Chris Dixon: From Quant Trading to Building a16z Crypto

And at the time I joined, there were only a couple of investing partners and there's only one fund now we have sort of this complex of funds and I was a, you know, reasonably prominent sort of angel investor blogger. They were probably, you know, looking at people that had some had been doing it for some period of time. I mean, I don't know exactly why, but I think in the end we just sort of hit it off.

0:00

Chris Dixon grew up in Ohio, got a computer in the 1980s and taught himself C and assembly language by making video games. After college, he wrote Monte Carlo simulations at an options market making firm in New York, then left to co found Site Advisor, an Internet security company he sold to McAfee in 2006. Two years later, he started an AI company called Hunch, built on neural networks that didn't yet have the GPU power to work well. It sold to eBay in 2011. In 2013, he joined Andreessen Horowitz, where he led a $75 million round for Oculus, made the firm's early investment in Coinbase, and eventually built a16z's dedicated crypto practice, now in its fourth fund. In this conversation, Dixon traces the full arc from quant finance to seed investing to Washington policy work on stablecoin legislation, and explains the framework behind his most unconventional bets. This episode previously aired on the Internet history podcast. Brian McCullough speaks with Chris Dixon, general partner at A16Z.

0:23

Chris Dixon, thanks for coming on to talk to us today.

1:35

Thanks for having me, Brian.

1:39

Yeah, you and I have spoken many, many times and I feel like we have gotten some of your beginning before. But let me go back to the very, very beginning and ask becoming a programmer, like, what, what was, what were your first encounters with computers and how did you know in terms of programming and computers that this is what I want to do?

1:40

Yeah, I mean I was, I think this is a fairly common thing in tech, but I just, as a kid, like got a computer, this is back in the 1980s and like just, you know, wanted to make video games and enjoyed programming and it was, you know, it was kind of a cultish, I don't know, niche activity back then and, and just, you know, really enjoyed it. Like I, I think kind of, you know, we'd say today got into a flow state and just sort of designing stuff and sort of figuring it all out and. Yeah, and it just really, and I, so I, you know, I was doing C programming and assembly language programming and making graphics stuff and video games and was really into it and then I, I was in, in college in the early 90s and at the time I kind of felt like computing had gotten too corporate and like it was sort of before the Internet had really taken off. And for those who remember the computer industry kind of moved from like a hobbyist phase to more of like Microsoft Office, Excel, I don't know, I just sort of. So I actually studied philosophy in school and got into like kind of, you know, cognitive, like a little bit the intersection, maybe a little bit what we call today AI did a little bit of AI, but more, it was sort of pre AI, but more philosophy of mind, cognitive science, logic and just, I don't know, I didn't really know what I was doing and I thought it was fun and didn't have a very sharp career idea. But then I was in New York and New York, the, you know, if you know how to program and you're in New York and it's expensive, you end up. I ended up doing various programming jobs which eventually led me into for two years post school finance at a hedge fund, doing programming just kind of to pay my, my student loans and things. And, but then, then the Internet really started taking off and I discovered that and got into that and fast forward, you know, I was, I was in New York and then in Boston for a while and ended up in the early 2000s starting a Internet security company.

2:04

All right, here you've, you've, you've jumped way ahead for me.

4:07

So I, I'm happy to go into more detail.

4:12

Yeah, yeah, yeah. So I, I researched you for this and I learned things that I didn't know about you. And so let me come back to the. You were essentially when you're saying after school you were a programmer, you were like a quant, you were, you were programming for quantitative finance and like trading systems and stuff like that.

4:16

Yeah, it was a company called Arbitrade and it did options market making. I, I had no particular like interest. I mean I wasn't like looking to work in finance I guess, but I was just sort of in New York, like I mentioned programming and if you're a New York program and I was just trying to honestly just pay bills and pay down debt and it was the best paying thing you could do, or at least that I found. Yeah. So it was a company that like today we call like quant trading, you know, high speed trading. I did, I wrote programs. I wasn't really quant per se, but I wrote programs that were kind of finance oriented. So for those who know this stuff like Monte Carlo simulations, like these sort of big simulations you run. And I would do basically kind of high performance algorithms for those. So try to make them really optimized so they would execute quickly. So we had a, I think we were about 20 people in our office. The company was bigger, it was like a couple hundred. But in the R and D group is about 20. And I was kind of the lead of, I eventually became the lead of sort of one part of that group which is sort of the finance group. So I kind of knew and I would say just generally about myself as I kind of like know a little bit about a bunch of things as opposed to a lot about one thing. So I knew kind of enough finance to get by and enough and I, and I was actually a pretty good program, decent programmer and so I just kind of knew a bunch of stuff. Yeah. And it was interesting. I mean, you know, I never had a real job. I mean I had part time computer jobs before that. And so one, it was just sort of interesting. I got a glimpse into Wall street, how that world worked, how markets worked. And it was a, it was a fun job. It was intellectually challenging. But I also realized that Wall street wasn't for me because it was just kind of, I don't know, like, I think it was too isolated. You're sort of sitting in an R D group in front of a screen and I don't know, just all you're trying to do is predict numbers. And I don't know, it just didn't seem, it didn't seem like the. Once I saw the other world, the sort of entrepreneurship world, which seemed kind of to me more exciting and dynamic and more people oriented, that just seemed much more appealing to me.

4:38

I think obviously we're going to come to crypto later on in this conversation, but do you think that maybe that time there being Wall street adjacent, being a programmer sort of was one of the things that helped you sort of be primed for when crypto comes around?

6:35

Yeah, maybe. Yeah, to some extent. Although it's funny because like if I wrote a book about crypto called Read, Write Own and if you read the book, I actually I probably have one of the least finance oriented takes of sort of blockchains and crypto. I'm sort of look at them as a new way to architect Internet services generally. So in some ways I'm, I'm not saying I'm not like there's no financial aspect to it, but it's certainly like not my main focus. But, but I do think thinking about kind of finance and money and networks and just all the kind of intersection of the sort of how the information economy works, which has kind of been my theme throughout my career. And you know, later on working on the Internet certainly all had their sort of common threads through all that. And in some ways some of the things going on in finance, pre Internet or early Internet I think did kind of predict some of the things that the Internet, you know, some of the kind of key themes of the Internet later on.

