Against the bubble talk, not against AI.
From Bloomberg via MSN, January 19:
An artificial intelligence startup that helps developers write and debug code is now worth nearly as much as United Airlines. A two-month-old AI computer company raised a massive $475 million seed round, with plans to secure even more financing soon. And a platform for ranking AI models is now valued at nearly $2 billion, less than a year after it was spun out of an academic project.
The exuberance for all things AI has rapidly spilled over into the normally staid field of developer tools, benchmarking services and back-end systems — areas that most regular consumers will never encounter directly — becoming a focal point for a new wave of tech investment. And behind many of these companies, you’ll find a relatively nascent multibillion-dollar fund run by an unconventional team at Andreessen Horowitz.
The venture capital firm, which goes by the nickname a16z, set up a dedicated $1.25 billion war chest in 2024 for bets on AI infrastructure, a term that the fund defines more broadly than the costly chips and data centers that make AI run. This month, the firm said it would commit another $1.7 billion to the effort.
To a16z, the word infrastructure encompasses any AI software marketed to technical buyers, rather than consumers. Think coding applications, foundational models and networking security, among others. “Some of the most important companies of tomorrow will be infrastructure companies,” said Raghu Raghuram, a managing partner at the venture firm and former VMware chief executive officer.
Those bets are starting to pay off. In recent months, Stripe Inc. agreed to buy Andreessen-backed billing platform Metronome for a reported $1 billion; Salesforce Inc. acquired Regrello, an AI provider for manufacturers; and Meta Platforms Inc. bought AI audio company WaveForms. In November, AI coding startup Cursor raised a new round of financing at a $29.3 billion valuation, far more than the $400 million it was worth in 2024 when a16z first backed it.
The VC firm’s co-founder Ben Horowitz cautions that it’s too early to make any judgments about the fund’s performance, which is usually assessed on a decade-long time horizon. But so far, he said, “It’s one of the best funds, like, I’ve ever seen.” As with so much in AI investing right now, however, it’s unclear whether a16z’s success with the fund defies an AI bubble or exemplifies it.
Silicon Valley has proven AI businesses can raise unprecedented sums from investors at ever-higher valuations to fuel grandiose dreams of rewiring society. The central tension of the boom is whether businesses will find AI software valuable enough to pay up for it — and soon. If companies don’t spend as much as anticipated, trillions of dollars of tech investments will look more precarious, including for firms a16z is now backing.
The task of guiding the prominent VC firm through the frothy AI infrastructure landscape falls to Martin Casado, a former computational physicist and longtime programmer who sold his startup, Nicira, to VMware for $1.26 billion. Casado joined a16z a decade ago and has become a successor of sorts to Horowitz, the firm’s original infrastructure expert. “I’m completely replaced,” Horowitz said. “I don’t know nothing anymore.”....
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