -Time Warner merger.

[853] So, who knows, by the time shareholders actually ultimately got liquid on that, what they were able to get out.

[854] So, Mark and Dreson, as part of the sale, becomes CTO of AOL.

[855] I love this.

[856] You can imagine how well that's going to work out.

[857] The funny thing is, like, he's not actually responsible for any day -to -day operations.

[858] He's kind of, like, chief futurist at AOL.

[859] I think his role is forward -looking technologies or something like that.

[860] he only lasts until like September of 99 when they like right ahead of the time Warner deal he's like yeah I am I want no part of this and leaves before that yeah oh wow I didn't realize he didn't even stay a year no so I wonder if he forfeited some earn out element or maybe he was just like the stock is going to be worthless soon anyway probably I'm out wow so Ben though this is going to become very interesting actually this deal becomes huge for the next chapter and ultimately for Andreson Horowitz, the firm.

[861] So Ben becomes the VP of AOL's e -commerce division.

[862] And what he ends up doing is him and pretty much the whole old server team from Netscape.

[863] What he figures out that they ultimately are tasked with doing is that all of the brands that are selling, trying to sell on AOL within the AOL, Wild Garden, you know, this is Nike, this is LLB, and this is LAND's end, like we're talking about you to all these retailers and CPG companies, they want to sell, but they're not internet companies.

[864] They don't have like e -commerce apps and servers and all the infrastructure that they need to make this happen so AOL can help them, but they got to go stand up like servers and data centers for all of these customers.

[865] And that's what Ben's team ends up doing.

[866] And quickly, he realizes, like, there's actually an opportunity here.

[867] Like, AOL is going to do this for their partners selling on AOL, which, again, is not the internet, or at least is not the web.

[868] It's not the web, yeah, it's the internet, but not the web.

[869] The web is, you know, I know that this is where the whole market is and is going to be in the future.

[870] These companies, Nike, et cetera, they're going to need help doing this same thing for their web applications, why don't we go start a company where we can operate this infrastructure for all these companies that are not technology companies?

[871] And then they can just host their websites and their web applications on our infrastructure.

[872] It's kind of like a cloud, like a cloud of internet infrastructure that you can just deploy your applications to.

[873] You can dynamically spin up and spin down these like virtual machines, David.

[874] So not even like owning your own server, but like having virtualization across multiple servers that scale elastically as you need them?

[875] Yeah.

[876] I mean, this is kind of a big idea, right, Ben?

[877] Wow.

[878] In 99, that feels a little ahead of their time.

[879] Maybe a little ahead of their time.

[880] But they like the idea so much that they move back to Silicon Valley.

[881] They leave D .C. where AOL was based.

[882] Actually, I don't know if they ever moved there or if they stayed in Silicon Valley, but they leave AOL and they start the company.

[883] They call it.

[884] They really want to embrace this cloud concept that they're pioneering?

[885] They call it Loud Cloud.

[886] Oh yeah.

[887] I can't wait to get into this.

[888] I do want to close the loop on a couple of Netscape things, though, before we move into the Loud Cloud chapter.

[889] So I was wondering, first of all, why did AOL buy Netscape?

[890] Like, if they're getting wrecked by Microsoft, why are they giving $4 .2 billion of their stock?

[891] Is it A, because they knew their stock was wildly overvalued, and let's say it's 10x overvalued, what's $400 million of actual value to go and pick this company up, which what we now know about the way that they were motivated to do the Time Warner deal to basically do a stock swap for a company whose stock they felt actually had real intrinsic value, it makes a lot of sense that they would wildly overpay for this sort of pseudo -defunct net -scape, even if all they got was the people and some technology behind it.

[892] So that's one explanation.

[893] The other would be basically to get a bargaining chip against Microsoft in case it became relevant for them to try and be less dependent on IE, to have a browser of their own that they could bundle in and distribute.

[894] There are other people who believe that AOL was interested in NetCenter, which is basically Netscape's web properties, which drew a lot of the traffic.

[895] It's sort of the MSN play that Microsoft had to be the destination website.

