Marc Andreessen appeared on Charlie Rose last night. (The entire interview is embedded above). He gave Rose a primer on everything from Facebook and cloud computing to the mobile Web. But he also tells Rose: “I’m creating a fund.” Actually, Andreessen is creating it with his investing partner Ben Horowitz, and it will formalize the angel investing he has been doing on his own for the past several years. It will be called Andreessen Horowitz. From the transcript:
Charlie Rose:
Why are you doing this?
Marc Andreessen:
Because of the nature and the scale of the opportunities. We’re actually been investing ourselves with our own money for three years and we’ve invested in 36 — he and I invested together in 36 deals in three years so about one a month.
Charlie Rose:
Yeah, but I’ve read that you think that the normal investment for you to make, this may have been prefund, what, was about 100,000 to 200,000?
Marc Andreessen:
That’s right, and we’re actually going to preserve and extend that model in the fund. So historically we’ve only invested up to $200,000 total in a deal. We’re going to definitely bring that up in the fund because we’re going to raise more money, be able to put more money in. But it’ll be pretty typical for us to do a $500,000 investment or maybe down to 200,000 or maybe up to a million in a deal to start. And what we’re seeing is a whole generation of startups that actually don’t need very much money to get started, so the cloud computing example, or a mobile application, an iPhone developer doesn’t need very much money to get started.
Andreessen, who sits on Facebook’s board, also says that Facebook could be generating $1 billion in revenues today if it wanted to, and thinks the New York Times should go all digital.
Marc Andreessen:
There’s a lot of confusion out there. Facebook is deliberately not taking a lot of the kind of normal brand advertising that a lot of Web sites will take. So you go to — a company like Yahoo which is another fantastic business and they’ve got these you know banner ads and brand ads all over the place, Facebook has made a strategic decision to not take a lot of that business in favor of building its own sort of more organic business model and it’s still in the process of doing that and if they crack the code on that which I think that we will, then I think it will be very successful and will be very large. The fallback position is to just take normal advertising. And if Facebook just turned on the spigot for normal advertising today, it’d be doing over a billion dollars in revenue. So it’s much more a matter of long term strategy. Companies —
Charlie Rose:
So if you want to make a lot of money instantly, you could.
Marc Andreessen:
Yeah, oh, very easily. It could sell out the homepage and it would start making just a gigantic amount of money.
The full transcript is below.
Transcript
The Charlie Rose Show Session Two
Guest:
Marc Andreessen
Charlie Rose:
Marc Andreessen is here. He is one of Silicon Valley’s most respected entrepreneurs. He has already founded and sold two companies, each for over a billion dollars. The first was Netscape. It revolutionized web browsing before it was sold to AOL in 1999. His second company, Opsware, was bought by Hewlett Packard.
Charlie Rose:
Mark Andreessen is here. He’s one of Silicon Valley’s most respected entrepreneurs. He’s already founded and sold two companies, each for over a billion dollars. The first was Netescape. It revolutionized web browsing before it was sold to AOL in 1999. His second company, Opsware, was bought by Hewlett Packard in 2007. He has two new ventures, the social networking site, Ning, and a brand new venture capital fund. We want to talk about all of that. I am pleased to have him back on this show. Welcome.
Marc Andreessen:
Thank you.
Charlie Rose:
First just let me talk about something that has — you own 1.6 percent of it. It is Facebook.
Marc Andreessen:
Oh actually I own less than that.
Charlie Rose:
Did you? Oh, no —
Marc Andreessen:
Fortunate enough to be on the Board.
Charlie Rose:
Okay, fair enough, if you’re on the Board, I mean, why did I read that it was 1.6 percent? Somebody then —
Marc Andreessen:
Somebody’s giving me a —
Charlie Rose:
You can’t believe what you read.
Marc Andreessen:
– credit I don’t deserve.
Charlie Rose:
All right, because they said that you had invested at the same time $260 million, is that right or wrong?
Marc Andreessen:
No, no.
Charlie Rose:
None of my business.
Marc Andreessen:
No, I joined the Board later on.
Charlie Rose:
Okay, all right.
Marc Andreessen:
Yeah, last year.
Charlie Rose:
There is this sort of silly idea, but you want to speak to it, that Facebook is the next Google and Google is the next Microsoft. You’ve heard of that. Does any of it resonate with you?
Marc Andreessen:
I don’t think there are nexts, like so for example there was IBM and then people said here’s the next IBM and there never was the next IBM. I don’t think — Google’s a totally different business than Microsoft.
Charlie Rose:
IBM was not the next IBM.
Marc Andreessen:
IBM was not the next IBM. Microsoft wasn’t the next IBM. Google — Google’s its own company, it’s a fantastic company, it’s its own company with its own model. Facebook is a fantastically successful company with a huge amount of potential. Google is you know just a gigantically successful business you know I think for anybody to voluntarily step up and compare themselves to that I think would be hubris, I think that would be a bit much in general. But Facebook’s got huge potential and frankly I think it deserves to be evaluated on its own.
Charlie Rose:
Well, it is evaluated at $15 billion?
Marc Andreessen:
Well, there was an investment round at $15 billion evaluation which was for preferred stock.
Charlie Rose:
Which was the Microsoft investment?
Marc Andreessen:
Microsoft investment and some other investors. People are getting confused on that by the way because that’s preferred stock and there was an internal assessment, a valuation [spelled phonetically] that people have lots of rumors about that was lower than that which was for common stock. So people are getting the preferred and common confused. And of course this is all abstract, right, because the company’s private. You know someday the company will you know at some point —
Charlie Rose:
And because the company’s not making any money.
Marc Andreessen:
Well, company’s financials likely are private so it gets to keep that to itself but company’s [inaudible] —
[talking simultaneously]
Charlie Rose:
But you’re on the Board of Directors —
[talking simultaneously]
Marc Andreessen:
I am on the Board.
Charlie Rose:
– you can be here and tell us.
Marc Andreessen:
I know. Company’s doing very well. On its internal goals it’s doing very well. It’s passed 175 million active users. Half of those users use it every day. A lot of those users use it 50 times a day. It’s generating I think a substantial amount of revenue. I think it can be doing a lot more revenue in the years to come.
Charlie Rose:
Have you read this story? Fortune has marked on the cover how Facebook has taken over our lives then but is it a real business?
