No medallions, dreadlocks or black fists

Just that gangsta glare with the gangsta raps

—Dr. Dre, “Let Me Ride”

At Opsware I used to teach a management expectations course, because I deeply believed in training. In it, I made it clear that I expected every manager to meet with her people on a regular basis. I even gave instructions on how to conduct a one-on-one meeting so there could be no excuses.

Then one day while I happily went about my job, it came to my attention that one of my managers hadn’t had a one-on-one with any of his employees in more than six months. While I knew to “expect what I inspect,” I did not expect this. No one-on-one in over six months? How was it possible for me to invest so much time thinking about management, preparing materials and personally training my managers and then get no one-on-ones for six months? Wow, so much for CEO authority. If that’s how the managers listen to me, then why do I even bother coming to work?

I thought that leading by example would be the sure way to get the company to do what I wanted. Lord knows the company picked up all of my bad habits, so why didn’t they pick up my good habits? Had I lost the team? I recalled a conversation I’d had with my father many years ago regarding Tommy Heinsohn, the Boston Celtics basketball coach at the time. Heinsohn had been one of the most successful coaches in the world, including being named “coach of the year” and winning two NBA championships. However, he had gone downhill fast and ended up with the worst record in the league. I asked my father what happened. He said, “The players stopped paying attention to his temper tantrums. Heinsohn used to yell at the team and they’d respond. Now they just ignore him.” Was the team now ignoring me? Had I yelled at them one time too many?

The more that I thought about it, the more I realized that while I had told the team “what” to do, I had not been clear about “why” I wanted them to do it. Clearly, my authority alone was not enough to get them to do what I wanted. Given the large number of things that we were trying to accomplish, managers couldn’t get to everything and came up with their own priorities. Apparently, this manager didn’t think that meeting with his people was all that important and I hadn’t explained to him why it was so important.

So why did I force every manager through management training? Why did I demand that managers have one-on-ones with employees? After much deliberation with myself, I settled on an articulation of the core reason and I called up the offending manager’s boss — I’ll call him Steve — and I told him that I needed to see him right away.

When Steve came into my office, I asked him a question: Steve, do you know why I came to work today?

Steve: What do you mean, Ben?

Me: Why did I bother waking up? Why did I bother coming in? If it was about the money, couldn’t I sell the company tomorrow and have more money than I ever wanted? I don’t want to be famous, in fact just the opposite.

Steve: I guess.

Me: Well, then why did I come to work.

Steve: I don’t know.

Me: Well, let me explain. I came to work, because it’s personally very important to me that Opsware be a good company. It’s important to me that the people who spend 12 to 16 hours per day here, which is most of their waking life, have a good life.  It’s why I come to work.

Steve: OK.

Me: Do you know the difference between a good place to work and a bad place to work?

Steve: Umm, I think so.

Me: What is the difference?

Steve: Umm, well …

Me: Let me break it down for you. In good organizations, people can focus on their work and have confidence that if they get their work done, good things will happen for both the company and them personally. It is a true pleasure to work in an organization such as this. Every person can wake up knowing that the work they do will be efficient, effective and make a difference both for the organization and themselves. These things make their jobs both motivating and fulfilling.

In a poor organization, on the other hand, people spend much of their time fighting organizational boundaries, infighting and broken processes. They are not even clear on what their jobs are, so there is no way to know if they are getting the job done or not. In the miracle case that they work ridiculous hours and get the job done, they have no idea what it means for the company or their careers. To make it all much worse and rub salt in the wound, when they finally work up the courage to tell management how fucked up their situation is, management denies there is a problem, then defends the status quo, then ignores the problem.”

Steve: OK.

Me: Are you aware that your manager Tim has not met with any of his employees in the past six months?

Steve: No.

Me: Now that you are aware, do you realize that there is no possible way for him to even be informed as to whether or not his organization is good or bad?

Steve: Yes.

Me: In summary, you and Tim are preventing me from achieving my one and only goal. As a result, if Tim doesn’t meet with each one of his employees in the next 24 hours, I will have no choice but to fire him and to fire you. Are we clear?

Steve: Crystal.

Was that really necessary?

You might argue that no matter how well managed a company is, it will fail without product/market fit. You might argue further that horribly managed companies that achieve massive product/market fit succeed just fine. And you would be right on both accounts. So was it really necessary for me to make such a dramatic speech and threaten one of my executives?

I think it was for the following three reasons:

• Being a good company doesn’t matter when things go well, but it can be the difference between life and death when things go wrong.
• Things always go wrong.
• Being a good company is itself an end.

