Market Data
The Myth of VC Power: Lessons from Andreessen Horowitz’s Miami Exit
Venture capitalists (VCs) often position themselves as the architects of success, hyping their role in creating unicorns and driving innovation. However, the recent exit of Andreessen Horowitz (a16z), one of the world’s top-tier VC funds, from Miami reveals a critical truth: VCs do not create ecosystems or spotting a dawn—they merely crow about it. The firm’s failed expansion into Miami serves as a stark reminder that even the most reputable VCs cannot manufacture success where the foundational elements are absent. Despite the influx of talent fleeing high-tax states like New York and California, the expected wave of unicorns never materialized. Two years later, a16z is packing up and leaving, leaving behind important lessons for entrepreneurs, developers, and VCs alike.
Lesson 1: Don’t Buy the VC Hype
VCs are masterful at hyping their successes, and for good reason. Their ability to attract high-potential entrepreneurs and secure funding from financial institutions depends heavily on their reputation. However, this hype often overshadows a harsh reality: VCs do not create unicorns. The presence of wealthy individuals or tax advantages in a region does not automatically lead to the emergence of successful startups. Unicorns are not conjured into existence by VC funding or marketing; they are built by entrepreneurs with the right skills, strategies, and drive. The hype surrounding VCs often distracts from the real heroes of entrepreneurship: the founders who put in the work to turn ideas into reality.
Lesson 2: Unicorn Entrepreneurs, Not VCs, Build Unicorns
Unicorn entrepreneurs (UEs) are the backbone of any successful ecosystem. These individuals are driven by a hunger for success, often stemming from personal experiences of adversity or a relentless desire to solve problems. While VCs provide capital and guidance, they are not the ones waging the battle on the frontlines. Entrepreneurs are the ones who take risks, adapt strategies, and persevere through failures. Even legendary entrepreneurs like Steve Jobs and the founders of Google faced rejected pitches before achieving success. VCs may provide the weapons for the guerrilla war of entrepreneurship, but they do not fight the battles. The real magic happens when an entrepreneur turns an idea into a proven concept, achieving what is known as the “Aha!” moment.
Why Unicorn Entrepreneurs and Unicorn Skills Matter
Unicorns are not built on wishful thinking or hype; they are built on the foundation of unicorn entrepreneurs and their unique skills. Here are three key reasons why UEs and their skills are the real drivers of success:
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Potential Cannot Be Predicted Before the Aha! Moment
No one—not even the most seasoned VCs—can accurately predict a startup’s true potential based on a pitch or a deck. Success becomes evident only after the entrepreneur has proven a breakthrough technology, a winning strategy, or exceptional leadership. This is why even legendary entrepreneurs often face rejection early on. For example, Steve Jobs was rejected by 10 VCs, and Google was turned down by 12 investors before proving their potential. Angel investors and pitch competitions often fail to identify future unicorns because they focus on the wrong metrics. -
Entrepreneurs, Not VCs, Drive Ventures to the Aha! Moment
VCs typically reduce their risk by investing only after a startup has reached the Aha! moment—when its potential is evident. Before that, they often point out flaws and hesitate to commit. It is the entrepreneur who must drive the venture from idea to Aha!, requiring more than just a compelling pitch. It demands skills, smart strategies, and the motivation to turn potential into proof. - The Five Kinds of Aha!
The Aha! moment can take five distinct forms:- Previous-Unicorn Aha: A track record of past success, such as building a previous unicorn.
- Opportunity/Tech Aha: A game-changing technology that solves a real problem.
- Strategy Aha: A business model with proven potential for dominance.
- Leadership Aha: Proven leadership that delays VC investment until after the startup has gained traction.
- Finance-Smart Leadership Aha: Building a unicorn without relying on VC funding.
While only 1% of 85 billion-dollar entrepreneurs succeeded primarily due to their technology, 99% of unicorn successes are driven by strategy, skills, and leadership. This is why pitch competitions and shows like Shark Tank often fail to predict real unicorns; they focus on theatrics rather than real-world potential.
Capital Follows Potential, Not the Other Way Around
One of the biggest misconceptions in the startup world is that a lack of VC funding is the primary barrier to success. In reality, it is the absence of unicorn skills and unicorn entrepreneurs that holds regions and individuals back. Capital is not the limiting factor; it is the potential of the entrepreneur and their venture that matters. VCs are not the architects of success; they are followers of potential. When an entrepreneur builds a venture with the right skills, strategies, and leadership, capital will naturally follow. Policymakers and entrepreneurs who focus on addressing a so-called “VC shortage” are tackling the wrong problem. The key to building billion-dollar ventures lies in developing entrepreneurs with the right skills and strategies, not in increasing the availability of VC funds.
My Take: Skills Trump Hype
The numbers are clear: only 1% of 85 billion-dollar entrepreneurs succeeded primarily because of their idea. The other 99% succeeded because of their skills and strategies. This is why I emphasize the importance of developing unicorn entrepreneurs in my books. Pitch competitions and Shark Tank-style events may create excitement, but they do not prepare entrepreneurs for the real challenges of building a unicorn. To create thriving ecosystems, regions and governments should focus on fostering entrepreneurial skills, providing mentorship, and encouraging smart strategies. When entrepreneurs are equipped with the right tools, they can build ventures that attract capital and create real value. The lesson from Andreessen Horowitz’s Miami exit is simple: unicorns are not made by VCs or hype. They are built by entrepreneurs with the skills and determination to turn ideas into reality.
