If some venture capitalists have issues with the brazen style of the 34-month-old, Sand Hill Road firm Andreessen Horowitz, just wait. The firm’s six GPs have just committed to dedicate half their venture income to charity, and they’re very intentionally going public with the decision.
It’s a move that no one other venture firm or private equity firm has made to date.
“We want to be appropriately humble,” says Andreessen. “We realize lots of individuals are already active” philanthropically, including uber VCs John Doerr and Michael Moritz, both of whom have signed Warren Buffett’s Giving Pledge, a promise by billionaires to give away most of their wealth to philanthropy over their lifetimes.
“But the reason that Buffett promotes the Giving Pledge is to set an example and to help norms evolve, and it’s become viewed as a good thing to be public about these things,” says Andreessen. “If we wind up [setting an example for other firms to follow], we’d be thrilled.”
It’s a brilliant move and one long in coming from a financial organization, says Silicon Valley-based futurist Paul Saffo.
“I don’t doubt the sincerity of Marc for a minute, and I think this could be comparable to when [Microsoft cofounder Bill] Gates announced he would start giving to charity,” Saffo says. “The moment Gates did that, it set off a virtuous competition with other CEOs in the Valley, and suddenly, CEOs had to do more in terms of charitable giving. Not only did they have to check off the Ferrari box and the Gulfstream jet, but they had to do a charitable foundation, too.”
The announcement of Andreessen Horowitz is “not just a great move on Marc’s part but will really put the pressure on other financial organizations in the tech sector to do the same,” adds Saffo.
Surely, critics will carp that Andreessen, as well as every other investment partner at the firm, has plenty of money not tied to their venture careers. It would be a valid point. But Andreessen says that none of the partners are billionaires. (He jokingly refers to the partners’ commitment as the “kids’ table version” of the Giving Pledge “because we don’t qualify” for it.)
More, Andreessen notes that each of the firm’s partners is active philanthropically already. (Indeed, in 2007, Andreessen and his wife Laura wrote a $27.5 million check to Stanford hospital to improve its emergency care facilities.)
Others may ask: what VC income? After all, the firm disclosed yesterday that it’s close to returning its first fund but has yet to produce any carry. Andreessen says the partners are giving away both half the carry they receive over their lifetimes, as well as half their management fees. Considering the firm is managing $2.7 billion and will undoubtedly raise much more in coming years, half their management fees alone should prove significant.
That Andresseen Horowitz is the first venture firm to take such a public step into philanthropy isn’t a complete surprise. The firm has been doing things its own way since emerging on the scene with its first fund in June 2009, including making big bets on clear winners that often look expensive at the time and talking frequently with the press.
Andreessen also married into a highly philanthropic family. His father-in-law, John Arrillaga, is one of the most prominent land owners in Silicon Valley and someone who Andreessen characterizes as the “ultimate case study” in philanthropy.
“His [real estate] firm has built [much] of the Valley,” says Andreessen. “But he’s also contributed enormous amounts to the Valley, contributing to Stanford and pouring money into nonprofits. Though his name is on some buildings at Stanford [including the Arrillaga Family Recreation Center, the Arrillaga Family Sports Center, and the Frances C. Arrillaga Alumni Center, named in memory of his late wife], for every building with his name on it, there are 100 [facilities or organizations that have benefited from his largesse without it].”
Andreessen’s wife Laura also teaches philanthropy at Stanford and “is herself extremely active in the field,” notes Andreessen, adding that in making Andreessen Horowitz’s dozens of employees read her recent book, Giving 2.0, he may have gotten it onto some best-sellers’ lists.
“We’re not the first VCs to [pledge much of their wealth]” acknowledges Andreessen, “but we think, hopefully, what we’re doing will be viewed as a positive thing in our industry. Some feel there’s too much us-versus-them right now, and frankly, it’s making us all look bad and there’s no reason for it. [Being a VC] is not just about making as much money as possible. I’m a big believer that what we’re doing and the companies we are funding are making the world a better place.”
That’s worth something, in Saffo’s view. As he puts it: “I think [John D. Rockefeller] was once asked, ‘How much money is enough?’ And he answered, ‘Just a little bit more.’”
“All these people who pooh-pooh gazillionaires who give away half their gazillions,” says Saffo, “they’re usually the most selfish people of all. The reality is that no matter how much money you have, it’s never easy to give it away.”
Image credit: Marc Andreessen (L) and Ben Horowitz in 2009. Photo by Brendan McDermid, Reuters