6:56

Number two that I didn't know about you, you were at Bessemer Venture Partners before you started to be a founder. So you were in VC before being a founder?

7:52

A little bit, Yeah, I was there for about, I think about a year and a half and I was, they, they were, I was very lucky to get that job. The industry was very different back then. This was 2003 and four for those. I mean we think of the, I think today people think of VC as a, you know, pretty sizable industry. You go to your average person and maybe they've heard of it. Back then. I don't think anyone had heard of venture capital. I had certainly never heard of it. And there were really probably only like 10 to 10 to 20 maybe kind of operating firms in that era. And so I, you know, I was, yeah, I was very lucky to get that. And it was in the New York office. I wanted to be in New York and was lucky enough to work on some really interesting things including the. We did the series AF Skype when I was there and I was able to kind of co work on that with some other folks. And so we were, it was the beginning of kind of the Internet revival after the Internet crash. So it was an exciting time and I got, you know, venture capital. For someone like me who had no significant business experience outside of this quant job, it was kind of a panoramic view of business. You get to kind of meet all these interesting entrepreneurs. So it was a great lesson. I realized partway through that I didn't have a great kind of promotion path there and so. And really had been thinking about starting a company and they were nice enough to kind of let me transition. I would say for the last six months I was there to being what people in venture call an eir, an entrepreneur resident. So sort of like working on the startup idea and they actually ended up along with another firm funding us. So it was a great experience and a real, you know, today, today we hire kind of junior people to, to work in a similar role at interest and horowitz And I always tell them, like, it's a great, you know, two to three year gig. You. You get this panoramic view of things and really get sort of a deep or a quick education and kind of startups, you know, even if you end up going off and doing something else, it's a great. It's a great learning experience. And that was true for me.

8:03

As you say you wanted to start a company and you're doing it, incubating it at Bessemer. So tell us what, tell us the inception of Site Advisor and Also, you know, 20 years on what Site Advisor was and did.

10:04

Yeah, it's actually. If you. If you go, it's still there, seemingly still around. It's actually apparently a big business unit for McAfee, were eventually fired by McAfee. And in fact, there's sort of a category now which is kind of nice to see. There's like competitors and things, but it's not. Security is not front and center for most people. So you may not know that, but. Yeah. So at the time, this was 2003, I was sort of working on it. For those who were around back then, it was really kind of, I think, of one of the worst times on the Internet for security and specifically two big issues, spyware and phishing. So phishing with the p. Phishing had just really started around, I'd say, early 2000s. This really. People started getting hit with these things. Fake email, pretending to be from someone else. And then spyware, which is really mostly gone now, was people would be sort of download a screensaver app or other kinds of things and have all these pop up, kind of come up. And what was interesting about these, both of these categories and kind of the insight we had was that in the past, security, security kind of issues had been things that were kind of hacking into people's computers through technical vulnerabilities. So like a worm or a virus takes advantage of some, you know, bug in the operating system or something like this. Whereas in the case of spyware and phishing, all the technology was working as designed. The problem was it was social engineering. It was a humans being tricked. And so the insight was that all the products out there at the time were kind of defending against technical hacks when the threat vector, as we say in security, had changed to social engineering. And the insight was that the products weren't built for that. And so the idea was very simple. It was a kind of a toolbar or, you know, or just sort of downloaded software that would just simply warn you Put up a big red box that said, this is a phishing email, this is a phishing website, this is a spyware website. And be kind of your. We always described as like your trusted friend who some people would have sort of a smart friend. They'd ask, should I click on this, should I download this? And this software would do that for you. And so that was the idea. And to build that though was kind of tricky. I had two co founders who were much more technical than I was. They were MIT computer science folks and they recruited a team of people and we built essentially like a. Today, you know, it's like a web crawler where you kind of crawl the web and then instead of indexing the websites the way search engines do, we would download the software and run all various kinds of tests and analyze the websites and do tests and then create this classification system that would say this is a good site, this is a bad site, and then feed that back into the product. So we spent probably a year building that database. It was, it was an interesting technical problem. And then released the product in 2004, maybe early five, I can't remember now. No, sorry, 2005. 2005. And then, and then again, different world. I mean the very few kind of new consumer Internet products back then, venture backed, that were like we were. There just simply weren't that many being funded. And so unlike today, when you maybe launch a product, an Internet product, you know, it's drowned out by all the noise. Back then it was like, oh wow, a new Internet product. Like people paid attention because there's weren't that many. And, and we very quickly got interest from the big security companies. McAfee and Symantec at the time were the big ones. And they came and visited us and then, and then eventually offered us to acquire us. And the way that business works is it was, it's a very hard to break through because they, at the time, all the security products were sold through partnerships with PC makers like Dell. Like you would buy a Dell computer and then they would bundle the security product or you'd get a Comcast subscription and they would bundle the security product. And, and it was very hard for us to kind of penetrate those channels. And so it became clear that the only way to really make this work was to eventually be part of one of these companies. And then through some process. And there was another thing which is back then it was very common. It was much, it was frankly just much harder to raise money. There just weren't as many VCs and I saw, you know, that I knew that was going to be a challenge to raise more money. There was a different ethos in the startup, in the VC world where you would often replace the founders like me with like professional CEOs. So I was also kind of, you know, not that I had great VCs and not that they were saying this, but I just had, you know, my mind was like, am I going to even make it? And will the company make it? And then we had these sort of nice offers. And so we eventually decided to sell that company in 2006 to McAfee.

10:20

Any lessons that you learned there in terms of like, for founders listening, like you're describing it was, it seemed obvious to you to sell, but about like negotiation to do an M and a takeout or integration after you're acquired that you learn there that might be useful.

