Yesterday, we asked Andreessen Horowitz partner Peter Levine how he and the firm evaluate enterprise companies to invest in.
Usually, the initial pitch meeting is about an hour long. That leaves just a few minutes for chatting to really get to know the team.
At some point, the partners ask the entrepreneurs about their goals for the company.
If they say something like “we’d be a great acquisition target” for a large company like Google or Oracle, that’s almost always a red flag.
Why? Because Levine and the firm are looking for startups that want to build platforms — defined as any technology that forms the basis for an entire ecosystem of other businesses. Apple’s iOS, Microsoft’s Windows, and Facebook Connect are platforms a lot of consumers are familiar with. But enterprise technologies like Salesforce.com and VMWare’s virtualization products are also platforms.
Platforms are the real multibillion-dollar opportunities.
There’s a ton of hard work and talent needed to make these platform ambitions come true — a lot of entrepreneurs SAY they’re building a platform when all they really have is a narrow, single-function application and a big dream.
But for Levine, dreaming big is table stakes.
Note that this is only one VC’s opinion — others may be perfectly happy investing in a company with the goal of spinning it off in a couple of years.
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