Meet the Venture Capitalist Getting Professional Athletes Into Startup Investing
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Jeff Jordan, a general partner at Andreessen Horowitz, specializes in marketplace businesses and has a strong thesis about the importance of network effects. He led investments in Airbnb, Instacart, Pinterest, and LimeBike. Before professionally investing, Jordan served as the CEO of OpenTable and president of PayPal.
In the Valley, Jordan is also known for mentoring investors with non-tech backgrounds. One example is Golden State Warriors player Andre Iguodala, who credits Jordan for helping him learn about startup investing.
Below is an excerpt of our conversation (five questions & one follow-up):
TERM SHEET: You took OpenTable public in May 2009. What lessons did you learn & what was the most surprising part of taking a company public?
JORDAN: It was the first financing I had ever worked on. To take a company public in the depths of the financial crisis was a learning experience to say the least. The parts that were most interesting to me is that public markets aren’t this big black box — they’re a wide range of investors with a wide range of interests. I understood that a lot of the skill of doing a successful financing is picking the right investors. If you pick ones who believe in the vision and don’t freak out if something bad happens, then you have a lot of freedom in operating the business.
Social Capital’s new SPAC will help companies go public without an IPO. What are your thoughts on a company going public through a special vehicle versus the traditional route?
I think IPOs could use a level of innovation. It seemed incredibly analog to do the same meeting 47 times over the span of two weeks. The lawyers tell you that you have to tell the story exactly the same way, and it’s the most mind-numbing thing you could ever imagine. So I think there is the opportunity for innovation in the IPO process. That said, it’s not terribly broken. When you take venture money, there are three potential doors: go bankrupt, sell the company, or take it public.
You talk a lot about the network effect, which is obviously integral to blockchain and cryptocurrencies. How do you foresee those networks evolving over time?
Part of the appeal of a lot of these digital currencies, which we’re pretty long on, is that networks can emerge. I’m fascinated by it, and it’s core network effect. The part that is really exciting to me is that every two-sided marketplace has a “cold start problem.” OpenTable, for example, had no diners and had no restaurants. What comes first? Every two-sided marketplace wrestles with this cold-start problem, and how you get the flywheel spinning. A carefully constructed ICO could have financial incentives to create that early momentum. Filecoin clearly had financial incentives for people to offer storage to the network. So if they have financial incentives, there will be storage opportunities so that when people looking for storage come, their side of the marketplace is populated. It’s a potentially really interesting model around incentives that can overcome the hardest problem in marketplaces — the cold start problem.
Athletes like Golden State Warriors’ Andre Iguodala regularly reach out to you for advice about getting into startup investing. How did you form those relationships?
I met Andre three or four years ago after I got a physical letter from his business partner Rudy Thomas. It said that he and Andre would like to have dinner. And I was like, “Alright, this is a scam.” I answered Rudy, and I said, “Why do you guys want to talk?” I learned that Andre has this passionate interest about technology and he’d like to learn more about investing. I made introductions to a number of early-stage companies that they were interested in.
Many athletes have a strong interest in technology. Andre said that one of the key reasons he came to Golden State is because of its proximity to Silicon Valley and the tech world.
What is an investment you decided to pass on that you still regret?
One investment that we didn’t pass on, but we didn’t end up getting it done was Snap. I think Evan [Spiegel] is showing to be one of the best product builders of his generation in the Valley. What he’s done with the Snap product — both the amount of innovation and the quality of innovation is pretty astonishing. I would have loved to have the opportunity to work on that.
What do you think about how the market reacted once the company went public?
I mean, that can be the flip side to going public. The question becomes, ‘Oh what have you done for me lately?’ For his original investors, Spiegel created huge value, but for some of the later public investors, he has not yet done that. I don’t think that story’s over. I think he’s creative enough to continue to put out some interesting things.
What’s the best business advice you’ve ever received?
Be the boss you want to work for. It’s pretty simple, but it gets pretty nuanced. I’m always a little conflict avoidant and slow to give criticism, but as an employee, I always valued the people who took the time to invest in me and mentor me.