Silicon Valley-based venture capital firm Andreessen Horowitz is changing its fundraising strategy, moving away from multi-stage, multi-sector flagship vehicles toward a more specialized fund approach that includes backing Black founders.
One of Andreessen Horowitz’s new specialized funds is the Cultural Leadership Fund, with a vehicle of around $15 million.
The Andreessen Horowitz (aka a16z) portfolio includes Airbnb, Lyft, Instacartand OfferUp, which all fall under the software umbrella.
The Cultural Leadership Fund was created in part to address missed opportunities, according to Ben Horowitz, a co-founder and general partner at a16z:
“We felt that we were leaving opportunity on the table in two important dimensions,” Horowitz wrote in a prepared statement co-written with Chris Lyons. “First, we had not systematically partnered with the established (African American) cultural leaders and second, we were not increasing the number of African Americans entering the technology business.”
A tech entrepreneur and blogger, Horowitz has a history of pairing hip-hop lyrics with his writing on tech and investing. In his announcement introducing the Cultural Leadership Fund, Horowitz said:
“One group of people has been responsible for more cultural influence than any other and perhaps all other groups combined. African Americans invented all modern forms of music from jazz to blues to rock and roll to hip hop. In the United States, most fashion, dance, and language innovation has come from this relatively small community. This is especially significant because worldwide, no culture influenced consumer behavior more than U.S. culture.”
The Cultural Leadership Fund is geared toward backing black celebrity investors, athletes and media figures. Limited partners are people who are “exclusively cultural leaders,” Horowitz said. These include:
The fund was raised by a16z partner Chris Lyons. “He will invest it in companies in the Andreessen Horowitz portfolio who are interested in partnering with the cultural leaders who invested in the fund.”
All of the fees and carry associated with the fund will be donated to nonprofits that enable African Americans to enter the technology industry.
Much of a16z’s investing team is white and male, although the firm did hire two women this year.
“a16z lists 29 investors on its website. None of them are black.” — Pitchbook
While 13 percent of the U.S. population is black, just 1 percent of VC-backed startups have black founders, another 12 percent are Asian, and 87 percent are white, according to CB Insights.
Just 105 companies with Black or Latino founders have raised rounds of $1 million or more since 2000, according to a recent study by Harlem Capital, a VC fund that backs diverse founders. Those companies brought in a total of $2.7 billion in equity funding from 140 investors.
A more specialized approach to funds isn’t a new idea hatched by a16z. It’s part of a broader trend, Axios reported.
All five of a16z’s flagship funds have been broad, investing across most stages and multiple industries. But from now on, the firm plans to raise more specialized funds, according to Pitchbook.
Here’s a look back at a16z’s flagship vehicles:
Fund I: 2009, $300 million
Fund II: 2010, $650 million
Fund III: 2012, $900 million
Fund IV: 2014, $1.5 billion
Fund V: 2016, $1.5 billion
The basic goals of the Cultural Leadership Fund are twofold, Horowitz said:
Andreessen Horowitz’s new strategy toward more specialized funds could indicate a larger trend as limited partners become more interested in backing funds focused on specific industries and stages, according to Axios.
That would logically lead to venture capital firms raising smaller pools of capital, but potentially more of them, Pitchbook reported:
“Some firms, of course, are still raising massive funds—Sequoia, for example, is in the process of raising an $8 billion vehicle, per multiple media outlets. This year, VCs in the U.S. are on pace to raise more total capital than any year in the past decade. In terms of fund count, U.S. venture investors are set to close about 270 funds, on par with the high fund count of the past four years.”
