US venture capital firm Andreessen Horowitz has raised $1.5bn for its fourth fund, a little over two years on from its most recent fundraise.
Andreessen Horowitz Fund IV will follow a similar strategy to its predecessor funds as a multi-stage venture capital vehicle.
Earlier this year the firm was reported to be in the market for a new fund. The previous vehicle included a $900m fund for early-stage investments and a $600m parallel fund for larger deals.
Fund IV is expected to have around $1bn for the general fund and $500m for parallel fund, although this could change before the firm holds a final close later this quarter, said the report.
In a blog post, Andreessen Horowitz partner and COO Scott Kupor, wrote, “We believe this is an incredibly exciting time to be a technology investor. The ultimate market size that this current generation of tech companies can go after dwarfs that of previous ones.
“The obvious reason for this is mobile internet penetration: We’ve gone from an internet population of 55 million users to nearly three billion, and smartphone users are expected to grow from 1.5 billion today to five billion in the coming years. The winners in tech today can become massively larger than those of previous decades because the markets they can sell into are enormous, and growing.
“Yet as these markets have grown, the technology costs required to support them have fallen dramatically due to developer productivity tools and cloud-based computing. For enterprise in particular, the advent of SaaS and BYOD has expanded the market opportunity. Why? In previous tech generations, selling to an enterprise required both the support of the end-users of the application and the IT organization. The limiting factor on application deployment for enterprises was the finite capacity of the IT organization, since they would ultimately have to install, support, and manage the applications internally. With SaaS-based applications, however, individual departments within a large enterprise can find and adopt new technologies freed from the constraints of the IT organization’s support capacity.
“Entire new enterprise application markets have been created simply as a result of the proliferation of mobile devices and cloud-based computing.”
Kupor also pointed to industries that previously were not candidates for venture-financed new company formation. He added, “These industries are increasingly being impacted as software eats the world, and that’s creating opportunities for expanding the venture capital category. We’ve already seen a number of traditional industries being eaten by software: television (Netflix), music (iTunes, Spotify, Pandora), retail (Amazon), movies (Disney’s Pixar); there will be many more in the coming years. Large, vertical markets — such as healthcare, education, financial services, energy, and even government services — are ripe for technological innovation. We are seeing many of the brightest entrepreneurs looking to transform these industries through software.”
Against this backdrop, annual LP investments into venture capital have averaged around $16bn to $18bn over the last few years, down from the $110bn peak in 2000, while the number of VC firms has also been declining.
Kupor added, “While such transitions can indeed be painful, this is a positive sign of a professionalising market — one in which the supply and the demand are in closer equilibrium.”
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