Andreessen Horowitz, the venture capital giant known as a16z, is ignoring the noisy world of AI chatbots to focus on the heavy machinery that actually runs the industry. This month, the firm added $1.7 billion to its massive infrastructure war chest, bringing its total bet on the technical back-end to $3 billion. Led by a team of physicists and elite coders rather than traditional bankers, the fund is snapping up the security, data systems, and coding tools that every other company will soon need to survive.
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a16z Seizes the Critical Tech Layer
While the public focuses on viral apps, a16z is quietly buying into the systems that power them. Managing partner Raghu Raghuram argues that the most durable companies of the next decade will be the ones providing the “plumbing” for the entire industry. This strategy directs capital toward automated coding tools and advanced cybersecurity; these are essential services that businesses can’t afford to lose.
a16z Saw Early Returns from the Infrastructure Strategy
Regarding the early results of this fund, several specialized companies have already seen their values skyrocket. The AI-powered coding tool Cursor, which was a favorite of the a16z team long before it went viral, saw its valuation jump from $400 million to nearly $30 billion in just one year. Other successful moves for the fund include:
- Stripe acquired the billing platform Metronome for $1 billion.
- Salesforce (CRM) absorbed the manufacturing AI specialist Regrello.
- Meta (META) took over the audio-focused AI firm WaveForms.
The Fund Is Run by a Team of Engineers
A major advantage of this fund is that it is run by engineers who can read a startup’s code themselves. Martin Casado, who sold his first startup for over $1 billion before joining a16z, hires technical experts who can separate real innovation from expensive marketing. This depth allowed the team to back founders like Mira Murati at Thinking Machines Lab, which recently reached a $12 billion valuation before even shipping a product.
In a market where many fear an AI bubble, a16z is looking for the essential survivors. While some critics worry about the high prices of private deals, Casado remains confident because the actual demand for processing power and developer efficiency is at an all-time high. The firm’s goal is to own the underlying infrastructure that remains valuable even if the initial excitement around consumer AI apps eventually cools down.
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