Two of Silicon Valley’s most experienced entrepreneurs, Marc Andreessen and Ben Horowitz, were reported by BusinessWeek to have successfully raised US$300 million for their first venture fund. As if raising money amidst a bleak recession wasn’t enough, the power duo’s first-ever venture fund was 20% oversubscribed; their intended fund of US$250 million had to be expanded to US$300 million to accomodate investor interest from the likes of an equally impressive list that includes Reid Hoffman, Peter Thiel and fund-of-funds stalwart Horsley Bridge Partners. Even top-tier venture capital firms like Kleiner Perkins Caufield & Byers, Accel Partners and Greylock Partners were helping out with Marc and Ben’s fund-raising efforts by opening doors to their LPs.
Truly mind-blowing stuff to end the week with.
Bewilderment and awe aside, Andreessen Horowitz appears to me to be an attempt by super-angels and VCs (and backed by LPs) to reinvent and revive the venture capital landscape. The VC industry’s impending demise is now moot – the question is no longer whether a major shake-out in the VC industry will take place, but how many firms will remain standing at the end of it. Underperforming VC firms will either no longer be able to raise new funds from their LPs, or raise much less than before. Many egos will be trashed, together with once-known brands in the venture capital industry.
By relying on the collective wisdom of experienced entrepreneurs to filter and select start-ups with smaller investment quantums, before doubling/tripling down on the surviving winners, Andreessen Horowitz can serve as a healthier and smarter pipeline of deals for VCs to cherry-pick and fund. LPs can also rest better knowing that their money, parked away with both VCs (more of it) and Andreessen Horowitz (much smaller tracts of it), will be (hopefully) better invested and yield better returns in the longer run.
Will this be the future of VC 2.0? Let the show begin!