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Following a Bloomberg report<\/a> that the Department of Justice is investigating venture firm Andreessen Horowitz for holding board seats with rival AI companies, VCs told TechCrunch that they were baffled<\/a>.<\/p>\n On the latest episode of the Equity podcast<\/a>, Kirsten Korosec, Sean O\u2019Kane, and I were similarly puzzled by the news. Yes, VC conflicts-of-interest are worth taking seriously, but as Kirsten wondered, \u201cOf all the things that the DOJ would focus on in terms of level of importance, why does this one rise to the top?\u201d<\/p>\n The news was also surprising because of a16z\u2019s ties with the Trump administration, and because the firm has been so quiet about the investigation. It\u2019s a real contrast with the firm\u2019s activity during the Biden years, when \u2014 as Sean put it \u2014 \u201cevery little policy change, especially related to crypto, generated a day\u2019s worth of posting.\u201d<\/p>\n But Sean also speculated that by targeting a16z, the DOJ might also be setting an \u201cexample\u201d that \u201csmaller firms would follow.\u201d<\/p>\n Keep reading for a preview of our conversation, edited for length and clarity.<\/p>\n Kirsten Korosec:<\/strong> I think that you bring some interesting perspective to this, Anthony, because you actually worked at a VC firm, whereas Sean and I have never been inside the confines of the VC world. We\u2019ve only reported on it.<\/p>\n Anthony Ha:<\/strong> Long-time equity listeners will know that I did spend a couple years working at an early stage VC firm \u2014 a much smaller firm than Andreessen Horowitz, as different as you can be while still technically being in the same industry.<\/p>\n It did color my response when I was reading this article, which is essentially about these board seats that Andreessen Horowitz holds, and the idea that they have board seats in some companies that have become competitors.<\/p>\n It was really surprising to me, as apparently it was to a number of other VCs. And again, I\u2019m not a lawyer, I was not on the legal team of this VC firm. There is, obviously, an understanding, and apparently laws, around the idea that you should not be on boards of competing startups. But this is not something that is, generally, enforced very closely.\u00a0<\/p>\n Founders don\u2019t feel great if you are on the board of their biggest competitor. But also, startups evolve. And I think that was true in this case \u2014 you invest in a startup doing one thing, and then, say, the AI boom happens, and suddenly they\u2019re doing something completely different. So the idea that you would have a year-long DOJ investigation into this \u2014 we don\u2019t really know what the results are, there\u2019s a lot of questions about this, but it just seems very strange.<\/p>\n Kirsten:<\/strong> In this case, Ben Horowitz sits on the Databricks board. Partner Martin Casado sits on Fivetran board. And to your point, especially in this AI-driven boom cycle, a lot of companies are changing what they\u2019re doing, and either to jump into the AI space or to take advantage of specific subcategories within it. And a company the size of Andreessen, which makes so many investments and is on a lot of board seats, you can see how this would happen.\u00a0<\/p>\n To me, what was interesting \u2014 and Sean, I wonder if you have an opinion on this \u2014 is of all the things that the DOJ would focus on in terms of level of importance, why does this one rise to the top?\u00a0<\/p>\n Sean O\u2019Kane:<\/strong> I\u2019m just excited we\u2019ve got another chance for disruption here. I mean, we could create a startup that is just going to put an AI on your board, and there are no conflicts of interest. Let\u2019s do it.\u00a0<\/p>\n No, you\u2019re right. It\u2019s weird for a number of reasons, and when I first saw the headline, it certainly piqued my interest because I wanted to know what it was that they were looking at.<\/p>\n We should back up just a real quick second. Bloomberg reported that this [investigation] has been going on for nearly a year, so this started under the Trump administration. The people who run Andreessen Horowitz are very friendly with the Trump administration, involved in the Trump administration in some ways, sitting on some councils and things like that.<\/p>\n And so, for as much rhetoric as the [second] Trump administration was putting out there when it was still incoming, about being antitrust forward and fighting against the big forces of consolidation or whatever, that really hasn\u2019t borne out. I mean, they settled with Live Nation. They didn\u2019t break up Ticketmaster. We could spend all day talking about how that was a pretty hollow promise.