For close to a year now, the Justice Department has had Andreessen Horowitz under investigation. The subject isn’t fraud. It isn’t securities violations. It’s board seats.
That detail is what has left venture capital scratching its head. Once Bloomberg reported that the DOJ was examining a16z over the board seats it holds at competing AI companies, the VCs I spoke with came away puzzled — and on the newest episode of the Equity podcast, Kirsten Korosec, Sean O’Kane and I didn’t manage to get much closer to an answer than they did.
“Of all the things that the DOJ would focus on in terms of level of importance, why does this one rise to the top?” Korosec said.
The rule exists. Nobody enforces it.
A couple of years of my career were spent at an early stage VC firm — far smaller than Andreessen Horowitz, about as different as two outfits can be while still nominally sharing an industry. That shaped how this story reads to me.
Plainly there’s a norm, and apparently statute too, that says you shouldn’t hold board seats at startups competing with one another. Yet close enforcement isn’t really a thing. Founders bristle when you’re seated at their biggest rival’s table. That discomfort is typically where the consequences stop.
Startups also mutate. You back a company doing one thing, the AI boom arrives, and before long it’s doing something else entirely. Turning that outcome into a year-long federal investigation looks odd on its face.
The specific seats in question
Ben Horowitz holds a seat on Databricks’ board. Partner Martin Casado holds one at Fivetran.
“And to your point, especially in this AI-driven boom cycle, a lot of companies are changing what they’re doing, and either to jump into the AI space or to take advantage of specific subcategories within it,” Korosec said. “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.”
Call that the generous interpretation: an accidental collision rather than an engineered one.
The silence is the tell
What’s more striking than the probe itself is the response to it. a16z has barely uttered a word.
Set that against the Biden years. “Every little policy change, especially related to crypto, generated a day’s worth of posting,” O’Kane said. Now there’s a live DOJ matter, and nothing.
“It certainly doesn’t seem like it’s 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,” O’Kane said. “We haven’t really seen that here. So maybe it’s all going to be copacetic in the end.”
The alternative explanation is that counsel told them to keep quiet. Korosec’s take: “But I do think that their reaction and how quiet they’ve been, perhaps they’re listening to their lawyers, perhaps that there is something a little bit bigger here.”
An investigation into the administration’s friends
Per Bloomberg, this has run for nearly a year — meaning it began under the Trump administration. Andreessen Horowitz’s leadership is on warm terms with that administration, and in certain respects embedded in it, holding places on councils and the like.
Which is what makes the antitrust framing tough to reconcile. “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’t borne out,” O’Kane said. “I mean, they settled with Live Nation. They didn’t break up Ticketmaster. We could spend all day talking about how that was a pretty hollow promise.”
He went on: “The Justice Department should not be a tool for the president to just direct at enemies or friends or whoever. But it’s just interesting that this is a bridge they were willing to cross, knowing how close they are with this administration.”
The DOJ is in considerable turmoil at the moment, and how politicized the office has or hasn’t become remains an open question. A drawn-out probe of a supposed ally runs counter to nearly every assumption an outside observer would make.
Why a year is the number that matters
It’s the timeline I keep returning to. Were the message simply “we don’t think you should hold these two board seats,” there wouldn’t be much to dig into. You instruct them to stop, or you spell out an alternative. Wrapped up inside a week. (Granted, I may be somewhat naive about the mechanics of DOJ investigations.)
Twelve months implies a great deal we can’t see. Some further, weightier allegation almost has to exist. What else would sustain an inquiry that long?
Korosec’s rejoinder is a reasonable one: “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.”
It’s also worth remembering that a16z has attracted scrutiny on neighboring terrain before. Two years back, O’Kane reported that Ben Horowitz personally brokered introductions between a16z-backed startups and the Las Vegas police department — something with, in his words, “maybe more of an anti-competitive flavor to it than this.”
What it means for everyone else writing checks
The question the rest of the industry actually cares about: will anyone adjust their behavior, or does this get shelved as a curiosity while firms go on collecting board seats and paying no mind to where those portfolios wander?
O’Kane suspects the outlier reading misses the point. “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,” he said. “And then maybe that puts these other people in more of a wary, cautious position.”
A structural reading is available too. Both the SEC and the DOJ have signaled that investigating public companies isn’t a priority and that they prefer pursuing individuals. The administration walked back guilty pleas Boeing had entered. It reached a settlement with Live Nation.
“If you’re not going after corporate prosecutions,” O’Kane said, “maybe one of the side effects is, you wind up paying a bit more attention to stuff like this.”
That’s the theory to keep an eye on. Not that overlapping board seats abruptly became a genuine antitrust priority, but that enforcement energy has to go somewhere once the Fortune 500 door is shut. If you’re a partner currently occupying five boards inside one broad category, the smart response isn’t alarm. It’s pulling up what those five companies are actually shipping this quarter and comparing it to the pitch you funded.