DOJ's probe into Andreessen Horowitz over board seats baffles VCs

The Justice Department has opened a probe into Andreessen Horowitz over its partners serving on the boards of two competing companies, according to a Bloomberg report. The investigation, which has been running for nearly a year, focuses on the venture firm’s board seats at Databricks and Fivetran. Ben Horowitz, a co-founder of Andreessen Horowitz, sits on the board of Databricks, which is valued at $190 billion. Partner Martin Casado holds the board seat at Fivetran, which merged with dbt Labs in June.

The news has baffled several venture capitalists who spoke with TechCrunch, as the two portfolio companies were not direct competitors at the time the firm invested. Databricks is primarily known for its cloud storage products but has expanded into AI data pipelines and application connectors through its Lakeflow product, a market that is now Fivetran’s main business. Given that Andreessen Horowitz has backed hundreds of startups, it is nearly inevitable that some of them will pivot or expand into overlapping markets and become rivals.

Backing direct competitors has become more common in recent years, with many VCs funding both Anthropic and OpenAI. However, holding a board seat on competing startups creates a much greater conflict of interest than a non-board investment, since directors typically have access to more sensitive strategic information. One investor noted that such conflicts can be resolved by having a partner step down from one board, but in this case, different partners from the same firm occupy the two seats.

Because Horowitz and Casado are different individuals from Andreessen Horowitz, the firm can potentially implement a so-called Chinese wall between them. This would prevent the two partners from sharing confidential information about Databricks and Fivetran with each other, according to the investor. That separation could allow the firm to maintain both board positions without violating competition rules.

The probe invokes Section 8 of the Clayton Act, a 112-year-old law that bars individuals or entities from serving on the boards of competing companies. Regulators have rarely applied this rule to venture capital firms, so the industry is closely watching the Justice Department’s actions. If Andreessen Horowitz is forced to give up a board seat, founders may place less value on board commitments from top-tier VCs, knowing those investors could be forced to step down if a portfolio overlap creates a future conflict.

Andreessen Horowitz did not respond to requests for comment from either TechCrunch or Bloomberg. Databricks and the Justice Department also declined to comment on the matter.