In the days since news broke that venture capital behemoth Andreessen Horowitz is nearing a deal to establish its first D.C.-area office, the region's investment and tech community has been buzzing with speculation about why it's coming here and what its presence could mean for the local startup scene.
Most insiders we spoke to are genuinely excited, saying that the Silicon Valley firm's decision to set up shop here is validation of a decades-long effort by business leaders and economic development types to position the D.C. region as a hub for innovation.
“To be honest, I’d be surprised if more of our peers don’t hang a shingle here inside the Beltway,” said Scott Frederick, managing partner at venture capital firm Sands Capital in Arlington.
But some worry that there are not enough deals to go around and that the $42 billion-asset Andreessen Horowitz, given its appetite for investing in companies focused on defense and national security, could wind up crowding out some of the smaller, local VC firms that target the sector.
There's also some speculation that Andreessen Horowitz, widely referred to as a16z, is establishing a D.C. outpost not so much to invest in local aerospace or cybersecurity firms but rather to help shape policy. Andreessen Horowitz has backed some of the world's largest tech companies, including Facebook and Airbnb, so it's perhaps no accident that it's adding an office at a time when lawmakers in both parties are looking to impose more regulation on large tech firms.
For now, Andreessen Horowitz is set to sublease 12,000 square feet at 800 17th St. NW from FedEx Corp. until FedEx's lease is up in 2029, as the Business Journal reported exclusively. Whether that signals it's here just temporarily or if it intends to plant roots here is anyone's guess, as the company has not responded to multiple requests for comment.
Entrepreneurs Marc Andreessen, a co-founder of Netscape, and Ben Horowitz, who joined Andreessen at Netscape in 1995, launched their namesake investment firm in 2009. The VC firm primarily backs early-stage startups and established growth companies spanning consumer and commercial tech, cryptocurrency, education and others and has satellite offices in San Francisco, New York, Miami and London.
To some, the arrival here signals that the D.C. region is poised to break into the top tier of such VC and tech hotbeds as Silicon Valley, New York and Boston.
Nigel Morris, the co-founder and managing partner of Alexandria's QED Partners, said his firm has co-invested with a16z on deals in the past and could potentially do more now that it has an office here. Its presence could also prompt other prominent VC firms to set up shop here, which Morris said would lead to more opportunities for local startups to land investments and, perhaps, encourage other startups to locate in Greater Washington.
It's "hard to see any downsides" to having Andreessen Horowitz in town, Morris said in an interview. “The more VCs come here, the more founders will come here and the more the whole space will flourish."
Andreessen Horowitz's decision to open a D.C. office would appear to be especially good news for startups working in the areas of national security and artificial intelligence, of which there are many in Greater Washington. The firm last year launched a practice called American Dynamism to invest in space, defense, robotics and manufacturing firms operating in the nation's interest, and last month, it closed a new $7.2 billion fund that allocates $600 million to this initiative.
The VC giant is an active investor in AI — it is a major backer in Elon Musk's xAI, which just raised $6 billion in a Series B round — and Jennifer Taylor, the CEO of the Northern Virginia Technology Council, believes its presence will only strengthen the region's already robust AI scene. Over the past 12 months alone, the D.C. metro area has outpaced most of the nation in new job creation tied to AI, thanks largely to the federal government's commitment to adopting these emerging technologies.
"The federal government is a major customer, and there's a major need for them to modernize and leverage AI," Taylor said. "The fact that Andreessen Horowitz is coming to our region, to me, it's a signal that this area is going to be a hotbed for new startups and innovators. We're just scratching the surface."
Jonathan Aberman, managing partner for D.C.-area VC firm Ruxton Ventures, agreed, noting that many government contractors are now heavily focused on building and refining AI tools that serve the federal government and the Pentagon in particular.
"If you are going to play in those spaces and you're going to play big, you want to be here," he said.
But, he added, a16z likely has other motivations as well.
"There are regulatory reasons, policy reasons why you want to be here the same way that Google has an office here and Facebook has an office here just for regulatory affairs," Aberman said.
That plays somewhat into the narrative that a16z or other big VC firms don't need to have D.C. investment offices because the region is still a long way from rivaling Silicon Valley as a tech hotbed. New Enterprise Associates, one of the largest venture capital firms in the world and for many years the largest operating in Greater Washington, quietly shuttered its Chevy Chase office at the end of 2023.
“We’re not Silicon Valley; we’re not even necessarily Minneapolis," said Jim Wolfe, entrepreneur-in-residence and associate professor of management at the Costello College of Business at George Mason University, of the D.C. region's tech scene.
But most industry experts believe that's poised to change. James Barlia, vice president at Revolution’s Rise of the Rest fund, has predicted another four to five Silicon Valley-based venture firms will establish D.C. offices in the next 12 months, buoyed by Andreessen’s move, and rising valuations of local companies. In a LinkedIn post, Barlia anticipated that between three and four local companies would have $1 billion exits in the next three years as well.
“D.C. has all the ingredients for greatness,” he wrote.
