Alex Rampell on TBPN: Revenge, Redemption, and Founder Drive

You either want revenge or redemption, and some of the best entrepreneurs have this in common. And you see this with some of the best entrepreneurs, like what is the driving motivation? These are all industries that I wouldn't say they've been untouched by software. They've been untouched by specialty software. And the reason why is because the market was perceived to be too small. That's the really hard thing to disambiguate today, which is you can have things grow so quickly, but they can also go to zero so quickly because anybody can build software on like a weekend, which is both great and terrifying at the same time. Today's episode is a conversation with Alex Rampell on TDPN following the announcement of A16Z's new fund. In this discussion, Alex reflects on his path early software entrepreneur to leading A16Z's apps fund and how those experiences shape the way he evaluates founders today. He shares what he looks for exceptional builders, including high agency, deep knowledge of category history, and the ability to materialize talent, capital, and customers, as well as why motivation beyond money, what he calls revenge or redemption, often determines who endures. They also get into how Alex is thinking about the application layer in an AI-driven market from Greenfield opportunities and labor-replacing software to proprietary data votes and what compressing timelines are raising the bar for defensibility, distribution, and long-term advantage. One of the day, congratulations. How are you doing, Keith? Good. Good. Fantastic. Super excited to have you on. I've enjoyed. You're somebody who's I've read your writing and listened to your podcast appearances for a decade now and always appreciated your point of view on a bunch of different things. So, welcome to the show. Yeah. Thank you. Now, I'm here to prove that I'm real. Fantastic. I mean, it's like proof of life is very important increasingly. Yeah. It is. I mean, first time in the show, can you give us a little bit of backstory to the journey to Andreessen and how long you've been there? Sure. So I've been here for 10 years. Previously, it'd been a long time, like six years. And previously, long time, my partner started by writing software when I was a kid in high school, actually, even before that. And then out of college, I graduated in 2003, I was probably the only person from my class that just kind of became an entrepreneur right away. Yeah. And it wasn't because I was smart or dumb, probably more dumb than smart. It's a guy who had a little business that I was running in college. So kind of kept doing that, met this guy named Chris Dixon, who was at Harvard Business School when I was at Harvard College. You have to remember, like, 2002, when we met, the internet, 1.0, I just died, everybody locked their jobs in September 11th that happened. And what do you do if you're a dried-up entrepreneur, you go to Business School? Yeah. It's called Cosmo.com, a huge hit that kind of went to zero. What did that guy do? He went to HBS. No way. So Chris Dixon was there. And he and I were like the only two people. I swear, and like, the entire state of Massachusetts, that thought that the internet was still kind of cool. We got it. We used by a French boyfriend, had coffee at Albon Pan, because it was a little cheap. And then cooked up a product called Did They Read It, which is still around today. It's an email tracking tool, it embeds a tracking pixel on every email that you send out. That did pretty well. Then we started the venture back company together that became site advisor, and that got acquired. And then I started another company called Trial Pay, to, like, the thing that we learned at that site advisor is that nobody likes paying for software. Like, you're willing to pay for an intangible good, like a glass of wine, $20 for that seems totally reasonable, right? But paying $20 for one song on iTunes, there would be riots in the streets. So the idea was, I'll give you this digital good for free if you buy something else. If you know how affiliate marketing works, it kind of plugs into that. So it's like, hey, we'll give you this product for free if you sign up for Netflix, or if you switch to Geico, or if you shop at the gap, or if you get a discover card, using the affiliate commission to go pay for the product, that did pretty well. Like, it was, like, half of the revenue site advisor, it was, like, from my, from a little shareware business that I used to have back in the day, it doubled our revenue. So I turned that into a company called Trial Pay. That did great for a while, that it did terribly, that I kind of resumed to okay, sold it to Visa. Then along the way, met this guy, Max Levchin, after he had sold slide to Google, and we cooked up a cup of tea called the firm. So I co-founded a firm at Max in 2012, and actually brought a firm to injuries in Horowitz as a funding opportunity, which they did. And Chris Dixon kind of ended up talking me into joining here in 2015. So Ben here. Chris Dixon, how quickly did you realize that Chris and Max were special, because I imagine you, during those two periods, you were meeting hundreds of different people, I'm sure people wanted to build stuff with you, other entrepreneurs. And you picked well back to back. And it's probably the hardest, hardest, you know, one of the hardest things to actually clock at times. Yeah, I mean, I think a lot of the greatest people, they have to do things in common. They have this term that is going around a lot like high agency, like they don't just like follow the rules, they just like take matters into their own hands and do something. And then they just kind of know the history of everything before, like they're just like students of history, philosophy, like Chris was a philosophy major, people don't know about him. He went to, he went to, you know, he got his bachelor's degree in philosophy, was going to do a PhD, kind of realize that was a bad idea, and then eventually went to business coaches, he will probably say the worst idea, but it was kind of self evident. I mean, Chris and I, I mean, the history, the history thing is a real thing, like if you're talking to an entrepreneur that has been building their business for one to two years, and you can tell them companies that in somewhat recent history in the last decade, even that have like attempted that, or companies that are