Many enterprise trade observers have questioned whether or not Andreessen Horowitz, a agency that manages $45 billion, has its sights on ultimately changing into a publicly traded firm.
Co-founder Marc Andreessen stated he isn’t “chomping on the bit to take the agency public,” on this week’s Make investments Just like the Finest podcast. However he mentioned his purpose of constructing a16z into an everlasting firm, drawing inspiration from JP Morgan and publicly traded personal fairness companies.
Traditionally, enterprise capital companies have been partnerships consisting of a “small tribe of individuals sitting in a room collectively, attempting to bounce concepts off of one another once they make investments,” Andreessen stated on the podcast.
The issue with the partnership mannequin, he stated, is that it’s extremely depending on the concepts and experience of these folks on the desk with “no underlying asset worth,” as he described it. As soon as the unique companions retire, the agency loses a variety of its worth, even when a brand new era of traders takes over.
“However even when they will maintain it going, there’s no underlying asset worth. That subsequent era is simply going to have handy it off to the third era,” he stated. “That’s most likely going to fail on the third era. It’s going to be on Wikipedia sometime: that agency existed, after which it went away.”
The partnership mannequin could be profitable. A16z’s billions underneath administration generates sizable cash administration charges for the agency, along with earnings made when its investments succeed.
Nevertheless, Andreessen stated he continuously reminds inside workers and restricted companions that the corporate isn’t elevating cash simply to reap the charges. It’s to provide the corporate the money to spend money on rising firms.
“After we go for scale, it’s as a result of we expect it’s essential to help the sorts of firms we need to assist our founders construct,” he stated.
Andreessen says his larger purpose for a16z is to create an organization that lasts. An alternative choice to a partnership is to construct an funding firm that’s managed like a enterprise, which implies it has administration, a number of layers of workers, division of labor with specializations, and coaching applications, Andreessen stated.
There are actually 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 companies,” he stated. “Then their leaders, over time, turned them into big franchises and large public firms.”
He named different examples, too, of personal partnerships was massive publicly traded firms like large personal fairness companies. 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 firms grew from partnerships into massive firms, their long-term success turned much less depending on just a few key traders.
“A giant a part of what we’ve been attempting to do is construct one thing that has that type of enduring side to it,” he stated.
In some ways, Andreessen Horowitz already appears extra like an working firm than many VC companies. A16z has dozens of individuals in its advertising and marketing group and huge groups that assist portfolio firms recruit expertise and promote their merchandise. The agency runs separate crypto, bio and well being, and American dynamism methods.
However possibly there’s another excuse Andreessen is eager to restructure away from the basic VC system. Relating to partnerships, he says, “It truly seems usually, what you uncover is that individuals truly don’t like one another that a lot.”