Marc Andreessen:
Yeah, sure. So I think people ask us about new companies all the time. They —
Charlie Rose:
They monetize it.
Marc Andreessen:
Yeah, [unintelligible] they monetize it. But look it’s got 175 million active users. It’s the sixth most populated country in the world right now if you compare it to countries. It’s on its way to 500 million users. I mean, it’s going to be a multibillion dollar success.
Charlie Rose:
So what’s going to be the trick to monetize it?
Marc Andreessen:
Oh, okay, so and this is where people are getting confused, is Facebook is deliberately, and this is actually very interesting.
Charlie Rose:
There’s a lot of confusion out there.
Marc Andreessen:
There’s a lot of confusion out there. Facebook is deliberately not taking a lot of the kind of normal brand advertising that a lot of Web sites will take. So you go to — a company like Yahoo which is another fantastic business and they’ve got these you know banner ads and brand ads all over the place, Facebook has made a strategic decision to not take a lot of that business in favor of building its own sort of more organic business model and it’s still in the process of doing that and if they crack the code on that which I think that we will, then I think it will be very successful and will be very large. The fallback position is to just take normal advertising. And if Facebook just turned on the spigot for normal advertising today, it’d be doing over a billion dollars in revenue. So it’s much more a matter of long term strategy. Companies —
Charlie Rose:
So if you want to make a lot of money instantly, you could.
Marc Andreessen:
Yeah, oh, very easily. It could sell out the homepage and it would start making just a gigantic amount of money. Yeah and so there’s just tremendous potential and it’s just a question exactly how they choose to exploit it. What’s significant about that is that Marc is very determined to build a long term company. And you know there’s as you know there are people in the Valley who like quick hits and like sell companies quickly and then there are people, Andy Grove for example, or Bill Gates, and I think in his own way now, Marc, and obviously the Google guys are other examples of this, who want to build a long term business. And so he’s got his eyes way out on the horizon.
Charlie Rose:
So when one others may have sold out to larger media companies —
Marc Andreessen:
Yeah.
Charlie Rose:
Mark insisted he would remain independent and develop his own company in his own way.
Marc Andreessen:
Yeah. And he had those turning parts presented to him. Any successful company in the valley gets acquisition offers and has to decide whether or not to take them. And he’s passed on some very lucrative offers and has a very big vision.
Charlie Rose:
Tell me what the big vision is.
Marc Andreessen:
So the big vision basically is — I mean the way I would articulate it is connect everybody on the planet, right? So I mean 175 million people —
Charlie Rose:
If you don’t think large, what the hell —
Marc Andreessen:
Exactly. 175 million people — 175 million people on the thing now. Adding a huge number of users every day. 6 billion people on the planet. Probably 3 billion of them with modern electricity and maybe telephones. So maybe the total addressable market today is 3 billion people. 175 million to 3 billion is a big challenge. A big opportunity.
Charlie Rose:
Let me remind you that you’re in the business of social networking.
Marc Andreessen:
Of course.
Charlie Rose:
That’s what your Ning is all about.
Marc Andreessen:
Of course, my own company Ning is about to cross 20 million users, and we’re adding 2 million users a month. We’re — and Ning is actually a business that lets you create your own social network, and we’re about to cross a million social networks on Ning that are —
Charlie Rose:
So you want to create a social network with your high school chums, then you can do that.
Marc Andreessen:
You can do that. And there is over a million of those. It’s easy, it’s free. Advertising — there is all kinds of ways. We make money on that, and that’s growing very fast. MySpace is doing very well for News Corps. LinkedIn is another company I’m an angel [?] investor in, you know, got north of 20 million resumes on it now. Everybody uses LinkedIn now to look for jobs and recruit. Which is a very hot topic these days.
Charlie Rose:
I would assume so. So social networking is hear to stay.
Marc Andreessen:
Oh, yeah.
Charlie Rose:
And it’s potential is just beginning.
Marc Andreessen:
Yeah.
Charlie Rose:
If you can connect everybody, then you have a huge opportunity to do a bunch of stuff.
Marc Andreessen:
Here’s the thing. If you can get 50 people or 100 or 150 million people to do something, then over time, you’re going to be able to get everybody to do it.
Charlie Rose:
Low politics —
Marc Andreessen:
Everything. Everybody. So there is huge potential, huge upside.
Charlie Rose:
The Obama campaign —
Marc Andreessen:
Yeah.
Charlie Rose:
Revolutionized politics, didn’t it?
Marc Andreessen:
Excellent example. The Obama campaign by far, like the most aggressive state of the art uses social networking approaches, right, and philosophies. Now, primarily, that was harnessed in the form of fund raising. Right? It was an engine to be able to generate just gigantic numbers of campaign contributions. So every new campaign is going to use these technologies and these approaches. We have a lot of politicians creating networks on Ning. There will be a whole new wave of social networking in politics, right? And also the Obama campaign was very good for volunteer coordination over this. But there is a whole aspect of this for getting the message out in how the campaign gets covered and how the debates happen and how communication happens, which has yet to come. And that will be in ‘12 or ‘16.
Charlie Rose:
And in fact, I think Obama now speaks — rather than using the radio program, speaks online.
Marc Andreessen:
On YouTube. Right. He puts the video on YouTube and then that spreads out all over the web. In politics that’s amazing. In the rest of the world, that’s how things work today.
Charlie Rose:
Does YouTube make money?
Marc Andreessen:
Google — I mean — I don’t know specifically. That’s a Google thing.
Charlie Rose:
You know.
Marc Andreessen:
Well, if they don’t –
Charlie Rose:
You know.
Marc Andreessen:
I’ll give you the same answer as I do on Facebook. If they’re not making money today, they easily could. These are all under-monetized, under-monetized assets. Give you an example. Every video on YouTube — Viacom. Viacom is suing YouTube, suing goggle for copyright infringement. It’s 180-degree the wrong strategy.
Charlie Rose:
On the part of Viacom?
Marc Andreessen:
On the part of Viacom to sue YouTube. They should be using YouTube as a distribution channel, right? They should let all the videos go on to YouTube, and then ever time there is a Viacom video on YouTube, there should be a buy button. And you’re driving traffic directly pack to the properties, you’re selling DVD’s, you’re selling music, you’re selling video games, you’re selling all the stuff that Viacom sells. These are the distribution vehicles of all time. These are nirvana. Right? It’s like Napster for the music industry.