14:57

I mean, I was naive on the sale. I was naive. I didn't really know what I was doing, but I had the benefit of having to acquire two offers. And so I played a kind of simple game theoretic thing where I would take sort of, I had an offer and I would go back to the other party and say, here's my offer. And actually, funny, I thought I started, let's call it X some number offer and then eventually got it to almost double, I think, by the end of it. And I thought I'd done a great job. And then I had dinner with the McAfee CEO like after the closing, and he told me he sort of pre authorized with the board twice what we sold for. So that was sort of the, you know, the. I had not even done a remotely good job apparently on, on optimizing that. But, but it was fine. It was a good outcome. And, and then at McAfee, I mean, look, so one challenge, I think the CEO that acquired us, I think he left a month after we were acquired. And I think by the end of the 18 months, I say 18 months, I think by the end where they had, I think we were on the third CEO and the management team had turned. And this is just not an uncommon thing at some of these big companies. So first of all, like, all of our expectations were kind of thrown in disarray. I think, you know, we went in with a really kind of overly optimistic attitude that we were going to like, I don't know, make, you know, make everything work as in through integrations and transform the culture of McAfee and all these other things. And, you know, kind of went up to the kind of encountered Corporate inertia and realized that was going to be very challenging. I finally, you know, kind of realized that the key thing was to kind of keep the product alive, to integrate it successfully and just hope that it would sort of, you know, that we could deliver value to them and they would be happy with it. And look back, you know, I kind of, I cared about them looking back on it as a good acquisition. That's why I'm happy to see it's still around. And like, you know, they do, I think they did feel like that. But in the end it was clear that, you know, the kind of stuff that we wanted to do, me and my co founders and just the kind of, you know, kind of being innovative and staying on the cutting edge just wasn't going to be something we could probably do there long term. So we stayed for our kind of vesting period, our agreement of 18 months, but then left and, and, and started immediately kind of working on a new

15:17

startup which is Hunch, so take me to Hunch and how, how that came around.

17:34

Yeah, so we were interested and this was, I did I sort of joke now that I was doing AI a little too early, Way too early. It was an AI company, machine learning company. It started in 2008 and I, I had been to, so I was involved like in this advisory group to darpa, the defense, this academic group that would get to a non classified academic group that would get together and talk about futuristic computer science ideas. And I had been to a few of them and everyone was talking about machine learning. And I, and I started getting, seeing these really cool demos and getting really excited. And so me and one of my co founders from site advisor, Tom Pinkney, who's MIT grad and more technical than me, we said hey, let's go do something with, let's figure out something cool to do with machine learning. And we started so we, we just sort of, and we just honestly were just eager to go kind of do something after McAfee. So we like rented an office and, and recruited two of our smartest engineers and, and just started playing around with it and then eventually, you know, and in retrospect, kind of, to be honest, I think with the first company we started with a problem to solve and then figured out the technology. And then with the second company, I think kind of a mistake we made was to start more with a solution and try to find the problem, which probably is not a great way to do things. And I think also in retrospect the technology just wasn't mature enough at the time machine learning today, what we call neural networks. AI is a form of machine learning, but there are different methods back then to do machine learning. And the reality is neural networks, which we tried, just didn't work that well. Well, because you didn't have the GPU power and things. And so they were just simply really out of favor because just then, you know, you just run the test and just didn't work as well. So we use other methods and just generally like, it was cool and it worked, but it wasn't magical the way it was today. And so we iterated with a bunch of products. We ended up with kind of a recommendation product technology that's sort of similar to what you see on Amazon. Like, if you like this, then you like this. And eventually 2011 we're acquired by ebay to do exactly that, to build that product for them. Um, but, and if you asked me at the time, I would have said we never, you know, we never really figured out the right product. In retrospect, that's not the case. I think we were just too early. Like, I think it's just that we, we were playing around with AI, you know, for those who follow the history of it. Like, it was 2013, so two years later when you had the Google Cat video demo and sort of deep learning became kind of burst onto the scene and then you started to see the image Net results and it, you know, it was a sort of the steady march over a decade until the, you know, the big bang of Chad GPT. So, you know, in retrospect, it was 15 years too early or 10, you know, 13 or whatever it is. And, and, and specifically, I think what happened during that time, right, obviously is GPU kind of computing power got so much better. And so, you know, it was a great experience. We had a good outcome. You know, I think, you know, we, I think we built some cool stuff, but it didn't kind of get to the scale we wanted. And I think that's my diagnosis now is just a little ahead of its time.

17:40

Yeah, I was going to say, and maybe this is a free startup idea for somebody out there, although probably five people are doing this. But with Modern ML, do you think that what your original vision was would be possible or what would it look like today if you were doing it with Modern?

20:50

You know, it's hard. It's interesting. I mean, I mean, for sure, like, I mean, you can use ChatGPT this way or any of these, you know, generalized foundation models, and they're pretty incredible. Like, you can Go. And a lot of what we're doing is you paste in your 10 favorite movies and it tells you what books to buy and what movies to buy and all that kind of stuff. And I think these models today do a pretty phenomenal job at it. And I guess one of the challenges, actually I think I don't do sort of pure AI investing today, but I imagine one of the challenges is it's kind of hard to build a product like this because the generalized foundation models are just so good in some ways. They sort of subsume all of the specific applications. Right. So I think very much it's, it's possible. But today I think the challenge is how do you make a product that's better than Quad, ChatGPT, Gemini and so forth, because these generalized models are just so powerful and can do so many different things. But

21:05

third thing I didn't know about you, that you in parallel to all this are helping to start Founder Collective. But tell me that story because again I, you're, you're still not officially a VC and I think you're starting to angel invest around this time. But how did you do Founder Collective?

