Andreessen Horowitz raises $650 million venture fund

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Marc Andreessen and his longtime business partner, Ben Horowitz, have raised a $650-million second fund for their venture capital firm, giving them a checkbook to match their ambitions.

Andreessen Horowitz raised the money in three weeks from all the same investors that participated in the first fund plus new investors. It took the firm three months to raise $300 million in July 2009.

It is noteworthy that the 15-month-old firm pulled this off in a tough environment for venture capitalists who are struggling to raise money as the industry delivers negative returns when averaged over the past decade. Venture capitalists are also facing rising competition from a new wave of ‘super angel’ investors who sink small amounts in start-ups that need less cash to bring their ideas to fruition than they used to.

Andreessen and Horowitz have growing clout for backing high-profile start-ups such as Foursquare and Zynga on Sand Hill Road, the prestigious stretch that is home to Silicon Valley venture capital firms, including theirs. None of the 28 companies they have invested in have been sold or gone public, but that could soon change. Apple and Google are both chasing one investment, the mobile payments company Boku, and another, Skype, is slated to go public next year.

Andreessen Horowitz is still committed to risking small sums, as little as $25,000, on fledgling start-ups with new ideas. But the new fund gives the firm the firepower to invest up to $100 million in a single deal and to take a bigger role in ‘really important companies,’ Andreessen said.

Investors are seeing more opportunity to invest in growth companies now that so few companies are opting to go public. Sometimes that means buying shares on the secondary market, which the firm did in the case of Zynga.

‘Every year a small number of companies ultimately get to be very big and very important,’ Andreessen said. ‘Our goal is to work with those start-ups.’

Andreessen is speaking of start-ups that grow into the likes of Facebook, where he sits on the board. He’s also speaking of potentially game-changing deals like Skype, the company that lets users call each other for free over the Internet. Andreessen Horowitz has about a 5% stake in the company which could deliver the largest initial public offering of a technology company since Google in 2004. The $50 million Andreessen Horowitz invested in Skype meant that it went through its first fund faster than it had anticipated.

Andreessen, who developed the Web browser that launched the Internet revolution and his first company -- Netscape -- already had influence and connections in Silicon Valley. But he has taken an increasingly visible role lately.

He joined Hewlett-Packard’s board not long after he started Andreessen Horowitz and quickly became a key player, acting as spokesman for the board when it parted ways with CEO Mark Hurd. And he was on the committee that helped recruit Hurd’s successor, Leo Apotheker. Andreessen also helped spin out Skype from EBay, where he also sits on the board. In addition, he has roles with two of the hottest companies in the consumer Internet space: He advises Twitter and has the ear of Facebook founder Mark Zuckerberg.

After selling their company, Opsware, to Hewlett-Packard for $1.6 billion in cash in 2007, Andreessen and Horowitz invested side by side, putting $4 million into 45 companies including Twitter before starting their own venture capital firm. Their approach has been to bring their years of experience as technology entrepreneurs to information technology investments in Silicon Valley, evaluating the merit of the idea and the tech savvy of the entrepreneur proposing it.

Like other firms, Andreessen Horowitz bills itself as a firm that supplies the advice and connections that can help fuel the growth of young start-ups. In an unusual move for a firm of its size it has hired teams to offer expertise -- business development, research, marketing -- to the companies in which it invests. It also helps them recruit talented engineers and other key employees, some 73 people so far.

-- Jessica Guynn