<\/p>\n The Justice Department should not be a tool for the president to just direct at enemies or friends or whoever. But it\u2019s just interesting that this is a bridge they were willing to cross, knowing how close they are with this administration.<\/p>\n And I\u2019ve reported on some things that Andreessen Horowitz have done that made me wonder if that was going to be part of this. Two years ago, we published a story about how Ben Horowitz was personally making connections between the startups that Andreessen Horowitz backs and [the] local police department in Las Vegas<\/a>, and things that have maybe more of an anti-competitive flavor to it than this \u2014 which, like you\u2019ve said, is maybe a bit more by chance because of the way that these companies evolved and wound up competing against each other.<\/p>\n [It] certainly doesn\u2019t seem like it\u2019s something that Andreessen Horowitz feels [is] such an overreach that we have seen them complaining about it on Twitter, like they were during the Biden era \u2014 where every little policy change, especially related to crypto, generated a day\u2019s worth of posting. We haven\u2019t really seen that here. So maybe it\u2019s all going to be copacetic in the end.<\/p>\n Anthony:<\/strong> To Sean\u2019s point about the DOJ, without getting too deeply into the politics of it, I think anyone who\u2019s been reading the news knows there\u2019s a lot of turmoil there. There\u2019s a lot of questions about sort of how politicized the office has or hasn\u2019t become. Which, again, just makes it very surprising and strange that there has been this long investigation into an ostensible ally of the Trump administration.<\/p>\n The last thing I wanted to say for now is also just the length of the investigation is very surprising. If it was just about, \u201cWell, we don\u2019t think you should be on these two board seats,\u201d there\u2019s not that much to investigate there. You [would] just tell them, \u201cDon\u2019t do that,\u201d or, \u201cHere\u2019s what we need you to do instead.\u201d [Yes, I may be a little naive about how DOJ investigations work.]<\/p>\n So, what that suggests [is that] there must be a lot that we don\u2019t know.\u00a0 There has to be some other, more serious allegation of something going on. Otherwise, what is there to investigate for that long?<\/p>\n Kirsten:<\/strong> Well, I think that you can have two truths. Meaning, you can have a slow, arduous process because of an inefficient DOJ, and also, you can have some sort of smoking gun or bigger issue. We don\u2019t want to get too speculative and make assumptions. But I do think that their reaction and how quiet they\u2019ve been \u2014 perhaps they\u2019re listening to their lawyers, perhaps that there is something a little bit bigger here.<\/p>\n My question is: How does this now affect other VC firms? Are they taking notice, or is this considered a weird outlier, and they\u2019re just going to proceed as normal and continue to take board seats and not worry too much about potential competition between boards down the line?<\/p>\n Sean:<\/strong> I think that\u2019s a good question. If this is really something that is such a concern inside the antitrust division of the DOJ, then maybe this is a way for them to \u2026 how do I best put it? Set the example that then those smaller firms would follow. Instead of, if you perceive this as [an] antitrust violation, going after all these other, smaller firms for doing something like this, you go after Andreessen Horowitz and you set the example. And then maybe that puts these other people in more of a wary, cautious position, and so I could see that being the case.\u00a0<\/p>\n The other thing to think about here is, this administration and the agencies that work for it and next to it have really backed off on public company prosecution in very explicit ways. The SEC and the DOJ have both said that public company investigations and things like that are just not a priority. They would rather go after individuals.\u00a0<\/p>\n Obviously, we\u2019re talking about Andreessen Horowitz as a company here, but it just makes me wonder if this is, in some ways, some sort of side effect of how the priorities have shifted. If you\u2019re not going after corporate prosecutions \u2014 you\u2019re backing off on guilty pleas that Boeing has entered, and again, settling with Live Nation and really backing off some of those Fortune 500-type companies \u2014 maybe one of the side effects is, you wind up paying a bit more attention to stuff like this.<\/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