adjacent, they're like, oh, I'm not familiar with that. It's like immediately like such a bear signal because the opposite, like that's the red flag, the whatever the opposite. Green flag, yeah, yeah, that's what I'm saying, but yeah, the green flag is green flag, what's the green flag? The green flag is not only have, do I know everything, I mean, I'll give you one example. I think the Carlson brothers went out to like Dehawks Ranch, like Dehawks started Visa. He's kind of like a weird quasi communist, even though he started one of the biggest companies of the world, because Visa was meant to be just like, it was a nonprofit, Visa was a nonprofit until 20, I don't know, 2008, maybe 2009, it was the biggest IPO's, yeah, that's right. Yeah, but it was a nonprofit until then, nonprofit like the NFL is a nonprofit, it like, makes a lot of money, but it's owned by the constituents, the constituents that own Visa were the banks. And it's like, okay, I'm starting a payment company, there were a lot of payment companies that can't be for, but it's like, who will, let's find this guy who's 90 years old, who's moved outside of capitalism is working as a farmer just to learn from him. And like, I have this mental model that I now use for entrepreneurs and it's a memo that I've written that we use internally a lot. I got to say, like, the best entrepreneurs, they have five things that I look for. They can materialize labor capital and customers and hopefully those are self evidence. Like, you can get people to quit their high-paying job for like, certain failure. It's like the Ernest Shackleton thing. It's like, you know, wanted men for dangerous journey, almost certain failure and death. And if you work, you might be famous, right? It's like, you want that. Very, very hard to do. You have to find people that can materialize capital. It's like, get people to give you money and the best, the best sign of future fundraising success. Like, if we do round end, we want to make sure there's going to be a round end plus one or you're going to be profitable on round end, which is unlikely. So are you good at fundraising? Can you get customers? Like, imagine it's like, I have two weeks of cash left. Please be my first customer. I have none. Like, who? It's very hard to pull that off. Yeah. Then you want to know the history of the space, which is super important to your point. You want that green flag version. Not just the intermediate, you know, what's the, what's the, the combination of green and red flag like this? Round? You don't want the turquoise. Whatever. Yeah. Like, you want the green flag. This person knows everything that's tried before and they have a new angle of attack. They're not going to learn on the job. They've actually learned through history. And then the last thing that I care about a lot, every day my, my team knows this. My favorite book is The Count of Monocrestia by Alexander Dumas. And it documents the story of this guy, Edmund Dantes, who's like wrongfully accused. He's like in prison for 17 years. But then becomes the richest person in the world. But doesn't give a shit. Right? And all the, all the riches in the world do not matter. He wants revenge. Yeah. Right? So you could either revenge. That kind of sounds bad. It was like a cool testimony. Yeah. But you either want revenge or redemption. Yeah. And some of the best entrepreneurs have this in common and the reason why it's so important for a venture lens is imagine that you're a 20 year old kid. You start a company and somebody offers you, I don't know, half a billion dollars to buy your company. And you go on 25 percent of it. You're going to make over a hundred million dollars. You'd have to be insane to turn that down. Right? Yeah. And that actually are going for, it's not that we don't want people that aren't capitalists that don't care about money. But it's like they care about if you've seen the movie Space Balls. It's like, we're not doing this for the money. We're doing it for a shitload of money, a little different here. It's, I'm doing it for another reason. And like a great example of this is there's this guy, Renaud Laplante, who started a company called Lending Club. Oh, yeah. Very famous company at the time. There was like a dearth of IPO's like Lending Club kind of gets to scale, goes public. He gets fired from his board, ousted from the company. He's probably made hundreds and millions of dollars. He's the count amount of crypto. He's like, fuck those guys. I am going to start a new company. I'm going to start an upgrade and you know what he called his new company, upgrade. It does the exact same thing as Lending Club. It's probably ten times the size of Lending Club now. And what's motivating him is not just the hopefully shit ton of money Space Balls quote, but he wants revenge. He wants redemption. And you see this with some of the best entrepreneurs like what is the driving motivation? Because when times get tough, like you need something, because like there is no money. Like if your company's going to zero, if you're Aaron or Shackleton in the winter of Antarctica, like your voyage is not successful, right? You need something else driving you at that point. And that's why that that medal is something that I find extremely valuable. Have you seen Space Balls, Jordy? I have not. You got it. Oh, my favorite. I've seen. I've seen no movies. This is not a small question. One of my, probably like a, I really, I was going to say maybe it's hard to exactly place it. Top 10. Like I loved your episode on, invests like the best on operating systems. How is AI kind of like updating your thinking on modes and operating systems and how somebody can create a lot of value with a startup? Yeah. Well, I think maybe I can rewind a little bit and just because we announced this new fundraise, I can tell you exactly what we told our LPs in terms of like what we want to invest in at the application layer, because I do application layer stuff and it's really three things. You know, category one is, I call it Greenfield Bingo and kind of maybe another way of answering your question is there's something that there's a quote that I use a lot. The best companies have hostages, not customers. Right. Right. Like that's why nobody likes using sales. You got to be taking revenge. You got to be taking hostages, you know, the best companies have hostages, not customers. Those are great companies to invest in, right. And that