Andreessen Horowitz, a prominent Silicon Valley venture capital group led by veteran tech investors Marc Andreessen and Ben Horowitz, has successfully raised $7.2 billion for investment in tech startups, marking one of the largest fundraising efforts by a venture capital firm in recent years. The funds will be allocated across various new funds, including those targeting startups at the forefront of the generative artificial intelligence revolution. Despite challenges faced by the venture capital industry in recent years, Andreessen Horowitz surpassed its fundraising target, reflecting its esteemed reputation built on early investments in companies like Facebook and Airbnb. Notably, $3.75 billion will be allocated to its “growth” fund, focusing on later-stage startups, albeit smaller than its 2021 growth fund of $5 billion.
It was stated that $1.25 billion of the funds would be directed towards a vehicle dedicated to companies developing AI infrastructure. An additional $1 billion would be earmarked for a vehicle aimed at AI applications. “To effectively cater to the market, we have established dedicated venture funds, each with its own specialized team and capabilities, focusing solely on these respective segments,” Horowitz explained in a blog post announcing the funds.
Since the launch of OpenAI’s ChatGPT in November 2022, investment in artificial intelligence (AI) has surged over the past 18 months. The initial enthusiasm for backing foundational models, like those supporting popular chatbots such as ChatGPT, has propelled the valuations of startups involved in their development, including OpenAI and Anthropic, to levels that present challenges for venture investors. Consequently, venture capitalists are shifting their focus towards investing in applications built atop these models or the infrastructure necessary for their development and operation. Andreessen Horowitz has also secured $600 million each for funds targeting gaming and its “American Dynamism” strategy, which supports US-based startups in aerospace, defense, and manufacturing sectors deemed critical to national interests.
The firm hasn’t secured new funding for its cryptocurrency fund, which amassed a record $4.5 billion in 2022, with much of it remaining uninvested due to a significant downturn in the digital assets sector. Venture capital fundraising has sharply declined as limited partners have scaled back their investments in risky startup ventures amidst increasing interest rates. According to PitchBook, a private markets data company, global VC fundraising reached $555 billion in 2021. However, last year saw only a third of that amount raised, and in the first quarter of this year, the sector secured $30.4 billion, indicating a trajectory towards its slowest year since 2015.
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