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Andreessen Horowitz is switching up the way it raises funds

The Silicon Valley powerhouse will focus on smaller, more specialized funds—a strategy it’s already put to use this year with vehicles aimed at crypto and diverse founders.

In 2011, Andreessen Horowitz co-founder Marc Andreessen wrote an essay for The Wall Street Journal called “Why Software Is Eating The World.” In the article, he explained why his then-two-year-old venture capital firm was putting its cash in big software companies like Facebook, Twitter and Skype: “We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses.”

Since then, a16z has run with the motto “software is eating the world"—an investment thesis that’s proved to be quite broad, as a vast number of today’s tech companies are software-oriented. The Menlo Park-based firm’s portfolio includes Airbnb, Lyft, Instacart and OfferUp—all different types of businesses catering to different consumer needs, but all falling under the software umbrella.

Now, nearly a decade after its founding, a16z is shifting its fundraising strategy toward vehicles with narrower focuses, per Axios. All five of the firm’s flagship funds have been more broad, investing across most stages and multiple industries. But from here on out, the firm plans to raise more specialized funds.

Here’s a look back at a16z’s flagship vehicles:

  • Fund I: 2009 | $300 million
  • Fund II: 2010 | $650 million
  • Fund III: 2012 | $900 million
  • Fund IV: 2014 | $1.5 billion
  • Fund V: 2016 | $1.5 billion

For its next vehicle, a16z will reportedly raise about $750 million to invest in early-stage consumer and enterprise software companies.

There’s already evidence of the firm’s new strategy of raising smaller, more niche vehicles. It secured $300 million for a crypto-focused fund in June. And earlier this month, a16z confirmed plans for a fund that will be used to back multicultural founders, with reports indicating that the vehicle will total around $15 million. The firm has also raised two biotech funds.

Andreessen Horowitz’s new strategy could also indicative of the start of a larger trend, as LPs become more and more interested in backing funds focused on specific industries and stages, according to the Axios report. That would logically lead to venture capital firms raising smaller pools of capital, but potentially more of them. (Some firms, of course, are still raising massive funds—Sequoia, for example, is in the process of raising an $8 billion vehicle, per multiple media outlets.) This year, VCs in the US are on pace to raise more total capital than any year in the past decade. In terms of fund count, US venture investors are set to close about 270 funds, on par with the high fund count of the past four years:

If VCs like a16z do continue to move toward a trend of more specialized vehicles, firms will likely continue to raise a big number of funds, since they’ll need to raise capital more often.

  • dana-headshot.jpg
    Written by Dana Olsen

    Dana Olsen was a senior writer at PitchBook, covering all things venture capital. She has a BA from UC Santa Barbara and a JD from Loyola Law School.

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