Andreessen Horowitz Returns Slip, According to Internal Data

I don't have access to the full article, but from the lede this looks like not very well researched journalism:

1. A16Z has 17 funds, with varying degrees of investing angles (early stage, crypto, bio, etc). So trying to do a fund by fund analysis is unfair.

2. IRR can be deceiving as it's time based. Some LPs invest based on "X Return" or IRR, and so cherry-picking one over the other is disingenuous without mentioning the other.

3. The larger the fund, the harder it is to have a higher IRR. A16Z keeps growing the size of it's funds (latest is $1b+). There are just simply not enough good deals out there to deploy that amount of capital. This is just like growing your top line revenue 50% from $1M to $1.5M, vs 10% from $10 to $11M. The former appears to have be semantically "better performing growth", when actually you made $500k more than you did previously.

4. The fact that they, a VC firm, are even returning their money means LPs will continue to invest. VC as an "asset class" is notoriously underperforming, with exception to the top 10% of the firms (which A16Z would likely be). Which begs the question, "so what?".

A few thoughts spring to mind:

It seems like the more money you have, the harder it is to deploy it efficiently.

It would be interesting to know the influence of David Swensen (the CIO at Yale), who's put a large portion of their endowment into Private Equity and Venture Capital investment, and how other large funds might be mimicking his strategy.

People always compare VC vs the S&P500 but I wonder if there's a side benefit to VC in that it's not necessarily linked to stock market fluctuations.

Are VC returns in the aggregate going to turn to absolute crap over the next ten years as hundreds of new funds (with a new one popping up every day it seems) all grinding it out - or will we see the opposite, where a lot of these smaller funds have very successful first funds (partially constrained by the sizes they're initially able to raise), only to be dramatic underperformers as they raise second and third funds?

Finally, it seems like more money doesn't make for better results (past a point). The Vision Fund being example A.

Generally it's more about allocation and diversification. You can only put so much money in "standard investments".

When you already have a few hundred million in stocks, bonds, etc, the marginal benefit to putting another few million into the bond market is completely irrelevant--it's a rounding error in the overall portfolio. But putting those few million into a venture capital fund has the potential to generate a noticeable return.

It can also insulate you against structural shifts in markets. If WeWork were to fundamentally change the global real estate market, or some new battery startup fundamentally changes the energy landscape, investors in the incumbents can be left with significantly devalued portfolios.

Having a piece of anything/everything that might become the "next be thing" is a hedge against that.

I don't think this is poor journalism (I think The Information do a good job reporting industry specific information in a non click baity way). I see this as reporting on a player in an industry that a substantial number of their subscribers are either exposed to, or interested in.

But I agree with the rest of your statements. Better to have a VC investment that brings a 12% return or whatever than some negative returning European or Japanese government bonds.

The point, as mentioned by the article, is to consistently beat out other similar investments at that scale (ie, index funds, private equity, etc). 44% isn't the competition, no. At a minimum 15-16% in the long run.

But otherwise at a more local level high risk capital expects high rewards.