Following a Bloomberg report that the Department of Justice is investigating venture firm Andreessen Horowitz for holding board seats with rival AI companies, VCs told TechCrunch that they were baffled.
On the latest episode of the Equity podcast, Kirsten Korosec, Sean O’Kane, and I were similarly puzzled by the news. Yes, VC conflicts-of-interest are worth taking seriously, but as Kirsten wondered, “Of all the things that the DOJ would focus on in terms of level of importance, why does this one rise to the top?”
The news was also surprising because of a16z’s ties with the Trump administration, and because the firm has been so quiet about the investigation. It’s a real contrast with the firm’s activity during the Biden years, when — as Sean put it — “every little policy change, especially related to crypto, generated a day’s worth of posting.”
But Sean also speculated that by targeting a16z, the DOJ might also be setting an “example” that “smaller firms would follow.”
Keep reading for a preview of our conversation, edited for length and clarity.
Kirsten Korosec: I think that you bring some interesting perspective to this, Anthony, because you actually worked at a VC firm, whereas Sean and I have never been inside the confines of the VC world. We’ve only reported on it.
Anthony Ha: Long-time equity listeners will know that I did spend a couple years working at an early stage VC firm — a much smaller firm than Andreessen Horowitz, as different as you can be while still technically being in the same industry.
It did color my response when I was reading this article, which is essentially about these board seats that Andreessen Horowitz holds, and the idea that they have board seats in some companies that have become competitors.
It was really surprising to me, as apparently it was to a number of other VCs. And again, I’m not a lawyer, I was not on the legal team of this VC firm. There is, obviously, an understanding, and apparently laws, around the idea that you should not be on boards of competing startups. But this is not something that is, generally, enforced very closely.
Founders don’t feel great if you are on the board of their biggest competitor. But also, startups evolve. And I think that was true in this case — you invest in a startup doing one thing, and then, say, the AI boom happens, and suddenly they’re doing something completely different. So the idea that you would have a year-long DOJ investigation into this — we don’t really know what the results are, there’s a lot of questions about this, but it just seems very strange.
Kirsten: In this case, Ben Horowitz sits on the Databricks board. Partner Martin Casado sits on Fivetran board. And to your point, especially in this AI-driven boom cycle, a lot of companies are changing what they’re doing, and either to jump into the AI space or to take advantage of specific subcategories within it. And a company the size of Andreessen, which makes so many investments and is on a lot of board seats, you can see how this would happen.
To me, what was interesting — and Sean, I wonder if you have an opinion on this — is of all the things that the DOJ would focus on in terms of level of importance, why does this one rise to the top?
Sean O’Kane: I’m just excited we’ve got another chance for disruption here. I mean, we could create a startup that is just going to put an AI on your board, and there are no conflicts of interest. Let’s do it.
No, you’re right. It’s weird for a number of reasons, and when I first saw the headline, it certainly piqued my interest because I wanted to know what it was that they were looking at.
We should back up just a real quick second. Bloomberg reported that this [investigation] has been going on for nearly a year, so this started under the Trump administration. The people who run Andreessen Horowitz are very friendly with the Trump administration, involved in the Trump administration in some ways, sitting on some councils and things like that.
And so, for as much rhetoric as the [second] Trump administration was putting out there when it was still incoming, about being antitrust forward and fighting against the big forces of consolidation or whatever, that really hasn’t borne out. I mean, they settled with Live Nation. They didn’t break up Ticketmaster. We could spend all day talking about how that was a pretty hollow promise.
The Justice Department should not be a tool for the president to just direct at enemies or friends or whoever. But it’s just interesting that this is a bridge they were willing to cross, knowing how close they are with this administration.
And I’ve reported on some things that Andreessen Horowitz have done that made me wonder if that was going to be part of this. Two years ago, we published a story about how Ben Horowitz was personally making connections between the startups that Andreessen Horowitz backs and [the] local police department in Las Vegas, and things that have maybe more of an anti-competitive flavor to it than this — which, like you’ve said, is maybe a bit more by chance because of the way that these companies evolved and wound up competing against each other.
[It] certainly doesn’t seem like it’s something that Andreessen Horowitz feels [is] such an overreach that we have seen them complaining about it on Twitter, like they were during the Biden era — where every little policy change, especially related to crypto, generated a day’s worth of posting. We haven’t really seen that here. So maybe it’s all going to be copacetic in the end.
Anthony: To Sean’s point about the DOJ, without getting too deeply into the politics of it, I think anyone who’s been reading the news knows there’s a lot of turmoil there. There’s a lot of questions about sort of how politicized the office has or hasn’t become. Which, again, just makes it very surprising and strange that there has been this long investigation into an ostensible ally of the Trump administration.
The last thing I wanted to say for now is also just the length of the investigation is very surprising. If it was just about, “Well, we don’t think you should be on these two board seats,” there’s not that much to investigate there. You [would] just tell them, “Don’t do that,” or, “Here’s what we need you to do instead.” [Yes, I may be a little naive about how DOJ investigations work.]
So, what that suggests [is that] there must be a lot that we don’t know. There has to be some other, more serious allegation of something going on. Otherwise, what is there to investigate for that long?
Kirsten: Well, I think that you can have two truths. Meaning, you can have a slow, arduous process because of an inefficient DOJ, and also, you can have some sort of smoking gun or bigger issue. We don’t want to get too speculative and make assumptions. But I do think that their reaction and how quiet they’ve been — perhaps they’re listening to their lawyers, perhaps that there is something a little bit bigger here.
My question is: How does this now affect other VC firms? Are they taking notice, or is this considered a weird outlier, and they’re just going to proceed as normal and continue to take board seats and not worry too much about potential competition between boards down the line?
Sean: I think that’s a good question. If this is really something that is such a concern inside the antitrust division of the DOJ, then maybe this is a way for them to … how do I best put it? Set the example that then those smaller firms would follow. Instead of, if you perceive this as [an] antitrust violation, going after all these other, smaller firms for doing something like this, you go after Andreessen Horowitz and you set the example. And then maybe that puts these other people in more of a wary, cautious position, and so I could see that being the case.
The other thing to think about here is, this administration and the agencies that work for it and next to it have really backed off on public company prosecution in very explicit ways. The SEC and the DOJ have both said that public company investigations and things like that are just not a priority. They would rather go after individuals.
Obviously, we’re talking about Andreessen Horowitz as a company here, but it just makes me wonder if this is, in some ways, some sort of side effect of how the priorities have shifted. If you’re not going after corporate prosecutions — you’re backing off on guilty pleas that Boeing has entered, and again, settling with Live Nation and really backing off some of those Fortune 500-type companies — maybe one of the side effects is, you wind up paying a bit more attention to stuff like this.
When you purchase through links in our articles, we may earn a small commission. This doesn’t affect our editorial independence.
