Andreessen Horowitz Is Not a Venture Capital Fund
VC is not bifurcated - it's two totally different strategies: Venture Capital, and Consensus Capital.
There, I said it.
And it’s not just Andreessen. It’s all the big funds.
They started out as VC. They operate funds that invest in private early stage companies. But they haven’t been VC funds for a very long time.
That’s not a knock on their success or influence - both of which are massive.
But to continue calling them venture capital is both disingenuous and damaging to how we understand our industry.
I vote we stop.
VC is not bifurcated. It’s two totally different strategies.
First off, it’s worth noting that all of these firms are legally not Venture Capital Firms - they are Registered Investment Advisors (RIA). This means they can, and do, invest beyond early stage private companies, in things like public companies, crypto tokens, non-traditional assets, and more. Andreessen, Sequoia, Insight, General Catalyst, Thrive Capital, Softbank Vision Fund, Lightspeed… all RIAs. All massive. No longer “just” VC funds.
They're big finance with a Sand Hill Road address.
And if you take an honest look at their actual venture strategy, you’ll also find it isn’t really “venture” anymore.
Since its earliest iterations in the 1940s, Venture Capital has always meant investing in early stage companies with the potential to generate alpha - high-risk, high-reward, uncorrelated with efficient (public) markets.
It’s never been about investing in the obvious. Quite the opposite, in fact.
That’s not how big funds invest anymore - Andreessen partner Martin Casado’s viral tweet last week acknowledged this: large funds are not picking contrarian bets. They’re picking consensus ones.
All of them are chasing the same founders, outbidding each other in giant rounds, competing away alpha for themselves and each other.
They’re ok with this. Their LPs are ok with this. They’ll make money, presumably, off the beta. They have power, access, and cultural cache.
They are #winning.
But they’re not VC investing.
Make data meaningful again
Meanwhile, all the VC commentators (myself included) are tripping over ourselves about what this all means. My B-school classmate Rob Go wrote about VC’s existential crisis (Viva la F!). Sapphire’s Beezer Clarkson says venture is broken. Carta data guru Peter Walker talks about the bifurcation of venture capital. Eric Newcomer describes it as a break between the “haves and the have nots”.
Every VC report that’s come out in the last few years - Carta, Pitchbook, Crunchbase, Angelist, all of them - show a few rounds and funds so large that they completely distort the data.
I say it’s time to split the data in two, and analyze both strategies independently.
Remove the mega-funds, and you’ll see a clear, consistent picture of the actual venture ecosystem. Venture capital as it’s always been - small, early, messy, contrarian, alpha-seeking.
Analyze the mega rounds / mega funds on their own. They’re not outliers - they’re their own investment category. I call it Consensus Capital.
What is Consensus Capital?
I might come back to refine this point in the future. From what I see today, there’s four defining factors for consensus capital:
The focus on giant outcomes only - forget unicorns, their hunt is for trillion dollar outcomes.
The belief that only one type of founder can achieve such an enormous outcome - the “consensus” founder, if you will.
Complete price-insensitivity, or a willingness to pay up at the entry point for that one type of founder.
Funds so large that they can deploy huge amounts - tens or hundreds of millions - in a single early stage round.
Again, none of this is a knock. There are great consensus bets to be made, capital itself becomes the moat for some of these companies, exits may be (are presumed to be) sooner than true venture exits, and you’ll make money off the beta, highly correlated with the growth of the entire category.
Crucially, you can deploy a lot more capital in one go following this strategy than via true venture capital. And large LPs want to move large amounts of capital. To them, the juice must be worth the squeeze.
In other words, none of the above means you won’t make money off consensus capital. It just means you’re not seeking alpha.
What this means for founders
You might ask: who cares what we call it, if money is still flowing into startups?
That’s fair enough. The problem is, when we talk about these giant funds as if they represent venture capital, we flatten the story of our ecosystem, and mislead non-consensus founders in the process.
Consensus capital goes to founders that have a very particular, very predictable pedigree. They went to a handful of schools, worked at a handful of startups, or built at a handful of AI labs. They are highly discoverable - you can literally set up an AI agent to find them before they raise. Many consensus investors do.
If you’re one of those founders, it should be very easy to raise consensus capital. The different funds will compete aggressively against each other, marking up the price of your company, effectively erasing the alpha from their own portfolio.
If you’re not one of those founders, it’s not the end of the world. Sure, it will be harder. But there is an entire generation of alpha-seeking early stage investors - true venture capitalists, what Marc and Ben were 25 years ago - that are looking for outstanding non-consensus founders like you.
This also doesn’t mean that the two types of capital can’t co-invest. You can become a consensus founder even if you lack the pedigree. The easiest (albeit not easy) way to do it is to go through a top tier accelerator like Y Combinator. Or, you can do it through traction and velocity alone.
When you make your business undeniable, consensus capital will follow.
A call for honest labels
Everyone predicting the death of venture capital is wrong. Plain and simple. As long as there are non-consensus founders with a real shot at the American Dream, investors willing to partner with them, and exit opportunities awaiting on the other side, VC will be alive and well.
But only for those who actually follow the strategy.
Let's call the different funds what they actually are. Let's create honest taxonomies that help founders find the right capital for their stage and ambition. Let’s split the analysis so the benchmarks for traction, valuations, and round sizes are not distorted by the beta-rich consensus crew. Let's give LPs clarity about what they're actually buying when they write checks to different types of funds.
And let's remember what venture capital really is: messy, early, conviction-driven, non-consensus bets on the future.
What’s on my browser this week
In the spirit of Labor Day - a searing, beautiful, difficult, and most of all honest look at working households in America today.
I love it when big things happen to great people. Andrea is an old twitter buddy who became a massively influential voice in the world of snacks. Snaxshot is on substack - give it a read!
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"Show me the incentive and I'll show you the outcome"
- Charlie Munger
f'ing brilliant insight into the current VC/startup situation. Thank you!