News & Analysis

driven by the PitchBook Platform
gettyimages-495485702.jpg
VC Fundraising

Modest a16z fund step-up ratchets back years of breakneck asset growth for VCs

Andreessen Horowitz is gearing up to raise $3.4 billion for its next early-stage fund and seed fund, a 17% step up from its previous pair of vehicles.

While many venture firms struggle to raise funds as large as their predecessor vehicles, Andreessen Horowitz is convinced that its brand and reputation can help it fetch more capital than it did at the height of the boom market.

The firm is gearing up to raise $3.4 billion total for an early-stage fund and a seed fund, Axios reported. If a16z succeeds at hitting its target, this set of funds will be 17% larger than its previous pair. Andreessen Horowitz announced that it had raised a $400 million seed fund in August 2021. Five months later, it closed on a $2.5 billion early-stage fund, its eighth flagship vehicle.

The news offers further proof that some top-tier managers can still plan to raise gargantuan funds even as many firms postpone new vehicles or take longer to fundraise. But it also underscores how ballooning AUM is a thing of the past in VC.

The $2.5 billion a16z mega-fund was 92% larger than its $1.3 billion 2020 predecessor. The more modest 17% step-up for the new funds is indicative of the broader market: The Q3 2023 PitchBook-NVCA Venture Monitor showed that the median step-up for US funds has been nearly 20% this year, down from more than 50% last year.

 


But that figure may not tell the whole story about the current fundraising environment. For example, Lux Capital and Felicis Ventures announced large funds this year, but those funds were slightly smaller than their previous raises as they both closed one large fund instead of a core vehicle and an opportunity fund.

Lux announced its $1.15 billion fund in April, which was $360 million less than what it raised across two vehicles in 2021, $675 million for an early-stage fund and $800 million for an opportunities fund. Similarly, Felicis announced in March an $825 million combined fund, smaller than its combined 2021 vintage $600 million early-stage fund and $300 million opportunities fund.

Other VC mega-funds that took less capital than their predecessors include Canaan Partners’ $650 million 2023 fund, coming in at almost 20% less than its 2020 $800 million vehicle, and Founders Fund‘s eighth vehicle, which the firm reduced from $1.8 billion to $900 million, Axios reported in March.

In the meantime, Insight Partners has cut the target for its next fundraise from $20 billion to $15 billion, and Tiger Global is struggling to raise a vehicle that’s already dramatically reduced from its original plans.

Andreessen Horowitz did not respond to a request for comment.

Correction: An earlier version of this article contained the wrong size of Lux’s latest fund. The fund closed with $1.15 billion. (Oct. 31, 2023)

Featured image of Andreesen Horowitz co-founder and general partner Marc Andreesen by Justin Sullivan/Getty Images

Join the more than 1.5 million industry professionals who get our daily newsletter!