The difference between life and death

When things go well, the reasons to stay at company are many:

• Your career path is wide open because as the company grows lots of interesting jobs naturally open up.
• Your friends and family think you are a genius for choosing to work at the “it” company before anyone else knew it was “it.”
• Your resume gets stronger by working at a blue chip company in its heyday.
• Oh, and, you are getting rich.

When things go poorly, all those reasons become reasons to leave. In fact, the only thing that keeps an employee at a company when things go horribly wrong — other than needing a job, which isn’t so applicable in the current macro environment — is that she likes her job.

Things always go wrong

There has never been a company in the history of the world that had a monotonically increasing stock price. In bad companies, when the economics disappear, so do the employees. In technology companies, when the employees disappear, the spiral begins: the company declines in value, the best employees leave, the company declines in value, the best employees leave … Spirals are extremely difficult to reverse.

Being a good company is an end itself

When I first met my friend Bill Campbell, he was chairman of Intuit, on the board of Apple and a mentor to many of the top CEOs in the industry, including Steve Jobs and Jeff Bezos. However, those things did not impress me nearly as much as his time running a company called GO Corporation. GO essentially attempted to build an iPhone in 1992. The company raised more money than almost any other venture-capital backed startup in history and lost nearly all of it before selling itself for nearly nothing to AT&T in 1994.

Now that probably doesn’t sound impressive. In fact, it probably sounds like a horrible failure. But I’d met tens of GO employees in my career, including great people such as Mike Homer, Danny Shader, Frank Chen and Stratton Sclavous, and the amazing thing was that every GO employee that I’d ever met counted GO as one of the greatest work experiences of their lives. The best work experience ever despite the fact that their careers stood still, they made no money and they were front-page failures. GO was a good place to work.

This made me realize what an amazingly effective CEO Bill was. Apparently, John Doerr thought that too, because when Scott Cook needed a CEO for Intuit, John recommended Bill even though Bill lost a ton of John’s money at GO. And for years, everyone who ever came in contact with GO employees knew what Bill was about. He was about building good companies.

If you do nothing else, be like Bill and build a good company.

Ben Horowitz is co-founder and general partner of Andreessen Horowitz. He was a co-founder and CEO of Opsware (formerly Loudcloud), which was acquired by HP, and he ran several product divisions at Netscape. He serves on the board of such companies as Capriza, Foursquare, Jawbone, Lytro, Magnet, NationBuilder, Nicira, Okta, SnapLogic and Tidemark. He blogs at http://bhorowitz.com/.

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We at GigaOM talk to a lot of startups, VCs and big companies buying up cloud startups — and the some names keep coming up again and again. Some of these guys (yes, they are all guys) have specialities within infrastructure, like networking or chips, while others are particularly skilled at building companies. With the list below, we’ve picked the VCs that are doing deals and real knowledge and influence in the space. On the up-and-comers list are newer VCs and those working with very early-stage companies, which means they haven’t had any exits yet.

If you’re building an infrastructure startup, these are the guys you’d want on your team.  (They’re listed in alphabetical order.)

The tried and true.

Alex Benik: General Partner at Battery Ventures
Current deals: Cumulus Networks, VSS Monitoring and Traceltyics
Exits: Anobit, which sold to Apple and Optichron, which was acquired by Netlogic.
Our take: Networking and semiconductors are some of Benik’s favorite topics, and he also has a lot of connections into Wall Street’s IT shops where enterprise meets webscale. He’s one of the few VCs (along with others at Battery) who still invests in semiconductors.

John Connors: Partner at Ignition Partners
Current deals: Opscode, Splunk, Tier 3
Exits: Heroku, which sold to Salesforce.com, Xensource which sold to Citirx, Likewise which sold to EMC
Our take: His experience as the former CFO of Microsoft means he has business savvy and plenty of connections (he’s on the board at Nike), plus his track record in the cloud space as an investors speaks for itself.

Satish Dharmaraj: General Partner at Redpoint Ventures
Current deals: MapR, StorSimple
Exits: Cloud.com which sold to Citrix and Posterous, which was acquired by Twitter
Our take: Dharmaraj has a special affinity for where the cloud meets the consumer, especially on a mobile device. He’s also part of the team that scouts for investments that Verizon can make to populate and better its 4G network.

Peter Fenton: General Partner at Benchmark Capital
Current deals: EngineYard, New Relic, DotCloud, Twitter
Exits: SpringSource, which he sold to VMware, and JBoss, which he sold to RedHat.
Our take: Fenton is super connected, and he understands large webscale platforms better than anyone.

