Normally, the world of early-stage investing is shrouded in secrecy...
The professional start-up investors known as Venture Capitalists tend to keep their investment returns a closely-guarded secret.
But in a rare shift, one of the most renowned firms in Silicon Valley just made its returns public...
And the results are simply amazing.
This Guy Basically Invented the World Wide Web
Before I get into the details, let’s take a look at the people behind this firm’s success.
The firm, Andreessen Horowitz, gets its name from its two founders: Marc Andreessen and Ben Horowitz.
You might not be familiar with their names, but your life has certainly been impacted by their work.
For example, Marc Andreessen is responsible for creating the world’s first web browser. And he commercialized his breakthrough with the creation of Netscape.
Netscape is one of the most successful IPOs in history. Initially priced at just $14 per share, it soared to $75 on its first day of trading.
Ben Horowitz, meanwhile, was a senior executive at Netscape. After Netscape, he founded Opsware, an enterprise software company. That company also went public, and was eventually acquired by Hewlett Packard for $1.6 billion.
After the acquisition, Ben and Marc decided to start Andreessen Horowitz.
You see, once they saw how much money they could make by starting and selling a single tech start-up, they realized they could make even more by owning stakes in many different start-ups.
And boy, were they right...
300% Return in 18 Months
Last week, The Wall Street Journal and market research firm, Cambridge Associates, compiled a detailed report on Andreessen Horowitz’s investment returns.
I’ll go over the aggregate results in a moment, but here are some of the highlights:
One of the duo’s first investments was in Skype, the video service.
Skype had just been spun out of eBay and a group of private investors was ponying up the cash to buy it.
Andreessen Horowitz decided to invest about $50 million into the deal.
Just 18 months later, Skype was acquired by Microsoft for $2.75 billion. This netted Marc and Ben a $153 million windfall.
Tripling your money in less than two years would have any investor jumping for joy—but imagine how you’d feel after this next one...
312 Times Your Money
Imagine turning $100 into $31,000...
Or $1,000 into $312,000...
Sounds unbelievable, right?
Well, that’s exactly what Marc and Ben did on one of their next investments.
You see, when it was still at its earliest stages, they backed the start-up that soon became known as Instagram.
Instagram quickly turned into the most popular photo-sharing app in the country…
And in 2014 Facebook swooped in and acquired it—for $1 billion.
This netted Andreessen Horowitz an astounding 31,200% return.
The Complete Picture
With examples like Skype and Instagram, you might think Marc and Ben were “cherry picking” the investments they shared with The Journal and Cambridge Associates.
But here’s the thing:
Andreessen Horowitz shared the return data from their entire portfolio.
And as it turns out, since 2009, Andreessen Horowitz has yielded an average return of 42% per year. That includes its winners and losers.
Compared to “homerun investments” like Skype and Instagram, maybe 42% doesn’t sound like a lot. But let me put that number in context...
- The stock market average is just 5% to 6% per year...
- Warren Buffett, widely recognized as the most successful investor on the planet, has historically earned just 22% per year...
- And if you earned 42% per year, in 10 years, you could turn a nest egg of just $10,000 into $333,000. And in 15 years, it would grow to $1.9 million.
This is why we advocate that everyone puts at least some of their portfolio in early-stage investments.
Not only are the average returns far higher than the stock market’s returns...
But there’s always the chance you get your hands on a Skype or an Instagram—where just one investment could change your life.
To your success!