Marc Andreessen on His Best Investment Advice and 4 Other Insights

• In a new book, David Rubenstein asks Marc Andreessen “lighting-round questions” about his investing philosophy.
• Andreessen shares his favorite tips,  the most common mistakes he sees, and his big investment regret.
• The following is an excerpt from “How to Invest: Masters on the Craft.”

In the 1990s, James Clark, the founder of Silicon Graphics, and a legend in the tech world, came to Carlyle’s office seeking venture capital for a company he was planning to launch with Marc Andreessen, a recent college graduate. Apparently, while in college, Marc had helped to develop a way to navigate the internet, and the new company was going to commercialize this method in some ways that were not yet clear to my partners and me.

As I recall, we first wanted to understand what the internet was, and then we proceeded to ask why anyone would want to navigate it. When we got past that, we focused on our greater area of expertise — the cost of participating. The valuation for this new company with no revenues was to be over $100 million.

Being the brilliant investors that we were, we naturally said that was a ridiculous valuation for a completely new startup. So we passed. (We also passed when they returned with a below $100 million valuation.)

That company was Netscape. It was later sold to AOL for $4.2 billion, and Marc became the chief technology officer of AOL. I wish I had known at our first meeting precisely how much of a tech wizard Marc really was— or how much of a venture-investing wizard he would turn out to be.

After leaving AOL, Marc created, with Ben Horowitz, another technology company, Opsware, and later it sold to

Hewlett-Packard for $1.6 billion. He then became a very active angel investor in Silicon Valley, investing in such companies as Twitter and LinkedIn. In 2009, Marc formed Andreessen Horowitz to enhance his venture capital investing and give investors a chance to invest alongside him and his partner. (Having learned from our earlier mistake, I told Marc at the outset that Carlyle would be pleased to buy a small minority stake in his firm, but he politely told us that he already had more than enough capital to get the firm going. It would have been a great investment.)

Beyond investment successes, Marc has also become a leader in the venture world as a commentator on and writer about technology and its benefits for society. Indeed, through his writings and speeches, he is a much more public figure than many of the other leading venture capital investors, certainly in the Silicon Valley area. As a result, he is one of the most influential and impactful individuals in the entire venture world.

David Rubenstein: Let me ask you a few lightning-round questions. What’s the best investment advice you’ve ever received?

Marc Andreessen: From Warren Buffett, probably: Put all your eggs in one basket and watch that basket. Deeply understand the nature of what you’re investing in.

David Rubenstein: What’s the most common investment mistake that you observe?

Marc Andreessen: People read about something in the paper, see it on TV, and take a flyer without deeply understanding it.

David Rubenstein: If I gave you $100,000 tomorrow, what would you do with it?

Marc Andreessen: Put it in an S&P 500 index fund. Don’t get fancy.

David Rubenstein: What mistake in the investment world have you made that in hindsight you wish you hadn’t made?

Marc Andreessen: For most forms of investing, the mistakes are the investments you make where you lose money. In our world, it’s the investments you don’t make.

David Rubenstein: If somebody wants to be a venture capital investor, what would you like them to know most about the art of` venture capital investing?

Marc Andreessen: It’s an alchemy of understanding people, understanding technology, understanding markets. It’s quite literally a liberal art. It encompasses all these dimensions. It makes sense to try to go deep in understanding the nature of how these new products get built and how these companies get built and try to get as deep into the substance as possible.