When Mosaic co-creator Marc Andreessen announced that his VC firm Andreessen Horowitz was pouring $15-million (U.S.) into a site called Rap Genius, everyone thought they had gone nuts. And for once, everyone was right! They had gone completely bonkers. From its goofy concept to the recent alleged racist outburst by one of the site's co-founders, Rap Genius is the Pets.com of the new social Internet bubble, and frankly, everyone involved in this site should have known better.
Take the name of the site out of the discussion, and it might have looked like a more solid bet. Andreessen Horowitz has had high-profile successes, with substantial stakes in Twitter and Skype, among others. Its affiliation with famed seed accelerator Y Combinator led it to Rap Genius' team, who were part of the prestigious program. But as the air has been seeping out of the stories behind two of Andreessen Horowitz's other success stories – Zynga and Groupon – there were emergent signs that this recent vein of innovation had been on the decline, if not entirely tapped out.
Andreessen's initial funding announcement on Rap Genius' blog came with a major caveat, namely that he was apparently more interested in the site's architecture. Rap Genius' lyrical notes were, in Andreessen's view, the new flowering of a feature built into the original Mosaic called "group annotations," allowing for comments and discussions on any page. It'd be like a comment box on every page on the Internet – what could possibly go wrong?
The post also called Rap Genius "the definitive online community of rap aficionados." That sparked the ire of pretty much every other site catering to rap aficionados, of whom there are rather a lot. Admittedly, most other sites were openly jealous of Rap Genius' funding windfall. But surely the three young Yale grads behind the company would understand that, to mollify the staid investment community, the prudent reaction would be to rise above the "haters" and show the world that they were serious about their project.
Not quite. Co-founder Mahbod Moghadam (who is Persian) has responded to a rap group's criticisms about Moghadam et al's relative privilege with a rap freestyle of his own, saying his tormentor (who is South Asian) looked like a "dirty cigarette." Now Moghadam is accused of making vile racist comments in a semi-public Rap Genius chat forum, and subsequently making death threats against the blogger who exposed him. Moghadam claimed at first that the site had been hacked, then revised his story to argue that he was being impersonated.
We can all have a good laugh at Andreessen Horowitz's expense when a seemingly-dubious investment turns out just as badly as observers feared. But it's also a potent reminder that, as investment themes reach their later stages, companies like Rap Genius are often the tip of the misguided-investment iceberg.