Andreessen Horowitz to invest $400 million in seed-stage companies

It won't change the firm's investing strategy, but a16z will help founders find their first hires.

Plant seedlings.

Andreessen Horowitz is betting big on seed investments.

Photo: Christian Joudrey/Unsplash

Andreessen Horowitz has always had seed investing as a core part of its strategy, going back to big wins like its $250,000 check into Instagram. But going forward, a16z partners will have a new and much bigger $400 million fund to do it from. On Friday, the firm is announcing a standalone seed fund that's meant to give LPs new investing avenues and marshal dedicated resources for seed-stage companies.

"We're very good at hiring VPs of products and VPs of sales, but our focus hasn't been as much on, 'Here are the first 10 hires,'" said a16z general partner Martin Casado.

When it comes to investing, Casado stressed that nothing is changing on the strategy. There's no new partners or seed specialists, and the size of the fund is what they'd been allocating for seed investing anyways.

What does change is that the firm plans to focus more on seed-specific resources that start from the earliest days of company formation, when founders wrestle with hiring their first product manager or figuring out a marketing plan.

It also is a new product for its LPs, who can tune their risk tolerance across a16z's seed fund, main fund, growth fund and specialty funds like crypto and bio.

Venture firms have tried dedicated seed funds before, but not all of them have worked out. Kleiner Perkins launched a $4 million seed fund in 2015, orders of magnitude smaller than a16z's $400 million effort, before winding it down two years later after the dedicated partners on it left the firm.

The challenge with having a seed fund can be signaling risk. If a16z invests in a company at the seed, but doesn't do the next round of funding, other investors might interpret that as a negative sign. Casado says it cuts both ways: More often than not, his seed investments are getting preempted by other firms who want to lead the follow-on rounds, he said.

As nontraditional investors take more of a share of the later-stage market, the earlier stages of investing have become more crucial to traditional VCs' strategies. Andreessen said that of the investments it has made since the start of 2020, about half have been in seed-stage companies.

Now it has to come up with ways to support them. With more than 240 people working at the firm, Andreessen Horowitz has always marketed its extra services, from recruiting to growth strategies, as part of its perks for entrepreneurs. Having dedicated operations for the earliest-stage companies as a result of the new fund will only sweeten the pot and attract more founders.

"Having been in that situation myself, I can appreciate how important the founding time is and having a dedicated team on the operating side of that. I think it's a beautiful thing," Casado said. Casado co-founded Nicira Networks, one of Andreessen's most successful early-stage deals.

Protocol | Enterprise

How Cloudflare thinks it can become ‘the fourth major public cloud’

With its new low-cost R2 cloud storage service, Cloudflare is jumping into direct competition with the AWS service that launched the cloud computing revolution.

Cloudflare will not charge data-egress fees for customers using R2, taking direct aim at the fees AWS charges developers to move data out of its widely popular S3 storage service.

Photo: Martina Albertazzi/Bloomberg via Getty Images

Cloudflare is ready to launch a new cloud object storage service that promises to be cheaper than the established alternatives, a step the company believes will catapult it into direct competition with AWS and other cloud providers.

The service will be called R2 — "one less than S3," quipped Cloudflare CEO Matthew Prince in an interview with Protocol ahead of Cloudflare's announcement Tuesday morning. Cloudflare will not charge data-egress fees for customers using R2, taking direct aim at the fees AWS charges developers to move data out of its widely popular S3 storage service.

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Tom Krazit

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Michele Morelli, Foursquare
As SVP of Marketing, Michele is responsible for overseeing the brand strategy, communications, and product and performance marketing of Foursquare’s apps and enterprise products. Prior to joining Foursquare, Michele held several senior leadership positions with wide-ranging responsibilities at AOL, Toluna, Citibank and Yahoo!.
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VR pioneer The Void is plotting a comeback

Assets of the location-based VR startup have been acquired by a former investor, who plans a relaunch with key former team members.

The Void's New York outpost closed during the pandemic. Now, the company is planning a comeback under new ownership.

Photo: The Void

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Protocol | Workplace

A new McKinsey study shows that women do more emotional labor at work

The 2021 Women in the Workplace report from McKinsey found that women are far more likely than men to help their teams manage time and work-life balance and provide emotional support.

Senior leaders who identify as women were 60% more likely to provide emotional support to their teams and 26% more likely to help team members navigate work/life challenges, according to the report.

Photo: Luis Alvarez via Getty Images

Over the last year, emotional support, time management skills and work-life balance have become drastically more important and difficult in the workplace — and women leaders were far more likely than men to step in and do that work for their teams, according to the latest iteration of McKinsey and LeanIn.org's annual Women in the Workplace report.

Senior leaders who identify as women were 60% more likely to provide emotional support to their teams, 24% more likely to ensure their teams' workload is manageable and 26% more likely to help team members navigate work/life challenges, according to the report. In addition, about one in five women senior leaders spend a substantial amount of time on DEI work that is not central to their job, compared to less than one in 10 male senior leaders.

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Amazon needs New World’s launch to be a success

New World arrives Tuesday. Whether it flops could determine the future of Amazon Games.

New World launches on Tuesday, after four delays. It could be Amazon's first big hit.

Image: Amazon

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Nick Statt
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