Andreessen Horowitz raises $7.2bn and sets sights on AI start-ups

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Andreessen Horowitz has raised $7.2bn to invest in tech start-ups including those at the forefront of the generative artificial intelligence revolution, in one of the biggest fundraising efforts by a venture capital firm in years.

The Silicon Valley-based group, led by veteran tech investors Marc Andreessen and Ben Horowitz, announced on Tuesday that it has raised the money to be split across a number of new funds.

The move bucks a trend across venture capital firms, which have struggled in recent years to bring in money from their backers — endowments, foundations and other institutional investors known as limited partners.

Andreessen Horowitz is one of Silicon Valley’s most prominent venture firms, building a reputation with early investments in Facebook and Airbnb. It beat its own target for the new funds, according to two people with knowledge of the matter. It represents one of the largest fundraisings by a VC since a downturn in the sector began about two years ago.

Andreessen announced $3.75bn would go into its “growth” fund, which will invest into later-stage start-ups with an established record, though this is smaller than the $5bn growth fund that it raised in 2021.

It said $1.25bn of the funds would go into an vehicle focused on companies that build AI infrastructure. Another $1bn would be allocated into a vehicle targeting AI applications.

“To best serve the market, we created dedicated venture funds, each with its own team of experts and capabilities, specifically focused on each segment,” Horowitz said in a blog announcing the funds.

AI investment has ballooned in the 18 months since the launch of OpenAI’s ChatGPT in November 2022. An early rush to bet on so-called foundation models — which underpin popular chatbots such as ChatGPT — has pushed the valuations of start-ups building them, including OpenAI and Anthropic, to levels which are hard for venture investors to underwrite.

Venture capitalists are looking instead at investing in the applications built on top of those models, or the infrastructure required to develop and operate them.

Andreessen has also raised $600mn each for funds focused on gaming and its “American Dynamism” strategy, which backs US start-ups in aerospace, defence and manufacturing in the national interest.

The firm has not raised fresh capital for its cryptocurrency fund, which brought in a record $4.5bn for the vehicle in 2022, much of which has yet to be invested amid a steep downturn in the digital assets sector.

Venture fundraising has plummeted as limited partners have pulled back from risky start-up investments in response to rising interest rates.

Globally, VCs raised $555bn in 2021, according to private markets data company PitchBook. Last year they raised a third of that and in the first quarter of this year they raised $30.4bn, putting the sector on course for its slowest year since 2015.


Business Asia
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