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The Justice Department has launched a probe into Andreessen Horowitz regarding the firm\u2019s partners serving on the boards of competing companies, Bloomberg reported<\/a>.<\/p>\n The nearly year-long investigation focuses specifically on the firm\u2019s board seats at Databricks, which is valued at $190 billion, and Fivetran, which combined with dbt Labs in June. The firm\u2019s co-founder, Ben Horowitz, serves on the board of Databricks, while partner Martin Casado serves on the board of Fivetran.<\/p>\n Several VCs told TechCrunch they were surprised by news of the probe. Databricks and Fivetran are competitors now, but the two companies weren\u2019t rivals when a16z invested in the startups, according to another Databricks investor who spoke on condition of anonymity. Databricks is largely known for its cloud storage products but, with its Lakeflow product, has expanded into AI data pipelines and application connectors. That\u2019s Fivetran\u2019s main business.<\/p>\n Given that Andreessen Horowitz has backed hundreds of companies, it\u2019s almost inevitable that some startups will pivot or expand into the same markets, becoming competitors.<\/p>\n While backing direct rivals has become more acceptable recently, as evidenced by the many VCs that funded both Anthropic and OpenAI<\/a>, holding a board seat on competing startups creates a far greater conflict of interest. Directors are generally privy to much more sensitive strategic information than non-board investors ever see. \u00a0<\/p>\n Such conflicts can be resolved by having a partner step down from one of the boards. However, because Databricks and Fivetran have different individuals from the same VC firm on their boards, a16z can institute a so-called Chinese wall between Horowitz and Casado, which would prevent the two partners from sharing confidential information about the two companies with each other, one investor said.<\/p>\n The investigation invokes Section 8 of the Clayton Act, a 112-year-old law stating that an individual or entity is barred from serving on the boards of competing companies. Since regulators have rarely targeted venture capital with this rule, the industry is watching the DOJ\u2019s probe closely. If a16z is forced to surrender a seat, founders may place less value on board commitments from top-tier VCs, given that those investors might be forced to step down if a portfolio overlap creates a future conflict. <\/p>\n Andreessen Horowitz did not immediately respond to our request for comment, nor did it respond to Bloomberg. Databricks and DOJ declined comment.<\/p>\n<\/div>\n When you purchase through links in our articles, we may earn a small commission<\/a>. This doesn\u2019t affect our editorial independence.<\/em><\/p>\n