[896] So that's sort of the reasons why AOL could have been willing to part with $4 .2 billion of their stock to do this.

[897] Now, if you trace it all the way through to today, I really have been trying to figure out, well, what happened to, like, the Netscape brand and what happened to the Netscape IP?

[898] Well, the brand is an easy one to trace.

[899] That stayed with AOL until they ultimately were bought by Verizon.

[900] So the big red checkmark Verizon owns the Netscape brand today.

[901] But somewhere along the line, the brand actually got separated from the technology, the bundle of all the intellectual property and everything that Netscape was.

[902] which did need a new name, because they couldn't use the Netscape name anymore, because that brand was owned by Verizon.

[903] So that got renamed New Aurora Corporation, which AOL sold to Microsoft, who then in turn sold them again to wait for it, David, to Facebook.

[904] Oh, yes.

[905] Oh, my gosh.

[906] I'm so glad you found this.

[907] So this is from Jamie Zewinsky, or JWZ, who was an early employee pseudo founder.

[908] I think many credited him with being a founder of Netscape.

[909] He has this great blog and crazy sort of bar and concert venue in San Francisco called the DNA Lounge.

[910] He writes, The former Netscape company is currently a non -operating subsidiary of Facebook, still known as the new Aurora Corporation.

[911] The Netscape brand remained with AOL.

[912] Wow.

[913] How crazy is that?

[914] That's so crazy.

[915] I'm so glad you paused us because there's another thing we got to talk about coming out of the Netscape.

[916] Mozilla.

[917] Mozilla, of course.

[918] Yeah.

[919] So I didn't realize this actually happened before the AOL acquisition.

[920] They open sourced in 1998, I believe.

[921] But yeah, you're right.

[922] Before AOL, they open sourced all the browser code.

[923] Ironically, like, it's so interesting that Mozilla, the code name of the Mosaic Killer, ended up becoming the name of the foundation who ended up stewarding the open source code project, which, of course, then created Firefox.

[924] So out of the ashes of the, sort of duplicated without ever looking at the code Netscape, which kind of came from Mosaic.

[925] You then have Mozilla.

[926] And they did name the browser Mozilla for a while and had a separate browser called Mozilla, which was compiled from similar source code.

[927] And then Firefox, which was a whole new thing, right?

[928] There was some code in common with the original Netscape browser.

[929] It was very different.

[930] Firefox, when it first launched, I remember this, had the search bar in the browser, which was a concept they borrowed from Opera, but that was not in Netscape.

[931] Correct.

[932] It was in the top right.

[933] It wasn't the Omnibar that Chrome pioneered.

[934] It was sort of that separate search window.

[935] But it makes sense to me now, knowing all this lineage, why user agents have always been such a mess, this is going to date me. But if you've ever written raw HTML code and needed to do a user agent check, because you need to figure out if it's IE and you need to account for some three stupid pixel offset that they have that shouldn't actually be in there, but the rendering engine sucks because it's licensed from whatever old mosaic thing.

[936] That's actually, that's an unfair criticism.

[937] The real reason why it sucks is because they had such dominant market share that Microsoft could do whatever they want to deviate from spec and just say, eh, everybody's using our stuff anyway, so who cares what the World Wide Web Consortium says it should do?

[938] The truth is what we say it is.

[939] So anyway, if you ever do these user agent checks on the strings, it has like every browser name under the sun listed.

[940] So if you're doing like a string search, you're looking and you're like, you're looking and Like, what is this Mozilla slash Firefox slash Netscape slash blah, blah, blah?

[941] And it's because it all freaking comes from the same original branch.

[942] And all these different browsers are competing against each other.

[943] But there's kind of only two major lineages.

[944] There is the Mosaic lineage.

[945] And then all those engineers left.

[946] And without looking back at the old code, they wrote new code called Mozilla.

[947] And everything is basically either from Mosaic or Mozilla.

[948] And there's been different stuff over the years with WebKit and with whatever.

[949] other, I don't know where opera is derived from, but it's amazing how much of the browser market share over time really just comes from those two.

