Marc Andreessen’s Portfolio Reveals Great Investing Lessons
Technology investors are rejoicing for a good reason. In just under a decade, their investments in technology stocks have doubled, even tripled. So if you’re as awestruck as I am and want to try your luck in the tech sector, then why not take tips from a frontrunner in the game? I’m looking no further than Marc Andreessen. His claim to fame may be Netscape, but it is his investments in technology stocks that have truly pushed Marc Andreessen’s net worth over $1.02 billion.
The man is a popular venture capitalist (VC) at Silicon Valley, so it is no wild guess that Marc Andreessen’s portfolio largely comprises of technology investments. Down at “the Valley,” VCs are revered as the guardian angels without whose blessings many start-ups would have failed to see the light of day.
VCs saw the potential in young Silicon Valley prodigies, put both their faith and money in them, and turned their potential into strong kinetic force. In the process, these venture capitalists multiplied their investments manifold—turning a few hundred thousands into millions, and even billions.
Andreessen, too, has invested in some of the most popular and promising technology start ups—either personally or through his co-founded venture capital firm, Andreessen-Horowitz (popularly called a16z).
Some of these startups have already grown into unicorns, racking up valuations in excess of a billion dollars! Facebook Inc (NASDAQ:FB), Twitter Inc (NYSE:TWTR), LinkedIn Corp (NYSE:LNKD), Box Inc (NYSE:BOX), Skype, Lyft, Airbnb, Inc., Buzzfeed, Oculus, Groupon Inc (NASDAQ:GRPN), Magic Leap, Imgur, and Jawbone are some of the popular names on the list.
So, while it’s true that we may not have the funds or, for that matter, the foresightedness that Andreessen has, we do have the opportunity to learn the tricks of the trade from his technology investments.
Investing in Technology Stocks Like Marc Andreessen
There’s no other way to put it. The technology sector is, hands down, the most lucrative investment sector of today. The veterans who traditionally steered clear of this sector are now regretting having done so. The Oracle of Omaha is an eye-popping example.
Just this week, Warren Buffett has publicly acknowledged his misstep in the annual meeting with Berkshire’s shareholders. He regrets not having invested in the tech behemoths of today—Amazon.com, Inc. (NASDAQ:AMZN), Google-parent Alphabet Inc (NASDAQ:GOOGL), and Facebook—when the time was right. We may have a great lesson to learn from his mistake, that is, to not let good technology stocks slip under the radar.
Andreessen didn’t make that blunder. Back in 2011, he made a bold statement, which at that time probably seemed like only a conjecture. But he put his money where his mouth was.
“Software is eating the world,” he said, while investing in Facebook, Twitter, and a bunch of other startups when they were still in infancy. (Source: “Why Software Is Eating The World,” The Wall Street Journal, August 20, 2011.)
Andreessen saw it coming early since he was an industry insider. No, not just as a VC, but primarily as an entrepreneur. When the tech sector first peaked in the 1990s, this software engineer pioneered Netscape, the first-of-its-kind web browser that went on to challenge the then-dominant Microsoft Corporation (NASDAQ:MSFT). He saw the technology sector up close, experienced its highs and lows, and learned its nitty-gritty.
Long story short; he’s one of the seasoned tech gurus to seek investing wisdom from. So, without further ado, let’s dissect some of his investing ideas.
Lesson No. 1: The Glass Is Half Full
Investing is often likened to gambling for a reason. Sometimes there are hits and sometimes misses. So to make the most of your investments, you’ll need to hold on to the great virtue of optimism. Because while the pessimist folds his cards, the optimist stays in the game.
The dot-com bubble was a catastrophic tsunami in the tech sector, the aftershocks of which continued for years. Investors are now too terrified of investing in technology stocks. For the last five years, pessimists have been talking of a tech bubble in the making. To this day, they wait to see it burst. But the optimists tuned out the noise. They bought in early and have, since then, seen their investments multiply.
Andreessen is one such optimist. In fact, to him, he’s the “most optimistic person he knows.” To say that even halfheartedly takes a lot of conviction.
As a tech investor, optimism is ingrained in his personality. It’s easy to see why. Technology is one sector that’s in a constant state of flux. If you’re an insider, you’ll rarely find any dull moments. The dot-com bubble was the last we saw. But Andreessen didn’t “waste time being depressed.”
Andreessen has long been bullish on the tech sector and remains so. He stayed optimistic even when the majority was bailing on technology stocks. And that’s exactly the lesson to take away from his investments.
If you have been idling in wait of the right time to invest, or if you’ve outrightly written off tech stocks from your portfolio, then you may be on the wrong side of history. The tech boom is real and it’s happening right now. So if you find some top technology stocks, and see a window of opportunity, then you might want to make a quick move. Because remember, time and tide wait for none!
Lesson No. 2: Invest in Social Trends
The best technology stocks are not buried somewhere, waiting to be unearthed. They are out there in plain sight. Andreessen has a simple way of finding them. He takes cues from his surroundings.
Let me give you an example. Andreessen noticed a few years ago that more people around the world had access to smartphones than to clean running water. So he made a bold prediction back in 2011 that in the next ten years, roughly five billion people will be smartphones users.
He was right!
For savvy investors, there’s a great takeaway here. It’s easy to guess that the greater population on the planet will be buying phones. This means top smartphone vendors like Apple Inc. (NASDAQ:AAPL) and Samsung have more room to grow.
