Why a16z chose London for its first non-US office

Transcript

Angie Lau: Crypto funding hit a three-year low as venture capitalists pull back in bear market conditions, high profile scandals and amidst regulatory uncertainty and the worst might be far from over. Rising inflation, interest rates have forced promising startups to lower their valuations, a sign that the air perhaps has come out of startup dealmaking.

And in the midst of all this doom and gloom, there’s hope, though, that artificial intelligence, or AI, can open up new investment opportunities. So, there is always a silver lining here. But the United States, once a leader in tech innovation, is grappling to adapt to new technologies and trying to push a square peg in a round hole, if you will, by applying old rules to Web3 and now AI. 

Amidst rising macroeconomic challenges and regulatory scrutiny, a leading American venture capital firm is looking to take some Silicon Valley glitz to the United Kingdom. We’ve got Andreessen Horowitz, better to you known as a16z, a name behind leading tech and crypto companies including Airbnb and Coinbase, is setting up its first office outside the U.S. and its chosen the British capital, as its next stop.

So the question is, does the U.K. have forward-looking regulations? How big is the VC market anyway in the country? Let’s dive into all that and more on this edition of Word on the Block, the series that takes a deeper dive into blockchain and all the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast. I’m Forkast Editor-in-Chief Angie Lau.

Today I am thrilled to welcome Sriram Krishnan, a partner at a16z who will lead the firm in London. This is really a big move here for the tech entrepreneurs. Sriram is popularly known as an informal advisor as well to Elon Musk on Twitter, amongst other things, with stints at leading social media platforms Google, Facebook, and Snap. Sriram has been at the forefront of some of the most exciting and disruptive trends in the industry. He also, by the way, hosts a podcast, The Aarthi and Sriram Show, with his wife.

You’ve moved from the U.S. to the U.K. Amidst all of this regulatory angst that we’re seeing in some parts of the world, and in other parts of the world really opening up. How have you been and how have things progressed since we last saw each other?

Sriram Krishnan: Now with our move to the U.K. we are now officially a16z. It’s such a delight to be here. It’s been quite a dramatic fun few months the last time we spoke. I lived in a different continent, San Francisco. Since then I moved here with my family. We are opening up our new office. We have teammates flying over here. We have a lot of exciting things at work. So it’s been great. It’s been exciting.

Lau: Exciting how? Obviously the personal part, the disruption but exciting in a way that the industry, investors and maybe the market wants to hear about. What are you seeing that potentially excites you? Movements in the space, on the ground in Europe. That’s different from perhaps what we’re experiencing in other parts of the world.

Krishnan: What really kind of drove us and brought us to the U.K. was a couple of things. The first is, as a firm, we have always been fans of the amazing talent over here and I have a couple of examples. We have loved the academic ecosystem over here — and I’m not just talking about Oxford and Cambridge, which are obviously incredibly well known, but also colleges all over the country. We have, as a firm and not just in crypto, partnered with, invested in, worked with, and been friends with a lot of people who have come out of these amazing institutions. So we knew that there was a lot of great talent that was always going to pull us here, and that part of it is obviously at the core of what we do. 

The second part of it is, for us, what we really focus on is, how do we make sure our founders, our entrepreneurs, the people we participate and work with have a stable, healthy ecosystem with clarity on the rules of the road for what they are building? We were super pleased that the government here has really leaned on making the U.K. a technology hub, a Web3 hub. 

I would really like to point out the Crypto Startup School (CSS). So Crypto Startup School is our incubator program, which we ran earlier this year rather than in LA. Very successful, and had some amazing companies that participated in it. What we announced is that we are going to hold the next edition of Crypto Startup School next spring here in London.

I get to meet some amazingly smart people not just founders, but, from policymakers to other people in the venture capital and technology ecosystem. And it’s just been fun. I’m just here, I’m just getting started. We’re just getting started and it’s going to be great.

Lau: The learnings have been many, The challenges have been many. And then to download it to the next generation of founders and startups amidst what potentially is a much more welcoming and open kind of regulatory conversation, policy conversation that the U.K. specifically is having with the industry. 

How is that ecosystem you think going to play out in the U.K.? What will we see as a result of that? I mean, I think it’s also notable that the U.K. ranked third in the world in crypto transaction volumes after the U.S. and India. So there’s a lot of appetite there.