Ben Horowitz: General partner at Andreessen Horowitz
Current deals: Factual, Nicira, Okta
Exits: Andreesen Horowitz is new enough that Horowitz doesn’t have infrastructure exits associated with it yet, except for Fusion-io’s public offering in 2011.
Our take: He has a lot of operational experience and built a cloud company before it was cool. On top on that he has a breadth of investments that help him understand the big picture.

Ping Li: General Partner Accel Partners
Current deals: Nimble Storage, Nimbula and ScaleXtreme
Exits: Reactivity which cold to Cisco and Fusion-io which went public in 2011
Our take: Li gets webscale at the consumer level and also understands what it takes from the infrastructure side to build it. He’s also in charge of Accel’s Big Data Fund and will have a front row seat to the infrastructure requirements of the big data era.

John Vrionis: Managing director at Lightspeed Venture Partners
Current deals: Embrane, Tintri, Niciria, Boundary
Exits: IO Turbine which sold to Fusion-io and Pliant which sold to SanDisk
Our take: Vrionis has a very clear view of the changes happening in the networking world inside the data center, but he’s also thinking big thoughts on big data and the infrastructure to support it.

The up-and-comers.

Mike Abbott: Investment Partner at Kleiner Perkins
Current deals: Abbott joined KPCB in December of 2011 so we’re still waiting on his portfolio
Our take: Abbott is a practitioner who helps grow Twitter’s infrastructure and engineering team. He also helped create Palm’s next-generation webOS platform and while new at the VC game, he has connections and knowledge to help entrepreneurs find their way in a mobile and cloud world.

Puneet Agarwal: Partner at True Ventures (see disclosure)
Current deals: Puppet Labs, Loggly, Urban Airship, Piston Cloud
Our take: Agarwal is best at the ooey-gooey middle layers between the hardware and the software. Think configuration management software or PaaSes, and with he’s comfortable working at the early stages, so is a good place to start when you’re tossing around an idea.

Frank Artale: Partner at Ignition Partners
Current deals: ServiceMesh, Bromium, AppFog, ScaleXtreme
Exits: He’s only been at Ignition since 2011.
Our take: Artale is one of two Ignition Partners team members on the list. His experience building sales channels at Citrix and focus on making cool tech into a marketable product is invaluable for starry-eyed entrepreneurs who think they have something cool, but don’t know how to make money off of it.

Jonathan Heiliger: General partner at North Bridge Venture Partners
Current deals: none yet at North Bridge, but he is invested in Tango and Sonus Networks
Exits: Last.fm which sold to CBS and Contendo, which sold to Akamai
Our take: His investments remain to be seen, but when it comes to scaling infrastructure and knowing the people who know how to build at webscale, Heiliger has the contacts and the knowledge base. Plus, he’s a nice guy.

Mike Volpi: Partner at Index Ventures
Current deals: Big Switch Networks, StorSimple and Path
Exits: Cloud.com, which sold to Citrix
Our take: Volpi is not exactly and up and comer in the investment space, but he hasn’t done that many cloud deals. But as networking rises in importance we expect him to make a splash. He also knows the enterprise sales channel better than anyone else thanks to his time at Cisco.

Disclosure: Puneet Agarwal is a partner at True Ventures which is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.

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Marc Andreessen

There’s no question that Andreessen Horowitz, the venture capital firm headed up by Marc Andreessen and Ben Horowitz, has become a major force since it was founded back in 2009. The young VC firm has funded some of the best and brightest companies in the tech industry: Facebook, Twitter, Zynga, Groupon, Airbnb, Box, Fab.com and Pinterest, to name just a few. And this is just the beginning — Andreessen Horowitz just announced it has raised $1.5 billion in fresh funding to invest in even more startups.

I talked to Marc Andreessen this week to get his thoughts on Silicon Valley, the startup ecosystem, and where the larger tech world is headed in 2012. Here’s what he had to say:

Silicon Valley is still tech’s ground zero

“Our firm is very Silicon Valley focused. Now, we’re not religious about it. We’ll go far and wide to find the best companies and fund them. But there is a magic to Silicon Valley. It’s a lot like Los Angeles with film, New York City with finance or fashion, and Washington D.C. with politics. A lot of people want to work where there’s a critical mass of other people in their field; it’s like a natural force of gravity.

Because the best people in technology keep coming to the Valley, there tends to be a self-renewing property to it. It’s become a place where great technology franchises have been built repeatedly. I would love for there to be a dozen Silicon Valleys around the world. But it’s a very hard thing to replicate.”

