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AI Investment from Andreessen Horowitz to Top $2.25 Bn While Crypto Funding Goes Dry

Last Updated April 17, 2024 3:17 PM
Giuseppe Ciccomascolo
Last Updated April 17, 2024 3:17 PM

Key Takeaways

  • Venture capital firm Andreessen Horowitz successfully raised $7.2 billion across five funds.
  • Part of this money will help to boost investments in artificial intelligence (AI).
  • No new funds will be allocated to Andreessen Horowitz’s crypto fund, mirroring broader VC sentiment towards crypto.

Venture capital firm Andreessen Horowitz announced  the successful raising of $7.2 billion across five distinct funds, signaling a resurgence of confidence in the tech startup ecosystem. This optimistic development comes amid a period characterized by a scarcity of exits within the industry over the last few years.

Although some funds will go toward investments in artificial intelligence (AI) infrastructures and applications, Horowitz refrained from disclosing any investments from its cryptocurrency fund. The broader crypto market saw funding hit a three-year low in early 2024, as venture capital investment declined, prompting concerns about the sector’s sustainability.

Horowitz Raised $7.2 Billion

Andreessen Horowitz announced the successful completion of a fundraising round, amassing a substantial $7.2 billion across five distinct funds. This move goes against the prevailing trend observed across venture capital firms, which have faced challenges in attracting investments from their backers, including endowments, foundations, and other institutional investors commonly referred to as limited partners, in recent years.

“This signifies a significant milestone for us,” remarked Ben Horowitz in a recent blog post , who, alongside Marc Andreessen, co-founded the firm back in 2009.

The lion’s share of this fresh capital resides within Andreessen Horowitz’s growth fund, which secured an impressive $3.75 billion. These funds are earmarked for later-stage companies poised for potential IPOs or for capital-intensive ventures requiring substantial investment.

Renowned as one of Silicon Valley’s foremost venture capital firms, Andreessen Horowitz has cemented its reputation through early investments in tech giants like Facebook and Airbnb. Surpassing its own fundraising targets, this achievement represents one of the largest capital raises in the VC sector since the onset of a downturn approximately two years ago.

Investing $2.25 Into AI

Horowitz outlined that $1.25 billion will go to infrastructure, encompassing investments in AI. Another $1 billion will help boost AI app investments. Additionally, $600 million will be directed towards gaming, with another $600 million dedicated to what the firm terms “American Dynamism.” This focuses on founders and companies aligned with national interests. And these include sectors such as aerospace, defense, education, and housing.

The company has recently introduced two specialized funds for artificial intelligence: a gaming fund and a fund aimed at supporting startups in the realm of “American Dynamism”. The firm defines these companies as addressing critical issues within the US. They operate in sectors like aviation, defense, and manufacturing.

The AI investment surge in the past 18 months, driven by OpenAI’s ChatGPT launch in November 2022, has significantly boosted startup valuations, particularly for companies like OpenAI and Anthropic. These valuations pose challenges for venture investors.

Despite the heightened excitement surrounding AI, venture capital deal-making experienced a significant downturn  in the first quarter of 2024. VC firms invested $36.6 billion across nearly 2,900 companies. This marked a 30% decline compared to the same period in 2023, which was already a lackluster year for VC funding. The industry has faced considerable headwinds due to rapidly increasing interest rates.

No New Money To Crypto Fund

Horowitz made no mention of the market slowdown, nor did he indicate any allocation of new funding towards cryptocurrencies. This is an investment area that Andreessen Horowitz displayed enthusiasm about during the crypto frenzy in 2021.

The firm raised a $4.5 billion crypto fund in 2022. This brought its total raised for crypto and blockchain investments to $7.6 billion. A source revealed  that Andreessen Horowitz is still in the process of raising additional funds for its crypto and biotechnology ventures. However, a spokesperson for the firm declined to comment. Andreessen Horowitz backs  prominent cryptocurrency companies such as Coinbase, Uniswap, and OpenSea. In February, the firm announced a $100 million investment in crypto restaking startup EigenLayer .

However, Crypto VC raising activity has significantly decreased, with VC rounds raising only $2.3 billion for crypto businesses – the lowest amount since Q4 2020. Historically, VC funding for the blockchain and cryptocurrency sectors has been substantial, especially during the booms of 2017–2018 and 2020–2021.

Initiatives for funding have undergone significant changes in response to fluctuations in the cryptocurrency landscape. Venture investment activity tends to correlate with cryptocurrency asset values, particularly for blockchain and cryptocurrency ventures. When the value of crypto assets rises, investments in related firms and projects typically increase as well.

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