The Inside Story of Growth Investing at a16z
a16z PodcastFull Title
The Inside Story of Growth Investing at a16z
Summary
This episode features a conversation with David George, General Partner at Andreessen Horowitz's growth team, discussing his approach to growth investing.
George shares insights on identifying breakout companies, the importance of non-consensus views on market size, underwriting upside, and differentiating between "pull" and "push" companies.
Key Points
- The primary edge in growth investing comes from forming non-consensus views on Total Addressable Market (TAM), as exceptional business models are considered table stakes.
- Investors should look for companies with a strong founder and a theory for busting through consensus market size views to achieve faster and longer growth.
- The "pull" company model, where the market pulls the product organically, is preferred over "push" models where the company forces its product onto the market.
- Unit economics are crucial at the growth stage, but are not the primary driver of exceptional returns; rather, they are a baseline expectation.
- Founders with significant capital should still pay attention to unit economics, though market conditions can justify temporarily relaxing criteria for rapid growth in competitive environments.
- Re-underwriting existing investments with fresh eyes is essential, even with multiple follow-on investments in the same company.
- The "single-trigger puller" model for investment decisions fosters stronger conviction and more honest discussions compared to committee-based approaches.
- SPACs offer a valuable liquidity option for companies but should not be viewed as a milestone; their value on the issuer side depends on unique propositions.
- What drives George is the continuous learning, working with founders, and the competitive desire to be the best, alongside a mission to generate strong returns for LPs.
- Fear of failure is channeled into harder work and deeper dives into learning and strategy, leveraging the endless nature of work in the VC business.
Conclusion
The key to breakout growth investing lies in identifying companies with a strong founder and a disruptive vision for market size, challenging conventional wisdom.
While unit economics are essential at the growth stage, the ultimate upside in venture investing often comes from accurately assessing future potential and market dynamics.
A conviction-driven decision-making process, coupled with a relentless pursuit of learning and a competitive drive, are crucial for success in growth investing.
Discussion Topics
- How can investors effectively identify non-consensus TAM opportunities in rapidly evolving markets?
- What strategies are most effective for founders in balancing aggressive growth with maintaining healthy unit economics?
- In a competitive VC landscape, how do firms differentiate themselves beyond just capital deployment?
Key Terms
- Total Addressable Market (TAM)
- The total market demand for a product or service.
- Unit Economics
- The revenues and costs directly associated with a particular business model or customer.
- CAC (Customer Acquisition Cost)
- The cost of convincing a potential customer to buy a product or service.
- GP (General Partner)
- A partner in a venture capital firm who is responsible for managing the firm and its investments.
- LPs (Limited Partners)
- Investors who provide capital to a venture capital firm but do not participate in the day-to-day management of the firm or its investments.
- SPAC (Special Purpose Acquisition Company)
- A company with no commercial operations that is formed solely to raise capital through an initial public offering (IPO) to acquire or merge with an existing company.
- Pull Companies
- Businesses where customer demand for the product drives growth, rather than the company pushing the product onto the market.
- Push Companies
- Businesses where the company actively markets and promotes its product to drive sales.
Timeline
George outlines his foundational framework for successful growth investments, emphasizing strong founders and challenging consensus views on TAM.
George explains that exceptional business models are necessary but not sufficient for generating outsized returns in growth investing, highlighting TAM as the key differentiator.
George uses Figma as an example of a company where the TAM was redefined to include front-end engineers, significantly expanding the market opportunity beyond traditional design roles.
George discusses DoorDash as an example of missing opportunities by not fully appreciating the maturing unit economics and localized network effects, despite early signs.
George emphasizes the importance of unit economics at the growth stage, focusing on their current state and the theory for their improvement or maintenance during scaling.
George explains that founders with significant capital may temporarily relax unit economic criteria in hyper-competitive markets, but this depends on the competitive landscape and customer stickiness.
George discusses capital concentration and re-underwriting existing investments, noting that Coinbase, Roblox, Databricks, and Stripe have each received multiple investments.
George addresses price sensitivity, stating that the focus is on underwriting upside scenarios and finding companies that forge more degrees of freedom on valuation through rapid growth.
George introduces the "Glenberry Glenross" market structure, inspired by the movie "Glengarry Glen Ross," where market cap creation heavily favors the leader.
George shares Qualtrics as a painful example of a company turned down due to price, which had all the other indicators of a great investment.
George discusses temporal diversification, suggesting that adjusting to the current market conditions and focusing on long-term potential is more important than rigid temporal diversification strategies.
George addresses the proliferation of capital in late-stage investing, noting that while some firms have good returns, the VC approach requires faster diligence and focused analysis.
George describes the investment decision-making process as a "single trigger puller" model, where the sponsoring GP makes the final call after robust discussions.
George discusses the courage needed to make investment decisions and how the single-trigger model fosters conviction by requiring the individual to own the decision.
George argues that the single-trigger model reduces internal politics by focusing on individual conviction rather than the need to convince a committee.
George views SPACs as beneficial for companies seeking liquidity but cautions against them being seen as milestones rather than strategic exits.
George states that his primary drivers are continuous learning, working with founders, competitiveness, and generating returns for LPs, not money itself.
George explains that he channels his fear of failure into working harder and deepening his understanding of companies and trends.
George highlights Loom as a recent investment due to its "pull" company nature, asynchronous video offering, viral growth, and passionate founders.
George discusses the transition from "pull" to "push" dynamics, suggesting that market leadership and understanding non-customer behavior can predict how long the pull will last.
Episode Details
- Podcast
- a16z Podcast
- Episode
- The Inside Story of Growth Investing at a16z
- Official Link
- https://a16z.com/podcasts/a16z-podcast/
- Published
- December 12, 2025