Charlie Rose:
I should count my lucky day that all my programs are on YouTube.
Marc Andreessen:
Oh, yeah. Of course. Because you want people to see them.
Charlie Rose:
Right.
Marc Andreessen:
I mean you want people to see them. So you put them out there. Like I say, there should be a buy button. There should be an advertisement.
Charlie Rose:
Right.
Marc Andreessen:
It’s like with Napster with music, right? 20 million people lined up in 1998 and decided they wanted to start using Napster to start listening to music. If there had been a buy the CD but been there, or buy the digital track, it would have been a gigantic source of revenue for the music industry and the music industry would be far healthier today. And so when you get huge numbers of people lining up to do something, in my view, you figure out how to take advantage of that.
Charlie Rose:
In my view, you have a market.
Marc Andreessen:
Right. Yeah. A market. You know, magic markets don’t appear –
Charlie Rose:
No, that’s right.
Marc Andreessen:
– all the time, so you take advantage of them.
Charlie Rose:
Okay. So what about this other part of Facebook, taking over our lives? Not so good.
Marc Andreessen:
Well, obviously I don’t think that that’s the case. So everything on Facebook is put on Facebook, or any of these other sites linked in as put on voluntarily. People have a lot of control who gets to see it and who doesn’t.
Charlie Rose:
You don’t deny that, in fact, some employers go first to Facebook and therefore if they see something they may not like, they may not hire somebody?
Marc Andreessen:
Well, yeah, but if I put photos of myself dancing around at a party down here on the wall and then apply for a job with you –
Charlie Rose:
There are photos around?
Marc Andreessen:
Possibly. I would have to check your hallway. Check your entrance. Check your Facebook pages.
Charlie Rose:
Yes, exactly.
Marc Andreessen:
But –
Charlie Rose:
I’m talking with about you.
Marc Andreessen:
For me? I’m sure there is photos. Who knows what kinds of photos are out there on me. But, yeah. I mean people are going to check. People are going to do Google searches. But I’ll tell you, it’s the other way around also; right? You’re an employee, you get to learn a lot more about the company you’re going to go to work for.
Charlie Rose:
So you find out about them, too.
Marc Andreessen:
Sure.
Charlie Rose:
On Facebook?
Marc Andreessen:
On Facebook, on Google –
Charlie Rose:
But there is always this controversy just erupted, which is the idea of who owns the user’s profile?
Marc Andreessen:
Yeah. Yeah. So there was confusion, Facebook put out a new release to their so called terms of service. It was sort of legalese. And it caused a lots of confusion. So Mark has announced that they’re actually pulling those –pulling that off the site, referring to the previous version, and they’re going to write a new document which is in English.
Charlie Rose:
Which says?
Marc Andreessen:
Which says users own their content.
Charlie Rose:
But do they keep it though? Does Facebook keep it, even though users own it?
Marc Andreessen:
Well, there is –
Charlie Rose:
Do they keep it after you sign off? They still keep –
Marc Andreessen:
There is a technical definition of keep, and they be there is actually practical like would it ever get used for anything. And so –
Charlie Rose:
So the answer is they do keep it, but it will never be used for anything?
Marc Andreessen:
No. I’m not saying they do or they don’t. I’m just saying because there is a copy –
Charlie Rose:
You know they do. What are you talking witho about?
Marc Andreessen:
I don’t know there is a lot of reason to keep people’s drunken party photos –
Charlie Rose:
But they do.
Marc Andreessen:
I don’t know. Maybe in some cases there are copies. Maybe there aren’t. If it never gets used for anything –
Charlie Rose:
Why don’t they erase it all?
Marc Andreessen:
Why doesn’t Google erase everything in the cache once websites disappear.
Charlie Rose:
I don’t know. That’s a good idea.
Marc Andreessen:
Well, in general, you try to –
Charlie Rose:
That’s a good idea.
Marc Andreessen:
You try to clean it up. Well, you don’t always know what’s active and what’s not. You don’t know when a user is going to come back. You don’t know –
Charlie Rose:
Oh, you being one of the technology geniuses don’t know?
Marc Andreessen:
I’ll tell you what. If a website dropped offline and Google immediately cut it out of their index, everybody would complain because it will just mean if a website just crashed for five minutes, it’s gone –
Charlie Rose:
Yeah, right. Right. So what’s the answer to all this?
Marc Andreessen:
Well, the answer to this is there is, I think, always a middle ground. You have to be very respectful of privacy. You have to provide a lot of controls to let people decide. Have sliders, and let people decide how they want to set it.
Charlie Rose:
Okay.
Marc Andreessen:
Give people the tools.
Charlie Rose:
Back to Ning. How many networks do I want to belong to? There is Linkedin, there is Facebook, there is — on and on and on and on.
Marc Andreessen:
I would say how many things do you care about in your life?
Charlie Rose:
Oh, man.
Marc Andreessen:
How many things are you into?
Charlie Rose:
I don’t want to belong to that many social networks.
Marc Andreessen:
But I mean that’s where it’s going. You’re going to be interconnected. You’re going to be interconnected into a web –
Charlie Rose:
Of tennis players, of whatever in your –
Marc Andreessen:
Exactly. People you grew up with, people — you know, shared –
Charlie Rose:
How many do you belong to?
Marc Andreessen:
Oh, dozens.
Charlie Rose:
Dozens. What kind are they? Tell me what they are?
Marc Andreessen:
There are all kinds of things. For music, I like crime fiction, I like –
Charlie Rose:
Just — slow down. Did you create this on Ning, this crime fiction?
Marc Andreessen:
No, no, no. In that case somebody else created it, and so –
Charlie Rose:
And I joined it.
Marc Andreessen:
I’m watching it.
Charlie Rose:
Have you created any of them yourself?
Marc Andreessen:
Well, I’ve created networks — I haven’t created anybody that [inaudible] scale.
Charlie Rose:
[laughter]. [talking simultaneously]
Marc Andreessen:
I haven’t created any that I would tell your audience about.
Charlie Rose:
10 or 11 or –
Marc Andreessen:
Exactly. Exactly. Small. But we use them all. One of the nice things is we see all the new networks being created, so we sign up for a lot of them ourselves.