22:03

Yeah, so I, I'll just, maybe I'll go back a little bit. So I was one of my angel investors, Ron Conway, legendary Silicon Valley VC and amazing person, a good friend and he was incredibly helpful to me. And then when I sold my first company I thought it was what he was doing was interesting, not as a full time job but as like kind of a side thing as a way to kind of. I was just really excited about startups and really excited about and wanted to work with my friends and they were starting companies and so I started angel investing. So writing a personal check into friends company. I literally, I think wrote my first one like a week after I sold. I didn't have any money before that, but then I sold Side Advisor, I did and so I started doing angel investing and I had basically was doing that for a couple of years and had this, had for a long time wanted to really kind of more aggressively. Okay, a couple things. Like one, it was obvious to entrepreneurs at the time that kind of there was a mismatch between what entrepreneurs were doing in the 2000s, which is building a lot of my friends at least and I were building consumer Internet startups, building on top of cloud services like AWS and being able to kind of get started and going at like 500k or a million dollars like to build a product as opposed to the venture market. Like when I was raising money, everyone was saying, we just write $10 million checks, right? So you had this venture world that was sort of built for like a different model. Like the 90s was much more capex intensive on the Internet. And then enterprise companies typically need more money, but you had this rise of consumer startups built on outsourc, of cloud hosting, and they just need a lot less money. And so the insight was, shouldn't there be firms kind of set up for that? And I had two friends, Eric Paley and Dave Frankel, who had both been entrepreneurs and both sold their companies and we were angel investing together. And then they like, at one point Eric was getting like job offers to work at a VC firm. And we were all sitting around saying, hey, why are you going to work at a VC firm? We've been doing this together. Why don't we start something to do it together? And so then we, so we started this to. The three of us started Founder Collective, which is a, you know, it's a, it's a great firm. It's still going. I left after the first fund, but, you know, I'm still good friends with all the folks and they've done a great job. But so we started that and then I, you know, and then, and then we were like, well, do we want to all do it full time? And I was like, look, I really want to do a second startup, so I'll do it part time, working my startup full time and kind of help out. And. But Dave and Eric went and did it full time. So we started that, we raised money in 2008, I want to say, I think, and I think we did the launch announcement in 2009 and invested that first fund from 2009-12, roughly, I think, and in retrospect, that was a really good time to do that. And that's because you had the confluence of two things. You had the financial crisis meant that a lot of VC firms kind of stopped investing and very few funds were formed. And so you just had not many people doing this. So sort of a lack of supply of kind of that type of venture capital. And then on the tech side, you had the iPhone and the rise of mobile phones, right? So the iPhone was, I think, 2007, the App Store, 2008, and kind of the golden age. If you look at like Uber, Snapchat, a bunch of those apps were like 2009 through 11 or something. And so it turned out that was just a really good time to be doing what we were doing. I think we did a pretty good job, but I Think a lot of it, honestly, in retrospect, was just timing. And so we, you know, in that first fund, we had a whole bunch of like kind of really uber venmo BuzzFeed. Yeah, BuzzFeed Trade Desk. My partner Eric did that, which is now a big public company. So it was just a great, you know, fund. It was great experience. But yeah, and then I fast forward ended up joining Andreessen Horowitz and doing kind of bigger scale vc and they, they kept, you know, growing, growing funnel, collected.

22:20

Hey, everybody, this is Brian Cutting in here. Real quick. If you like the deep dives into tech history that I do on this show, you should know about my day jobs. First of all, I'm the host of the Tech Brew Ride Home podcast, part of the Morning Brew Family. Every day in 15 minutes on that show, I tell you what happened that day in the world of tech for almost a decade. It's like I'm telling you the tech history that is happening in real time. I'd love you to check it out because that show allows me to do this show search Tech Brew, Ride Home and your podcast app of choice. But also I have a rolling fund, the Ride Home Fund. We invest in early stage startups, have made dozens and dozens of investments over the years. So if you're an accredited investor, you can invest alongside me in the companies making the tech history of the future. You can find out more and sign up to invest alongside me atridehome fund.com. but before we get to Andreessen, let me ask you something I've never asked people before, but you just incepted this question because now, like precede and seed is like a whole category of funds and things like that. So angel investing from former operators, you know, people that have made their money from a former startup or something like that. Do you feel like that there are waves where it is a good time to invest in your friends, or is it always like the tide coming in? It's always gonna come in because you're always on the. You've just had success and you kind of have sort of the idea of what the next wave is gonna be. What I'm asking is for operators out there, people that have had success, is it always a good idea to angel invest with that first success or not?

26:06

You know, financially, I don't know if I want to advise anyone to. Angela? Yeah, yeah, it's very, very risky. And like, I'm not sure I think you have to do it because I mean, for me, like a lot of it was honestly Just because I enjoyed it and it was sort of a way like if you're a sports fan or I'm not a sports fan but if you're like, it's like a way of startup fan. So it's like a way to kind of be a fan and like support

28:00

or it's a social thing. It's your friends.

28:20

Yeah, social, you know, you may or may not be successful. It's honestly I think it's, it's a very risky thing. You should certainly consider it like your risk capital bucket, not your life savings. So I don't want to advise it but for me a lot of it and I, by the way, I still do that. Like if a friend's doing something, I want to support them in some way and it's, you know, whether it's a startup or a fund or something else. Right. It's the same mentality. And I do think that the kind of the, the, the one consistent thread in all of this is ultimately all of these things are talent businesses. And so if you know somebody well and have faith in them, you know, I've always believed that's a good thing to bet on and you know, so that as opposed to like having putting your finger in the wind and trying to predict, you know, exactly what's going to happen tech wise, my, my philosophy and this is I learned like I mentioned Ron Conway, I learned a lot of it from him. He's just very, very people focused. In fact, in fact, when I started Site Advisor I remember he liked me I think and then, but then he introduced me to a bunch of security experts and I believe they all gave negative feedback. And yet he's still invested. And I remember asking him and he's like, well I just had faith in you and I just didn't, you know, he just doesn't think about the trends that much which is kind of, you know, it's, there's some really, there's some wisdom in that because the tech, the trends shift so much in tech. It's very hard to know like the people are much more consistent. So I would say with respect to the angel investing, I mean it's become a much more like back then there were maybe there were some other funds started around founder, collective. It was like lowercase and baseline and the first round had been around a couple years. I think beta works, you know, obviously involved, involved in, in the, in the history of New York kind of anniversary thing. So there were others but it was relatively small. I mean it was, we all knew each other in fact, we were all often co investors in each other's funds and it was just a very small group. And yeah, like you said, it was kind of a social club. It was like an investing club or something. And we'd often like, work together and collaborate and it's just a different thing now. It's much, there's many, many more. It's much more institutional. That said, also, the tech world is much more successful and there's many more successful to companies. Maybe, maybe it all balances out. I don't know.

