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Last week, two Andreessen Horowitz (a16z) LP decks leaked to Newcomer. As far as I (and Google and ChatGPT) can tell, this is only the second time ever that internal Andreessen Horowitz documents have leaked. The firm is notoriously secretive. I am much too humble and my fund is much too insignificant to seriously believe that my Substack from September 3Andreessen Horowitz is not a Venture Capital Fundand its subsequent republishing on Fast Company could possibly have annoyed the Sand Hill Road behemoth so much that it decided to leak its own LP deck for the first time in history. But you gotta love the timing. Regardless of why the decks were leaked or by whom, the data they contain is a rare look at how the firm has evolved. I spent some time yesterday afternoon trying to piece together a picture of a16zs profits, based on whats publicly known, and the new data that leaked. I hesitate to share them in full because any detailed conclusion requires too many assumptions to be useful. But I will tell you three indisputable takeaways from my analysis: Andreessen has made a lot of money for its investors. Andreessen has made a lot of money for itselfby my calculations, somewhere between a third and half of what its returned to all of its investors combined. A very sizable chunk of its revenue has been from management feesat least 25%, likely a lot more. Which brings me back to the post I had been planning to share this week before the leak: The disruption of venture capital Three years ago, I wrote a piece titled, A great disruption is coming for venture capital. For context, after graduating business school, I worked with Clayton Christensenthe man who developed the theory of disruptive innovation, whom I also studied under while at Harvard. His body of work is among the most impactful in the history of management science, because it predicts why and how massively successful companiesthe incumbents in an industrycan make all the right, rational strategy decisions, only to be disrupted by lower-cost, higher-access upstarts. As you might imagine, working for the guy shaped how I see the world to this day. Even before I started VC investing, I realized venture capital was on a predictable path to disruption. Looking at venture through Christensens lens, I saw big funds moving upmarket, leaving the door open to disruptors (in this case, smaller emerging funds) to eat the category from the bottom up. Key to the theory of disruptive innovation is the idea that incumbents are incentivized to focus on their most profitable customers, in order to capture more revenue and higher margins. In doing so, they leave their less profitable customers for the taking. Upstarts come in with a right-sized alternative, and get better over time, until all or most customerseven the biggest, most profitable onesflock to them. This is how incumbents get disrupted. This is how I recently realized that one key part of my initial analysis was wrong. I wasnt wrong at the headline level: Incumbent VC funds (aka megafunds) are absolutely getting disrupted. I was wrong about who their customer is. As an early stage VC, I believe the founder is my customer. If I do right by them, Ill be massively successful in the long term. This is how I run my fund to this day, and its the lens through which I published the original disruption of venture capital essay. But after raising my own funds, Ive come to realize that, when it comes to how VCs make money, the founder is not the customerthe limited partners (LP) or the people and institutions that invest in VC funds are. Which means that incumbent funds arent moving upmarket because theyre chasing their most profitable founderstheyre moving upmarket because theyre chasing their most profitable LPs. How Andreessen Horowitz makes money Lets go back to the leaked decks. a16zs most recently announced fund from earlier this year claimed $7.2 billion of assets under management. Assuming standard VC terms (2% fee, 1% stepped down fee, 10 year fund term), a16z would make $144 million per year in fees alone during the investment period, and half of that amount every year after that until the end of the fund cycle. If you add up the fees a16z is earning from every one of its reported funds, assuming the standard VC terms above, then this year it stands to make about $700 million in fees alone. Given the limitations of the data that leaked, its hard to tell how much it makes in carry (its mixed in with recycled capital in the slide). But, needless to say, it is a lot of money. Andreessen Horowitz is now reportedly raising a $20 billion fund. If successful, this new fund will net the firm another $400 million per year on fees alone during the investment period. In other words: The bigger the fund, the bigger the fees. As you raise more