Krishnan: You take ourselves out of the equation, you’re thinking about what it takes to have a fantastic entrepreneur ecosystem in a country? You need a few raw ingredients. The first is you need amazing talent. You need amazing academic institutions and the U.K. has that in spades. As I said earlier, it’s colleges all over the country. Not just, close to here in London or close by. 

So this is not just in crypto, this is like multiple other sectors. We have amazing founders and people who are technologists out here. So that you need that, like without amazing people wanting to build companies, I don’t think you can get to that next step. 

The second part, as you pointed out, is the existing crypto ecosystem out here. We’ve been lucky as a firm to work with multiple founders over the years. So for example, even before the crypto fund existed at Andreessen Horowitz, we’ve worked with people like Herman Narula of Improbable, the firm invested in back in 2015. So we always kind of had a partnership here. 

But over the last year as kind of like if you want to take it as a sign of our commitment to the U.K., we have gone much deeper. For example, earlier this year we announced investment in a company called Gensyn, which I think is on the cutting edge of crypto and protocols and, kind of bringing to the couple of teams that you are talking about. We have other things in the works in the U.K. which we hopefully can talk about soon. So that’s the second part, which is like, ‘Hey, there is an existing ecosystem out here of founders, of people, of the community participating in crypto that we can partner with and be a part of, and be a contributor to.’ So that’s number two. 

And the third is, as you pointed out, the regulatory and policy environment. We have been heartened by what we’ve seen from the government and what we’ve heard from various other policymakers, and various other institutions out here about wanting the U.K. to be a technology startup hub and more particularly a hub for Web3 innovation. You’ve obviously seen comments from the Prime Minister downwards on that. So that’s third because, at the end of the day, the founders we want to work with just want to know what the rules of the road are. They want to get down to building amazing platforms and technology that hopefully all of us can do.

The number one thing I often hear is, okay, how can you, how can the firm, help people at some of the earliest stages? How can you help connect people back to other founders, other people from Silicon Valley, and get them resources? That kind of ties into Crypto Startup School. 

We obviously built a community around these very early-stage founders, and we want to build that.  

Lau: We are hearing stories of, and experiencing just around the water cooler, what startups and founders are experiencing with the drying up of capital. And so I’m curious, with founders and startups, what are those conversations like? What is your assessment? Is this a global issue? Are there pockets of opportunity here? And what are LPs and principal investors looking for before they write checks?

Krishnan: It is clear that over the last say, a year and a half or two, the fundraising environment has changed dramatically. And this is obviously not just a crypto conversation. I know several founders, several CEOs across the board have had to make some very hard changes. I’ve had to talk to a lot of those CEOs and I’ve been on boards of companies or I’m on boards of companies that have worked through some of those, and those are hard. You are kind of letting go and parting ways with people that you deeply care about. There are obviously some real deep human impacts there. 

But one of the patterns you end up seeing and the firm has ended up seeing, is the bear market is usually the best time to go build because there’s less noise, there are less tourists, there are less people who are just here because of the hype. You put your head down and can really go build. Usually, some of the great companies in the industry kind of came out of the bear market era. And for us, we are long-term investors. We look at things on, seven, eight, 10 year horizon. We’ve actually seen some people building amazing products. For example — this is one of my favorites and I tweet about it a lot — one of my favorite products these days is Farcaster. If you look at Farcaster, it is a decentralized social platform. Dan Romero and the founders are incredibly thoughtful builders, and they have been hard at work.

I’m a product person, I’m a technologist. What I can react to is people building stuff and things I can use. So I love hanging out in Farcaster. I love participating in conversations there, because I think that’s what brought a lot of us here, which is actually amazing things that we can touch, feel and hear and that gets me really going.

Lau: I totally want to hear more about that. But hang on to that thought. Of course you’re the guy to talk about it. Twitter or X. We’re kind of still confused about that iconic blue and white bird logo. It’s changing to X anyway.

I want to ask Sriram obviously, what’s happening in the social media space with Twitter. He happens to also be an informal adviser to Elon Musk, and I also want to hear why Sriram is betting on decentralized social media networks. You heard a little bit about that, but more when we come back.

Lau:  Welcome back to Word on the Block. I’m your host, Angie Lau and I’m here with Sriram Krishnan of a16z.

Krishnan: I love it. I’m working on my British accent. A16z right. We need our British viewers here to tell us how to pronounce it right. With the power vested in me by Angie, I’m going to rename the firm.

