UPDATED: Why a Third Fund for Andreessen Horowitz May Not Be Far Behind

Earlier today, I asked Marc Andreessen if we’d see his venture firm, Andressen Horowitz, raise a third fund in 2011. “Nice try,” Andreessen joked before telling me that it was “doubtful.”

I doubt that.

Andreessen Horowitz is one of the biggest winners to come out of today’s news that Microsoft has purchased the Internet phone company Skype for a stunning $8.5 billion dollars in cash. After all, it was just two years ago that Andreessen Horowitz joined a consortium of investors to spin Skype out of eBay for more than $2 billion $3.1 billion, purchasing for itself what was believed to be 2 percent 3 percent of Skype for $50 million.

At the time, the deal “generated a tremendous amount of controversy for us,” writes firm cofounder Ben Horowitz in a blog post he published today. Now, it has provided the firm with what one source close to the deal says is “at least a 3x” return. Andreessen wouldn’t confirm that statement or discuss any numbers relating to the deal.

(Update: Silver Lake Managing Director Egon Durban tells my colleague Bernard Vaughan that the consortium paid $3.1 billion, including a previously undisclosed settlement with the company’s founders, who had sued the company after the deal and who ultimately invested in the company as part of the investor group. Durban says Silver Lake purchased 40 percent of the company, while the Canadian Pension Plan Investment Board acquired 12 percent, and Andreessen Horowitz obtained 3 percent.)

Assuming Andreessen Horowitz turned its $50 million into $170 million for investors (2 percent of $8.5 billion), roughly $250 million (3 percent of $8.5 billion) the outcome represents a buyout-size, as opposed to venture-size, return. But considering that it comes from a $300 million fund that closed not quite two years ago, it’s certain to impress any institutional investors who weren’t quite sure of what to make of the unconventional venture firm. Who wouldn’t like to see half of a at least two-thirds of a fund returned this quickly, particularly with so many remaining bets on the table?

More, Andreessen Horowitz continues to spend money – “invest,” Andreessen corrects me – like a gambler with a hot hand. Because of its investment in Skype, the firm’s first fund was invested in less than 18 months. But the firm has hardly slowed the pace with its second, $650 million, fund, closed last November.

Already, it has sunk a reported $80 million into secondary shares of Twitter (it acquired them in February); a reported $80 million into secondary shares of Facebook (it acquired them in November at a $33 billion valuation, according to the firm); $49 million into Aliph, maker of the Jawbone headset; and an undisclosed amount into Groupon, as part of Groupon’s $950 million financing round in January.

And that’s saying nothing of the $18 million the firm recently invested in the casual mobile gaming startup TinyMobile, or the $86.5 million that textbook tablet maker Kno has raised between 2009 and last month, most of it from Andreessen Horowitz. That’s also saying nothing of the firm’s growth. Already this year, Andreessen and Horowitz have brought aboard a fourth GP — Scott Weiss – and venture partner Peter Levine; both will be focused on enterprise investments. The firm is rumored to be adding another venture partner shortly.

Of course, just last month, Andreessen Horowitz raised a $200 million “co-investment” fund that it can use to buy bigger stakes in the growth companies that its second fund invests in; no doubt that will buy the firm more time. And Andreessen Horowitz might also choose to recycle some of its funds, rather than distribute them to LPs, which could also push out its next fundraise. 

Further, we’re not likely to see a Skype-like deal anytime soon, suggests Andreessen. Asked today if the firm is eyeing any other spin-out opportunities, he told me, “We haven’t seen anything even comparable in the last 18 months, though optimism springs eternal.”

Still, with most funds reserving at least a third of their capital for follow-on investments, Andreessen Horowitz’s pace of investing, and today’s big win — which many view as validation of the firm’s strategy — it doesn’t seem unlikely at all that we’ll see a new fund from the firm before the year is up. In fact, if I had the money that they do, I’d bet on it.

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