Many enterprise business observers have puzzled whether or not Andreessen Horowitz, a agency that manages $45 billion, has its sights on finally changing 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 Finest podcast. However he mentioned his aim of constructing a16z into an everlasting firm, drawing inspiration from JP Morgan and publicly traded non-public 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 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 a variety of its worth, even when a brand new era of buyers takes over.
“However even when they will hold it going, there’s no underlying asset worth. That subsequent era is simply going to have at hand it off to the third era,” he mentioned. “That’s in all probability 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 might be profitable. A16z’s billions below administration generates sizable cash administration charges for the agency, along with income made when its investments succeed.
Nevertheless, Andreessen mentioned he consistently 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 corporations.
“After we go for scale, it’s as a result of we predict it’s essential to help the sorts of corporations we wish to assist our founders construct,” he mentioned.
Andreessen says his greater aim 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 suggests it has administration, a number of layers of workers, division of labor with specializations, and coaching packages, Andreessen mentioned.
There are actually precedents of small partnerships evolving into giant companies, which Andreessen can use as a mannequin for a16z’s ambitions.
“Goldman Sachs and JP Morgan, 100 years in the past, seemed like little enterprise capital companies,” he mentioned. “Then their leaders, over time, turned them into large franchises and massive public corporations.”
He named different examples, too, of personal partnerships was giant publicly traded corporations like huge non-public 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 corporations grew from partnerships into giant companies, their long-term success turned much less depending on a number of key buyers.
“A giant a part of what we’ve been attempting to do is construct one thing that has that form of enduring side to it,” he mentioned.
In some ways, Andreessen Horowitz already appears extra like an working firm than many VC companies. A16z has dozens of individuals in its advertising group and enormous 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 relation to partnerships, he says, “It really seems usually, what you uncover is that individuals really don’t like one another that a lot.”