When running a VC fund, it pays to walk the walk

“Closing this latest [$1.5 billion] round from our investors was a pretty straightforward process. The key thing is, we’re really focused on the alignment of our interests with the people who invest in us. Each of us at Andreessen Horowitz has a significant personal investment in the firm ourselves. We each pay full management fees and carried interest, so we’re exactly side-by-side with our investors.

We also have a hard commitment that none of our partners will make private technology investments outside of Andreessen Horowitz — you won’t see me investing in a startup as an individual. Our investors really like that, it makes them feel that we’re real partners.”

Tech should learn the language of Washington

“Ever since I arrived in the Valley, there’s been a debate about how the tech industry should approach government and legislation. There’s one school of thought that says we should just ignore Washington and build the future on our own, the idea that we’re going to invent our way out of any problem that comes up. Then there’s the other school of thought, that it’s very important to engage with Washington on their terms, because the industries that are threatened by technology are very good at lobbying. I’ve always been more in the second camp.

Technology is very important and it has a big impact on the world. Politicians are naturally going to want to be involved in something that is that important, and they’re going to try to make laws about it. For every exciting advance we make, there’s someone on the other side that is threatened by it. The oldest and most entrenched industries are lobbying like crazy, so for the tech industry to not participate is just handing the ground to them.

On top of the traditional methods, we can also do new stuff like the SOPA/PIPA blackout, which was a whole new form of engagement and protest. I know that a lot of people in Hollywood were absolutely shocked at the effectiveness of that.”

A startup shakeout is coming, but that’s OK

“There has been a lot more seed funding in the past two to three years. In terms of our own self interest as a VC firm, we want as much seed funding as possible — it presents us with a lot of great opportunities to evaluate for a venture round.

There is going to be a shakeout at the seed stage. A lot of companies will come up for Series A funding at some point, and there are just too many of them to really raise what they’ll need. But that’s not a bad thing. It’s a very small amount of funding they’ve taken on so far, and nowadays a lot of them will have the opportunity to sell as a talent acquisition. It’ll work out fine for them. In the long run, imagination tends to be rewarded, not penalized.”

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VCs Fred Wilson (left) and Ben Horowitz flank moderator Erick Schonfeld at TechCrunch Disrupt

“Building a company is really hard so you might as well build something important,” said Horowitz, of the new and influential firm Andreessen Horowitz. He said he’s disappointed to see smart entrepreneurs pitching him on small ideas like ad targeting optimization and avoiding expensive things like hiring a sales force, all because they’re holding themselves to bare minimum expenses.

But Wilson argued that the best outcomes for both entrepreneurs and investors result from investing small amounts of money in risky ideas, and increasing the commitment as risk decreases. This ensures that founders are minimally diluted, as they can hold onto their significant stakes in the company if they don’t get desperate for funding because they’re running out of money. Even Zynga, which has raised something like $220 million in funding, isn’t exactly a fat startup, contended Wilson, as it hasn’t lost money following CEO Mark Pincus’ initial investment. Rather, those hundreds of millions have been the “insurance money” to allow Pincus and Zynga to make large risky bets without putting the company on the line.

Horowitz, besotted with the promise of dreaming big, responded by saying: “I have to pause because Fred has removed all the joy out of being an entrepreneur.” He pointed to big-thinking companies such as the electric car maker Tesla, which has raised hundreds of millions in private and government funding. “As an entrepreneur you really don’t have a choice. Often the idea and the market dictate the amount of money you need to build.” Wilson never really countered this point.

After Horowitz shot down Wilson’s self-described “fairly rigorous mathematical analysis” because it ignores the serendipity of startup opportunities, Wilson pointed out that Horowitz’ examples weren’t web companies. Sure, markets like automobiles and chips and biotech might need lots of money, but “in this sector, the web sector, I would argue there are very few ideas where the fat startup model makes sense.” This was his most salient point. Wilson also noted that managing large-scale companies takes experience, saying the first-time entrepreneurs he funded at Etsy, Twitter and Tumblr just weren’t ready. “I would not advise anybody to go fat startup if they don’t have that experience and that capability at day one.”

Asked by moderator Erick Schonfeld who made a more cogent argument, the crowd sided with Wilson. I found it surprising that the cite-the-spreadsheet argument was more compelling than advice to think big — but this was an audience of web startups, after all, where lean is the new black.

