Venture capital firm Andreessen Horowitz just announced that it has closed its Fund IV. And it’s a massive $1.5 billion fund for all sorts of investments from seed rounds to late-stage rounds.
Previously, Andreessen Horowitz had raised $300 million in 2009 (Fund I), $650 million in 2010 (Fund II), $200 million in 2011 (Growth fund) and $1.5 billion in 2012 (Fund III).
“We’re going to keep doing the things that we’ve been doing,” partner and COO Scott Kupor told me in a phone interview. “We want to look at everything and be able to invest.”
Among the reasons cited as to why venture capital is an exciting space right now, mobile comes first. Kupor writes that billions of new people will get a smartphone in the coming years, which will greatly increase the Internet population.
At the same time, technology costs have gone down dramatically. For example, Andreessen Horowitz recently led a $37 million round in cloud hosting company DigitalOcean — on this platform, you can run a cheap virtual server for just $5 a month.
Kupor also states that enterprise and SaaS-based applications present a great market opportunity. And finally, healthcare, education, financial services, energy, and government services have yet to be disrupted by young and scrappy newcomers.
“We understand the underlying software ecosystem and how it applies to more and more industries,” Kupor said. But don’t expect investments in biotech. Andreessen Horowitz wants to stay focused on what it does best: software.
When asked about the size of the new fund, Kupor said that this is the amount that the firm was looking for.
“You should size the fund depending on the market opportunity. Given the state of the market, this is the right fund. This is the right amount of money,” he said.
The firm didn’t invest all the money in the previous fund yet. It will set aside money to do follow-on rounds in existing portfolio companies, but that’s about it. “We’ve got a little more room left but we’re largely at capacity,” Kupor said.
According to CrunchBase, last year, the firm participated in 97 first rounds and follow-on rounds, including rounds in Pinterest, Jawbone, Fab and Lyft.
In the blog post, Kupor reminds us that limited partners invested $110 billion in 2000. These days, limited partners are “only” investing $16 billion to $18 billion per year into a limited number of VC firms.
“I certainly don’t think that it’s a bubble. The level of money that LPs are committing to the industry is the good level. There is a relatively small number of firms that can achieve high returns, and they understand that. They are trying to rightsize their investments,” he said.
Arguably, the firm may have lured LPs with Marc Andreessen’s innovative Twitter account. He uses this medium to
spam write entire blog posts over multiple tweets. And you may have heard as well that Ben Horowitz is exploring a new career as hype man for Nas. How can you say no to these guys?