Behind the $15 billion funding: How a16z is redefining the venture capital game

An Unusual Venture Capital Empire

On January 9, 2025, a16z announced the completion of its latest funding round, adding $15 billion in new capital. This number alone is already staggering—but more noteworthy is what it signifies.

Currently, a16z manages over $90 billion in assets, accounting for more than 18% of the US venture capital financing in the same year. Of this $15 billion, four separate funds rank among the top 10 in US venture capital deals in 2025. In other words, a16z is not just a large VC firm; it is redefining the very concept of “venture capital company.”

Some might say that this scale is too large for a VC firm and that it’s impossible to generate outsized returns. But a16z’s answer is simple: we are hunting elephants.

Why Scale Becomes an Advantage

This argument sounds counterintuitive, but data supports this conclusion.

Since the 2009 global financial crisis, a16z’s first fund was only $300 million. At the time, almost all competitors mocked this size as “too small.” The result? From Fund I to Fund IV, a16z’s first four funds achieved a total enterprise value of $853 billion in distributions or latest post-money valuations.

Just Facebook alone later added over $1.5 trillion in market cap.

In 2016, a competitor VC wrote an article claiming a16z’s returns “lag behind VC elites.” Ironically, the fund criticized—Fund III—ultimately achieved a net TVPI (total value to paid-in) of 11.3x (or 9.1x including parallel funds). Its portfolio included Coinbase (which paid out $7 billion in dividends to LPs), Databricks, Pinterest, GitHub, and Lyft.

These are not theoretical exercises but real historical records.

The Databricks Story: How Belief Turns into Value

Among all cases, Databricks best illustrates a16z’s operational logic.

In the mid-2000s, the big data boom was underway. Hadoop, with its MapReduce programming model, was highly sought after, and massive capital flowed into this space. But Ben Horowitz of a16z believed Hadoop was not the architecture of the future—it was too inefficient for iterative workloads like machine learning.

His colleagues told him, “Ben, you’re making a big mistake. Everyone is investing in Hadoop, and you’re not.”

Then Databricks appeared. Founders Ali Ghodsi and his team from UC Berkeley’s AMPLab developed Spark—a more elegant, more efficient big data processing framework.

The team believed they needed $200,000 in startup capital. Ben’s response changed everything:

“I won’t write you a $200,000 check. I’ll write you a $10 million check.”

His reasoning was: if you’re really going to do this, you have to go all-in. The team ultimately dropped out of school to start the company, and a16z led the Series A funding.

This deal exemplifies three core traits of a16z:

• Belief that a particular founder or team will become a winner in a specific field
• Willingness to provide the capital they believe is necessary—possibly even more
• Once the goal is set, continuous full-resource commitment

Three years after Databricks was founded, its revenue was only $1.5 million. At that time, no one could be sure if the company would succeed—except one person: Ben Horowitz.

Years later, when Ali Ghodsi tried to establish a partnership with Microsoft but faced slow progress, Ben directly introduced him to Microsoft CEO Satya Nadella. Ali received an email from Satya that same day and within hours was “bombarded” with 20 emails from various Microsoft departments.

Later, when Ali was recruiting a sales executive, the candidate demanded a “change of control” clause in the contract. This created a deadlock. Ben sent Ali an email:

You are severely underestimating this opportunity. We are the Oracle of the cloud. Salesforce’s value is 10 times Siebel’s. Workday’s value is 10 times PeopleSoft’s. Our value will be 10 times Oracle’s. That’s $2 trillion, not $10 billion. Why does he need a change of control clause? We either don’t change control or we do.

This email was written in 2018, when Databricks was valued at only $1 billion with $100 million in annual revenue. Today, Databricks is valued at $134 billion with over $4.8 billion in annual revenue.

Ben bet on the future. He won.

The Evolution of Three Eras

To understand why a16z can handle a $15 billion funding scale, it’s essential to see how it has evolved.

First Era (2009–2017): The core logic was that software was consuming the world, and the greatest software companies would be valued far above the market. During this period, a16z rose through three actions—paying higher prices, building operational infrastructure others considered wasteful, and viewing technical founders as scarce resources. The result was a consistent 3-5x net returns.

