Andreessen Horowitz raises $650 million fund

Ronny Kerr · November 3, 2010 · Short URL: https://vator.tv/n/1351

Foursquare, Skype and Zynga investor could be courting Twitter next

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Andreessen Horowitz, one of Silicon Valley's most reputable venture capital firms, announced Tuesday that it has raised a $650 million fund. At a time when venture capital is just starting to restore its former health, the size of the fund is all the more compelling because the firm that raised it is so young.

The firm was created in June 2009 as a joint venture between Ben Horowitz, co-founder and early CEO of Opsware (which sold to HP in 2007 for $1.6 billion in cash), and Marc Andreessen, the man credited with creating the first Web browser, Mosaic.

Andreessen Horowitz first closed a $300 million fund near the time of its founding. That money has since been invested in several well-known startup companies, including Digg, Foursquare, Skype and Zynga.

Impressively, the firm says it raised this second fund in just three weeks' time, a quarter of the three months it took to raise half the capital a year ago. All of the original investors and some new ones joined the second fund.

The only question now is which startups the firm will fund with its second round.

With some sources saying microblogging darling Twitter is considering another big round of funding somewhere in the $200 million range, it's tempting to think that Andreessen Horowitz would like to get a slice of that pie. (Russian firm Digital Sky Technologies, major funder of Facebook, Groupon and Zynga, is another possibiity).

The firm is no stranger to late-stage deals, having contributed $50 million to Skype (a deal that compromised a sixth of the firm's entire first fund). Andreessen Horowitz would indeed repeat the decision with another late-stage company, as long as the two investors really felt confident in the business' future.

On the other hand, Marc Andreessen doesn't sound like he's ready to spend a third of the new fund on just one company.

"I don't expect it will be [spent] as fast," he said of the second fund.

More likely, we'll be seeing startups raising less than $50 million rounds from Andresseen Horowitz.

For example, the last company to be funded by the firm was Kno, a digital textbook company that closed a $46 million equity and debt financing round, led by Andreessen Horowitz with participation from Silicon Valley Bank and TriplePoint Capital. Before that, Apptio, a SaaS business provider, raised a $16.5 million Series C round, led by Shasta Ventures with help from all current investors including Andreessen Horowitz, Greylock Partners and Madrona Venture Group.

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Digg

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Digg is a user driven social content website. Everything on Digg is user-submitted. After you submit content, other people read your submission and “Digg” what they like best. If your story receives enough Diggs, it’s promoted to the front page for other visitors to see.

Digg has been a force ever since. Acquisition offers have been made, Rose was on the cover of BusinessWeek and according to Alexa, Digg is in the top 100 most trafficked sites on the internet. The success hasn’t come without its share of problems though. The site has had to face services aimed at gaming the way stories hit the front page, as well as a user revolt. Digg has however been able to get over these hurdles as it continues to be one of the social news leaders.

Zynga

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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist.  The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel.  Zynga is headquartered at the Chip Factory in San Francisco.  For more information, please visit www.zynga.com.

Twitter

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What is Twitter?

Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests. 

Where did the idea for Twitter come from?

Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.

How is Twitter built?

Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes. 

We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.

How do you make money from Twitter?

There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.

In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet. 

At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.

Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.

 

What's next for Twitter?

We continue to focus on building a product that provides value for users. 

We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.

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