28:22

All right, let's. Let's take it to Andreessen Horowitz. First of all, they recruited you?

30:32

Yeah, I mean, I mean, I, they. I think someone at the firm reached out and I knew them. I had, in fact, I, without ever really having met them, I had actually blogged about them as like an exciting new or I had mentioned them and in the blog post about sort of exciting new.

30:38

Let me interrupt.

30:52

Yeah.

30:53

Why do you think they wanted to recruit you?

30:54

You know, good question. I think initially it was, you know, probably a scouting mission. And then I went out and spent a lot of time with like Mark and Ben. I think it was more of a probe or something. Hey, you want to have a conversation? And then I went out to. I was in New York, I went out to California and spent a bunch of time. And, you know, I think they were. So they started the firm 2009, and at the time I joined, there were only a couple of investing partners and there's only one fund now we have sort of this complex of funds. And you know, I think they were. I think they were probably looking. I was a, you know, reasonably prominent sort of angel investor blogger. They were probably, you know, looking at people that had. Some had been doing it for some period of time. I mean, I don't know exactly why, but I think in the end we just sort of hit it off. And specifically, I think my mind, I was like, angel investing is fun. Like, I saw, I sold my second company. I was like, look, I don't know if I can do another startup. It's just so taxing, personally stressful. And you know, in, in this business, it's sort of a player coach thing. You're either a player, like an entrepreneur or you move on to coaching. I was like, it's time to move on to coaching. And then I was sort of, okay, I could do kind of smaller time investing. But, you know, at the time you're in New York, you always feel like you're a little bit in the minor leagues, California is the big leagues. And then just the size of the checks. Like, I was like, okay, I think something that kind of bothered me, I was like, look, maybe I can make money doing this, but. But am I really having impact? Like, am I really. Does it really matter that I'm doing this? Am I just sort of tagging along? And so what was appealing to me was the idea that, that you could go and like, actually have impact. So one of the conversations I had with them was I was like, look, if I do this, I want to, like, do a bunch of like, really kind of more out there futuristic things and like, and potentially really risky things. Like, you know, big checks into kind of big new things, which we can jump forward to. But like, in my first year though, 2013, I think I did. I did that maybe in some cases. Well, in some cases not. But that was sort of the appeal to me was the idea of kind of doing. Trying that out in California at kind of the cutting edge and particularly kind of leaning into the more futuristic things.

30:59

Yes, that was going to be my next question. So you're famous, and I quote you in my book for the quote, that the next big thing often starts out looking like a toy. So you're famous for being into investing in things that seem like sci fi out there. So what's your framework for evaluating weird ideas that you're like, well, this isn't gonna look so weird if it's right a decade on?

33:06

Yeah. So I mean, first of all, this is not a framework, but I actually just like the things and I use them. This is what I do. I like these things and I use them and I buy. Even today, I don't do hardware investing. I buy every new hardware device. I'm always using them and playing with them as an example. I like all the AI stuff and I use it and I still program a little bit and use the tools and, and mess with them. And I just think it's neat. I don't know. I've always liked technology. So part of it is that. That I think I actually do like it and use it. But part of it is, I guess I sort of have developed over the years kind of a framework which I think of as sort of, as you said, the next big thing starts as a toy. But also this idea that sort of a lot of interesting things start with kind of cults and niche movements of smart people that are excited by things. And so I used to spend a lot of time on various technology subreddits and like, you know, I was into, like, biohacking and 3D printing and VR and, you know, I would, like, fund all these little Kickstarter things and buy them and, like, see what's going on. And, you know, I don't know. So I was into this stuff, right? And so the first year I was at the firm, I did a whole bunch of. I made a drone investment, 3D printing investment, a few crypto investments, a bitcoin mining company. Coinbase was another one I did that year. A VR Oculus that year. What else? A couple of AI things over the years, you know, so a whole kind of range of. And each of those, I think, was, like, the kind of hypothesis was like, crypto early on was relatively niche movement, but they were like all these really smart people I knew were really into it, and they had all these interesting theories. And I would spend. It was sort of these rabbit holes you go down and that. The more you learn about. I always find this interesting. Like, certain rabbit holes, I find the more you go, you know, flat earth people, I'm just making it up and picking on the easy target. But, like, you go down the flat earth rabbit hole. I did that once. It's not that interesting. Like, do they actually believe the Earth is flat? Like, it's kind of silly, right? You go down the bitcoin rabbit hole in 2013, it's pretty interesting. There's all these smart people. The technology is interesting. You know, there's a lot of, like, interesting computer scientists and economists and, you know, and I got sort of really kind of sucked into that and all the. Anything about. All the possibility, where could this go and how could it evolve? And could it be more than a kind of niche, kind of cryptocurrency? Could it be a payment system? Could it be this or that? Could you abstract parts of it and build other architectures? VR, you know, early VR was, you know, a lot of this stuff, too. You kind of projected out, like, early VR, like, the, you know, the graphics weren't very good and the ergonomics were bad and this and that. But, you know, you can imagine sort of Moore's Law taking hold and the. All those things getting better and application developers coming on and where would it go? Right? And I particularly think that's sort of been one of the interesting things in computing, right? Is you have this interplay between the technology and the creative side of what you do with the technology, like the applications and the infrastructure and the two. Like with the Internet, that was one of the fun things to watch it Evolve. The Internet would get better and faster and more, performing a better bandwidth and mobile phones and so forth. But then you had all these creative people building new applications like social media and, and YouTube and just like, and so it's just really kind of fun and creative and you just like, you know, I would just sit around for hours as an angel investor, as a vc, talking to friends, talking about the possibilities, getting excited about it and then, and then trying to find kind of the way I would invest back then was sort of find the best in each of these rabbit holes, like who are the smartest teams of the best products in those rabbit holes and try to make an investment. So that was the appeal to me of joining the firm, being able to do that. I did, I was able to do that. It was great. And, and, and, and yeah, and then just got involved with a bunch of exciting kind of projects and, and you know, like all venture capital, the majority of them did not work. And that from the outside, venture capital might seem like, oh, you make some investments, do this. The reality is you're spending a lot of time dealing with the things that don't work and the, you know, the drama around that and the financial challenges and human challenges. So while on the one hand it was exciting to do that, on the other hand, you know, that's just the reality of that job. This job is that you do a lot of that. And then. Yeah, and so did that until I eventually, in 2015 or so, decided to kind of really focus on one of those rabbit holes, the kind of crypto rabbit hole.

