Photo: djevents via Flickr
OpenTable CEO Jeff Jordan announced his retirement in May, the same day that the company posted decent but unspectacular earnings.It was the cap to a wild stock ride — shares had gone up 400% since January 2010, but leveled out earlier this year and dropped 15% on the day Jordan announced his retirement.
The rumour was that he was quitting to become a partner at Andreessen Horowitz, but it wasn’t until last week that Marc Andreessen confirmed it.
We caught up with Jordan last week to talk about his move. Here’s some of what he told us:
- Why he moved. After more than a decade running OpenTable, PayPal, and eBay, he felt like he’d “kind of done the operating thing.” He was already an advisor or board member to about a dozen early stage startups, so moving to the VC world was a natural fit. (He noted that he’s still the chairman at OpenTable and will still be involved in its business.)
- Don’t underestimate mobile. “The amount of OpenTable’s business that comes from through mobile devices already is astonishing.” He also said that mobile devices like smartphones and tablets add entirely new use cases so people spend far more time on the Internet.
- He loves network effects. eBay, PayPal, and OpenTable all benefited from strong network effects — the more people used them, the more useful they became. It’s safe to assume he will be looking for businesses with similar characteristics.
- Betting on companies, not segments. Unlike some other VC firms, Andreessen is pretty agnostic about the market segments and geographies that it invests in, although it has what Jordan calls a “bias” toward Silicon Valley companies. “There’s 10 or 15 companies traded each year that matter, and we would love to participate in as many of those that we can.”
Here’s a lightly edited transcript of our conversation:
Business Insider: You’ve been a CEO of companies for some time. Why did you decide to move into the venture world right now?
Jeff Jordan: I got to Silicon Valley a little over a decade ago, and have had the privilege of running some pretty special companies — I mean, eBay, PayPal and OpenTable. What I found over time was that I was getting increasingly involved in early stage companies — people looking for seed capital, or for an advisor or a board member. Over time, I realised that I’ve kind of done the operating thing. It’s been challenging, and a bit exhausting, and the amount of my time that I was allocating to working on startups — you know, early stage, fast-growing businesses — was going up and up. So when I started to talk to Mark and Ben, they said, “Tell us some of the companies you’re involved with.” And I think I stopped counting at about 12. And so part of what this is is formalising and going pro with what I’ve been doing with my time anyway.
BI: Who were some of these early stage companies you were working with?
JJ: There have been some that have had monetization events and some that are still in process. Some of the ones that have had good events are Pure Digital — the Flip video camera — Hotwire, Tiny Prints, that sold to Shutterfly earlier this year. On the ongoing work: Zoosk, CafePress, TrialPay, Wealthfront.
BI: So why Andreessen Horowitz? Tell me a little bit about the process of starting to work with them.
JJ: I’ve known Mark and Ben for a while, but more socially than professionally. I had, over the years, had different conversations with different firms. The approach that Mark and Ben have put together really appealed to me. It’s the entrepreneur first, targeting general partners that have operating experience, really investing heavily in value-added services that helps the portfolio company — frankly, like an operating business — were all appealing. So when I decided that I wanted to be an investor, this was a pretty easy decision on where to do it.
BI: So what areas of investment you’re going to be focusing on? Is it going to be mostly consumer internet?
JJ: I think a lot of my background is in consumer internet, between PayPal, eBay, OpenTable, and some of the companies I was mentioning like Hotwire and Cafe Press and TrialPay. One thing that is appealing is the breadth of the canvas that Andreessen Horowitz plays on. So every partner votes on every investment. And so I hopefully get to bring some expertise in that consumer Internet, but I also get to play on a broader area of business, which is attractive to me.
BI: Do you think there are any corner areas that aren’t getting the investment and the attention they might deserve?
JJ: That hopefully gives some level of proprietary intellectual property. [Laughs] I do think social is interesting. I think mobile is just in its first inning. The amount of OpenTable’s business that comes from through mobile devices already is astonishing. And so I think that’s still in the first inning, and a lot of very interesting things are going to play out in front of it.
BI: What do you think of the platform situation with mobile? iPhone gets most of the profit, Android gets most of the growth. Is there room for a third platform?
JJ: It’s interesting — concentration and fragmentation at the same time. On the tail, there’s a lot of cost to building proprietary apps to play on the emerging platforms, but it’s still that 80/20 world with the iPhone and Android really driving most of the commerce. There are differences with geography, but in the U.S. at this point it’s largely a two horse race.
BI: How would you handicap Microsoft’s chances, versus what’s going on with RIM?
JJ: I like the Microsoft product. It looks pretty good. I think RIM — almost innovator’s dilemma. It was so successful driving an email-intensive product. I was a user until a few years ago. But they now need to make a leap to stay relevant.
BI: What areas do you think are a little over-hyped or a little too hot?
JJ: Part of the thesis of Andreessen Horowitz [is] that the net has gotten so big that new ideas can get enormous incredibly quickly. Zynga, that’s one and Groupon, that’s one. Businesses are getting to massive scale extraordinarily quickly now. We thought that eBay grew fast or Google grew fast, but these things are exploding. So, it’s harder to find an unpopulated niche, but if you do, there’s just explosive potential and growth, and in many cases, profitability.
BI: Is that primarily a function of the number of people who are online now as opposed to 10 years ago?
JJ: The number and the depth of use. And the robustness of the form factors. Mobile can add entirely additional use cases. I know my online time has expanded significantly from the time when I used to just have a PC.
BI: How does your experience at OpenTable inform what you’re going to be doing now? Any broad lessons?
JJ: I had a spectacular four years as OpenTable CEO and remain an active executive chairman. I think, for me, some of the interesting observations there are, you know, global is important, mobile is extremely important. And then, network businesses are very attractive. I think if you look at the commonalities between eBay, PayPal and OpenTable, all three are businesses that built a network in a vertical. Network effect businesses are very attractive businesses.
BI: I’ve had that debate with other folks. How important are network effects? How do you get them?
JJ: And what’s a real network effect versus a claimed network effect?
BI: Or network effect versus scale?
JJ: Yeah. Great businesses can be built on scale. I think Amazon has built a phenomenal commerce business largely on scale. Their network effect isn’t obvious to me, but boy, have they used scale effectively.
BI: When you think about network effects, Google introduced their Facebook competitor last week. Do you think it has a chance?
JJ: I have not spent enough time with the Google competitive product. I think the Facebook network effect is strong, judging from the way my 16 year olds use it. Holy cow.
BI: Andreessen-Horowitz has seemed to focus on Silicon Valley companies. At the same time, international Internet growth is a big deal. Do you see the firm starting to look more outside Silicon Valley?
JJ: I think there’s an important distinction between the companies we work with versus the markets that those companies play in. And the markets they play in will be global markets. In terms of companies we work with, I think there’s a Valley bias, but there are a number of companies in the portfolio that aren’t in the Valley. Skype is in Luxembourg, Foursquare is in New York. The belief of the company is that there’s 10 or 15 companies traded each year that matter, and we would love to participate in as many of those that we can. And if they’re not in the Valley, we should go find them.
BI: So you don’t necessarily dismiss the idea of funding a company, say in India?
JJ: India and China I think bring additional levels of complexity. I don’t anticipate in the near term that we will have a direct presence in those markets. I think there is clearly going to be lots of money made in China, for example. One question is: how much of that will be made and returned to Westerners? And that’s two different questions.