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#148 a16z Closes $7B: What It Means Emerging VC Managers & LPs
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a16z closes $7.2 billion → what does it mean for emerging managers (“venture alpha”)?
As reported by Axios, Andreessen Horowitz (a16z) has closed on $7.2 billion for its newest set of funds.
CFO take: a16z raises capital from large investors looking to access venture capital and is a barometer for how LPs feel about the asset class. Many LPs take a “barbell approach” to venture capital. They invest in large fund vehicles like a16z to get “venture beta” (2x-3x target returns). The other side of the barbell is “venture alpha” (5x+ target returns), often represented by emerging managers.
Now that many LPs have re-upped their “venture beta” bucket, expect to see them re-up their “venture alpha” allocations in emerging managers that can stand out.
Why it matters: Even in a muted fundraising environment, legacy firms can beat their own fundraising goals (a16z's marketing had cited a $6.9 billion target).
Zoom in: As Axios previously reported, the firm created a masterfund vehicle, though limited partners are not required to invest through it.
About half of the targeted capital was aimed for its growth fund, though a16z ultimately raised $3.75 billion for it.
Instead of dedicated seed or early-stage funds, it's splitting them in sectors. It raised $1.25 billion for its AI infrastructure allocation (originally targeting 15%), $1 billion for AI apps (also initially targeting 15%), and $600 million for its "American Dynamism" strategy (an original target of 10%).
Lastly, it raised $600 million for its second gaming fund, which was targeted as 10% of the fund.
A16Z raised more than their target of $6.9B:
50% for the growth fund,
15% for AI Infra,
15% for AI Apps,
10% for American Dynamism 10% for games
Lan Xuezhao at Basis Set ($185m) shared an update on X that captured how AI is creating portfolio acceleration at smaller, emerging manager funds like Basis Set. These funds invest in companies at early stages and lower valuations, before they are ready to raise a large pool of capital from a16z. Here’s what Lan is saying:
First thing in my inbox today at 5am is an investor update from a company that went from $1m to $2m in ARR in less than 2 months, projecting $8m by eoy.
At least 6-7 companies in our portfolio are growing like this. Investor & LP sentiment seem to be trending very positive. Good year ahead??
That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”