An Analysis of a16z’s Core Investment Philosophy: Focusing on Non-Consensus

Analyzing a16z's Investment Strategy: Non-Conventional Focus

Core member Fred Li of THUBA DAO wrote an analysis on why a16z has become a leading VC in the crypto field and in Silicon Valley. He primarily attributes this to their core investment philosophy of focusing on non-consensus approaches.

a16z founder Marc believes that investing in “non-consensus” companies can help achieve excess returns. Most major breakthrough technologies and companies initially appear crazy. Making mistakes in non-consensus thinking is a necessary part of investing, because most of VC’s returns depend on the huge returns of a few investments. Therefore, even if there are many wrong non-consensus thinking, as long as returns are obtained under the right non-consensus thinking, they will cover most of the returns. Successful consensus investing is more like the play of index funds and ETFs, which can obtain stable but not huge returns.

This can also be seen from the history of a16z’s fund launch. a16z laid out the encryption industry since it invested in Coinbase in 13 years. In 18 years, it began to launch the independent a16z encryption fund. Within five years, it launched four encryption funds, and the amount of the fourth encryption fund in 2022 reached 4.5 billion U.S. dollars, which is currently the largest fund in the encryption fund.

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Based on the philosophy of focusing on non-consensus investment, a16z discovered star projects such as Twitter and Facebook in the personal angel stage, and after establishing a fund, it discovered well-known Web2 projects such as Skype, Airbnb, and GitHub. Later, it actively embraced new tracks such as Web3 and metaverse, and invested in Coinbase and Roblox, bringing rich returns.

Reference: https://twitter.com/Dacongfred/status/1679345615724236803

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