Andreessen Horowitz Faces Deal Flow Decline Despite $7 Billion Fundraising Efforts

What to know: Andreessen Horowitz, known for early bets on then-startups such as Facebook, Instagram, and Airbnb, is reportedly on the verge of closing on up to $7 billion in new funds. The firm is seeking $6.9 billion for a master feeder fund, with expectations of a final close in early April ranging between $6.5 billion and $7 billion. Notably, half of the raise, potentially $3.5 billion, is earmarked for the firm’s fourth growth fund, a decrease from the $5 billion growth fund announced in early 2022. Additionally, the firm is diversifying its investment strategy by allocating funds across various subsectors, including AI infrastructure, AI apps, American dynamism, and gaming.

Deeper details: In a recent development, Andreessen Horowitz founder Marc Andreessen penned The Techno-Optimist Manifesto, emphasizing technology as a solution rather than a problem. Despite this optimistic outlook, a16z has experienced a decline in deal flow every quarter since Q1 2023, as indicated by Crunchbase data. However, the firm is expected to reverse this trend in the current quarter. The announcement of the new funds coincides with challenges faced by venture firms in the industry, with reports of firms like OpenView Venture Partners returning a significant portion of previously raised funds to limited partners due to market conditions.

A history of growth: The venture capital market has been witnessing shifts and challenges, with reports of firms adjusting fundraising plans to adapt to the evolving landscape. Established firms like Founders Fund and Tiger Global have made adjustments to their new fund sizes in response to market dynamics. This adaptation reflects the broader trend in the industry where firms are navigating changes to meet investor expectations and market demands. The ability to remain agile and responsive to market conditions is crucial for sustained success in the competitive venture capital landscape.