[950] Yeah.

[951] And it all still funnels through to today, which is crazy.

[952] Yep.

[953] It's so fun to actually have the right excuse now to be able to tell this whole story on Acquired.

[954] Right.

[955] Like it always felt like Netscape was kind of, there was a point in the Acquired's life where we would have done a whole episode on Netscape, but now it's like, God, I don't know that we can do that.

[956] And this is the perfect vehicle.

[957] I'm so glad to do it.

[958] Totally.

[959] Well, thank God from the lessons of Netscape and LoudCloud, which we're about to go into, became the ashes upon which the phoenix of a landscape -changing venture firm would come from.

[960] So we have the excuse.

[961] The Firefox of venture firms, shall we say?

[962] I mean, honestly, though, after the financial crash, when all the funding, like, it's not crazy to call it a Firefox or a Phoenix or whatever in founding a venture firm in 2000.

[963] and deploying capital the way they did.

[964] I'm jumping ahead.

[965] I know we'll get there.

[966] Absolutely.

[967] If you want to be really nerdy, you could call it the Thunderbird of VentureFrives.

[968] I used to use Thunderbird.

[969] I thought it was great.

[970] Yeah.

[971] Okay.

[972] So back to the story, Ben and his server team, they've realized this market opportunity.

[973] They've got this idea for a cloud computing cloud infrastructure.

[974] So he hooks up with two of his core team, Tim Howes and Sickree.

[975] They leave AOL.

[976] They go back to Silicon Valley.

[977] They're like, we're doing this.

[978] And it's still 1999.

[979] The bubble is still quite inflated at this point.

[980] And there is a lot of hype.

[981] And everyone's drunk.

[982] NetScape IPOed with great revenues and great growth, but now everyone's just drunk.

[983] Yes.

[984] So immediately they want to get Mark involved, of course.

[985] Like, who wouldn't want Mark and Jason involved in something like this?

[986] Mark totally gets it.

[987] He's like, Yep, this is a big idea.

[988] And actually, this is amazing.

[989] At the press briefing for the launch of LoudCloud, Mark would be there.

[990] And he would use, in trying to describe what this concept is, this cloud infrastructure concept, he would use the very same electricity metaphor that Bezos would then use eight years later describing AWS at the YC event.

[991] And what is the metaphor?

[992] So Bezos is an analogy that he used.

[993] was German beer distilleries used to produce their own electricity to mash the hops and everything and do what they were doing in the distilleries.

[994] And then they hooked up to the grid and just used electricity from the grid.

[995] And the innovation they realized is the electricity doesn't make the beer taste any better.

[996] There's no reason why they should create the electricity.

[997] And the whole idea of cloud infrastructure is the same thing.

[998] Renting your infrastructure from LoudCloud or Amazon or Azure or Google doesn't make your beer taste any better if you're an application provider.

[999] So Mark was the first one to use this.

[1000] So of course they want to get him involved.

[1001] But remember, Mark has learned at this point that he shouldn't run companies, although I guess he made that mistake with Ning later.

[1002] Mark says, I don't want to be an active co -founder, but I'll be chairman and I'll invest $6 million.

[1003] So I guess he was able to get enough money out of the AOL stock.

[1004] that he can invest $6 million.

[1005] So they go out to raise, Ben and team go out to raise venture money on top of this.

[1006] And they meet Andy Rackcliffe at Benchmark Capital, who they just love.

[1007] And Ben in A Hard Thing About Hard Things is a quote that he has describing Andy.

[1008] He says, if I had to describe Andy with one word, it would be gentleman.

[1009] And the relationship between him and Ben and Mark is, deep and continues to be deep to this day.

[1010] And Andy, of course, was benchmarks, you know, like infrastructure guy.

[1011] He started as a telecom investor.

[1012] So this is completely in his wheelhouse.

[1013] And he gets it.

[1014] So now this is where things get a little murky.

[1015] And no doubt this scene is one of the major seeds of Andres and Horowitz and the firm's whole philosophy.