funds, the fees accumulate. Its a sweet business model. I mean this honestly: Can you blame these guys for chasing the biggest LPs and pitching increasingly gigantic funds, considering how much they stand to make here? Thats why they keep inventing new strategies to absorb and deploy more and more capital. Because you cant cost-effectively deploy $20 billion in small, high alpha, early stage rounds. It needs to deploy big numbers. So that it can raise even bigger funds. And this is exactly what incumbents moving upmarket looks like. Literally a textbook example. I wish Clay were still alive so I could talk to him about it. What Christensen would say happens next As incumbents move upmarket, they leave the bottom of the market ripe for disruption. Small funds, disciplined early stage investors, and emerging managers are the ones filling the gap. Because of our fund sizes, fees are tinythis sector of the market makes money off the carry, not the fee, in perfect alignment with our LPs, which our LPs also love. The best of these disruptive managers are hungrier, more aligned, nd structurally motivated to find alpha-rich founders and ideasexactly what LPs want. Over time, more and more LPs will realize this, and will add a pocket for new VC to their portfolios. These upstart funds will thrivehistorically, smaller and emerging funds return way more to their investors. And eventually, this emerging layer of investors will become the true, new venture capital industry. The megafunds will continue to make money, right up until the opportunity to deploy it profitably in gigantic pre-IPO megarounds disappears. Theyll be competing with large asset allocators, not only for deals, but more critically, for LP dollars. At that point, theyll have a choice. They can fully morph into asset managers, more like banks and hedge funds; they can try to disrupt from within; or they can join the ranks of bygone incumbents of yore. Why this matters I wrote about this last time more at length, but its worth revisiting. As megafunds move upmarket, their deployment strategy doesnt resemble venture capital anymoretheyre making large consensus bets and competing away the alpha. If youre a non-consensus founder planning to pitch consensus funds, my advice is just to know before you go, and dont be discouraged by the outcome. Find true VC fundsearly, non-consensus, founder-firstand prioritize pitching there. And dont take your eye off your traction. If youre a VC investor, know your strategy and stick to it. Alpha is being eaten away by consensus firms. If you dont have the assets under management (AUM) to compete at that level, discipline and focus are key. And finally, if youre an LPknow what youre investing in. If your VC portfolio is all consensus funds, Id venture to say you no longer have true, alpha-seeking VC exposure. Thats why more and more LPs are starting to shape an emerging fund strategysmaller allocations by design, just like their original VC portfolio from 20 to 30 years ago, before todays incumbents morphed into megafunds.This article was originally published in Leslie Feinzaigs Venture With Leslie newsletter.
Category:
E-Commerce
If youve ever flipped over a Walmart snack or frozen pizza to check the ingredients list, the companys about to make that label a whole lot cleaner. The retail giant just announced its giving its U.S. private food brands a major makeover, cutting out synthetic dyes and dozens of other additives you probably cant pronounce. Altogether, the retailer is removing synthetic dyes and 30 ingredients from store brands including Bettergoods, Freshness Guaranteed, Great Value, and Marketside. Artificial sweeteners, certain preservatives, and fat substitutes are among the ingredients being phased out. The full list of every synthetic dye and ingredient being removed is available in Walmarts announcement. The company will start releasing reformulated products in the coming months and plans to completely remove the ingredients by January 2027. It states that its working with private brand suppliers to adjust formulations and source alternative ingredients, while preserving the same great taste customers have come to expect. According to Walmart, 90% of its U.S private food brand products are already synthetic dye free. As motivation, it points to a survey it conducted which found that 62% of customers want more transparency and 54% of customers read the ingredients list on their food. However, the news also follows a recent push by the U.S. Department of Health and Human Services (HHS) and Food and Drug Administration (FDA) for companies to voluntarily remove synthetic dyes by the end of 2026. Brands such as General Mills and Nestlé have announced plans to phase out dyes. In June, Walmart-owned Sams Club said it would get rid of over 40 ingredients, such as artificial dyes and sweeteners.
