November 16, 2021
“The IPO From Hell” and Other REAL Lessons from the Startup Crucible | Ben Horowitz on Starting Greatness with Mike Maples Jr.
Check out the Starting Greatness episode page
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
- This article was Gates attempt to target Netscape and have Microsoft monopolize the internet
- 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
- The idea came from their time at AOL, which at the time had half the traffic on the internet
- 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
- Businessweek wrote a story called “The IPO from Hell” – that certainly doesn’t help shareholder confidence
- 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
