- Andreessen Horowitz revealed it closed $9 billion in new funds on Friday, bringing its total AUM to $28.2 billion.
- The firm has been growing its coffers and investment team non-stop through the pandemic.
- The fresh powder could signal that this year’s venture market will continue to smash records.
Andreessen Horowitz has done it again.
The storied venture capital firm has taken the wraps off three new funds totaling $9 billion, a representative for the firm said last Friday. This is the first major funding announcement of the new year, and the sum is eye-popping.
In a blog post, Ben Horowitz, a founding partner, shared how the money adds up. The $9 billion includes a $1.5 billion biotech fund, a $5 billion growth fund for investing in later-stage companies, and $2.5 billion that’s earmarked for consumer, enterprise, and financial services technologies, according to a spokesperson.
The new funds bring the firm’s total assets under management (AUM) to a whopping $28.2 billion.
The firm, known as A16Z, has been growing its coffers — and investment team — non-stop over the course of the pandemic. In 2020, it closed on $5.8 billion in funds, a record sum at the time, according to Crunchbase data.
Since then, it’s raised a $2.2 billion crypto fund, one of the largest of its kind; a $400 million seed fund; and a second Cultural Leadership Fund, the size of which is unknown, but sources told Insider it’s consistent with the first $18 million fund.
All together, the funds it’s raised over the past seven months at least double 2020’s total sum. The fresh powder could signal that this year’s venture market will continue to smash records. However, not all investors believe that such megafunds are good for the industry.
Wesley Chan, a general partner at Felicis Ventures, told Insider in November that when firms collect so much money, they generate so much income from management fees that they lack incentive to make their money on returns from their investments, especially when returns take years to materialize.
Because all that capital needs to be invested, mega funds also encourage VCs to bid up the valuations they offer startups.
Increasing valuations let investors get wealthy as their shares grows more valuable, which is, after all, the point of investing. In a nod to this, Lolita Taub, a general partner for a new fund still in stealth, and a scout at Lightspeed, sent a tweet praising Andreessen Horowitz on the new funds, saying that it now has “another 9 billion to mark us all up with!”
But Chan’s point was that mega funds create “misaligned incentives,” he said, that could lead to firms driving up valuations, then raising new funds instead of investing their time into helping startups build durable companies.
The rise of megafunds is mixed news for emerging fund managers, too. While they may eventually benefit from increasing valuations, those who are raising funds for the first time say they have a harder time when the large firms gobble up so much of the available capital. The number of inaugural funds closed has faltered since 2019.
Still, A16Z’s new megafunds means the trend is still strong. And that means, at least for the time being, the number and size of startup financings will likely keep trending upward in 2022.
Are you an Andreessen Horowitz insider with insight to share? Contact Melia Russell via email at email@example.com. Open DMs on Twitter @meliarobin.