kind of goes to the part that I was making like, you know, NetSuite, Workday, Salesforce like they're all hated by their customers, but none of those customers can leave. However, if you build a better version like kind of a more AI first version of all these companies and you're selling into the Greenfield, you've got a shot, right. Because like I was lucky enough to be the first investor in Mercury and Mercury worked not by stealing people from SVB. They just worked. It's like, Oh, you're a brand new company. You can use shitty SVB or you can use really good Mercury. And that worked. Whereas they never got customers from SVB until the weekend that SVB failed. So that Greenfield opportunity for software like that is AI enabled in the same way that like, that was true for a cloud, right. That was true for a vault. It's like, here's the new thing. The incumbent will eventually build it. Like another expression that I use a lot is like, the battle between every startup and incumbent is whether the startup gets the distribution before the incumbent gets the innovation. The incumbent, my default assumption is that the incumbent normally wins because they have the distribution, they will get their act together three years later. And with AI and cursor and everything else, they'll get their act together maybe three weeks later. So the kind of the might of distribution is very, very powerful. So one option is you just go into the Greenfield. So that's kind of category one is a, you know, we call it Greenfield Bingo. It's just like build. We have a bet. It's just like NetSuite. It's better. It's AI enabled, but they're not going to steal customers from NetSuite. They're just going to get Greenfield. Category two is this kind of new super exciting category of software does labor. And like there is no incumbent software product for another trial attorneys. It's called Microsoft Office, but like Eve does that and does that really well. There's no incumbent software product for dental office receptionist, but Henner does that and does that very well. So that's a really, these are all industries that I wouldn't say they've been untouched by software. And this is exactly what happened to SaaS. Like FinTech really changed SaaS significantly because take, I'm sure you've heard of Toast. Toast is one of my favorite businesses. It's like Square, but it's only for restaurants. It's this whole operating system for restaurants. How many restaurants on their IBM PC, Jr. in 1984 use software like zero? And how many of them would pay tens of thousands of dollars a year for software zero? But they all need payment processing. They all need payroll. They need these other services you kind of bundle them in with software. And this is the really exciting thing about AI is you go say, Hey, trial attorney, I want you to pay $50,000 a year for software. You said this 10 years ago, like, no way. We'll pay for Microsoft Word because we use it to write demand letters, like that's it. And now you can say, Hey, we'll handle all these cases for you that you could not handle profitably. And that's AI software. Now they are software buyers. So that's category two. And then category three, I called the walled garden. And I wrote a post about this a little while ago. But walled garden businesses are amazing because if you assume that in the world that we live in today, and this is another way of thinking about kind of defensibility in AI, open AI has their sights kind of on everything, right? Like anthropic probably has their sights on everything. It's so easy to build everything. So I'm not have you guys heard of open evidence? Yeah. Yeah. Okay. So I tore my Achilles in February, it's almost a year. It sucks, right? It's all better now. I need to go on. It was. I was skiing in Japan. There we go. That's a good reason. Yeah, one of the more, um, tear my Achilles. What do I do? So I go to a chat GPT, um, I'm in like the clinic in Nisaco, Japan, talking to the Scottish doctor and he tells me, Oh, yeah, you only have surgery in the US. Nobody does it outside the US. I was like, this guy's on crack. Like, of course you have surgery to fix an Achilles. I go to chat GPT. It tells me everything. Um, then I think I find this thing open evidence and it's like chat GPT, but it has every single medical document in the world. And imagine that tomorrow, chat GPT, five, three comes out. It's AGI. Everybody agrees it's AGI. Human race is over, but it has no medical data. And then on the other side, you have GPT 3.5 and it has every single piece of medical knowledge ever known to mankind. What would you rather use? And the answer, at least for me, and I did use this, is open evidence. So there are so many businesses that look like this where they find some proprietary piece of data. They're the only ones that have, because before you would have to sell data. That was like your only, that was your only hope as a business. Um, and like another example that I mentioned this post, there's a company called VeeLex. And VeeLex is this like 25-year-old European data business that bought up, you know, legal records in Spain to start. And they would sell it to firms like Wilson Sincini that needed it for case law. Um, now they sell an outcome, because they're the only ones that have all the records. So you can chart, you can build a really interesting business if you're the only source of some unique form of data. And I love businesses like that, because that's the other, sorry, for being so long-winded here on the answer to your question. But, um, the, the, the, the businesses that can be very, very large in AI that can grow very, very quickly, you still need to make sure that they're fundamentally defensible. And that's the really hard thing to disambiguate today, which is you can have things grow so quickly, but they can also go to zero so quickly, because anybody can build software in like a weekend, which is both great and terrifying at the same time. Yeah, indeed. Well, thank you so much for hopping on the show and breaking it down. Incredible. Overgreens. Yeah. Yeah. Really? Yeah. Great to meet you. Thanks for listening to this episode of the A16Z podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X, A16Z, and subscribe to our substack at a16z.substack.com. Thanks again for listening, and I'll see you in the next episode. This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. 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