Charlie Rose:
When we interview people like you, we always have to ask this question. What is the hottest idea there and what’s the next big idea?
Marc Andreessen:
Yeah. Well, so I mean I think — maybe this goes off track from your question, but I think the hottest idea is innovation is actually alive and well. I mean there are more — I know. But look, there are a lot of people who are arguing the other side of that.
Charlie Rose:
That innovation is dead?
Marc Andreessen:
Oh, there is a lot of people — I mean a lot of people I have been hearing or reading. There is a lot of, you know — well, I mean –
Charlie Rose:
Saying what?
Marc Andreessen:
Innovation is dead or these things can’t be turned into businesses. One or the other.
Charlie Rose:
That’s not innovation. They got this great thing but they can’t monetize it.
Marc Andreessen:
There is even some very successful people out in Silicon valley who are arguing that innovation is dead.
Charlie Rose:
Like whom?
Marc Andreessen:
Two very good friends of mine, Andy Grove and Judy Estron [spelled phonetically].
Charlie Rose:
That’s true. They are saying — you’re right, you’re right.
Marc Andreessen:
There are actually people saying that. So what I’m actually seeing is an endless series of new ideas. We can name all kinds of — cloud computing is a fantastic new idea. It’s –
Charlie Rose:
That’s not a new idea. It’s been out there for –
Marc Andreessen:
Well, I started a company called Loud Cloud in 1999 –
Charlie Rose:
I know you did.
Marc Andreessen:
– which —
Charlie Rose:
10 years ago —
Marc Andreessen:
People didn’t know what we were talking about. But now, it’s a big deal. I mean it’s a legitimate —
Charlie Rose:
It’s been around for a while.
Marc Andreessen:
But at scale, as a big thing — let me tell you what’s happening. So Amazon has this so-called cloud service. And so companies instead of needing their own servers, they can just upload their software code into the Amazon cloud and it will actually return their application or their site on Amazon servers. So you’ve got a whole generation of startups that are basically just a couple of programmers with a couple laptops, and they upload everything into the Amazon cloud. It’s pay by the drink like utility. So all of a sudden, you have this whole new wave of Internet startups getting started for practically no money, right? So there is a level of innovation. Every kid coming out of Harvard, every kid coming out of school now thinks he can be the next Mark Zuckerberg, and with these new technologies like cloud computing, he actually has a shot.
Charlie Rose:
There are more opportunities today than there have ever been.
Marc Andreessen:
Oh, yeah.
Charlie Rose:
Because of all the different kinds of things that are possible?
Marc Andreessen:
Yeah. It’s a cascading. It’s a layering effect. Every layer of new technology makes another layer of innovation —
Charlie Rose:
Exactly.
Marc Andreessen:
– possible on top, and that just keeps roll.
Charlie Rose:
All right. Let’s talk about mobile for a second, because you’ve said some interesting things about that, cell phones and mobile. There was a big meeting, I guess, over in Spain, Barcelona or somewhere —
Marc Andreessen:
Yep.
Charlie Rose:
– right? Did you go to that?
Marc Andreessen:
No, I didn’t.
I read about it online.
Charlie Rose:
So did I.
Marc Andreessen:
There we go.
Charlie Rose:
So tell me about it. What came out of that, and so — what can we say about where we are and where we’re going in terms of mobile? And later, this whole idea of another company you have called Quick or something.
Marc Andreessen:
Qik —
Charlie Rose:
Okay So take off.
Marc Andreessen:
So the big thing is mobile has arrived. So you have these technology friends that people talked about, and talked about, and talked about, and talked about, and talked about, and they never quite happen. And then all of a sudden, they happen. And they’re a big deal. The Internet was like that. The Internet took off in ‘94, ‘95. The Internet had much getting built for 25 years up to that point. But it took off in ‘95.
Charlie Rose:
It took off because of you in part, because of the browser?
Marc Andreessen:
Because the technology got right. The technology of the browser. But the browser became possible because the windows interface, the windows and Macintosh user interfaces became mainstream. So the technology comes together, and all of a sudden the market takes off. So in mobile, you’ve now got the 3G networks.
Charlie Rose:
Right.
Marc Andreessen:
You’ve got really super sophisticated handsets. You’ve got application developers, you’ve got content, you’ve got all this stuff, and it’s just catalyzed, and it’s just gone boom. And so here in the US, we see it with the iPhone.
Charlie Rose:
Right.
Marc Andreessen:
Right? And now the iPhone is a template that every other technology vendor is going to copy, right, or base ideas off of.
Charlie Rose:
Explain that.
Marc Andreessen:
Right. So the iPhone is the first true cell phone that is actually a full computer.
Charlie Rose:
Right.
Marc Andreessen:
It has a full operating system. It has the ability to support a large number of applications. It has a software development kit that you can use to build applications. It has a way to distribute applications over the network onto the phone.
Charlie Rose:
It’s a whole business. It’s a new venture, in fact, for people to provide applications for the iPhone.
Marc Andreessen:
Exactly.
Charlie Rose:
It’s a big venture capital business.
Marc Andreessen:
Yeah. And in fact, actually, there’s thousands of iPhone applications. But –
Charlie Rose:
Exactly.
Marc Andreessen:
– [unintelligible] in the last 12 months.
Charlie Rose:
Exactly.
Marc Andreessen:
And some of them are free, and some of them you charge money for.
Charlie Rose:
Right.
Marc Andreessen:
And there’s just enormous diversity of application. So whether you’re a doctor, and you’re reviewing X-rays on the thing, or whether you’re a caterer listening to music, or whether you’re sending — you know, you’re on the FaceBook application or you’re on a Ning application, it can do anything. So it’s a full general purpose computer. And that’s the first time that somebody has actually delivered that product with a fast — with relatively fast AT & T 3G network.
Charlie Rose:
What was so different about the iPhone that made it sort of a game changer?
Marc Andreessen:
I would say two things. One is, it’s the first real operating system. And I say that’s a sort of — sounds like it’s a technical concept. But it’s the first operating system that really makes a lot of applications possible. And there’s a whole bunch of technical details for that, but it’s a real [unintelligible]
Charlie Rose:
A big system within a phone.
