Andreessen Says Foreign Web Co.’s Could Take Advantage of Prism Fallout

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SUN VALLEY, Idaho– Venture capitalist Marc Andreessen said in an interview that U.S. Internet companies may lose business to foreign competitors following revelations about Prism, the government data-mining effort.

In an interview on the sidelines of Allen & Co.’s annual conference, Mr. Andreessen said the severity of the threat depends on whether it will come to light that other governments also have Prism-like programs.

“It remains to be seen how big a hit,” he said. Mr. Andreessen, co-founder of venture capital firm Andreessen Horowitz, is a board member of Hewlett-Packard Co., eBay Inc. and Facebook Inc.

Technology giants Google Inc., Facebook, Microsoft Corp. and Apple Inc., have repeatedly denied knowledge of Prism or giving the U.S. government broad access to its servers as documents leaked by former National Security Agency analyst Edward Snowden suggested. But, beyond saying they comply with court orders, they have shared few details about their cooperation with security agencies.

Mr. Andreessen says the Prism fallout illustrates how trust between the U.S. government, companies and citizens is at a low, just when they need to be cooperating to combat mounting cyber-security threats.

“The virtual world is now infrastructure,” he said. Software developed by the private sector is “building the doors, the locks, the bridges.” That exposes a big threat to national security if the public and private sectors don’t cooperate, he added.

But he says resolutions aren’t easy due to mistrust between the two. “What [cooperation] should look like, I don’t know,” he said.

Wearing seersucker shorts and a Puma jacket, Mr. Andreessen also discussed the market for technology deals.

He said increasingly too many technology startups sell too early, stunting the number of big companies that will emerge.

Andreessen-Horowitz-backed Silver Tail Systems, a security-software provider, sold to security company EMC Corp. last year for $250 million he said, before its business really started to take off.

“It was great, but it would have been greater if it had had a $100 million business and they bought it for $1 billion,” he said. “We spend a ton of time trying to convince founders to not take those deals. As a consequence, you don’t have a new breed of Intels, and Oracles and Googles.” EMC didn’t return a request for comment.

He also predicted a big uptick in M&A across the board. Big technology companies are going to need to do deals to transform themselves to keep up with the times, he said. Mr. Andreessen cited Apple, saying “at some point, Apple will need to be a Web and cloud company and buy something.” An Apple spokeswoman declined to comment.

He predicted that “acqui-hires,” when companies buy young startups for their teams of engineers, will continue and says smaller companies have begun doing them too.

He said he expects the explosion in seed-stage companies to continue, in part due to the growth in the number of incubators that back them. “Honestly, I don’t understand why there are 50 incubators. There should be one or two.”

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