Lau: I have a young child. Their future is going to look enormous. I’m already seeing it. The decentralized social media opportunity. Personally, I totally agree with you, is huge. The fact that we have all been tied, sharing our content, sharing our deepest, darkest, breakfast items, what we did yesterday, vacation spots, and then also deeper thoughts. And it is all out there. But we’re the commodity. 

So, where do you see this going? Within our lifetime, but also kind of evolving this technology interface, the societal changes that we’re going to see alongside technology innovation when it comes to social media.

Krishnan: If you go back to social media, say 10 years ago, there was a compact. The compact was, you as a company say, ‘you give us your content, you log in, you post amazing things and we are going to give you eyeballs, we are going to give you an audience.’ 

Even if you set aside crypto and Web3, that compact has shifted as people have come and said: ‘We want more of a voice and we want more of a say.’ And that has shown up in multiple ways. For example, creators have gone to many platforms and said: ‘We are making a living from these platforms and we are bringing so much value, we deserve a share of that value.’ Others have said: ‘Look, we are bringing so much to the platform and we need to have a say in how the platform has been governed.’

These have obviously been playing out in multiple fashions all over the world. When I look at decentralized social media, I think of it as the ultimate expression of that. Which is how do you have a platform where the economics and the governance is really not tied to any one central entity, but everyone has a say. No one can be really forced to use an interface of choice and be forcibly removed from the platform without an alternative. 

Let me make an example. Today, if you had to go build an alternative client to Gmail, for example, you absolutely can, because email is always built that way.

Anybody can use SMTP or IMAP protocol and absolutely build a client. If you had to go build an alternative client to — I don’t want to pick on anybody, I’ll just say — an Instagram, to a TikTok, to a YouTube, you can not do that. And a lot of good reasons why you can not do that. 

I worked on the other side of that, but you just can not do that. You need them to approve it. Most cases, you absolutely cannot. One of the exciting things about decentralized social and I’m just going to use Farcaster, which we are invested in as an example, is that you don’t need any permission to go build any sort of interface. What this means is it harnesses the innovation of the community. 

If you are a teenager with just a laptop and an internet connection anywhere in the world, you go, you open up your laptop and you can start building something super fun. Farcaster has actually seen that one of the most exciting apps on top of Farcaster is somebody who took the client but then built an alternative visualization, which makes it look a little bit more like Reddit, and they needed no permission from the centralized team. That is something definitionally not possible with any existing social media platform. So that’s super exciting. 

The other part of it, very exciting, is that you now have the right to exit. For example, if for some reason, the founding team doesn’t like you, I always joke with Dan [Romero] and Varun [Srinivasan] about this. You can obviously go build an alternative. So these things are so foundational. The reason why they’re exciting, if you’re listening to this and wonder why is exciting, it harnesses permissionless innovation.

Lau: The audience has been tied so much to these platforms, networks, if you will. If you’re going to use the old TV metaphor in broadcast networks analogy that you were a channel maybe on X or YouTube or whatever it is. But with decentralized social media, you actually become the network yourself. You are no longer tied to platforms. You are the platform. You are the platform, the content creator. You can aggregate your friends and your families to get a critical mass of audience.

You’ve been working closely with Elon. There’s been so many changes at Twitter. It’s now called X. There’s also speculation that the platform is going to start incorporating crypto payments. Since we saw Tesla briefly accepting Bitcoin payments back in 2021. What’s your view on that? Your personal view. Whether or not you could speak for Elon. No one can speak for Elon. But obviously what is within the realm of thinking when it comes to crypto and social media platforms like X. And what are the conversations like that you’re having with Elon Musk?

Krishnan: Well, when I get asked this, I always say one thing, which is there’s one person who speaks for Elon Musk and you can find him ‘@elonmusk’ on X. He’s very active and you might get a response. 

I obviously cannot speak for him or the team. But I am obviously a fan personally and as a firm, we have been working with him and the team for a while. There are a few things I would say. The first is, that I personally was at Twitter for a few years. You talk to any existing or former Twitter employee, one of the things that always was sometimes frustrating was how do you get rapid product development done? Elon, and I know that he’s not to everyone’s taste. Some of my old colleagues may disagree with me. The truth is, there’s been so much rapid product development done over the last year or so since he came in and took the reins. So, for example, the ability to upload video, the ability to kind of post longer form tweets, there’s a bunch of stuff in there that seems very exciting to me. The fact that there are a lot of changes, not all of them are going to work, nor should they. What I think is exciting is just building amazing new things.