Marc Andreessen:
It’s actually unism. It’s actually the same operating system –
Charlie Rose:
Right.
Marc Andreessen:
– that runs banks and airlines.
Charlie Rose:
Right.
Marc Andreessen:
Just shrunk down to run in the phone. And that’s part of the brilliance of what Apple did is it’s a real operating system. And then also, they packaged the whole thing together, including the tool kits to build the applications and then the way to actually distribute the applications onto the phone. And that had never been done before. So you could have bought a Microsoft phone or a Rim phone or whatever, and they just — they never had it quite put together right so somebody could build an application, distribute it, sell it and get it down to [unintelligible].
Charlie Rose:
In fact, you have said that iPhones are the demarcation point between operating systems. And the other problem we had is that from were so many different standards.
Marc Andreessen:
Right, right, of course.
Charlie Rose:
In America, unlike Europe, and so they got a — and Japan, they had a huge –
Marc Andreessen:
Yeah.
Charlie Rose:
[unintelligible] Asia, not Korea.
Marc Andreessen:
For building proprietary systems, they had a big advantage because there was a single network.
Charlie Rose:
Right.
Marc Andreessen:
Basically a single kind of network. Now in the US, the networks have also consolidated down.
Charlie Rose:
Right.
Marc Andreessen:
So there’s a much smaller number of networks. But now the iPhone is a point, sort of a central point whereas a developer, you can rely on the iPhone being a stable platform for development. And so a lot of developers are doing that. And then the other significant thing is now that the iPhone is successful, it paves the way, much like the MacIntosh paved the way for Windows PCs.
Charlie Rose:
Right, right, right.
Marc Andreessen:
It paves the way for another set of companies, whether it’s Microsoft or Rim or, you know, dozens of others who are startups to create new devices.
Charlie Rose:
By the way, you are one of the people who really do — and I think that this is enormous, to give credit to Bill Gates for developing an operating system that was the standard.
Marc Andreessen:
Yes.
Charlie Rose:
And things happened because of that.
Marc Andreessen:
That’s a big deal.
Charlie Rose:
You know.
Marc Andreessen:
That’s a very big deal. And it’s a very serious commitment for a company. Apple’s had this commitment, Microsoft’s had this commitment. You have to commit — it’s actually a commitment to what’s called backward compatibility. See, if you have to commit to never break anything. So you load up Windows Vista, and you can still run the original Visical [spelled phonetically] from 30 years ago, which was the original killer app on the PC, original spreadsheet. And so that is a long-term institutional commitment that takes a very serious company to be able to do. And then the opportunities, I mean, Netscape was an application that got built on top of that kind of platform. The Macintosh is that, the iPhone is that. And it’s sort of a responsibility for the next set of vendors to do the same thing.
Charlie Rose:
I just read I think this week where Microsoft has an operating system that they’re — a mobile operating system that they’re now going to work with LG and a whole new phone. I mean, other people will be doing that.
Marc Andreessen:
Well, they’re doing a rethink.
Charlie Rose:
Trying to create new operating — what?
Marc Andreessen:
They’re doing a rethink. They’ve had a mobile strategy for years, right, and they’ve had a mobile, Windows Mobile. They’re doing a rethink of it because they’ve seen the iPhone, right? So the iPhone is like –
Charlie Rose:
They’re doing a rethink because they saw Google, too.
Marc Andreessen:
Well, and also — another good reason to do a rethink. The iPhone is liked beam from the future, right? The iPhone, when it landed was like beamed in from five years in the future. And so it has — it itself is fantastic, and it has inspired a level of creative thinking around it that we’re going to see the results from over the next two, three, four years. And there’s lots and lots — I mean Samsung obviously is very serious about this, Nokia is very serious about this. You know, and then there’s a lot of software developers. Ning is very serious about providing the software for this. FaceBook is as well. And Google is as well. And so there’s going to be just a tremendous amount of innovation, and then actually a lot of people using it. It’s going to be a real thing.
Charlie Rose:
What is this idea you have for what is it called Qik?
Marc Andreessen:
Qik, yeah.
Charlie Rose:
Qik, is that way you can do live streaming wherever you are?
Marc Andreessen:
Any cell phone with a camera.
Charlie Rose:
Yeah.
Marc Andreessen:
Can be a source of live streaming video straight onto the internet or onto everybody else’s phones.
Charlie Rose:
All right. Just explain to me the potential of this.
Marc Andreessen:
So basically, 3 billion phones in the world. They all have cameras. 3 billion sources of live streaming video.
Charlie Rose:
Right.
Marc Andreessen:
Anybody, at any time can pull out of their pocket and can start streaming video live. They could be at a political protest.
Charlie Rose:
Right.
Marc Andreessen:
They could be at a — you know –
Charlie Rose:
So we can go live anywhere in the world now –
Marc Andreessen:
– bank robbery.
Charlie Rose:
– at anyplace.
Marc Andreessen:
You could be doing an interview.
Charlie Rose:
Right.
Marc Andreessen:
And it goes live. And of course, it goes live which is a big deal, but it also gets recorded, and so it can be streamed. It can be played back later. And so it streams up onto the web. You can embed these videos into your blog –
Charlie Rose:
And what’s the quality of this –
Marc Andreessen:
– your YouTube video.
[talking simultaneously]
Charlie Rose:
–video?
Marc Andreessen:
Well, it depends, there are phones actually that actually don’t have camcorder functions yet and so it actually stitches together a video stream out of individual frames, which is a neat trick by itself. And then now there are cell phones coming out — there are cell phones coming out now that have high def camcorders built in. And so you’re going to have in a couple years it’s going to be fairly common to have a little phone and it’s going to have high def camcorder and it’s going to be streaming high def video over either 3G or the new 4G networks straight onto the Web.
Charlie Rose:
And you know what they’re going to do? They’re going to be able to inject these little devices inside us you know a live stream what’s happening in our body so they’ll tell us exactly how everything is functioning.
Marc Andreessen:
I can’t wait.
Charlie Rose:
I can’t either. No, I’m serious.
Marc Andreessen:
[unintelligible] for healthcare?
Charlie Rose:
Technology is changing medicine more than any other particular thing that I know of or it has the potential to change more than anything else.
Marc Andreessen:
It really should.
