The US Justice Department has spent nearly a year examining Andreessen Horowitz over board seats the firm holds at competing artificial intelligence companies. Bloomberg reported the investigation on August 17; TechCrunch discussed it this week.
Two directorships are named. Ben Horowitz, the firm's co-founder, sits on the board of Databricks. Martin Casado, a partner, sits on the board of Fivetran.
Nobody has been charged with anything. That should be said at the outset and not buried: an investigation establishes no wrongdoing, and the firm has not been accused in public of breaking any law.
What the concern would be
The account we read does not name the statute involved, so what follows is the general shape of this kind of inquiry rather than a description of the government's theory.
Competition law in the United States restricts what are called interlocking directorates: the same person, or people from the same firm, sitting on the boards of companies that compete with each other. The worry is straightforward. A director sees pricing, strategy and product roadmaps. If the same director, or the same investor, sees them at two rivals, the information can travel, and competition between the two becomes harder to sustain even without anyone intending it.
Venture capital sits awkwardly with that principle by design. A firm's value to its investors comes partly from placing partners on the boards of many young companies in a single sector, and in a fast-moving field like AI, companies that were not competitors when the investment was made frequently become competitors later.
What is not known
Almost everything else, and the article is candid about it.
The legal basis is not stated. Andreessen Horowitz has not commented, which the piece contrasts with how vocal the firm was on policy questions during the previous administration. The investigation began under the current administration and has run for close to a year without a public step.
That duration is what the TechCrunch discussion fixes on. Anthony Ha, a TechCrunch weekend editor who previously worked at a venture firm, called the length very surprising, on the view that a case about board seats alone would not require that long to examine. Kirsten Korosec, a host of the outlet's Equity podcast, questioned why this would be a Justice Department priority at all. Sean O'Kane, another host, speculated that the department might be pursuing the largest firm in order to set an example that smaller ones would follow.
A note on what this article is
The piece we relied on is a write-up of a podcast discussion, edited for length, not a reported investigation. The three people quoted are journalists at the publication, not lawyers, regulators or people with knowledge of the inquiry, and their remarks are speculation offered as such.
We are reporting it because the underlying fact, that a nearly year-long federal inquiry into the largest venture firm in the industry became public on August 17, is real and consequential. The question of whether it will change how venture firms take board seats is at this stage a matter of opinion, and the opinions available are those of the podcast.
We verified this from a single publication, which itself relies on Bloomberg's reporting, and we could not reach Bloomberg.
