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 practically 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 accomplice Martin Casado serves on the board of Fivetran.
A number of VCs informed TechCrunch they have been stunned by information of the probe. Databricks and Fivetran are opponents now, however the two corporations weren’t rivals when a16z invested within the startups, in accordance with one other Databricks investor who spoke on situation of anonymity. Databricks is essentially recognized for its cloud storage merchandise however, with its Lakeflow product, has expanded into AI information pipelines and utility connectors. That’s Fivetran’s fundamental enterprise.
Provided that Andreessen Horowitz has backed a whole bunch of corporations, it’s nearly inevitable that some startups will pivot or develop into the identical markets, changing into opponents.
Whereas backing direct rivals has develop into extra acceptable just lately, as evidenced by the various VCs that funded each Anthropic and OpenAI, holding a board seat on competing startups creates a far better battle of curiosity. Administrators are usually aware of way more delicate strategic data than non-board traders ever see.
Such conflicts will be resolved by having a accomplice 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 stop 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 regulation 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 trade is watching the DOJ’s probe intently. If a16z is pressured to give up a seat, founders could place much less worth on board commitments from top-tier VCs, on condition that these traders could be pressured 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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