The Story Behind Silicon Valley‘s Most Powerful Investors: Andreessen Horowitz

Andreessen Horowitz, better known as "a16z", is one of the most influential venture capital firms in Silicon Valley today. Since their founding in 2009 by entrepreneurial legends Marc Andreessen and Ben Horowitz, a16z has funded some of the most consequential companies in tech history.

With over $28 billion in assets under management, a16z casts a long shadow over the entire startup and technology landscape. Understanding their story gives key context on why this firm has become so dominant. So let‘s dive in!

What role does Andreessen Horowitz play in Silicon Valley?

I‘ll do my best to summarize the key responsibilities Andreessen Horowitz takes on as one of Silicon Valley‘s self-appointed kingmakers:

  • Supporting visionary founders with funding at all stages (seed to late) and access to a powerful network of experts/connections
  • Shaping trends through actively promoting entire emerging technology sectors from crypto to AI to biotech
  • Policy advocacy to influence governmental rules so founders can innovate quickly
  • Attracting talent by heavily recruiting startup employees, executives and policy experts into their orbit
  • Informing discourse with thousands of thought leadership essays, books, podcasts and media

In a nutshell – they supply the money, vision, connections, talent and marketing necessary for world-changing technology companies to thrive.

The Netscape Connection

The roots of Andreessen Horowitz trace back decades to Marc Andreessen‘s experience as founder of Netscape in the 1990s.

Netscape served as the springboard for both of a16z‘s founders achieving their first massive success. Below is a snapshot of key events:

199424 year old Marc Andreessen co-founds Netscape, later releasing Netscape Navigator, the first widely used web browser
1995Netscape IPO‘s at $28 per share, closes day at $75 per share with $2.9B valuation
1999AOL acquires Netscape for $4.2 billion

As you can see, Netscape represented a massively important milestone for Andreessen, Horowitz and the early internet – launching the browser wars and the dot com boom in the process.

Years later, this experience would motivate a16z‘s launch…

The Origin Story

After selling Netscape, Andreessen and Horowitz went their separate ways for awhile. By the mid-2000s, they reconnected to launch LoudCloud, an early cloud computing company later sold to HP.

During 2007-2009, before launching a16z, Andreessen and Horowitz invested around $80M of their own money into angel deals in companies like Twitter and Airbnb. They saw massive 10x paper returns from these early mobile and social investments.

This convinced them that major gaps existed in how venture capital worked. So in 2009 they launched Andreessen Horowitz with the radical vision to fill those gaps and reshape the entire industry.

Below are the key problems a16z aimed to solve with their approach:

Existing VC ProblemHow a16z Solved It
Rigid focus only on financial returnsAdded extensive post-investment support services for portfolio companies
Limited check sizes and stages fundedFunded companies at ALL stages from seed to pre-IPO with big check sizes
No marketing to promote portfolio companiesHired full marketing team to actively promote a16z‘s companies
Reactive culture dominated by large firmsTook bold risks and moved aggressively to shape the future
Misalignment between fund economics and incentivesTied partner profits solely to investment returns

This outsider strategy and stellar timing (investing during the recession) allowed a16z to massively outperform peers right from the start…

The First Decade of Returns

Since launching their initial $300M fund in 2009, Andreessen Horowitz has expanded at a blazing pace:

  • 10+ venture funds raised totaling over $17 billion
  • 360+ investments made
  • $95 billion in investment returns

The below table illustrates their fund returns:

Fund NumberAmount RaisedGross Returns
Fund I$300 million$2.7 billion
Fund II$650 million$3 billion
Fund III$1.5 billion$8.4 billion
Fund IV$1.5 billion$7 billion

This type of exponential early growth established a16z as a new archetype for the modern venture firm.

Now 10+ years in, Andreessen Horowitz sits firmly entrenched as Silicon Valley power brokers with dominion over technology‘s most promising sectors…

The Road Ahead

Andreessen Horowitz now wields significant influence over which innovative companies get funded and how fast emerging technologies like web3 or AI advance.

Some of this power springs from the celebrity status of founders like Marc Andreessen who weigh in regularly as public intellectuals on everything from bioethics to remote work.

Meanwhile, Ben Horowitz and the partners at a16z aggressively court visionary founders from all backgrounds offering checks with few strings to transform the future of computing.

As their first decade has shown, betting against Andreessen Horowitz as they march steadily on seems like an unwise move. Far from slowing down, the firm appears dead set on funding key technologies for the next 100 years.

I for one can‘t wait to see what massive companies and returns they produce next! Success aside, the entire technology world owes a16z sincere gratitude for taking risks and moving mountains to advance entire sectors most investors overlooked.

Let me know what other thoughts/questions you have on this iconic firm!

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