Made Men: Why Venture Capitalists Sponsor Other VCs

Check out this blog post I just published on BusinessWeek’s TechBeat blog:

The big news out this week in the venture capital market is the launch of Andreessen Horowitz, a new $300 million venture capital fund co-founded by Marc Andreeseen, a tech visionary who founded Netscape Communications, the startup that triggered the Internet tsunami.

Raising $300 million for a first time fund is an incredible achievement in today’s depressed capital-starved economy. How did Andreessen and his long-time business partner and co-investor Ben Horowitz pull it off? Well, tops on the list is the stellar reputation and track record of this pair. Andreessen has been at the forefront of the three major technology trends of the last 20 years: The Web, cloud computing and social networking.

After Andreessen launched Netscape, he and Horowitz founded tech service provider Opsware, which Hewlett-Packard bought in 2007 for $1.6 billion. Andreessen also co-founded Ning, a social networking company that is growing fast and generating revenue. “Marc understands technology on a deeper level than 99% of the public,” says Todd Chaffee, partner with Institutional Venture Partners.

But one other big reason that the two were able to attract so much money, a key detail that I broke in my story for BusinessWeek, was the duo gained the support of three of Silicon Valley’s most established and successful venture capital firms: Kleiner Perkins Caufield & Byers, Accel Partners and Greylock Partners.

The lead partners of these three firms (Kleiner’s John Doerr, Accel’s Jim Breyer and Greylock’s Aneel Bushri) sponsored Andreessen Horowitz, say several sources. Being sponsored is sort of like being a made man in the mob. You are tapped on the shoulder and invited into an elite club.

Concretely, this means that these sponsors made personal introductions to several of their limited partner investors to help Andreessen raise money. No doubt, that sponsorship gave the investors more comfort to invest their dwindling capital with a group of first-time VCs. “Those are great anchor tenants that will give them more credibility,” says Roger Lee, partner with Battery Ventures.

Read the rest of the post here.

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