Likewise, smartphones will become the biggest avenue for businesses to reach out to potential customers. That means digital advertisers will be minting a lot of money—the two biggest being Google and Facebook.
Simply put, by looking at social phenomena, you are able to shortlist the best technology stocks.
Take another example. Andreessen was one of the earliest investors to see potential in self driving technology. He noticed how the average driver of our age is much worse at handling his car than the average autonomous driving software. He was quick to predict that it made sense for our population to eventually give up driving in favor of computers driving their cars for them.
In fact, he has gone so far as to prophecize that driving your own car might become a social stigma like smoking cigarettes in public. Hmm…interesting!
Anyhow, that brings stocks like Tesla Inc (NASDAQ:TSLA), Google, and Apple under the spotlight—all of whom are busy perfecting the self-driving technology.
In a nutshell, by taking cues from social trends, investors may be able to identify disruptive technologies early on and invest in them on a bargain way before the market moves in.
Take note that Andreessen has already invested in quite a few Bitcoin start-ups. So, it’s definitely a technology worth keeping tabs on.
Lesson No. 3: Software Is the Future
If you’re still having troubles finding the right technologies, then Andreessen already has his top pick filtered out for you.
Andreessen sees every single sector of the economy to get stirred by the software revolution, if it hasn’t already. Again, he couldn’t be more right.
Software makes it cheaper to conduct business. So it’s safe to assume that every single industry will eventually give way to the software revolution.
In fact, if you pay attention, it is already happening. Most industries today are already digitized, data has gone remote somewhere in the cloud, computer algorithms define our preferences now, and artificially intelligent assistants virtually control our lives.
All in all, computer codes hold the strings of our businesses. So if you haven’t already jumped on board, now may be a great time to consider technology stocks pivoted on the software revolution.
Two software technologies worth considering at this point are artificial intelligence (AI) and cloud computing, with the three top players in this space being Amazon, Microsoft and Google.
My view is that Amazon leads the pecking order. The company is dominant in the cloud space with “Amazon Web Services” (AWS) and has made a mark in AI with its popular assistant,”Alexa.” So AMZN stock is definitely worth a second look.
Also, just so you know, beyond the tech sector, Andreessen expects two sectors to see significant disruption from technology in the coming years—healthcare and education. So you might as well keep an eye out for prospective investments in these sectors.
Lesson No. 4: Look for Companies Always in Beta
Wait! Before you make a final decision on investing in any of the top technology stocks, you must check on one thing: Is the company flexible to adapt? Speaking in technology terms, look for a company that’s “always in beta”—that is, constantly improving.
Andreessen sees adaptability to be the key to success. He correctly notes that most tech companies started out in a different market than the one they are in today. They adapted with changing times and shifting needs.
Take, for instance, Amazon. This tech and ecommerce giant would have long sunk into oblivion had it remained merely an online bookstore.
So no matter how great a technology company looks like right now, if it doesn’t evolve with changing times, it will go extinct. I like to quote Facebook’s example for its great ethos.
The company has always promptly responded to competition by staying ahead of the game. Either Facebook acquires a budding rival (like it did Instagram) or it replicates it (like it did Snap Inc (NYSE:SNAP) and “Snapchat”). Both ways, Facebook remains invincible. At the same time, it continues to span out into new technologies beyond its core business of social media—like virtual reality, artificial intelligence, and drone technology. This helps it stay afloat in a constantly shifting technology paradigm.
In short, look at technology stocks whose business ethos are built around adaptability.
Lesson No. 5: Look Past Quarterly Performance
Once you’ve found the right technology stocks and have made up your mind about investing, take wisdom from the most important of all lessons from Andreessen.
Do not run after quarterly numbers!
It’s the greatest of all pitfalls. Not just Andreessen, but any seasoned investor would tell you the same.
Although it’s true that VCs like Andreessen wish for their startup investments to bear fruit through IPOs, they acknowledge that being a public company is never easy. Andreessen understands this, which is why he’s glad that a16z is not a public company. He backs his decision of staying private with a strong reason.
Public companies face strict market scrutiny. Andreessen believes that such companies become too focused on the short-term performance and lose sight of their long-term goals.
It’s true! Most bureaucratic corporations of the past are now struggling to make ends meet at the hands of the more dynamic technology companies. Just look at Wal-Mart Stores Inc (NYSE:WMT), which, for a very long time, refused to accept Amazon’s encroaching stronghold over its market.
Walmart’s executives were too focused on churning out profits. They failed to see that Amazon was undercutting them. Amazon was losing money but quietly building its customer base. Today, Walmart executives are losing sleep trying to find ways to beat the world’s biggest e-tailer, but to little avail.
Case in point; investors should focus on technology stocks with promising long-term goals; ones that they can invest in and forget. Leave quarter-by-quarter trading to Wall Street’s hyenas, and let these antsy traders lose their shirts while you quietly build your fortune.
Bottom Line on Investing in Technology Stocks
Having gone through these investing lessons, Marc Andreessen’s take on technology stocks must have become obvious to you. That is, long-term investments in the right technology stocks will, sooner or later, bear fruit. That’s because technology will continue to disrupt traditional forms of businesses.
Patience and optimism are the key to investing in technology stocks. To seek the best technology stocks, just look around yourself. Disruptive social phenomena happening around you will give you hints in the right direction. Remember that good technologies companies are ones that adapt themselves to shifting trends.
Here’s to hoping that you’ve learnt some wise lessons to invest like Marc Andreessen and may be able to multiply your investments in the best technology stocks.