What Does Andreessen Horowitz’s Metamorphosis Say About the Future of Equities?
Andreessen Horowitz (also known as “a16z”), one of the most prestigious names in venture capital and notably the first VC firm to raise a significant cryptocurrency fund, recently announced that it will be relinquishing its status as a venture capital firm and, instead, restructuring as a registered investment advisor (RIA).
While the transition will undoubtedly have significant economic and compliance implications for Andreessen Horowitz, the move will allow the firm to allocate much more of its capital into areas like cryptocurrencies as well as give it greater flexibility to leverage its capital.
Andreessen Horowitz’s metamorphosis is a big deal.
A really big deal.
And, one that is extremely foretelling in terms of where the firm believes global equity markets are headed.
In its present state, Andreessen Horowitz is allowed by law to invest up to 20% of its capital in “short-term holdings” (like cryptocurrencies) as well as incur significant leverage -- up to 15% of its aggregate capital contributions and uncalled committed capital.
It certainly makes one wonder why one of the most successful venture capital firms in history would uproot its entire business model just so it could exceed these considerable thresholds.
That’s one helluva risky bet on an asset class considered by some to be nothing more than a ‘passing fad.’ The fact is, flourishing companies do not uproot their entire business models without (what they perceive as) a good reason.
And certainly not for some passing fad.
So what does Andreessen Horowitz see that others have not (yet)?
Are they envisioning an economic revolution?
Are they betting that security token offerings (STOs) will become tomorrow’s IPOs?
Are they are counting on crypto ultimately displacing equities altogether?
Or do they simply believe that cryptocurrency returns are going to dwarf private equity returns?
Perhaps it is all of the above.
Time will tell.