A stage agnostic VC firm, Andreessen Horowitz aka a16z, managed to capitalise on the blockchain, crypto and metaverse bubble at the right time, a formula they wish to replicate with AI. The firm seems to have steered away from the things of the past and is speeding towards generative AI with the overwhelming outpouring of its “vision for the AI-enabled future”, suggesting ways generative AI could help with “the creation of new medicines”, “climate change” and whatnot. 

A16z says it takes a long view of relationships and defines its investment philosophy as being “in the business of investing in innovators”. It also claims that it “think(s) far more about how big the outcome will be if a deal succeeds than all the ways that it can fail.”

And that’s true for them, however, they apply a very crafty and effective tactic—hype, exit, repeat. It is well-known for leveraging effective PR to create hype around companies like Coinbase, Airbnb, Affirm, Instacart, Netscape, and Skype, leading to high valuations. However, after the VCs exit, the valuations of these companies often decline. If the barrage of their well-crafted and researched blogs around GenAI are anything to go by, Andreessen Horowitz is looking to do the same with generative AI. 

While, Geoffrey Hinton, the Godfather of AI broke his decades-long association with Google to warn people openly about the dangers of AI, Marc Andreessen, one of the co-founders of the VC firm went ahead and wrote a 7000-word blog last month on “why AI will save the world” and all the naysayers should just shut up.

After extensively dismissing the worries of AI sceptics, Andreessen introduced a new panic: the possibility of American AI losing ground to China’s dystopian concept of AI dominance. He suggests that to prevent this, the ‘free world’ must invest heavily in developing AI as an open and unrestricted technology. 

Sounds more like a move to coerce people into directing funding towards AI hype companies he is associated with, doesn’t it? In a recent episode of the Joe Rogan podcast, Marc doubled down on the usefulness of AI, in contrast to detractors who fear its potential to destroy or control humanity. He presents a compelling vision of AI’s ubiquity, envisioning its application in various fields, such as education, scientific research, art, and military strategy. 

Cofounder Marc Andreessen suggested that AI will take over everything from tutoring children and helping scientists to augmenting artists’ work and improving warfare. He went to length envisioning the AI his son will grow up. He said that when children who grow up with AI go to college or enter the workforce, “they’ll have an ally right with them. They’ll have basically a partner whose goal in life will be to make them as happy and satisfied and successful as possible.” 

Going All in on AI

Just yesterday, the firm announced the onboarding of Anjney Midha, Ubiquity6 cofounder and former CEO, who is joining the firm to lead its artificial intelligence investing efforts. The firm has raised a total of $7.1 billion across seven funds, which looks to support tech entrepreneurs and offer guidance from a diverse team of engineers, executives, industry experts, and academics. It has actively led fundraising campaigns, such as raising $30 million for People.ai. 

a16z has raised a total of $32.4B across 27 funds in total, with 1,416 investments and 625 lead investments. It has made 203 exits in firms like Github, Coinbase, Pinterest Reddit, and also picked up new shares in OpenAI, Replit, and Replicate. Additionally, the company has dedicated a bio fund focused on advancing AI in the medical domain to aid disease prevention and treatment. Some of their notable investments include Shield AI, which develops AI software for intelligence, surveillance, and reconnaissance, and Freenome, an AI-driven platform for understanding the immune system. It has also invested in Inflection AI, Scale AI, Hippocratic AI, and Character.AI.

Not just that, a16z has also invested in Open AI CEO Sam Altman’s risky bet–-Worldcoin, which is out to scan every iris in the world. At this point, the firm seems to have leaped headlong into the fray.

The Sea of Investment

AI companies are experiencing significant attention and investment from venture capitalists. However, VCs tend to invest in AI founders who hail from from premier institutions like Stanford, Harvard and others, alongside having prior experience with big techs. Conversely, graduates from these universities can join AI startups, becoming highly valued assets for attracting funding. In exchange, these graduates would receive equity in the startup. This concept is akin to a service where Stanford University graduates act as a valuable resource for AI startups seeking investment.

This pattern has been observed in technology markets that hold disruptive potential — first with crypto and blockchain, then with the metaverse, and now with AI — the hype surrounding these technologies has attracted substantial funding. However, this surge of interest from VCs could potentially lead to the AI bubble burst. Prior to VCs’ involvement, tech giants like Google, Meta, and Amazon were already investing heavily in AI innovation and development. But once the AI hype gained momentum, even these established companies jumped on the AI bandwagon.

Despite the optimistic reports and claims, many generative AI use cases are yet to materialise, and enterprises struggle with security concerns. AI’s potential for disruption should be approached with measured scepticism, as there are numerous AI grifters seeking to capitalise on the hype.

Update: 27th July | 16:11: The article has been updated to show a16z’s investment and exit