By
Chimamanda U. Martha
April 19th, 2024
Andreessen Horowitz will soon cease to be a venture capital firm, veering away from the majority of its Sand Hill Road neighbors in Silicon Valley to instead become a registered investment advisor, or RIA.
The 10-year-old firm, founded by Marc Andreessen and Ben Horowitz, Andreessen Horowitz filed in March to become an RIA, as it seeks greater flexibility in its investments, particularly when it comes to cryptocurrencies, said Margit Wennmachers, an operating partner at the firm:
“As a firm, we have this massive ambition to be the best investor period, and want the flexibility to invest in what we think is the best investment.”
As Forbes reported, this move is expected to give a16z more flexibility in the types of investments it can make, particularly regarding cryptocurrencies that often involve buying up tokens instead of private stock. U.S. securities regulations have tagged these as riskier investments and limited how much a firm can invest in them, along with secondary purchases and fund or token investments, to no more than 20 percent of a fund.
Now a16z employees will need to go through background checks and register their investment holdings. There will also be more restrictions about what they can trade individually and what they can say about financial performance.
The company will now be able to put as much as $1 billion into riskier bets, such as cryptocurrency or other digital assets.
An early and enduring believer in cryptocurrencies, marketplaces, and applications, the firm grew particularly frustrated over its inability to invest more of its flagship fund into crypto startups.
By becoming a registered investment advisor, Andreessen Horowitz will no longer have to limit its stakes, including in its general fund — the newest of which it’s expected to announce shortly. It will also have the freedom to invest any percentage of its fund that it wants in larger high-growth companies, to buy shares from founders and early investors, and to trade public stocks.
The shift was completed in March, and required the firm to hire some new compliance officers, as well as audit each of its employees.
General partner Katie Huan (who co-leads its crypto-specific fund) said that the shift also brings a number of benefits, including the fact that partners in the firm can collaborate on deals. This allows them to pool expertise.
Andreessen Horowitz has already invested heavily within the crypto space. Last year the firm raised its first crypto fund, with $300 million in capital committed. Wennmachers said that during the process of setting up that fund, Andreessen decided to register as an RIA. The change should become official this month, she said, after the 45-day processing period for the Securities and Exchange Commission.
To date, it has backed crypto exchange Coinbase, stablecoin developer TrustToken, cloud computing platform Oasis Labs and other startups.
a16z Investing $25 Million in Crypto Payments Startup Celo
Together with venture capital firm Polychain Capital, Andreessen Horowitz’s cryptocurrency fund a16z Crypto have invested $25 million in cryptocurrency payments startup Celo.
Celo announced that the two investors have purchased $15 million and $10 million in the project’s Celo Gold tokens, respectively. They wrote:
“The token-based funding effort also saw participation from “several other leading institutions” from across the world. We strongly believe that anyone, regardless of their location or socio-economic status, should have access to basic financial tools for storing and transmitting currency.”
Celo’s protocol is designed to be mobile-friendly and “ultralight,” allowing funds to be sent to cellphone numbers. The Celo Gold token it describes as a “deflationary” cryptocurrency that cuts down on price volatility. The startup also offers another token, the Celo Dollar, which is a stablecoin pegged to the U.S. dollar.
On the business level, it aims to enable easier remittances, cash-transfer programs and micropayments through its open-source platform, taking an initial focus on helping unbanked or underbanked people.
Also, a16z-backed crypto startup TrustToken has launched its second stablecoin – one pegged 1:1 to the British pound.
The company said its new TrueGBP token is now available for trading on over-the-counter (OTC) desks, including Alameda Research, Bluefire Capital, Galois Capital and QCP Capital. The firm is working to make it available for general trading on cryptocurrency exchanges soon.