The fundraising crunch doesn’t seem to be hitting venture capital firm Andreessen Horowitz, which announced today that it has raised $650 million for a second fund, more than doubling the $300 million it raised 16 months ago.
The new fund will continue to focus solely on computer science and will be stage agnostic, with the freedom to fund seed rounds as small as $50,000 up to larger growth rounds of up to $100 million — twice the limit of the previous fund. General partner Marc Andreessen said half the fund will be focused on growth opportunities and he welcomed the chance to pursue bigger deals, similar to Andreessen Horowitz’s $50-million bet on Skype. He said that while he is not opposed to seed deals, they are less attractive these days with the glut of VCs and angels looking at opportunities there. “There are more seed investors putting more money to work, there are a lot more deals and valuations have gone up while the quality has gone down,” he said. “The opportunity is diminishing relative to a couple years ago.”
This second fund gives the fledgling firm even more momentum in Silicon Valley and shows the power of Andreessen, who some have dubbed the King of Silicon Valley. Andreessen Horowitz has invested in 28 companies, including Foursquare and Zynga, and owns 5 percent of Skype, which is preparing for an IPO. Andreessen sits on the board of Facebook, eBay and HP and was previously an active angel investor with bets on Twitter and Digg.
Andreessen Horowitz will be looking broadly at computing but will be keeping an eye on mobile, infrastructure and cloud-investment opportunities, as well as potential deals with storage and networking companies. Andreessen said the firm also wants to entertain fresh ideas from entrepreneurs who may be looking at opportunities outside of the current hottest areas. Interestingly, Andreessen said he believes the U.S. is ripe for a return of consumer electronics companies, which he is also on the lookout for.
While other firms have struggled to raise funds, Andreessen said his firm was able to raise $650 million in three weeks, tapping all of the existing investors from the first round — which took three months to complete. He said it shows that limited partners are willing to put their faith in top firms that can access good entrepreneurs and strike quality deals. “The reality is there are 10-20 funds that have good returns while every other VC is over-funded with too much money chasing opportunities,” Andreessen said. “Investors are getting tougher. It’s tough for people with 10-15 years of bad returns to get money but investors are excited about firms that they think can get good deals.”
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