There are obviously some very serious world events happening in the Middle East. You’re seeing so much of that conversation play out on X and it is a crucial part of sort of the global conversation happening. So I always tell people this, I owe a lot to Twitter over the years, and X as it’s now called, has been foundational. In my career, I’ve met amazing people. It has meant a lot to me professionally, and I think it should, and will continue to play a critical role in sort of being the home for discourse globally and I’m excited. I know it’s early days. I’m excited about all the product changes that are happening.

Lau: I want to also ask you about another innovation trend. Trend, reality that’s, becoming more and more entrenched in society. And I want a deep dive into the intersection of emerging technologies like artificial intelligence and the perceived threat around it. How is Sriram thinking about it? What is the intersection of AI and blockchain? All the rest. Stay with us. You don’t want to miss it. Thanks for watching Word on the block. We’ll be right back.

Welcome back to Word on the Block. We are here with Sriram Krishnan of a16z.

It’s really fun to think about the future like that. And just the past year, I’d say the acceleration of artificial intelligence into the modern-day lexicon. It’s displacing roles in real-time. It is unlocking a lot of these tech barriers that were so expensive and once seemed impossible to overcome. And suddenly, a lot of business logic is changing. How should we think about that? What kind of ideas and implementation of artificial intelligence, how it should change business logic? And how are you thinking about that as a venture capitalist?

Krishnan:  There is this kind of fantastic symbiosis between what AI and crypto can do together. Because if you look at the heart of AI, if you look at the last year, a lot of the amazing innovation and these large language models, just because of the capital needed, has been done by two or three companies. Huge props to all of them to what Sam Altman and Dario Amodei and all of them have done. But if you kind of go back to the earlier conversation, I don’t think the internet that we want should be centralized. I don’t think any of us would want AI to be controlled by two or three large players, even if they’re good people. What we want is for all of us to have a say. So there is a great quote that people attribute to Peter Thiel, but I don’t know whether it’s from him, that AI is a centralizing force and crypto is a decentralizing force. 

So if you look at what part of what crypto does very well is it gives people a say. It gives people a stake through all these interesting protocols and incentive mechanisms. I’m hoping and we obviously have a couple of points of evidence of this. That’s what crypto can bring to the table with AI. 

I’ll give you an example. This kind of ties into our UK conversation. We just announced a few months ago that we led a round in a company called Gensyn. The heart of what they do is they try and bring distributed training to what can power large language models. This morning we had an amazing discussion about what kind of models and architectures can actually work on a distributed ecosystem, but maybe someday you can harness the CPU under your desk. That is an example of really bringing some great ideas from crypto, which are incentive mechanisms, and protocol design. Aligning all these different stakeholders in a decentralized fashion into AI. So I think that’s going to be really exciting. There’s another theme I want to touch on, which is open-source. And I think if you look at crypto

Lau: Like Llama.

Krishnan: Yes, that’s a great example. So if you look at crypto, Vitalik had a very good tweet post. I’m just going to say tweet to keep it simple. Vitalik had a very good tweet about a year ago, where he said a lot of the trust in crypto comes from the fact that you can look at it, inspect it, break it open, and sometimes mathematically prove it. But there’s kind of an inherent openness at the heart of crypto. 

Now, the very nature of these large language models makes it much harder. There’s a lot of cutting-edge work to be done on opening them up, interpreting them, and understanding them.

Open source is going to be a key part of what I know a lot of other people do. So for example, you mentioned Llama, Yann LeCun of Meta, for example, is a great proponent of making things open-source. And I think we as a firm in general, are big fans of open-source, because going back to an earlier conversation, I think it harnesses the global community. Anybody can open up a laptop and go participate. I’m very much pro decentralization and open-source.

Lau: I could talk about this with you for a long time. Lots of great conversations, and a lot of great thinking from Sriram Krishnan.

Krishnan: Thank you. This was amazing, super fun. If you’re watching this and especially watching this in the UK, I want to hear from you. Send me a DM, send me an email, smoke signal, whatever works. I want to hear from you. Ideas, suggestions, what we can do. But I’m here to listen.

Lau: One of the most intellectually curious humans in the world, just sat down with him. Sriram Krishnan. Thank you for this. Super appreciate having you on Word on the Block and want to thank everyone for watching this follow-through. 

Reach out to Sriram. Smoke signals might be hard. DMs might be better on X or otherwise. So thank you all for joining us on this latest episode of Word on the Block. I’m Angie Lau. Forkast’s Editor-in-Chief. Until the next time.