Many enterprise trade observers have puzzled whether or not Andreessen Horowitz, a agency that manages $45 billion, has its sights on ultimately turning into a publicly traded firm.
Co-founder Marc Andreessen mentioned he isn’t “chomping on the bit to take the agency public,” on this week’s Make investments Just like the Greatest podcast. However he mentioned his purpose of constructing a16z into a permanent firm, drawing inspiration from JP Morgan and publicly traded non-public fairness corporations.
Traditionally, enterprise capital corporations have been partnerships consisting of a “small tribe of individuals sitting in a room collectively, attempting to bounce concepts off of one another after they make investments,” Andreessen mentioned on the podcast.
The issue with the partnership mannequin, he mentioned, is that it’s extremely depending on the concepts and experience of these individuals on the desk with “no underlying asset worth,” as he described it. As soon as the unique companions retire, the agency loses quite a lot of its worth, even when a brand new technology of traders takes over.
“However even when they’ll hold it going, there’s no underlying asset worth. That subsequent technology is simply going to have at hand it off to the third technology,” he mentioned. “That’s in all probability going to fail on the third technology. It’s going to be on Wikipedia sometime: that agency existed, after which it went away.”
The partnership mannequin will be profitable. A16z’s billions beneath administration generates sizable cash administration charges for the agency, along with income made when its investments succeed.
Nevertheless, Andreessen mentioned he continuously reminds inside employees and restricted companions that the corporate isn’t elevating cash simply to reap the charges. It’s to offer the corporate the money to put money into rising corporations.
“Once we go for scale, it’s as a result of we expect it’s essential to help the sorts of corporations we wish to assist our founders construct,” he mentioned.
Andreessen says his larger purpose for a16z is to create an organization that lasts. A substitute for a partnership is to construct an funding firm that’s managed like a enterprise, which implies it has administration, a number of layers of employees, division of labor with specializations, and coaching applications, Andreessen mentioned.
There are definitely precedents of small partnerships evolving into massive firms, which Andreessen can use as a mannequin for a16z’s ambitions.
“Goldman Sachs and JP Morgan, 100 years in the past, appeared like little enterprise capital corporations,” he mentioned. “Then their leaders, over time, turned them into big franchises and massive public corporations.”
He named different examples, too, of personal partnerships become massive publicly traded corporations like massive non-public fairness corporations. Blackstone, which now has a market capitalization of over $200 billion, went public in 2007. Apollo, KKR, and Carlyle held their IPOs quickly after Blackstone, and TPG listed on Nasdaq in early 2022.
Andreessen argues that as these corporations grew from partnerships into massive firms, their long-term success grew to become much less depending on a number of key traders.
“A giant a part of what we’ve been attempting to do is construct one thing that has that sort of enduring facet to it,” he mentioned.
In some ways, Andreessen Horowitz already appears extra like an working firm than many VC corporations. A16z has dozens of individuals in its advertising and marketing group and huge groups that assist portfolio corporations recruit expertise and promote their merchandise. The agency runs separate crypto, bio and well being, and American dynamism methods.
However possibly there’s one more reason Andreessen is eager to restructure away from the basic VC system. In terms of partnerships, he says, “It truly seems usually, what you uncover is that individuals truly don’t like one another that a lot.”
