DEVELOPMENT
Almost everyone who invests in cryptocurrency knows about the Andreessen Horowitz fund. It is the top Tier 0 fund.
Let’s look at this foundation from different angles!
Mark Andreesen and Ben Horowitz
They didn’t appear on the scene out of nowhere. Mark Andreesen led the team that created Mosaic, one of the first Internet browsers in the 1990s, and then co-founded Netscape, where he hired Ben Horowitz as project manager.
Together, Mark Andreesen and Ben Horowitz co-founded the software company Opsware, which they sold to Hewlett-Packard for $1.6 billion in 2007.
About company
Founded in Silicon Valley in 2009 by Mark Andreessen and Ben Horowitz, Andreessen Horowitz (known as “a16z”) is a venture capital firm that supports bold entrepreneurs building the future through technology.
They do not depend on the stage of investment: they invest in seed rounds, they invest in late-stage technology companies in biotechnology and health care, the consumer sector, cryptocurrency, enterprises, fintech, games.
The company manages $33.3 billion in assets in several funds.
A bit of history
Between 2006 and 2010, Mark Andreesen and Ben Horowitz actively invested in technology companies. Individually and together they invested $4 million in 45 startups, including Twitter. During this time, the two became known as “super angel” investors.
July 6, 2009. Launch
Sand Hill Office Park is an office building in Silicon Valley that is home to several venture capital firms, including Andreessen Horowitz.
On July 6, 2009, Mark Andreesen and Ben Horowitz launched their venture capital fund with an initial capitalization of $300 million.
In 2009, the company made its first two investments:
- Apptio, a SaaS developer for business management.
- In Skype stock. The company’s founders saw the investment as a success after selling Skype to Microsoft in May 2011 for $8.5 billion.
In 2010-2011, the company invested:
- $10 million in cloud company Okta, leading its Series A round.
- $80 million in Twitter, becoming the first venture capital firm to own stock in four of the most expensive private social networks at the time: Facebook, Groupon, Twitter and Zynga.
- In Airbnb, Lytro, Jawbone, Belly, Foursquare, Stripe and other high-tech companies.
In 2012-2013, the company invested:
- 156 companies, including 90 companies in its portfolio and 66 startups through Start Fund Y Combinator funding.
- $100 million in GitHub, which brought the fund more than $1 billion when GitHub was acquired by Microsoft for $7.5 billion.
- Clinkle, Coinbase, Databricks, Lyft, Oculus VR, PagerDuty, Pixlee, Ripple , Soylent, Swiftype and uBiome.
In 2014-2015, the company invested:
- $57 million in A/B testing startup Optimizely.
- $90 million in Tanium, BuzzFeed and Forward Networks.
- $40 million in Stack Exchange.
- $2.8 million in Distelli.
- $80 million in Onshape, a cloud-based CAD software company.
- In blogging platform Medium, Samsara, Impropable, Honor, Inc., OpenBazaar, a blockchain startup, and biohacking company Nootrobox .
In 2016-2019, the company invested:
- $8.1 million in Everlaw, a legal technology company
- $3.5 million in RapidAPI, an API connectivity platform for developers.
- $2 million in Cardiogram, a digital health company.
- In Apeel Sciences, a food science company.
- In Sigma, Health IQ, Asimov and Cadre.
- In Imply, Smartcar, PeerStreet, CryptoKitties, Dfinity, Earnin, Pindrop, Tenfold and Very Good Security.
- $15.3 million in Substack.
- $9.2 million in AnyRoad, an experimental marketing platform, and David Ulevitz of Andreessen Horowitz joined the AnyRoad board of directors.
In 2020, the company invested:
- $150 million in Roblox, a social video game platform for kids.
- $50 million in Figma, a vector graphics editor and prototyping tool.
- $12 million in Clubhouse ($10 million principal plus $2 million in stock purchases), an audio chat social networking app that was valued at nearly $100 million as of December 2020.