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Why Startups Aren’t Changing the World

Marc and Ben have a simple objective for their new fund: use their nimbleness — the fund will have just two general partners — to invest in companies that meet their view of the world. “We are going to focus on products that we understand, which is essentially classic computer technologies,” Andreessen said. We met last week to discuss his new fund; I decided to focus our conversation about the web infrastructure. “There are a lot of changes in the (web and IT) ecosystem,” he said. “lots of interesting opportunities in the (web’s) backend.”

I agree — as I have often talked about in the past, as we hurl towards what is essentially an ultraband, always-connected and networked planet, there are enormous opportunities. Today’s technologies are woefully falling short of the needs of this new web. When I interviewed Facebook’s VP of Engineering, Jonathan Heiliger, who spoke at our Structure 09 conference, he bemoaned the lack of hardware to meet the needs of his fast-growing company.

It is hardly a surprise that Andreessen and Horowitz are taking a top-down and bottom-up approach to investing. Marc’s history of working with the web’s front end (Netscape and Ning) gives him the ability to understand the web layer. He also sits on the board of Facebook, a company that is helping redefine the future of the Internet.

Marc and Ben previously teamed up to form Opsware, an IT infrastructure management company that after a few setbacks evolved into a thriving venture that was eventually acquired by Hewlett-Packard for $1.6 billion. That gives the duo an opportunity to understand the changing innards of the Internet.

WebappVM, Apptio, ExtraHop and Good Data are some of their current investments in the infrastructure of the web. Marc said they would be looking at more investments in cloud computing startups. “We think that networking is going to follow the same curve as the workstation,” Andreessen said. Moore’s law is going to allow companies to build smart, next-generation devices that are based on a commodity infrastructure platform.

In the past, we have written about companies such as Vyatta, which are taking on Cisco by building an open-source router. This trend is only going to gather momentum, Andreessen argues. The edge networking devices will get a lot smarter, and that is going to open up opportunities. Andreessen and Horowitz believe that things will follow the same curve as Linux and Solaris. It took a long time for Linux to gain traction, but when it did, it eventually started to corrode Solaris. “Hardware will get a lot dumber and a lot cheaper, and software will become the key focus,” Andreessen said. His optimism stems from the fact that the networking stack is still built on 20-year-old ideas of the network and the infrastructure. Storage is one likely candidate for massive disruption. For instance, the emergence of solid-state storage offers immense opportunities both in terms of innovation and investment. (Related GigaOM Pro Report: Bringing Moore’s Law to the Data Storage Market. Content available only to subscribers. Subscribe to GigaOM Pro for $79 a year.)

Disclosures:

1. I am a venture partner at True Ventures, an early-stage venture investment firm. True is also an investor in the parent company of this blog, Giga Omni Media.
2. Allan Leinwand, founder of Vyatta, is an occasional guest columnist for GigaOM.

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When Koster first gave me a detailed demo of Metaplace, back in September 2007, the MMO was still in alpha and the company (which he co-founded with John Donham) was still called Areae. Today the MMO moves into closed beta, and the company itself has been renamed Metaplace.

Since that demo, Koster told me in a recent interview, they’ve been working to improve the system’s usability. “The tools should not look like techie tools,” as Koster put it, “but something your mom can use.” And while the virtual world’s main building options will still be user-friendly, “if you push on the door…you get to see the guts of it and really take control.” That way, advanced players will be able to tinker and add complex scripted interaction to their works.

The improvements have already paid off, according to Koster. Metaplace is seeing impressive creativity among its users, who are building not just games, but, for instance, animated cows with an AI system that lets them do the conga, and a tribute site to a Scandanavian folk music group embedded with a Norse mythology role-playing game. Another enterprising user figured out how to connect Metaplace’s chat system to Babelfish, so avatars’ text conversations are automatically translated into multiple languages. “Blew our minds,” says Koster.

Koster from the very beginning has touted the web-centric nature of Metaplace, so it’s notable that they’re now backed by Marc Andreessen, who kinda sorta invented the web browser. Andreessen first approached Metaplace by cold-calling them, according to Koster, who believes the Netscape founder’s interest is related to his more recent venture, the user-created Ning social network. “If you look at what we’re trying to do,” Koster observed, “I think there’s a lot of similarities there.”

Metaplace is also giving out free invite codes to the closed beta to 100 GigaOM readers. The code is “MPGIGAOM“– go here to redeem it.

Image credits: Metaplace.com.

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The investment is significant because Qik is trying to stand out from both the competition and obscurity and Andreessen is a Silicon Valley heavyweight. In recent months the company has attracted high-profile users such as U.S. congressman John Culberson, The Vatican and the prime minister of Singapore.

Andreessen’s other online video investments include EQAL and CastTV.

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