“The IPO From Hell” and Other REAL Lessons from the Startup Crucible | Ben Horowitz on Starting Greatness with Mike Maples Jr.

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Key Takeaways

  • Ben Horowitz gives a detailed timeline on Loudcloud’s “IPO from Hell” and how it went from $0.35/share to being acquired for $1.65 Billion at $14.25/share
    • In a near-death experience as a founder, it takes a lot of humility and resiliency to make the best choice out of all the horrible choices
  • “If you have the will and the idea, [being a founder] is the best thing you can do with your life” – Ben Horowitz

Intro

  • Ben Horowitz (@bhorowitz) is the co-founder of venture firm Andreessen-Horowitz (@a16z). Mike and Ben discuss the “IPO from Hell” and how it shaped him into the founder he is today.
  • Host: Mike Maples Jr. (@m2jr)

Netscape

  • Netscape went public in 1995 after 16 months after founding (the average for venture-funded companies now is around 8 years)
    • It was the first company that attempted to capitalize on the emergence of the internet
    • Ben served as a product manager and later VP for Netscape
  • Internet Tidal Wave article by Bill Gates
    • This article was Gates attempt to target Netscape and have Microsoft monopolize the internet
      • Microsoft used lots of tactics to do this; many of these tactics became illegal
    • And eventually, Internet Explorer certainly did beat out Netscape’s browser product, Navigator
  • AOL eventually acquired Netscape in 1998

Loudcloud – IPO From Hell

  • Microsoft’s web server, BackOffice, was five times faster, had security built-in, and was free to use
    • SuiteSpot was Netscape’s attempt to compete
    • Marc Andreessen, the founder of Netscape, leaked all the information about the new product and pretty much called Ben out for not doing his job well through a colorfully worded email
  • Marc Andreessen eventually came around on Ben and named him CEO of another venture of his, LoudCloud
    • The idea came from their time at AOL, which at the time had half the traffic on the internet
      • A company would pay AOL to funnel web traffic towards them, often so much that it would crash their site
      • Loudcloud would support web traffic through cloud-computing software; the demand was extremely high because no companies knew how to use the internet at scale
  • At the time of the dotcom crash, the company was too big (infrastructure became incredibly expensive) and the product wasn’t good enough yet
    • Venture capital came to a halt and Loudcloud’s customers were going bankrupt at a crazy rate
    • Forced them to go public far before they were ready, they only had three weeks of cash at the time
  • Loudcloud’s services were sold to EDS for $63 million, and they licensed them Opsware for $52 million over 3 years
    • They were a software company with only one customer – stock fell from $2/share to $0.35/share
    • Michael Ovitz, a board member, bought $10 million worth of stock and forced a short squeeze on stock price
  • They were acquired by HP for $1.65 billion at $14.25/share

Lessons as a Founder

  • In a near-death experience as a founder, it takes a lot of humility and resiliency to make the best choice out of all the horrible choices
    • Almost all startups go through trials, AirBnB lost 80% of their revenue in a week when COVID hit
    • The decisions you make in these times make you a better leader
  • Nobody cares, there are no excuses attached to being a CEO
  • “If you have the will and the idea, [being a founder] is the best to you can do with your life” – Ben Horowitz
Starting Greatness with Mike Maples : , , , ,
Notes By Drew Waterstreet

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