Breaking Analysis: Furrier On Being Founder-Friendly

Although Netflix posted good revenue numbers in its third quarter, they were disappointed by its subscriber numbers. Even with the lower than hoped for subscriber numbers, reports show that Netflix is way ahead of its competitors in the streaming video game, beating out YouTube, BitTorrent and iTunes. Amazon and Hulu barely made it on the chart. SiliconANGLE Founder John Furrier says that this really speaks volumes to the streaming video industry around the user behavior and the user consumption patterns. He said it shows that the rights to the content is is everything in this business, and also, the brand matters. Netflix had 33% of the streaming marketshare. YouTube is also very popular, but they don’t have any content rights, other than the user-generated content. They are trying to dip their toes in the water, to try to generate more legitimate content, by doing live-streaming, but so far, it hasn’t panned out for them, hence their traffic is much lower than Netflix.

Furrier explained that there’s some serious technical challenges around traffic of large content type, such as video, going across service provider networks. He gave the example of how Verizon, Comcast, the telco and the cable companies have specific zones or networks that they own, and when traffic travels across these different zones, they have to have peering arrangements. When peer-to-peer clients, like BitTorrent, send traffic across, it just floods the networks. Comcast doesn’t want any traffic coming from Verizon that’s not being paid for, so this is all being subsidized by the cable and telco companies. As a result, there’s a huge technical routing issue of this unmonetized traffic. Netflix’s competition needs to do two things: 1) solve the technical problem by making downloading and on-demand streaming more effective, and 2) have really good content.

That 33% marketshare should make founder and CEO Reed Hastings breathe a little easier. These days, it seems like any time a company hits a speed bump, such as Facebook with its disappointing IPO, founders are led to the guillotine, with the townspeople investors waving their pitchforks and torches. Furrier disagrees with this concept. He said founders of companies used to be kicked out as soon as possible by the investors. Furrier calls this “playbook page 23” – a metaphor to the fact that part of the venture capital playbook is to get rid of the founders, take over the companies and make a ton of money. This was the old way. Furrier says the new way is different because 1) founders are more experienced and they’re becoming investors themselves, and 2) the access to information and transparency on both sides is freely available. “Because of this new frictionless environment of information, that transparency actually creates efficiencies in the start-up eco-system.”

Andreessen Horowitz has created a founder-friendly, early stage investment friendly environment where entrepreneurs trust them and have this mentorship and have services that will help them make good decisions. It’s not that entrepreneurs want to control the company; good entrepreneurs know when to step away. This new environment of information is creating a new era of entrepreneurship and it’s completely disrupting the business. The trend is towards keeping the founders around, having transparency of information and mentoring and services available, and whoever does it this way will win. See the whole segment with Kristin Feledy and John Furrier on the Morning NewsDesk show.