Charlie Rose:
I mean imaging and the rest. Imaging is like just the beginning of the potential and you’ve seen it now with the brain in extraordinary ways.
Marc Andreessen:
Yep. Absolutely.
Charlie Rose:
All right, so is this thing working now, this [unintelligible] thing?
Marc Andreessen:
Yep, yeah, this works, so you download it, you install it, you use it, you stream it, people are –
Charlie Rose:
How much does it cost?
Marc Andreessen:
Well, you know they’re working on that.
Charlie Rose:
You’re so evasive.
Marc Andreessen:
They’re working on that. There’s a bunch of you know there’s a bunch of –
[talking simultaneously]
Charlie Rose:
Your reputation is being very candid and outspoken –
Marc Andreessen:
They’re working on that.
Charlie Rose:
Everything is you’re working on it, I can’t tell you.
Marc Andreessen:
They’re working on it.
Charlie Rose:
All right.
Marc Andreessen:
So the thing with these things is that actually makes sense, people actually laugh about this, but it actually makes sense, if you can get the scale, you can figure out a way to build a business around it.
Charlie Rose:
Of course.
Marc Andreessen:
If you can’t get it to scale, it doesn’t matter how many creative ideas, you have to build a business. And so you raise venture capital. You get it to scale and then you build a business around it.
Charlie Rose:
Let’s talk about venture capital. You’re starting a new fund.
Marc Andreessen:
I am starting a — for the first time in my life –
Charlie Rose:
You and — for the first time?
Marc Andreessen:
I’m crossing over into the dark side. I’ve been an entrepreneur three times. I started three companies.
Charlie Rose:
Yeah, and I mean that was — you’ve been the guy who’s out looking for venture capital.
Marc Andreessen:
I’ve always been the guy raising money.
Charlie Rose:
Yeah, and so now you’ve got a bunch of money and you have a partnership or a fund and you’re raising money from all your friends.
Marc Andreessen:
I’m creating a fund. I actually — it’s a friend of mine, friend of mine is a long term colleague, Ben Horowitz and I, who have worked together for 15 years, he and I are going to –
[talking simultaneously]
Charlie Rose:
So what’s your history with him because I’ve read of it?
Marc Andreessen:
Oh, he was one of our first guys at Netscape.
Charlie Rose:
That’s what I thought, right.
Marc Andreessen:
So he was one of our key product leaders at Netscape and he’s just coming off of a job at Hewlett Packard. We sold our second company to HP and he was running 3,000 people there and was very successful. So he and I are going to start it. And it’s going to be sort of a — it’s going to invest in a lot of early stage — lot of companies like the ones we’re talking about. And you know our claim to fame is we’ve actually you know by entrepreneurs for entrepreneurs, we’ve done it, we’ve been on that side of the table for a long time, we know what it’s like.
Charlie Rose:
Why are you doing this?
Marc Andreessen:
Because of the nature and the scale of the opportunities. We’re actually been investing ourselves with our own money for three years and we’ve invested in 36 — he and I invested together in 36 deals in three years so about one a month.
Charlie Rose:
Yeah, but I’ve read that you think that the normal investment for you to make, this may have been prefund, what, was about 100,000 to 200,000?
Marc Andreessen:
Yeah, we –
[talking simultaneously]
Charlie Rose:
You’d have to make a lot of small investments.
Marc Andreessen:
Right.
Charlie Rose:
So that if anything goes bad or there’s no –
Marc Andreessen:
That’s right, and we’re actually going to preserve and extend that model in the fund. So historically we’ve only invested up to $200,000 total in a deal. We’re going to definitely bring that up in the fund because we’re going to raise more money, be able to put more money in. But it’ll be pretty typical for us to do a $500,000 investment or maybe down to 200,000 or maybe up to a million in a deal to start. And what we’re seeing is a whole generation of startups that actually don’t need very much money to get started, so the cloud computing example, or a mobile application, an iPhone developer doesn’t need very much money to get started.
Charlie Rose:
What’s not very much money?
Marc Andreessen:
Very much money might be anywhere from 200,000 to say a million and a half.
Charlie Rose:
Really?
Marc Andreessen:
Right.
Charlie Rose:
To get started to –
Marc Andreessen:
To basically to prove that the product can work, right? To basically give you something that you can use, right? And then based on that you then often go raise a traditional venture capital route.
Charlie Rose:
I heard the other day a story of someone who went out to prove a product that did not exist online to see if there was a market –
Marc Andreessen:
Mm-hmm, oh, right exactly actually that’s — I think it’s the same guy, it’s the guy we’ve actually invested in.
Charlie Rose:
Right.
Marc Andreessen:
Who actually is raising money himself for his own company now.
Charlie Rose:
Right.
Marc Andreessen:
From a venture capitalist.
Charlie Rose:
Right.
Marc Andreessen:
Very close to getting that deal done. And so he had this very clever idea which was you can actually launch — he used Google Ad Words, right? So he was buying little ads on Google. He said the great thing with Google Ad Words is you put up an ad and people click and then even if there’s nothing on the other side they didn’t know that and so you can actually test how often they click and so you can test what the response rate is and so the really, really smart marketers are doing this now, you run Google Ad Words campaigns, or the equivalent thing on other systems, and you check the response rate for different words, different value propositions, different markets, different nationalities, different languages, and you see the response rates. And you don’t even have to [unintelligible], you don’t have to have the product. And you basically build the product after the fact and you back into –
Charlie Rose:
So if there’s enough support for the product, then you go make it, right?
Marc Andreessen:
But what I’ve heard is in the old days really smart book authors used to put classified ads like in literary journals and say you know new book you know poetry for sale, $30, and then they would you know if they got like 500 orders they would actually write the book.
Charlie Rose:
Oh, yes, yeah.
Marc Andreessen:
And if they didn’t, they’d return the money. And so you can just basically do a much more sophisticated version of that online. And so this guy, Andrew Chen [spelled phonetically], is the guy I’m thinking of.
Charlie Rose:
Yeah, what’s his idea?
Marc Andreessen:
So it’s a new kind of — you’re going to hate this — it’s a new — it’s undisclosed — it’s a new kind of viral consumer internet service, by viral, meaning it’s going to — it’s a service like a Facebook or a Twitter that spreads from user to user on its own steam, where he has a –
[talking simultaneously]
Charlie Rose:
Why am I going to hate this?