[1016] And it would get sewn right here.

[1017] So I don't know exactly how it went down.

[1018] I don't think anybody's ever given the whole story, but this is as best as we can reconstruct it.

[1019] So we'll have to just have the protagonists on for a kumbaya one day.

[1020] Yep.

[1021] So obviously this was a super hot deal.

[1022] And yeah, Netscape had failed, quote unquote, but like you said, Ben, everybody was drunk at this point in time.

[1023] Somehow, I believe that Andy and Benchmark agree to do the deal without a full partner meeting.

[1024] And they agree to do it for a very high price, even at the time, which was a $45 million pre -money valuation, and Benchmark is going to invest $15 million in the company.

[1025] It's a big check for them.

[1026] Are they even doing their $400 million funds at this point?

[1027] Probably around that.

[1028] No. And I think this was before their billion.

[1029] fund, which famously they said they'll never repeat.

[1030] I think their funds were like maybe $250, $300 million at this point in time.

[1031] So big check, big valuation, brand new company, and no partner meeting, at least as far as I can tell.

[1032] So the deal's going down.

[1033] And the benchmark partnership, though, doesn't like that Mark is investing so much personally.

[1034] He's not actively involved co -founder.

[1035] he's investing six million bucks.

[1036] And here's the thing.

[1037] The price of the deal is based on a pre -money valuation.

[1038] Because venture deals, you know, until the last five, six, seven years, they all used to be priced on a pre -money valuation.

[1039] Now, the problem with a pre -money valuation...

[1040] Nobody knows what they actually own until you specify exactly how much is being raised.

[1041] Exactly.

[1042] So if more money gets raised, then you're going to own less of the...

[1043] company because the post money valuation goes up based on the amount of money raised.

[1044] So benchmark is writing this huge check.

[1045] They want to get 15 divided by 60.

[1046] They'd want to be the only money into the round.

[1047] Well, then they should have specified the post, David.

[1048] They should have specified the post, but people didn't do that back in the day.

[1049] So here's Mark coming in now.

[1050] He's pumping the valuation up by six million bucks and he's coming in.

[1051] So they try to cut Mark out of the round.

[1052] Oh.

[1053] Yeah.

[1054] So that was wrong move number one.

[1055] You don't really want to crossmark Andresen.

[1056] for benchmark if Andresen Horowitz didn't exist.

[1057] Not only if Andresen Horowitz didn't exist, but if Ben and Mark were like part of the benchmark family.

[1058] Totally.

[1059] That's an even better point.

[1060] Oh, my gosh.

[1061] Oh, my gosh.

[1062] Yeah, creating a little bit of a friction point here, assuming that that is any factor contributing to going on to create their own venture firm.

[1063] Well, that wasn't the only part.

[1064] So it gets worse.

[1065] So supposedly, after the deal.

[1066] is done and closed.

[1067] Mark, of course, is like, F you, I'm putting my $6 million in and you think you're going to come between me and Ben?

[1068] Like, we've been through this.

[1069] It'd be like, you know, it'd be like benchmark trying to come between you and me. Like, that's not going to happen.

[1070] Right.

[1071] So Mark invests the $6 million.

[1072] It's a $66 million post money valuation benchmark only gets like 22 .7 % ownership.

[1073] After the deal's done, remember, and I think this is why I think they didn't present the whole partnership before the deal was done because Ben and Mark and the whole leadership team of LoudCloud of this new company, they come in to meet the full benchmark partnership.

[1074] I think they only really knew Andy at this point.

[1075] So they come in, you know, it's supposed to be like a slap on the back, get to know you, like, you know, oh, this is great.

[1076] You're our VC firm.

[1077] Hey, that was weird with Mark, but like, we'll get over it.

[1078] Right.

[1079] So supposedly in this meeting.

[1080] David Byrne, who was then one of the GPs at Benchmark, and he had been a very successful executive recruiter before joining Benchmark as a GP.

[1081] Ben is presenting, and the whole management team's there.

[1082] And he says to Ben in front of everyone, hey, just stop.

