According to Bloomberg, the United States Department of Justice has conducted an investigation into Andressen Horowitz (a16z) to see whether the partners of the venture are also on the boards of companies with competitive relationships. Following the news, a number of practitioners expressed surprise at the investigation.
Survey focused on two data companies
Reports indicate that the survey has been going on for almost a year, focusing on a16z seating arrangements in Databricks and Fivetran. Ben Horowitz is currently on the Databricks Board, while Martin Casado, a partner, is on the Fivetran Board.
Databricks currently estimates about $190 billion. Fivetran completed the merger with dbt Labs in June this year. Both companies now cover data-processing-related operations and are therefore considered competitive.
Overlap takes place after investments
Databricks investors stated to TechCrunch that when a16z invests in these two companies, they are not direct opponents. Databricks became more famous for cloud data storage products in the early days, and then made use of LakeFlow to expand to the AI Data Pipeline and Application Connector area, which is one of the core Fivetran operations.
Such cases are not uncommon in the windfall industry. The large institutional portfolio is extensive, and it is not difficult to emerge when an enterprise that was not directly competing subsequently enters the same market as the investment company reoriented or expands its product line.
Industry concerns about board boundaries
It was mentioned that in recent years it has become more common for investment competition companies to invest in, for example, a number of institutions supporting both Anthropic and OpenAI. There is, however, general agreement within the industry that board seats are different from ordinary financial investments, as directors usually have access to more sensitive business and strategic information.
According to investors, such conflicts could normally be resolved by withdrawing one of the board seats. An alternative approach would be to establish information segregation within the same institution to avoid the exchange of confidential information between the two companies by different partners.
This inquiry by the United States Department of Justice refers to section 8 of the Clayton Act, which is 112 years old. This provision prohibits individuals or entities from serving on the boards of competing companies at the same time. The investigation is being closely followed by the regulatory authorities, who in the past rarely used this rule to look at the windfall industry.
If a16z is eventually asked to relinquish one of the seats, the market may re-evaluate the actual value of the board seats offered by the head. In the case of start-up companies, the Board ' s commitment may not be sustainable in the long term if there is greater overlap in the future.
Both Databricks and the United States Department of Justice refused to comment and a16z has not responded to TechCrunch and Bloomberg's requests for comment.