Marc Andreessen:
Because I’m not going to tell you what the idea is.
Charlie Rose:
[unintelligible]
Marc Andreessen:
Or I’m also not going to tell you how he’s going to make money. But he’s still –
Charlie Rose:
Or how much money he’s made or whatever.
Marc Andreessen:
Or how much money he’s made. He’s getting started. But it’s this approach. He stakes this analytical marketing approach and runs the ad campaign before the product exists.
Charlie Rose:
Tell me about Twitter.
Marc Andreessen:
Twitter.
Charlie Rose:
You’re invested in that, too?
Marc Andreessen:
Yeah. Exactly. That’s the kind of company — I’m an angel investor in that, and that’s the kind of company — that’s exactly the kind of thing that we want to do in the funds. So —
Charlie Rose:
Are they making any money?
Marc Andreessen:
Not yet. Not yet. Actually Twitter — I believe Twitter’s current revenue may actually be zero.
Charlie Rose:
Yes, exactly. Explain what Twitter is and why everybody is talking about it.
Marc Andreessen:
So Twitter is a new kind of messaging system, or sort of a combination of an SMS sort of short messages, a little bit like blogging. So basically, people can post either from their PC key board or from their cell phone. They can post these short updates. And it actually limits the updates to 140 characters.
Charlie Rose:
Right.
Marc Andreessen:
And when you go to the Twitter home page, it just has a simple question which says what are you doing? And then you type in 140 characters, and it says that. And you been subscribe on Twitter to people you’re following. And they could be people who are friends of yours, or people who don’t know who have public feeds. So for example, you could have a feed on Twitter, if you don’t already, that has a notification of the guests on each show and a link to the video.
Charlie Rose:
Right.
Marc Andreessen:
And the thing is growing like wild fire —
Charlie Rose:
I know it is. It’s just amazing.
Marc Andreessen:
Exactly. So it percolated along for about a year, and then it took. The last two or three months, it’s growing vertically. And so — and the uses are nearly infinite. It can be used for news, like you can — there is a whole API —
Charlie Rose:
As long as you can keep it within 140 characters, you got —
Marc Andreessen:
Yeah. But 140 characters, you can headline and link to a news article. You can do a headline and a link to a video. You can do a notification — the other thing is like real time reporting —
Charlie Rose:
You can do a synopses and a link to a website?
Marc Andreessen:
Link to a website. A link to a Qik video. Exactly. You can do all these things. And you can search on it, right. So you can see what’s happening in real time. So the next time there is a, you know, next time a plane lands in the Hudson, this actually happened with the plane that landed in the Hudson, all these people are doing Twitter. Is there are actually people on the plane with their cell phones doing Twitter updates saying, well, I’m hoping they get the rafts deployed. Oh, good, they got the rafts deployed.
Charlie Rose:
Water coming in the plane, what do I do now?
Marc Andreessen:
Exactly. And so it’s basically — it’s sort of — think about it as sort of a real time electronic nervous system for lots and lots of sort messages to be accept all over the planet for all kinds of people to all kinds of other people for all kinds of uses.
Charlie Rose:
So when did you become an angel for this?
Marc Andreessen:
When it first got started.
Charlie Rose:
Really? Why? Tell me the process in your little mind that made you think that this was a big deal.
Marc Andreessen:
Okay, so two things. One is the entrepreneurial I’m a huge fan of. So the entrepreneur is a guy by the name of Evan Williams. He created blogger, which is one of the big blogging services.
Charlie Rose:
Right.
Marc Andreessen:
He created a company called Odeo. This is a good example of what’s happening. He created a company called Odeo for podcasting. He raised 3 1/2 million dollars. Turns out the idea didn’t work. He did something revolutionary. He gave the money back. He went back to the investors, he made them whole, he gave the money back. He had this little side project —
Charlie Rose:
He’ll earn a reputation right there.
Marc Andreessen:
Yeah. Exactly. He actually made up the difference out of his own pocket and gave the money back. He had a side project that spun out Twitter that he and another guy named Jack Dorsey were working on as a sort of a side project, which was Twitter. It started to take off. So they said, you know what? It’s that, not this. Shut that down, return the money. This. Raise new money for it. All the investors who were in the first company were delighted to come into the second company because he had the reputation for being somebody who either wins or treats you fairly. And then, you know — for those of us in the industry just looking at the dynamics of how he put Twitter together, it was pretty obvious that it was going to work at all, it was going to be viral and it could get big. So, you know, he placed the bet early, relatively small amount of money. I don’t know what he raised in the first round, a couple million dollars or something.
Charlie Rose:
When did you appreciate the idea of [unintelligible] viral?
Marc Andreessen:
Oh, viral? I don’t know. Probably — I would say probably post Netscape. We saw it with Netscape a lot, but we didn’t really have the terminology to describe it. But I would say especially PayPal and the PayPal guys who are friends of mine have been very, I think, advanced thinkers on that topic. And especially in 2000, 2001, 2002.
Charlie Rose:
I think Peter is on the board of Facebook.
Marc Andreessen:
Peter Till [spelled phonetically] is on the board of Facebook with me. And so he is — he’s just — they’ve developed a very sort of rigorous way of thinking about this concept, and so I’ve learned from that, and been involved in much of these businesses.
Charlie Rose:
Here is what I have never understood, I want you to explain to me at this mom. Microsoft decides that Netscape has a good idea. We’d like to be in that business.
Marc Andreessen:
Sure, yep.
Charlie Rose:
They go to the University of Illinois where they have the code.
Marc Andreessen:
Yes.
Charlie Rose:
Which you —
Marc Andreessen:
Wrote.
Charlie Rose:
– wrote. You wrote the codes.
Marc Andreessen:
Yeah.
Charlie Rose:
University of Illinois insisted on keeping the code that you —
Marc Andreessen:
We didn’t take it with us.
Charlie Rose:
Was that a voluntary choice by you?
Marc Andreessen:
Oh, yeah, that was voluntary.
Charlie Rose:
So you could have taken it with you, but you didn’t.
Marc Andreessen:
We knew it was no good.
Charlie Rose:
Wait a minute. Let me finish the story. So they had it and so Microsoft went and bought the code.
Marc Andreessen:
Mm-hmm.