In 2021, the company invested:
- $100 million in social network Clubhouse, which was valued at $1 billion.
- $220 million in mobile banking and fintech company Current.
- $100 million for trading platform NFT OpenSea.
- $18 million into Pearl Health, a healthcare technology company.
- $150 million to Sky Mavis, a Vietnamese studio that develops Axie Infinity, a cryptographic online game.
In 2022, the company invested:
- $450 million (at $4 billion valuation) in Yuga Labs.
- $27 million in Rutter, a universal API for commercial data.
- $90 million in Hadrian Automation in Los Angeles.
None of the founders had been paid for years, and the company’s new general partners were paid lower than usual.
Instead, most of her fees, the traditional 2% managed funds that cover all company expenses, went to a fast-growing service team, including experts in marketing, business development, finance and recruiting.
The company has also invested heavily in engineering and academic research to support its startups.
Company structure
According to SEC rules, “high-risk” investments must be limited to no more than 20% of a traditional venture capital fund.
The company dropped its venture capital benefits and registered as a financial advisor. This is a costly and painful step that requires hiring compliance specialists, vetting each employee and prohibiting investors from publicly discussing the fund’s portfolio or performance.
In 2019, the company applied to restructure as a registered investment adviser to have more freedom for riskier bets such as cryptocurrency.
The organizational structure of Andreessen Horowitz as a venture capital company typically consists of board partners, special consultants, an operations team and a team of full-time service professionals. The company uses the Creative Artists Agency model of a Hollywood talent agency.
Rather than having specific industry general partners, the general partner works on behalf of all companies in their portfolio. In-house service professionals, whose skill sets range from business development to recruitment, are called upon to share their expertise with the companies in Andreessen Horowitz’s portfolio.
The company also operates a center that allows companies in their portfolio to connect with existing businesses, called the Executive Briefing Center.
The Executive Briefing Center is located in both California and New York. Established businesses that have been identified by their portfolio companies as potential clients are invited to the center for networking and presentations on those companies’ products and services. For existing companies in attendance, it gives them the opportunity to keep up to date on the latest developments in their area of interest, as well as build possible partnerships with the presenting startups.
At the Briefing Centers, Andreessen Horowitz employees play the role of matchmaker, enticing large corporations and government agencies with the prospect of seeing cutting-edge technology and then building appropriate portfolios of startups to present to visitors.
Decision-making model for choosing a startup
At the initial stage, when a startup is brand new, the decision is almost entirely about the team. Who are they, what is their pedigree and track record to expect that they can build something special?
In the venture stage, when a startup has a prototype or initial product, but not yet a fully functional business, some combination of people make the decision, as in the case of seed rounds, as well as product/market fit – is there reason to believe that this product is going to take off in this market at this time?
In the growth stage, when a startup is fully entering the market and ramping up sales and marketing efforts to expand, the decision comes down much more to the financial characteristics of the business, especially the economics: can the startup profitably sell its product to every customer?
16+16 indicators by which startups are judged
First 16 indicators
Second 16 indicators
The company receives about 2,000 incoming qualified proposals per year. By “qualified,” we mean that the company already knows people directly involved in the company and/or people in some way related to the company (angel investors, other venture capitalists, consultants, coaches and mentors, lawyers or clients).
Out of the 2,000 that are seen, 20 to 40 investments per year will be selected. So the final sample is about 1-2%.
The best venture capitalists in the U.S. collectively make about 200 investments a year. Of those 200, about 15 will generate 90%+ of the investment income throughout the year.
The best venture capitalists in the industry may invest in 2 or 3 of the 15 companies each.
So even the best venture capital in the business will miss out on most of the big winners by definition.
According to CB Insights, cryptocurrency and blockchain startups raised a record $25 billion in 2021, an eightfold increase from last year, as venture capitalists sought to participate in the bitcoin and other token rally.
