Executive Summary
Andreessen Horowitz's David George reveals a counterintuitive reality: their best performing fund in firm history is a $1 billion fund, not a smaller one. This challenges the venture orthodoxy that large funds can't generate superior returns. George's data shows that 47% of value creation happens between Series A and B, while 53% occurs post-Series C, indicating massive late-stage value creation opportunities. The private markets have grown 10x over 10 years to $5 trillion, fundamentally changing where returns are generated. Meanwhile, public small-cap quality has deteriorated dramatically - Russell 2500 ROIC has fallen from 7.5% to 3% over 30 years. George argues we're in the early innings of an AI wave that will create companies larger than previous generations, with application layer companies showing 3x faster growth than predecessor SaaS companies. The key insight: focus on companies with organic customer acquisition and high engagement rather than pure model plays, as the models will become commoditized infrastructure while applications capture the value.
Key Insights
what David George said“We actually just looked at the 50 top IPOs from 2017 to 2025. And if you disaggregate where the dollars of return come from, 47% of the dollars of gain happens between the C and the Series B, and 53% of the dollars of gain happen from Series C plus.”
what David George said“11 labs has this. ChattuPT has this. XAI has this where it's organic customer acquisition or very low cost sales acquisition, a bridge, Harvey companies where like the market is just absolutely starving for their product.”
what David George said“On the gross margin point today, I'll say this. We give a little bit more of a pass than we used to. And if we ever see a company that pitches us as an AI company and they have SaaS gross margins, we ask a lot of questions. It probably means that people aren't actually using the AI features.”
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