Software may be eating the world but Andreessen Horowitz was very happy to foot that grocery bill for ten years. As one of the world’s leading venture capital firms, co-founders Marc Andreessen and Ben Horowitz have successfully raised $1.7 billion across seven funds to finance their chosen few in the technology and financial services industry.
With an estimated $10 billion earned in investor profits and an expected public offering for at least five of their Silicon Valley rising stars – Airbnb, Lyft, PagerDuty, Pinterest and Slack – in the next year, it’s hard to imagine what else they could possibly want to accomplish. But for those who see possibility where others see perimeters, there is always Ahab and his white whale.
In the spirit of Moby Dick, Marc Andreessen is planning another big fishing trip and is taking his business along for the ride. A16Z recently announced they would be casting off their venture capital classification and assuming their new identity as an RIA (registered investment advisor).
While the venture capital market has been very kind to both founders, there are certain trade-offs that came with operating outside of the SEC’s immediate view. Primarily, that they were largely limited to investing only in new shares of private companies. For many years, this was a happy arrangement for everyone but then crypto-currency arrived on-scene. The U.S Securities & Exchange Commission remains unconvinced that this sector can be safely navigated without their supervision so Andreessen & Horowitz is finding another way.
The firm wants greater flexibility with their investment options, says Margit Wennmachers, an operating partner with A16Z. “As a firm, we have this massive ambition to be the best investor period, and want the flexibility to invest in what we think is the best investment,” Wennmachers said.
Marc Andreessen has his own way of describing their reasoning. “What’s the number one form of differentiation in any industry?” he asks. “Being number one.” With that in mind, the firm raised its first crypto fund – a cool $300 million has been committed – and their RIA status should be confirmed sometime this month.
Registered Investment Advisor status does not come without its pitfalls. Bob Raynard, the managing director with Standish Management, stated that the rules are quite strict. Lack of privacy and increased costs are just a few of the reasons why RIAs aren’t a dime a dozen.
“If [Andreesen Horowitz) is becoming an RIA, its cost structure just went way up,” said Raynard. He pointed out a compliance officer will have to sign off on everything an employee at the firm acts on, in addition to all investing choices made by its partners’ spouses, children, and parents. Even with the tighter restrictions, it’s believed that the move will prove profitable in the long run.
But for those about to go into deepest, blackest mourning for their venture capital loss, A & H have asked that they do not despair. The firm has just finished raising another $2 billion fund so they can write even bigger checks for those lucky boys and girls sporting the most promising Silicon Valley startups. Andreessen Horowitz may be up to risky crypto-business these days but they haven’t forgotten about ol’ venture faithful.