33:38

Before we get to 816Z crypto, indulge me by telling two stories of companies you just mentioned. Tell me how you got conviction on Oculus.

37:56

Yeah, so I had met like Palmer and Brendan. Brendan to CEO in I think, I think early 2013. Well, I'd first seen him on Kickstarter and, and then there was this sort of viral John Carmack video that went around the Internet. John Carmack, the legendary programmer, was talking about how like VR might happen. And of course, if you're into technology and sci fi, like VR has been around as an idea and it's always going to happen. Yeah, it was like always around the corner, but never did. But then these sort of this Carmack video and you tried it out like maybe now's the time, like maybe this stuff has got, you know, and the kind of, the insight partly was that mobile phones made it possible because you now had these screens that were cheap and high quality and processors in a lot of ways. In fact, some of the early products were literally phones you put on your face. Right. And so. So sorry to get to know them, but. But I think it was, you know, over the course of the year, you know, there's a whole kind of dance you play in venture capital of, like, you may like to want to invest in somebody, but you don't get the opportunity to eventually did by the end of the year in. In November, I think. But, you know, one of the big insights was I just, you know, if you're do. I was out meeting with people doing VR, and everyone was. Every meeting you have, they're talking about how they're building something for Oculus. Oculus, Oculus. And you just sort of, you know, this is one of the things I've learned in this business is you just need to go and go talk to a lot of smart people, and when you do that, you start to hear common patterns and you start to hear about the companies they respect. And like everyone, this was clearly the center of gravity in this little growing universe. Whether that universe would be real or not was another question. But it was clearly like the, you know, they had kind of harnessed that energy, and so it felt like a, you know, an exciting place to be. Now that said, I mean, it's one thing to have a theory, it's another thing to like, make. It's a hardware company, and they have to, like, manage supply chain and inventory and all these other things. And it was a. The round we led was a $75 million round, which today you see that, you know, three times a day on Twitter, rounds like that. But back then, it was actually like a big, unusually big venture capital round. So. So that was that. What was the other one you asked? Sorry, the.

38:08

The second one would be Coinbase.

40:18

Coinbase was similar in that I had met them early. They were in Y Combinator. And what often happens back then, at least, was Y Combinator. You know, we'd sort of go and meet all companies there. I think in the early part of the year, I met Fred and Brian, and I spent a lot of that year meeting, like, a lot of crypto companies. The big challenge then, like, Bitcoin in 2013, Bitcoin itself was just sort of a bad word in the sense of, like, people thought it was only used for crime or something. And so, in fact, it was. One of the things we wanted to do at the firm was to buy Bitcoin, but all the lawyers, like, fought against it really hard and things. We eventually figured it out, but, like, that was like a big thing in Silicon Valley is even the people that wanted to buy bitcoin, it was like, really hard to do. And then a lot of the teams we met were kind of came out of this kind of libertarian ethos of the early crypto world that were like, we don't need to be regulated. We don't need to follow rules. That's not how we felt. We felt like, look, this is interesting, but it needs to be, you know, needs to be regulated. There need to be guardrails around it. And so with Fred and Brian, they were the first team we met who were really kind of Silicon Valley true technologists, wanted to build great products and wanted to take the regulation side seriously. Like, when we invested, there were eight employees, I think, and one of the, like, the eighth employee they hired was, I think, a senior compliance person from PayPal. That was a very important signal to us. So anyway, so that was all. And then it took a long time. I used to go over there. They were working out of an apartment, I used to go over there for dinner and we'd sit around and talk about crypto stuff. And I think they liked the fact that I had then invested in this. Our friend Balaji Srinivasan, he had a bitcoin mining company which we let a $25 million investment in. And they were like, wow, this is like, I think that was maybe the first Silicon Valley VC investment in a crypto thing. And they were like, you're actually, you know, taking it seriously. You seem to really believe in it. So I think hopefully that that kind of helped convince them that we were good people to work with. And then eventually, I think also in November, we, around the same time as Oculus, figured out a way to make an investment.

40:20

I want to thank you because I first bought bitcoin when I learned that A16Z had had invested in Coinbase. So I appreciate that, but. Okay. I also have heard over the years that you were one of the key people inside Andreessen Horowitz that was pushing we need to do a crypto fund. So if that is true, can you tell me the story of how hard that was, either internally or with the lawyers? As you're saying, to say, we need to do a fund to do this.

