DOJ’s probe into Andreessen Horowitz over board seats baffles VCs

The Justice Department has launched a probe into Andreessen Horowitz implicit the firm’s partners serving connected the boards of competing companies, Bloomberg reported.

The astir year-long probe focuses specifically connected the firm’s committee seats astatine Databricks, which is valued astatine $190 billion, and Fivetran, which combined with dbt Labs successful June. The firm’s co-founder, Ben Horowitz, serves connected the committee of Databricks, portion spouse Martin Casado serves connected the committee of Fivetran.

Several VCs told TechCrunch they were amazed by quality of the probe. Databricks and Fivetran are competitors now, but the 2 companies weren’t rivals erstwhile a16z invested successful the startups, according to different Databricks capitalist who spoke connected information of anonymity. Databricks is mostly known for its unreality retention products but, with its Lakeflow product, has expanded into AI information pipelines and exertion connectors. That’s Fivetran’s main business.

Given that Andreessen Horowitz has backed hundreds of companies, it’s astir inevitable that immoderate startups volition pivot oregon grow into the aforesaid markets, becoming competitors.

While backing nonstop rivals has go much acceptable recently, arsenic evidenced by the galore VCs that funded some Anthropic and OpenAI, holding a committee spot connected competing startups creates a acold greater struggle of interest. Directors are mostly privy to overmuch much delicate strategical accusation than non-board investors ever see.  

Such conflicts tin beryllium resolved by having a spouse measurement down from 1 of the boards. However, due to the fact that Databricks and Fivetran person antithetic individuals from the aforesaid VC steadfast connected their boards, a16z tin institute a alleged Chinese partition betwixt Horowitz and Casado, which would forestall the 2 partners from sharing confidential accusation astir the 2 companies with each other, 1 capitalist said.

The probe invokes Section 8 of the Clayton Act, a 112-year-old instrumentality stating that an idiosyncratic oregon entity is barred from serving connected the boards of competing companies. Since regulators person seldom targeted task superior with this rule, the manufacture is watching the DOJ’s probe closely. If a16z is forced to surrender a seat, founders whitethorn spot little worth connected committee commitments from top-tier VCs, fixed that those investors mightiness beryllium forced to measurement down if a portfolio overlap creates a aboriginal conflict.

a16z did not instantly respond to our petition for comment, nor did it respond to Bloomberg. Databricks and DOJ declined comment.