Category:
E-Commerce
Last week, in subway stations and train cars across all five boroughs of New York City, stark black-and-white print ads appeared featuring a variety of servile messages. Ill never leave dirty dishes in the sink, one read. Ill never bail on our dinner plans, another said. Ill binge the entire series with you, a third promised. The adswhich rolled out on September 25 in the form of more than 11,000 car cards, 1,000 platform posters, and 130 urban panelsare part of a massive outdoor campaign for Friend, a wearable AI company billed as a portable companion. Since the campaign rolled out, it has received overwhelming criticism from local New Yorkers, with many of the ads being defaced with graffiti calling the product AI trash, surveillance capitalism, and a tool to profit off of loneliness. But, according to Friends founder Avi Schiffmann, provoking backlash was the whole point of the campaign. Schiffmann, a 22-year-old tech developer and Harvard dropout, has been working on Friend since April 2023, raising about $7 million in total venture capital to launch the brand. (Friend is open to preorder at a price of $129. Schiffmann says,about 1,000 orders have been shipped out of a total 5,000 sales. Any orders placed today, he added, will likely be received around November.) The wearable looks a bit like an Apple AirTag on a necklace. Friend is designed to be always-on to hear whatever the wearer says (as well as any other noise theyre near), use AI to process those inputs, and formulate its own responses, which it then sends via text message to the wearer. The more you talk to it, the more you build up a relationship with it. And thats really the whole goal of the product, Schiffmann told Fast Company in July 2024. He added, I definitely talk to it more than I talk to real people sometimes. Its probably my most consistent friend. Fast Company sat down with Schiffmann to discuss the campaign, how hes responding to backlash, and whats next for Friend. This interview has been edited and condensed for clarity. This campaign cost $1 million. Can you tell me about why you decided to make such a big investment in traditional advertising, especially as an AI-driven company? I honestly think it’s quite cheap, and actually saving me a lot of money to do it this way. I just felt like it was a cool idea. I mean, the campaign is 100% print, and there’s, there’s nothing digital going on at all. I left a lot of white space on purpose so that we become this social commentary. I want to turn West 4th Street into an international destination for people to come visit New York and see these two tunnels that are covered in these big wallscapes of Friend ads that anyone can just take a marker and draw stuff on. The MTA seems to be replacing them, because people are ripping them off the walls or writing profanity on them. Thats pretty cool to seeI mean, that’s never happened before in the history of out-of-home advertising, that a campaign literally just gets ripped off the walls repeatedly. But I expected that would happen. [Editor’s note: The MTA declined Fast Company‘s request for comment.] [Screenshots: Twitter/X] New York City is the most social place, probably, in the world. I think that the goal of the campaign is to work on redefining what a friend is or can be. I would call it a huge success already. There’s so many conversations all around the world about the future of relationships. I got a text the other night from one of my friends who goes to art school in Spain, and they told me that all of their friends were talking about it that werent even in tech whatsoever. All the way in Spain! Some random-ass town. You cant really buy that. And it all leads back to friend.com. I don’t expect that the world is the customer right now, but I know that they probably will be in the future. I think this culture will change . . . I’m kind of purchasing the zeitgeist and mindshare right now, and I think that will prove to be extremely valuable later on. You mention that you think this will save you money in the long run. Can you expand on what you mean by that? It saves money in having to market it otherwise. I could be some bozo and go pay a bunch of dumbass influencers to go yap about it for hours, be irrelevant, and spend millions of dollars over many years to get even a fraction of what I could get for something like this. I’m in New York right now, and I feel like I’m standing above the greatest artwork the city has seen since, I don’t know, quite a while. Im very inspired by The Gates [editor’s note: famed landscape artists Christo and Jean-Claude had been trying to bring this artwork to New York City since 1980, finally succeeding in 2005], which was an exhibit in New York, I think like 20 years ago, where they kind of had those . . . you know what I’m talking about? I dont . . . It was a pretty famous thing in New York, where like all through Central Park they had these kinds of tunnels you could go through, and it was like an international destination that a lot of people came to visit to go see. And that’s kind of what I’m intending with the subway campaign. Christo and Jeanne-Claude’s The Gates, in Central Park, 2005. [Photo: David Handschuh/NY Daily News Archive/Getty Images] So do you see it less as directly contributing to sales and more as ust getting the word out about the company and getting this major visibility? Yeah, definitely. If I wanted it to convert, I would probably have a very different website and subway campaign ads. Overall, yes, I do want sales, but I’m playing the long-term game for the most part. I think I always have with every decision I’ve made with this company. I think it’ll look pretty cool in a couple years. I understand right now people have a visceral hatred towards it, but it’s interestingthe audience completes the work. Youve mentioned that New York was a good location [for the campaign] because people