Andreessen Horowitz strikes again—but with a slightly different approach.
Also known as a16z, the firm announced it has raised $2.75 billion across two funds: $750 million for a sixth namesake fund, focused on early-stage enterprise, consumer and fintech investments, and $2 billion for a late-stage venture fund, marking the first of its kind for the 10-year-old investment firm.
The raise comes about a month after the firm publicly transitioned from a venture capital firm to a registered investment advisor, allowing it to more freely commit funds to a variety of investment vehicles while also enduring the increased costs and paperwork associated with such a status. In late 2018, the National Venture Capital Association concluded that median annual compliance costs related to regulatory obligations are eight times higher for a registered investment advisor compared with an exempt reporting advisor (such as VC firms). The median costs for an RIA are $405,000 versus just $50,000 for an ERA, the NVCA reports.
The trade-off may be worth it for the famed a16z, however, as the firm continues to rake in windfalls from 2019’s high-profile IPO streak. Its recent scorecard includes about 43.5 million shares (9.6% ownership) in Pinterest purchased in 2011 as part of a $27 million Series B, in addition to sizable stakes in Slack, Robinhood, Stripe and Lyft. Flush with cash, co-founder Marc Andreessen will most likely find the $405,000 median cost estimate in a forgotten, mothballed jacket someday by accident, making this a non-issue for the firm.
In a blog post, the firm explained its rationale for describing the fund as “late-stage” instead of “growth-stage.” “We believe that ‘growth’ is a loaded, one-size-fits-all term that not only means very different things to different people,” the company wrote. “In each era, there are a set of companies executing on unusually big visions for emerging categories, and we want these companies to be supported with a venture mindset that supports long-term vision and greater innovation risks.”
The specific “big visions” that the firm will invest in are not immediately clear, but this may suggest a period of comparatively more conservative investments that stand in contrast to investing in Pinterest in 2011 or Lyft in 2013. With its new RIA status, the company may seek to preserve its recent IPO windfalls while still investing more aggressively and in a more venture-focused way than a traditional, conservative mutual fund-centric investment firm.
Investing in a variety of growth stages is not new for the firm, as it insisted in its blog post. But with a new RIA designation and a substantial amount of realized gains under its belt, the company’s sentiment may be shifting accordingly.
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