Second Era (2018–2024): Winners became larger than expected, with longer private holding periods. a16z’s response was to raise larger funds, build specialized funds (crypto, late-stage VC LSV, etc.), and hold positions longer. During this period, LSV I achieved a net TVPI of 3.3x, and crypto funds performed even better—CNK I returned 5.4x net DPI to LPs.

Third Era (2024 and beyond): New tech companies, if supported, can not only transform industries but also dominate them. This means a16z needs to not only pick winners but also shape the competitive environment to “create” winners.

How Power Operates

What exactly does a16z provide to its portfolio companies?

Answer: Power.

This power operates through several channels:

Talent Acquisition: a16z has the largest talent recruiting team in the industry. CFOs of Cursor, the finance deputy at Deel, the president of Applied Intuition—many key executives come from a16z’s talent pool. This is not just ancillary service but a core competitive advantage.

Sales Channels: When Odyssey needed to partner with state governments on education savings accounts, a16z’s government relations opened the door. When Flock Safety wanted to sell to enterprises, a16z’s corporate market connections provided introductions to over 200 key decision-makers.

Brand Endorsement: For a startup, support from a16z itself confers legitimacy. This legitimacy is especially critical when selling to government agencies or large corporations.

Political Influence: Since 2022, a16z has been building a government affairs team in Washington to advocate for policies supporting crypto, AI, and other emerging technologies. The bipartisan efforts of the Fairshake Super PAC and the eventual passage of the GENIUS Act benefited from this.

The characteristic of these values is that as a16z grows larger, the costs of these capabilities decrease relatively. A recruiting team of 100 people serving 10 companies versus 100 companies incurs limited additional cost but multiplies the value.

Self-Fulfilling Belief

One aspect often overlooked is: how does a16z’s ongoing support translate into higher valuations and better business outcomes?

The best illustration is Deel. In 2024, the company faced negative media coverage. a16z’s GPs almost immediately tweeted support and privately defended the company’s reputation. Subsequently, Deel’s valuation in the next funding round was $5 billion higher than before.

This is not just moral support. When Ben Horowitz said he would buy all available secondary shares of Deel on the market, he was serious. According to founder Alex Bouaziz, a16z ultimately acquired “around twenty percent” of Deel’s shares.

This creates a cycle:

1. a16z deeply understands its portfolio companies
2. Provides substantive support (recruiting, sales, policy)
3. The company grows faster and larger
4. a16z can continue investing more in larger funding rounds
5. This ongoing support further elevates the company’s market position

How Scale Generates Compound Returns

So, how does a16z justify that $15 billion in new capital can generate 5-10x returns?

The superficial logic is that the market is expanding. According to a16z’s theory, as technology penetrates more industries (from manufacturing to healthcare to defense), the addressable value (VCAV) will grow significantly. The scale of frontier tech companies will be 10x or 100x that of the old companies they replace.

But the deeper logic is that a16z has built a self-reinforcing machine.

Every component of this machine—recruiting, sales, political influence, media presence, brand—becomes stronger with scale. Every dollar of management fee invested into platform building recoups multiple times in the portfolio.

That’s why a16z is willing to appear “stupid”—investing in controversial AI applications like Cluely, supporting potentially failed tech routes, entering unfamiliar fields. The failure cost of individual investments is minimal, but the upside of success is infinite.

Moreover, the externalities of this mode are positive. As a16z becomes more powerful, other funds are forced to improve their operational capabilities to compete. The result is an upgrade of the entire industry’s infrastructure—benefiting all founders.

The Future Bet

a16z’s third-era bet can be summarized as: a venture capital firm can grow stronger rather than weaker as its scale expands, just like other tech companies.

If this bet succeeds:

• Top founders will continue to flock to a16z because of its abundant resources
• LPs will keep investing because the returns prove the viability of this scale
• Competitors will be forced to upgrade but will never catch up with the compounding advantage of the first mover

$15 billion is not the end. It’s the beginning of v2.

Because if this model works, a16z’s best years are just beginning. And everyone hoping that new technologies will change the world should wish for its success.