Venture capital firm Andreessen Horowitz announced a new fund of $400 million targeted at supporting seed-stage companies; this comes amid a surge of announcement of subsequent funding rounds among companies.
Andreessen Horowitz’s new fund also comes after a $2.2 billion crypto-focused fund, which is preceded by a $4.5 billion announced in November 2020, and a biotech fund in February 2020.
The company’s recent seed funds mark an interesting development in the history of Andreessen Horowitz which, years ago, withdrew from making seed-stage deals to avoid the appearance of conflicts of interest. For some time, the venture capital company held the notion that there was often too much uncertainty at the earliest stages of company formation, and this caused the company to avoid investing in very young startups.
This notion has changed over time and Andreessen Horowitz is again investing in young startups. Facing competition head-on, the company has invested heavily in seed-stage investments. Since the beginning of 2020, about half Andreessen Horowitz’s investments have been in seed companies, making seed-stage investments a big part of the company’s program.
According to Martin Casado, a general partner of the firm, the new fund will be largely used to optimize the company’s processes around seed deals and to ensure that investors are rewarded properly for the associated risk.
When asked if formalizing the new fund will affect Andreessen Horowitz’s relationship with other seed-stage firms, Martin Casado responded that venture capital works closely with seed funds and plans to continue to do so. “I do think the environment has become more and more competitive at the seed stage, and if you actually look at some seed-stage startups that I have personally been involved in, they’ve received term sheets from hedge funds, growth funds, all the way down to angel investors. Everybody is in the mix at the seed stage. I think this is an evolution of the industry rather than kind of a key shift,” he said.
According to the company, the seed fund is not a change in its investment strategy, but is part of a productive venture, as it keeps up with the industry whose number of seed funds has doubled. Having a seed fund, rather than being a shift in strategy, is a strong indicator of Andreessen Horowitz’s commitment to seed investing as a first-class motion for the firm. While its core focus is to continue to back the best software companies, the company said it is dedicated to offering the best platform to bring companies from seed through an initial public offering.