The Justice Division has launched a probe into Andreessen Horowitz concerning the agency’s companions serving on the boards of competing corporations, Bloomberg reported.
The almost year-long investigation focuses particularly on the agency’s board seats at Databricks, which is valued at $190 billion, and Fivetran, which mixed with dbt Labs in June. The agency’s co-founder, Ben Horowitz, serves on the board of Databricks, whereas associate Martin Casado serves on the board of Fivetran.
A number of VCs instructed TechCrunch they have been shocked by information of the probe. Databricks and Fivetran are opponents now, however the two corporations weren’t rivals when a16z invested within the startups, based on one other Databricks investor who spoke on situation of anonymity. Databricks is basically recognized for its cloud storage merchandise however, with its Lakeflow product, has expanded into AI knowledge pipelines and utility connectors. That’s Fivetran’s fundamental enterprise.
Provided that Andreessen Horowitz has backed lots of of corporations, it’s nearly inevitable that some startups will pivot or increase into the identical markets, changing into opponents.
Whereas backing direct rivals has turn into extra acceptable not too long ago, as evidenced by the numerous VCs that funded each Anthropic and OpenAI, holding a board seat on competing startups creates a far better battle of curiosity. Administrators are typically aware about far more delicate strategic data than non-board buyers ever see.
Such conflicts may be resolved by having a associate step down from one of many boards. Nevertheless, as a result of Databricks and Fivetran have totally different people from the identical VC agency on their boards, a16z can institute a so-called Chinese language wall between Horowitz and Casado, which might forestall the 2 companions from sharing confidential details about the 2 corporations with one another, one investor mentioned.
The investigation invokes Part 8 of the Clayton Act, a 112-year-old legislation stating that a person or entity is barred from serving on the boards of competing corporations. Since regulators have hardly ever focused enterprise capital with this rule, the business is watching the DOJ’s probe carefully. If a16z is compelled to give up a seat, founders might place much less worth on board commitments from top-tier VCs, provided that these buyers could be compelled to step down if a portfolio overlap creates a future battle.
Andreessen Horowitz didn’t instantly reply to our request for remark, nor did it reply to Bloomberg. Databricks and DOJ declined remark.
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