[1083] When are you going to get a real CEO?

[1084] And Ben is like, what do you mean?

[1085] Like, he knows what David means here.

[1086] But he's trying to like, hey, like, this is a friendly meeting.

[1087] Like, let's not break out the knives yet.

[1088] And in front of the management team.

[1089] In front of the management team and Mark.

[1090] Like, that just pulls out the rug underneath his ability to lead these people to do that.

[1091] Yeah.

[1092] So apparently then, Byrne just, like, doubles down again and keeps attacking Ben and is like, you're not qualified to lead this company.

[1093] Like, how are you going to take this thing public?

[1094] You know, blah, blah, blah, blah, all of this stuff.

[1095] Which also is ridiculous because, of course, Ben is qualified to lead this.

[1096] company.

[1097] Even if you weren't, why on earth would you say this?

[1098] He was doubling revenue quarter over quarter at Netscape in his division.

[1099] I mean, and on top of all of that, Mark Andresen threw six million in.

[1100] So, I mean, he kind of needs you, but doesn't really need you.

[1101] And you've already committed.

[1102] Like, just do the value -creating activity of giving the leadership team the confidence in their leader at this point.

[1103] Totally.

[1104] So this creates, as you can imagine, an intense dislike between Ben and Mark and all of the benchmark partnership except for Andy because, you know, I guess nobody else really like stepped up to defend them here.

[1105] So we will later in part two get to the amazing profile that Tad Friend did in the New Yorker of Mark Andreessen in 2015.

[1106] But 2015, so 16 years later, there are these great quotes in there.

[1107] Ben says about the whole philosophy of Andresen.

[1108] He says, we were always the anti -benchmark.

[1109] Our design was not to do what they did.

[1110] And he's talking about this.

[1111] And then Mark says about Bill Gurley, of course, the most visible benchmark partner at the time, I can't stand him.

[1112] If you've seen Seinfeld, Bill Gurley is my Newman.

[1113] Jerry's Bette Noir.

[1114] Wow.

[1115] This is something that you definitely have to know about Andreessen Horowitz, especially in their early days about when they were starting, they were loud about being different.

[1116] Like, they wanted to position themselves as in every way we possibly can, we are the opposite of your classic venture capital firm personified by benchmark.

[1117] Which is totally, we're going to get into this in part two, but is so great because that is the exact same playbook that benchmark took against Kleiner Perkins when they started.

[1118] It's fascinating.

[1119] It's such a good strategy.

[1120] And who was the architect of that?

[1121] strategy, Andy Rackleff.

[1122] And who is the one benchmark partner that they love, Andy Rackcliffe.

[1123] And Andy would then retire from Benchmark not long after.

[1124] And the ties here end up actually running deep.

[1125] Like Eric Fisheria, who was a, you know, loud, proud exec, would go on to become fantastic partner at Benchmark.

[1126] Well, here's the funny thing about all of it.

[1127] Like, this is so great.

[1128] It's such drama.

[1129] And I really do think that this experience was a big part of what planted the seed for Ben and Mark to start Andresen Horowitz.

[1130] But all of this drama is just great for everybody.

[1131] It's great for Andreessen.

[1132] It's great for benchmark.

[1133] No press is bad press.

[1134] And the more that people are talking about and writing about this as Andreessen Horowitz is getting off the ground, the more it just increases the stature of both firms.

[1135] Well, in the 2015 piece you're talking about is literally called Tomorrow's Advance Man about Mark Andreessen.

[1136] That's the one you're mentioning, right?

[1137] Yep.

[1138] That is the puff piece of puff pieces.

[1139] Like, it's a great analytical piece.

[1140] But it's like, hey, you're the best futurist in the world.

[1141] Say whatever you want.

[1142] And so having a platform to be able to kind of do any of this stuff, Mark takes full advantage.

[1143] Oh, totally.

[1144] It's so smart.

[1145] All of this drama around the funding aside, nonetheless, people are still jazzed about LoudCloud.

[1146] Two months after the Series A, they raise another $45 million.

[1147] $1