Portfolio of cryptoprojects
Company funds for cryptocurrency investments:
Jun 25, 2018 AH Crypto Fund I $300 million
Apr 30, 2020 AH Crypto Fund II $515 million
Jun 24, 2021 AH Crypto Fund III $2.2 billion
May 25, 2022 AH Crypto Fund IV $4.5 billion
In May 2022, the company announced the launch of its largest fund to date at $4.5 billion.
The fund intends to focus on cryptocurrency and blockchain technologies. The company said the $1.5 billion was for seed investments and the remaining $3 billion will be for venture capital investments.
The fund is the company’s fourth fund targeting digital assets, raising a total of about $7.6 billion.
Below are general and detailed data about the company’s crypto portfolio, where they are leading investors.
In 2013-15, the company participated in the following investment rounds as a lead investor:
- $25 million in cryptocurrency exchange Coinbase
- $2.8 million in TradeBlock
- $116 million in Earn.com
In 2016-19, the company participated in the following investment rounds as a lead investor:
- $52 million in Filecoin
- $27 million in MakerDAO
- $2 million in dYdX
- $140 million in BlockTower Capital fund
- $12 million CryptoKitties
- $8.2 million in Compound
- $20 million to TrustToken
- $15 million in MakerDAO
- $17 million in Anchorage
- $5 million in Arweave
- $33.2 million in Compound
- $163 million in DFINITY
- $24 million in Dapper Labs
In 2020-21, the company participated in the following rounds of investments as a lead investor
- $8.3 million in Arweave
- $25 million in blockchain Optimism
- $23 million in NFT platform OpenSea
- $8 million in RTFKT
- $4.4 million in Element Finance
- $28 million in Aleo
- $4.6 million in Yield Guild Games
- $152 million in Sky Mavis
- $7.5 million at OnChain Studios
- $250 million at Alchemy
- $5M at Irreverent Labs
- $150 million at Mythical Games
- $50M at Matter Labs
- PleasrDAO
- $5 million at Sound
- $19 million in Bitski
- $61 million in Chia Network blockchain
- $40 million in Talos
- $314 million in blockchain Solana
- $12 million in Nansen analytics platform
- $9 million in blockchain Phantom
- $100 million in NFT platform OpenSea
- $111 million in Helium
- $20 million in Syndicate
- $5 million in Angle Protocol
- $23 million in Forta Protocol
- $260 million in CoinSwitch Kuber
- $7.5 million in Cryptosys
- $27.6 million in Iron Fish
- $13 million in Nym Technologies
- $36 million at Mysten Labs
In 2022, the company participated in the following rounds of investments as a lead investor:
- $170 million in Autograph
- $60 million in Everyrealm
- $10 million in BreederDAO
- $200 million in Helium
- $70 million in Lido
- $150 million in blockchain Optimism
- $150 million in MSquared
- $200 million in Aptos
- $4 million in Loop Crypto
- $40 million in Irreverent Labs
- $4.8 million in Battlebound
- $135 million at LayerZero Labs
- $34 million at Spruce
- $25 million at Co-Create
- $23M at TipTop
- $15 million at Azra Games
- $16.4 million at PartyDAO
- $23 million at OnChain Studios
Conclusion
Andreessen Horowitz is known for his early investments in Lyft, Pinterest, Slack, Airbnb, Pagerduty and made his first major cryptocurrency investment in Coinbase in 2013.
Since then, the company has supported numerous cryptocurrency and NFT startups, including Alchemy, Avalanche, Dapper Labs, OpenSea, Solana, Sky Mavis and Yuga Labs.
The company compares the long-term capabilities of cryptography to the next big computing cycle after the PC in the 1980s, the Internet in the 1990s and mobile computing in the early 2000s.
The company’s long-term planning horizon gives it a chance to wait out market fluctuations: “We want to make sure that we are connected to entrepreneurs in the long term and that our structure can give them time to create meaningful protocols and companies, which obviously does not happen overnight.”