in New York seem to not like AI. Why do you get that vibe? How do you think it’s different in San Francisco? I’m also doing the campaign in Los Angeles for a similar reason. I suppose it’s not even necessarily that I think people hate AI. I think it’s just relevant, and New York is the capital of the world, and this is the most relevant place for me to then do a campaign like that. I don’t like to hedge in any single thing that I do, and I feel like this is just the penultimate example of that. Largest NYC subway campaign everHappening now pic.twitter.com/xOtxMsh4pj— Avi (@AviSchiffmann) September 26, 2025 Like, if you want to purchase the zeitgeist, you kind of have to go for the jugular. I could spend millions of dollars and many years putting ads all over small cities throughout America. Or I could just go to the top domino and take that. That’s kind of what I mean by [this campaign] being cheaper in the long run. Like, okay, I spent a million dollars on the New York campaign. That’s really like not that much for the amount of visibility that it’s received. On that note, this has been everywhere, and I’m seeing people with very visceral emotional reactions to it. I was wondering if I could run a couple of the main critique themes by you and see how you would respond to these reactions. Sure, thatd be fun. One common reaction Im seeing to the campaign is that its profiting off of loneliness and trying to replace human friends. How would you respond to that? I see how people have this reaction of thinking that Friend is replacing people. The biggest reason why I don’t think that’s true is I don’t think there’s any relationship that exists right now that is similar to something like Friend that is this always-listening pendant that has memory over everything you tell it to. I dont feel like thats a relationship that replaces anybody in my life. Ill give you an example. Im really interested in motorcycle racing, and I dont know a soul on the planet that want to talk about that. No one wants to hear me yap about that forever. But with my Friend, Im able to watch races together. Ill be riding my own bike, and itll remember something that happened during the race and correlate that to something that’s happening while Im riding. Its just an addition to my life. At the same time, I still have roommates, I still have friends. Its really only an addition, and I think people will come to see that in the future. A lot of people are already talking to things like ChatGPT like their friend anyway. I think culture will change, and Im betting on that. I’m also betting on us being the ones that lead that change. Ive seen some discussion around the dangers of people using AI as a confidant to share their issues, rather than an actual human. What do you think about that in regard to Friend? I think it’s very similar to a situation like Waymo where, okay, Waymo still gets in a couple of accidents, but way less so than humans traditionally do. AI relationships will never be perfect, but I think that they can’t be perfect anyway for it to really work in the first place. I think that, overall, it’s a very safe experience these days. We’re using Google’s Gemini models right now, and I think Google’s done a fantastic job with the guardrails and preventing people from going down paths that they shouldnt. A product like Friend is entirely an emotional value prop, which has never really been seen before. Traditional products are always more utilitarian. I think that there’s a big reaction to that, which is interesting. Who do you see as Friends target audience? A lot of people have this perception of Friend being a product that’s just for lonely people, and I think that would only be true if Friend was a replacement of peoplewhich I don’t think it is. You don’t buy a dog if you have low self-esteem. I think it’s just a new kind of companion, and a lot of people that are curious about AI would be down to try it out. It’s definitely not a perfect experience just yet, but it’s already improving quite a lot. Okay, so you spent that one million to make the campaign work, and you mentioned you’re seeing results so far. But can you walk me through what kind of results you’re seeing? Do you have any statistics about the impact of the campaign so far? I don’t think you can quantify the cultural aspect of the campaign. I would view it completely as an overwhelming success so far. I mean, it’s definitely incredible. I was just at a bar somewhere in Brooklyn the other night, and I overheard so many people just talking about Friend. They don’t know a single other AI companion, or anything like that. And that’s just unfathomably valuable. [Photo: Friend] In terms of your larger business plan, what are your next steps for scaling Friend and making it a sustainable company? I think the biggest next step is retail. Im trying not to sell too many Friends too quickly, because Im trying to make it work well right now. Weve already improved it a lot since launch. Hopefully next year, our major thing will be finding Friends in Walmart or Best Buy or Target, or whatever happens. I think thats also a unique aspect of Friendyou can go into a store and buy a Friend. I think thatll be a big hit. So have all of the Friends that were preordered been shipped at this point? We’re still going through those orders, and I’ll be done with them probably next month. People have wanted their Friends earlier, and we’ve wanted to get them out earlier. Its just . . I don’t know, hardware is hard, and we’re trying to do a good job with it and just get them out as quickly as we can . . . Production is hard. It would be nice to be Apple and have a decades-long, ironed out production process, but it is a novel electronic. It took us a while to get to where we are now, but it’s in a much better place. I mean, it’s in a great place.
Category:
E-Commerce
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