42:22

Yeah, no, I was. I went. I was. For sure. I mean, I was the one who started the crypto fund. So I started doing full time crypto, I think, in 2015. But at the time we didn't have a crypto fund. So I did it out of One what we call the main fund. And so I started just making kind of crypto investments. The big difference with crypto, right, is that you're not generally what you want to eventually own are these digital assets, these tokens. And that's very different for a whole bunch of reasons. You have to custody them. You, you may have, you have to buy and potentially sell them. You have to have a different kind of compliance regime. There's a whole like regulatory regime in Dodd Frank. The kind of the, the, the, the kind of the major governing regulatory framework of the financial services industry that exempts venture capital firms from some of the regulations. When you own crypto assets, you're, you're no longer classified as a venture capital firm. You have to, you have to register, called an RIA instead, which is a much heavier compliance burden. The, you know, in addition to the legal things, the LPs, meaning our investors are, you know, at the time were not familiar with these assets and they would get these financial statements and they'd say, what is this Bitcoin? And other things on there? And they would have questions. Whole bunch of like, so, like a whole bunch of reasons why it was kind of complicated to do. And so the idea was, let's start a new fund from scratch that has a opt in set of LPs, investors. We go to the investors and we say, here's what we're doing. Do you want to opt into it so you understand what you're getting into? And then also where we started from day one, to have all of these kinds of capabilities to custody and trade and have compliance and all these other kinds of things you need to do and be an ria, which at the time the firm was not the firm is today, but an ria. And you have to be audited and do all these other things by the sec and you're overseen and so and you have to have like a. Trading internal policies and just all these kind of complicated things. So that was the question. And then finally in. So 2017, decided to do it. I think we announced it 2018. And actually we're like a whole separate set of entities. And yeah, so I was the one who spun that out and have been running on our fourth fund, but have been running that since then. So. Yeah, and like a big part is part of the legal, but also like I mentioned, like the LPs, the employees, like, it's just, I just find if something's different, it's good to get everybody who's involved to opt into it and not to feel like they're kind of being you know, corralled into it. Right. So like specifically like with the LPs, this is like our investors, right, Our universities, endowments. I went out with a partner of mine and talked to I think 60 investors and these were like, you know, two hour meetings, it was a real thing for like four weeks and basically gave them kind of two pitches, gave them a pitch as to why I thought this would be a good thing to invest in and then gave them an anti pitch as to all the things that could go wrong and why they might not want to invest and just was trying to be kind of fully transparent and say, you know, we want, we hope to get some subset of our investors to opt in and. But we want the ones who opt in to like know what they're getting into and you know, know that it's going to be. Could be much more volatile and risky than even venture capital, which itself is already volatile and risky. And so we did that and like kind of I hoped and expected we got a subset of the LPs to opt in and you know, that was a good thing because they've since then been sort of happy with that and feel like they got what they expected and then, and then went and recruited a whole new team of people that were also employees who were true believers. And that was important because that kind of creates the culture of the, of the firm because we're really kind of creating a new. And this was also at the beginning at the. The firm as a whole has since kind of what we call verticalized. So there's a crypto fund, a bio fund, a growth fund, a infrastructure, AI infrastructure, AI apps and American dynamism, the different groups and each one kind of runs as a somewhat autonomous set. But this at the time we were the first one to do that. And so we were kind of building in some sense within the broader firm a new kind of entity within it. And so that was a whole set of interesting kind of challenges. I think in the end has worked out well, but you know, it's a process to get there.

42:56

We're running out of time. I got to get you out of here in a second. So I'm going to skip ahead to. We last spoke when your book came out, Read, Write, Own. That was last year, so before the current regulatory regime. So this is my only question for contemporary stuff. How are you feeling about the environment for your thesis on Web3 and crypto in the current environment?

47:16

Yeah, I mean so for those interested, as you mentioned, I wrote a Book, read, write on. And my long term, I think it's a long term thesis. My long term thesis is that what ultimately the value of blockchains is they allow you to build new networks that have new, that have different implications in terms of the benefits to users and network participants. Specifically, the argument I make in the book is that they have kind of the, what I would call the societal benefits of the early Internet networks, what I call protocol networks like the web and email, but a lot of the kind of modern affordances and competitive advantages of what I call corporate networks, which are things like, you know, Facebook and YouTube. And so it's fundamentally about a new way to build networks. We, I think had a lot of, I mean clearly had a lot of challenges the last couple of years, particularly around regulation. And, and I think as a result of that, my view generally is that that unclear, ambiguous regulation, which is what we have, it both makes it harder for good actors, good entrepreneurs to know what to do, but also emboldens bad actors. And so we had a lot of scammers, most prominently FTX and a lot of other damage to the industry. What I've worked very hard on for the last four years is working in D.C. to kind of get this fixed and cleared up. And very importantly, we got a bill passed recently that's called Genius that relates to stablecoins which now provides a federal regulatory framework for stablecoins. And as a result, and for those who follow it will know there's been a wave of innovation in that space. And we've also cleaned up a lot of the, I think all of the bad behavior essentially. And we're now in the process of trying to get a second piece of legislation passed called market Structure, which will do that for the rest of the industry. So overall I think it's, we, we, we were slowed down a lot by this, but I think things are kind of back on track and I'm, I'm long term optimistic. And we're seeing like we just put out a state of crypto report last week, which is our annual report on kind of the whole.

47:46

Love it.

49:52

Yeah, we're seeing a lot of really good trends of like real use cases, particular on stable coins. Stablecoins are now, you know, they've now the volume surpassed Visa as a network. And it's very importantly uncorrelated with trading volume. Like it's not just people using kind of crypto for trading, it's real use cases.

49:52

It's the actual infrastructure of money. Sort of the original concept.

50:09

Yes it is, it's kind of come all around full circle, and it's particularly in, like, developing countries. You see a lot of people using this as a payment system, as a way to access dollars. You see big companies like Stripe and Visa. Just today, Western Union made a big announcement. You know, you pay 10% on remittances right now, a lot of times sending money to another country, and this gets it down to basically zero. So there's a whole bunch of interesting benefits. And so it's. I think it's been. We've had setbacks and it's been slower than I'd like, but I do feel like it's now getting back on track to the original vision. And we're hopefully cleaning up a lot of the kind of scammy behavior, which is what I, you know, which has really held things back and harm consumers and try and now kind of refocusing a lot of the energy on kind of constructive use cases. So, you know, it's been, I mean, look, I was talking earlier about AI. Like, I think that, you know, the original Neural Network paper, I think, was 1943, Alan Turing's famous 1950. I started my company in 2008. It really didn't hit until, I think, what was it, 2021 or 2022 when ChatGPT came out. So sometimes my experience with these things, they do can take longer. But that I, you know, I'm. I believe that. That eventually we'll get there in crypto, the way that we have in AI and I, and I just, you know, I, I like working on things that I feel like I actually matter in it. Like, I think if I were. If you're working on AI today, it's very hard outside of maybe a few people to be. It's such a big industry and so people working on it. Whereas this is an industry where I feel like if there weren't, you know, a handful of people who have stayed the course and worked hard on policy issues and things, that the whole industry kind of kind of gone off course. And so I feel like, you know, it's a role. It's something where I can actually contribute and try to kind of keep it on course. So I'm, you know, I'm enjoying doing that. And I think, I think. I think we're making good progress.

