The Inside Story of Growth Investing at a16z

David outlines his foundational investment framework developed at General Atlantic: successful growth investments require great founders plus non-consensus views on total addressable market. He argues that exceptional business models are merely table stakes—not sources of edge—despite most growth investors spending 90% of their time on them. Real returns come from identifying markets that will grow bigger and longer than consensus expects.

• •Exceptional business models are table stakes in growth investing, not sources of alpha—you can make mistakes but rarely get upside surprises
• •Edge comes from non-consensus TAM views: markets where consensus lags reality (e.g., Roblox as co-experience platform vs. kids game)
• •Figma example: redefining 'designers' to include all front-end engineers creates 10x+ larger addressable market
• •Pattern recognition: invest in companies that grow faster and longer than expected due to market expansion

Deep dive into evaluating unit economics at growth stage, using DoorDash as a key example of a missed opportunity. David explains how to identify early signals of improving economics in mature markets and localized network effects. He addresses the challenge of unit economics when founders have massive capital raises, emphasizing that the decision to optimize depends on competitive dynamics and customer stickiness.

• •Look for unit economics in mature markets as leading indicators—DoorDash's South Bay suburbs showed strong economics and localized network effects
• •Unit economics are very important at growth stage but rarely surprise to the upside—focus on ensuring they don't deteriorate at scale
• •With capital abundance (e.g., Saloni's $1B raise), advise founders to relax criteria only in hyper-competitive markets with sticky customers
• •DoorDash lesson: missed the power of market position maintaining restaurant-side economics plus innovative loyalty programs

David introduces the 'Glengarry Glen Ross' framework for identifying winner-take-most markets where the leader captures vast majority of market cap. This pattern appears not just in consumer companies with network effects (Google, Facebook) but also in B2B without traditional network effects (Salesforce, Workday, ServiceNow). Understanding these dynamics is critical for valuation decisions and long-term thinking.

• •Winner-take-most markets: first place gets Cadillac, second gets steak knives, third gets fired—leader captures disproportionate market cap
• •Pattern extends beyond network effects to B2B: Salesforce, Workday, ServiceNow command almost all market cap in their categories
• •If you identify the right market structure and leader, valuation becomes more flexible—focus on 5-7 year horizons
• •Tech is ~25% of US market cap and growing—long-term orientation allows tolerance for being off by 1-2 years on timing

David addresses the challenge of 2x higher entry prices in today's market. He explains the 'When Entry Multiples Don't Matter' framework: invest in great companies growing very fast to afford more degrees of freedom on valuation. The key is thinking in 5-7 year terms and being willing to accept timing risk. He shares Qualtrics as his most painful price-based pass.

• •Best companies growing fast provide more degrees of freedom on valuation—focus on identifying those first, independent of price
• •Think in 5-7 year terms: willing to accept risk of being off by 1-2 years rather than missing great companies
• •Qualtrics was most painful price-based pass: huge market hiding in plain sight, sales model that worked, exceptional business model at scale
• •Temporal diversification matters less than adjusting to current market conditions—not trying to be an index fund

Discussion of the proliferation of late-stage capital from hedge funds and crossover investors. David challenges the perception that these players are irrational, noting their returns are actually good. He explains how a16z adapted: faster diligence with prepared minds, focusing on 3-4 key questions rather than exhaustive analysis, and playing the 'end game' by offering more than just capital through the firm's platform.

• •Crossover funds' returns are actually pretty good—not irrational players, just different time horizons
• •Diligence processes compressed dramatically: moved from 2-month deep dives to rapid assessment of 3-4 critical questions
• •Business model assessment is table stakes (1-2 questions), real decision-making focuses on future growth potential
• •a16z's 'end game' advantage: move fast, pay fair prices, write large checks, AND help founders scale through platform resources

Deep dive into a16z's single-trigger decision model where individual GPs make final investment calls. David explains this is the ultimate measure of conviction—if a GP gets negative feedback but still invests, that's true conviction. He contrasts this with committee models that create 'selling' dynamics and less intellectually honest conversations. The model also eliminates internal politics around deal advocacy.

• •Single-trigger model = ultimate conviction test: GP can invest despite negative partnership feedback if they truly believe
• •Committee models create 'selling' dynamics—people convince rather than build conviction through challenging questions
• •Eliminates politics: no need to trade votes or advocate deals, no convincing required
• •Benefit of founder-operators running firm: avoid typical investment firm politics where superstar investors become managers

David's perspective on the SPAC boom: great for companies as another liquidity option, but only valuable if founders treat it like going public, not as a milestone. For SPAC issuers, value proposition must be unique beyond just being a financial vehicle. The proliferation of SPACs may make it harder to generate attractive returns on the issuer side.

• •SPACs are good for companies—provide alternative path to public markets and liquidity
• •Key advice to founders: only pursue SPAC if you're truly ready to be a public company, not treating it as a milestone
• •SPAC issuers need unique value proposition beyond financial vehicle to attract best founders
• •Proliferation of SPACs will make it challenging for issuers to generate really attractive returns

David introduces the 'pull vs push' framework using Loom as the most recent example. Pull companies have markets pulling their product organically (viral, bottom-up adoption) rather than pushing product to market. Loom exemplifies this: 10x YoY growth at scale through viral asynchronous video, building enterprise sales on top of organic traction, with passionate domain expert founders.

• •Pull companies: market pulls product from them (viral, organic spread) vs. push companies forcing product to market
• •Loom case: 10x year-over-year growth at scale through viral asynchronous video adoption
• •Building enterprise top-down sales motion on top of bottom-up organic traction
• •Assess pull longevity by: 1) uniqueness and market leadership, 2) talking to non-customers about future behavior, 3) ensuring push economics make sense

Personal discussion of what drives David: not money, but learning, working with best founders, and deep fear of failure combined with extreme competitiveness. He channels fear into working harder—diving deeper into companies, trends, and forming differentiated views. Returns are a scoreboard element, with mission-driven focus on generating outcomes for LPs (universities, nonprofits).

• •Money doesn't drive motivation—it's learning new things daily and working with best founders in the world
• •Deep fear of failure and extreme competitiveness: returns are one element of the scoreboard
• •Channel fear into action: work harder, get smarter about companies/trends, reach out to learn from others
• •Mission side: generating returns for LPs (universities, nonprofits) to fund their good causes