Charlie Rose:
From the University of Illinois, right?
Marc Andreessen:
Actually indirectly.
Charlie Rose:
Okay. They got it.
Marc Andreessen:
Illinois licensed it to a startup company which then licensed it the Microsoft, and then was surprised when Microsoft decided to actually do something with it.
Charlie Rose:
And what they did was created Explorer?
Marc Andreessen:
Yes.
Charlie Rose:
Right?
Marc Andreessen:
Which is why I now take credit for both, Firefox —
Charlie Rose:
[laughter]
Marc Andreessen:
– and Internet Explorer.
Charlie Rose:
And Mosaic became —
Marc Andreessen:
Mosaic —
Charlie Rose:
Became Firefox.
Marc Andreessen:
No, Mosaic became IE.
Charlie Rose:
IE, right.
Marc Andreessen:
Netscape became Firefox.
Charlie Rose:
Right. Right. Right. That’s right. Because AOL and then —
Marc Andreessen:
As a matter of fact, if you go to the about page on IE, if you go to about IE up in the menu there, you’ll actually see down at the very bottom, developed at the University of Illinois.
Charlie Rose:
Amazing.
Marc Andreessen:
Actual center for computing applications.
Charlie Rose:
You’re a big guy.
Marc Andreessen:
I take credit for that. Exactly.
Charlie Rose:
All right. Let me talk about where this — this whole thing in the world is going in terms of Facebook. Newspapers.
Marc Andreessen:
Yep.
I’ve heard of them.
Charlie Rose:
What is it between you and the New York Times?
Marc Andreessen:
You want to know what really pushed me over the edge?
Charlie Rose:
What?
Marc Andreessen:
Judy Miller.
Charlie Rose:
Really?
Marc Andreessen:
Just —
Charlie Rose:
Explain who Judy Miller is.
Marc Andreessen:
Technology. She’s the national security reporter who covered the run up to the Iraq war and the WMD topic. And I just — I took —
Charlie Rose:
She was wrong on the question of WMD and people thought her sources —
Marc Andreessen:
Completely, completely incorrect. And I would normally cut somebody slack for something like that, but then the folks at Knight Ridder at the time, Knight Ridder, now McClatchy got it completely correct.
Charlie Rose:
Right, they did.
Marc Andreessen:
So I actually got to know a couple of those folks, and I asked them like what was the difference, how did you get it right? They said, oh, we talked to the colonels. The Times had access to all the generals and all the politicians. We talked to the colonels. We talked to the guys that were actually in the field doing the work. They said, we don’t see any of this. We don’t understand what these guys are talking about in Washington. We don’t see any of it. So they said to us was totally obvious. So like at that point –
Charlie Rose:
At that point what?
Marc Andreessen:
At that point, I didn’t know this at the time, like a lot of people, so I read the Times, and I said, hey, you know, war with Iraq, great idea. Right? Existential threat, weapons of mass destruction. He wants to kill us. We have to go kill him first. So, okay. I’ll give somebody one shot at that but not two.
Charlie Rose:
And then?
Marc Andreessen:
And then –
Charlie Rose:
That happening turned you against the New York Times because you created a thing called New York Times death watch.
Marc Andreessen:
In fairness, I’ve actually totally dropped that. I think at this point it’s become unfair.
Charlie Rose:
To the New York Times?
Marc Andreessen:
Well, because –
Charlie Rose:
Your sense of fairness overwhelms me.
Marc Andreessen:
I know. Things — events are playing out.
Charlie Rose:
So you’ve got the New York Times death watch is no longer there.
Marc Andreessen:
That was a blog post that I did. A blog post that I did that I was kind of — it was a little bit tongue in cheek and a little bit serious. But with an underlying point.
Charlie Rose:
Here is where you go — what’s the under underlying point?
Marc Andreessen:
Well, the underlying point is fundamentally, there is a structural change happening in that business, so –
Charlie Rose:
In the newspaper business.
Marc Andreessen:
In the newspaper business. Well, in the entire media business. In all branches of the media industry, but the newspapers are sort of front and center topical. And the reason I bring up Judy Miller is because the typical — there are exceptions to this. There are friends of mine who are trying very hard to grapple with this. But the typical sort of newspaper industry response is, you know, we just got to figure out a way to kind of gut through it, like if we can — if we can get through the advertising recession, if we can downsize the paper, if we can downsize the news room –
Charlie Rose:
I don’t think that’s what their idea is, but go ahead.
[NE] .
Marc Andreessen:
Start returning ads on the front page, if we can just figure out some kind of combination of things, then we can keep printing the paper and delivering it as a physical medium, and this Internet thing will kind off stay off to the side.
Charlie Rose:
No, I think that’s not true. I think they’re trying to survive until the Internet thing pays off. That’s how they’re doing it.
Marc Andreessen:
But this is — this is playing offense versus playing defense. Their revenue today is still, in most cases, 90 percent print.
Charlie Rose:
Right.
Marc Andreessen:
10% online.
Charlie Rose:
Right.
Marc Andreessen:
That means they spend 90 — I can tell you. I have been involved with a lot of companies, right? Ninety percent — if 90 percent of your revenue is coming from something, 90 percent of your time is being spent on that. So they’re spending 90 percent of their time –
Charlie Rose:
And the future 10 percent –
Marc Andreessen:
Future 10 percent, and spending very little time playing offense. For the most part, they’re Internet divisions have been off to the side, often with different news rooms. I mean just like bizarre separation.
Charlie Rose:
So to play offense for a newspaper for you means what?
Marc Andreessen:
Oh, you got to kill the print edition.
Charlie Rose:
You would stop the presses tomorrow?
Marc Andreessen:
You have to kill it.
Charlie Rose:
Stop the presses tomorrow.
Marc Andreessen:
You have to kill it.
Charlie Rose:
Stop the presses tomorrow.
Marc Andreessen:
Stop the presses tomorrow. I’ll tell you what. The stocks would go up. Look at what’s happened to the stocks. This investors are through this. The investors are through the transition. You talk to any smart investor who controls any amount of money, he will tell you that the game is up. Like it’s completely over. And so the investors have completely written off the print operations. There is no value in these stock prices attributable to print anymore at all. It’s gone.
Charlie Rose:
So you would recommend to the owners of the New York Times, stop printing papers.
Marc