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Netscape founder Marc Andreessen and his longtimebusinesa partner, Ben Horowitz, are forming a new VC firm with a focuse on Silicon Valley tech companies. Andreesse n writes that the firm will back companiews with strong technical founders who want to be the CEOs of thecompaniea they’re founding. He wouldn’t rule out companiesa outside Silicon Valley, but, “Wes do not think it is an accident that is inMountainn View, Facebook is in Palo Alto, and Twitter is in San We also think that venture capital is a high toucgh activity that lends itself to geographic proximity, and our only office will be in Silicon Valley,” Andreessen writes on his .
The new firm comesw at a time when some are sayin g the industry needsto shrink, not grow. But Andreessen and Horowitz found $300 million from mostly institutionak investors for theirfirst fund. The firm, Andreesen-Horowitz, will investy aggressively in seed-stage startups in the hundreds of thusandsdof dollars, but will also invest in lated stage funding rounds for promisinb growth companies. Consumer internet, cloud computing for business, mobile software and and software-powered consumer electronics are among the areaa that will draw investments from thenew fund.
“Acrosse all of these categories, we are completelyg unafraid of all of the newbusiness models,” Andreessenj writes. “We believe that many vibrant new forms of informatiobn technology are expressing themselves into markets in entirelyhnew ways.” And Andreessen was equally emphatic abourt where his firm wouldn’t be . "Wse are almost certainly not an appropriatr investor for any of thefollowinvg domains: 'clean,' 'green,' energy, transportation, life sciences (biotech, drug medical devices), nanotech, movie production consumer retail, electric cars, rocket space elevators. We do not have the firstg clue about any ofthese fields.
" Andreessen-Horowitz will have the capacithy to invest anywhere from $50,000 to $50 millioh in new companies. He said that at least initiallu he and Horowitz would be the only two generapl partners inthe company, and they would be selective abouyt the portfolio companies whose boards they join – generallhy limiting that level of involvement to firmds in which Andreessen-Horowitz have a $5 million or more stake. Andreessen believes his and Horowitz’ss records as entrepreneurs will make them idealventurs capitalists. “We have built companies, from to high scale -- thousands of employeesa and hundreds of millions of dollars ofannual revenue.
In short, we have done it ourselves. And we are buildinvg our firm to be the firm we woulsd want to work with as entrepreneurs Andreessen writes. Andreessen founded the pioneering web browsedrcompany , which was lated sold to . Since then, he and Horowitz launched , a tech serviced provider sold toin 2007. Netscapr and Opsware sold for acombined $11.7 The two have been active investors in the tech spac e since then. They’ve angel invested in 45 tech startups in the last five and Andreessen serves as chairmanof Ning, and on the boardx of Facebook and eBay. Word that the pair woule be forming their own venture capital firm was broken on the Charlir Rose showin February.
But detailx came on Monday. The pair had initially planned onraisingh $250 million for the fund, but investor interest prompted them to boost the amount, BusinessWeek . The news magazine reportsd thatReid Hoffman, founder of social networkingg site LinkedIn, is among the investorws in the fund, which raised most of its moneyu from institutional investors. Andreessen-Horowitz launchez at a tough time for the venture capital one in which some are saying the industryg needsto shrink, not Venture capital, like the rest of the financial industry, has been hit hard by the economic downturn. Venturr firms make money when theirr portfolio companiesgo public, or are sold to largefr companies.
But the IPO markeft has been anemic inrecent months, making profitable exitd more difficult to find. A recent argues that the industry needs to trim down toregaihn effectiveness. "The venture industry needd to shrink its way to becomingv an economic forceonce again," said Robert E. vice president of Research and Policy at theKauffmanh Foundation. “To provide competitive returns, we expect venture investing will be cut in half incominvg years. At the same time, lowering valuations and improving overall exit multiples should help resuscitatewthe industry.
” The Kauffman study finds that despite such high-profils success stories as Google and , venturse firms have relatively littls to do with most new Only about 16 percent of the 900 companiezs on the Inc. 500 list of fastest growing companiedsfrom 1997-2007 had venture backing.
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