The job of a VC is to sift the great entrepreneurs from the rest, and it can sometimes take some creativity to get it done.
In an interview with Andrew Huberman, Marc Andreessen, the co-founder of the prominent venture capital firm Andreessen Horowitz, offered a compelling analogy for the process of identifying truly exceptional entrepreneurs. He compared it to the methods used by homicide detectives, emphasizing the importance of detailed questioning to uncover truth and separate genuine passion from fabricated narratives. Andreessen, known for his early investments in companies like Facebook and Airbnb, highlighted the cyclical nature of entrepreneurial pretense, correlating it with market trends and the allure of social status.
“There are (entrepreneurs) who definitely try to come in and basically present as being something that they’re not,” Andreessen explained. “They’ve read all the books, listened to all the interviews, and studied everything. They construct a facade and they come in and present something they’re not,” he said.
Andreessen said that there was direct correlation between this behavior and the state of the US stock markets. “The kinds of people who do the thing that you’re talking about, they’re fundamentally oriented for social status. They’re trying to get the social status without actually the substance,” he said.
Andreessen pointed to the post-dot-com bust era, recalling the joke that B2B stood for “back to banking” and B2C meant “back to consulting.” These were the status-seekers who abandoned the tech scene when the bubble burst. “They’re like, ‘Screw it. This is over. Stick a fork in it. I’m going back to Goldman Sachs or McKinsey… where I can be high status.’” This created a “flushing effect” during the downturn. Conversely, in a bull market, “you get a lot of people showing up… with a lot of, let’s say, public persona without the substance to back it up.”
To counteract this, Andreessen Horowitz employs a specific strategy: “The way we test for this…is exactly how we stress test for this… it’s the same way homicide detectives try to find out… whether you killed somebody. It’s the same tactic, which is you asking detailed questions.” He elaborates on the detective’s methodology: “‘What were you doing last night?’ ‘Oh, I was at a movie.’ ‘Which movie?’ ‘Which theater?’ ‘Which seat did you sit in?’ ‘What was the end of the movie?'” This escalating line of inquiry eventually exposes fabricated stories. “People have trouble making things up. It just kind of obvious bullshit.”
According to Andreessen, fake founders face the same challenge. “They’re able to [present] a conceptual theory of what they’re doing that they’ve kind of engineered, but as they get into the details, it just fizzes out.” Conversely, genuine entrepreneurs have spent years immersed in their field. “The true people that you want to back that can do it… what you find is they’ve spent five or 10 or 20 years obsessing on the details of whatever it is they’re about to do. They’re so deep in the details that they know so much more about it than you ever will.”
Andreessen’s analogy underscores a critical element of venture capital: discerning genuine passion and deep expertise from superficial posturing. In a world increasingly saturated with startup narratives, the ability to penetrate the surface and identify true substance becomes paramount. His comments are particularly relevant in the wake of the recent tech downturn, a period that has witnessed both a market correction and a reevaluation of entrepreneurial motivations. By employing the meticulous approach of a homicide detective, Andreessen suggests, VCs can effectively separate the wheat from the chaff, ensuring that their investments are placed in the hands of those truly capable of building enduring and impactful businesses. And for people looking to raise money, it means knowing your business inside out if you want to be backed by top VCs.