50:13

Final two questions. First one is, you've worked with Marc Andreessen and Ben Horowitz for the better part of 15 years right now. What's the biggest lesson you've learned from working with the two of them?

52:05

Yeah, I've learned a lot from them. I mean, I learned, I mean, I've, you know, for years sat in meetings with them and got their advice on startups and entrepreneurship and markets and, I don't know, life. So I've just learned a ton from them on all of those things. You know, they have had a front row seat, Mark, you know, especially obviously since the beginning. Your book talks a lot about that. Great book, by the way. I recommend it to all of our employees and Ben also, along with him. And so, you know, they just have seen, seen so many interesting things and so just a lot of it's in the details. You know, I think I look at a lot of it too. I just, I think they do. And our firm tries to do, just set the example for what really, you know, like high integrity, first class business, you know, hard work, kind of excellence. Like, I just, I, A lot of, I think, you know, I, I find a lot of the great thing about working with great people is just being able to see, you know, kind of what that looks like and setting the bar high. And I don't know, I've just been. It felt like it's a privilege to work with all, to work at this firm and along with all these people that are, that are so good and people on our team. So it's hard to summarize. I mean, it's, it's really a game. It's a business of, of specifics, of a million nuances. It's hard to maybe summarize what else. I don't know. Yeah, I don't know of a single lesson.

52:20

No worries. All right, this one maybe is easier. Final one. You've straddled. Originally you were in New York City. You've straddled the coasts. What makes New York City different as a tech hub, as a startup ecosystem than any other place, including the Valley?

53:42

Yeah. I've always loved New York. I grew up in Ohio and then moved to New York for college and have spent most of my adult life in New York. I still have a place here. I'm in New York right now. I come here a lot. I love New York. I don't think there's any city in the certainly in the country that's like New York in the sense that you have just, you know, such a dynamic city, so many different industries, so many intersecting cultures. I found it, I've always found it to be such an exciting, dynamic city. It's a, you know, you've got the financial industry, you've now got a significant tech Industry, you've got the creative industry. You know, the creative world.

54:05

Crypto and AI are very big.

54:40

It's international. I, I, you know, like it's a, you know, I just, you know, today, walk downtown, walk to walk to the office and back and like just all the interesting things you see, the dynamism, the excitement, you know, it's a magnet for talent. San Francisco is great too. Like, San Francisco to, you know, is the heart of AI right now and sort of the deep tech side side. And it's very hard to match in that way. San Francisco is very much though an industry town. Right. You go there and it's very hard to kind of escape that. I do think that the kind of confluence of all these different industries and cultures makes for a real strength in New York and just the kind of creativity and dynamism, I guess I would say. And I think it's natural that New York would be the kind of the other hub. I think if you're closer to an industry, like if you're doing something an application in AI for finance, for creative industry, there's a lot of reasons to be in New York. Maybe if you're doing kind of hardcore foundation models, you might want to be in San Francisco. I don't know. But I think there's a, there's a, there's an obvious argument for New York being the application town. You know, it's where the customers are, it's where the users are. It's much closer to kind of, you know, you get a much broader cross section of behaviors. People love to move here. It's very easy to recruit. My experience having, you know, two of my companies based here is very easy to recruit, you know, students out of technical universities and things to come to New York. They all want to come here. Continues to be a magnet. It was really depressing. I was here for part of COVID and just seeing it, you know, at that state, and I very excited to see how it's bounced back. It feels to me having been here, I don't know, 25 years on and on, most of the time, you know, like more vibrant than ever maybe. And it's great to see the tech industry particularly, you know, it's. When I was, it was always sort of this had this sort of insecurity complex, you know, kind of. It was always trying to measure up to the Bay Area and things. It's not, you know, it's still, I don't think it's still at the scale Bay Area, but it's certainly a very Real and kind of escape velocity tech community now. And I think a clear and crypto, it's the number one. It's not even a question. It's the number one in the world. That's where our crypto firm headquarters are. That's the majority of our companies are. And it's great. We have a lot of political support to try to, I think to try to make it the world world headquarters that if we get the right regulation, I think it clearly will be. And then in, you know, I think in every other area of tech, it's a very serious kind of, you know, probably number two in some areas and number one in others.

54:43

You know, for this project, I just interviewed Clem from Hugging Face and and he said the key thing for him for New York City was the talent. It's easier to get talent to move to New York City. So it's interesting to New York.

57:18

I mean, it's been going on since, you know, forever, right? I mean, it's like if you're an ambitious person who want, you know, is social and wants to explore the world or something, I don't think there's a better place to come. I don't know. I came here and a lot of my friends came here and I've spent years recruiting people here and they always seem to want to come here. We actually had a bunch of folks when we post Covid, we just said you could be in either New York or sf And I was surprised the number of like people who are lifetime Bay Area moved to New York and loved it. I mean, they love walking to work, they love the culture, you know, just the. Like I said, I think the fact that there's different, there's so many different industries and variety of people makes it, makes it so appealing.

57:32

So, Chris, thanks for coming on again to talk to me about all this. I love it.

58:11

Great. Thank you, Brian. Really appreciate it.

58:16

Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts and Spotify. Follow us on X16Z and subscribe to our substack@a16z.substack.com thanks again for listening and I'll see you in the next episode. This information is for educational purposes only and is not a recommendation to buy, hold or sell any investment or financial product. This podcast has been produced by a third party and may include paid promotional advertisements, other company references, and individuals unaffiliated with A16Z. Such advertisements, companies and individuals are not endorsed by AH Capital Management, LLC, A16Z or any of its affiliates. Information is from sources deemed reliable on the date of publication, but A16Z does not guarantee its accuracy.

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