In venture capital, network centrality is an important driver of VC performance. In short, better networked VCs have better fund performance. This is not networking in the “I have 500+ contacts on LinkedIn” sense but means being networked with other high quality investors to share dealflow, syndicate deals, etc.
Since VCs often syndicate their deals with other VCs, these co-investment patterns reveal a web of relationships between firms that can be analyzed to provide insight into which firms are closer than others, whose networks truly are stronger, where firms have overlapping investment strategies and where funds may be sourcing their dealflow from (what seed funds or angels for example).
Deal sourcing via one’s network has been a particularly hot topic as evidenced by both Andreessen Horowitz and Sequoia Capital’s “deal scout” programs where individuals not only source deals but invest the firm’s money. (Sequoia formalized its scout program into a seed fund this year). Being hyper-networked is a point of pride for the firms as typified by Andreessen Horowitz marketing partner Margit Wennmachers’ recent comment that:
“…We’re so connected, it’s the equivalent of the White House.”
With the help of a new interactive Investment Syndicate Dashboard now available on every VC profile on CB Insights, we wanted to highlight some trends among two of the more “networked” Silicon Valley investors – Andreessen Horowitz and Sequoia Capital. (Note: A free PDF of Investment Syndicate Dashboards for the 20 most active VC investors is also available after logging into CB Insights).
Below are some high-level trends for these two hyperactive VCs.
Note: This data can be accessed directly from CB Insights. Every investor profile has their own unique Investment Syndicate Dashboard.
Andreessen Horowitz Investment Syndicate Trends
Andreessen Horowitz (A16Z) has made a number of seed investments over the past two years, including over 30 in 2013 year-to-date. And its most frequent co-investor in such deals has been SV Angel, who has co-invested with A16Z in over 25 seed rounds and 48 deals overall. As the year-over-year trend line highlights, A16Z’s syndicate with SV Angel has increased dramatically in the last year with recent co-investments including Swiftype and Vastrm.
Fellow hyperactive VC Greylock Partners has also seen its relationship with A16Z grow recently. The two firms have made over 30 co-investments, including four in 2013 YTD. Below are A16Z’s top 5 co-investor by number of deals.
When we look beyond who they invest with to who invests in A16Z companies prior to them getting involved, it is not surprising to find Y Combinator as the most frequent investor in companies before A16Z invests. In 2011, A16Z jumped on board YC’s Start Fund program. A16Z has also made a number of follow-on investments to startups first backed by prominent NY-based investor Union Square Ventures including Shapeways and Dwolla, as well as Khosla Ventures (Boku, Lookout).
With over 50 co-investments, Accel Partners is Sequoia Capital’s top investment syndicate partner. Interestingly, the two firms have shared fewer investments as of late, co-investing in just one startup (P2P lending platform Prosper Marketplace) in 2013 YTD. More recently, Sequoia’s relationships with frequent co-investors Tenaya Capital and Norwest Venture Partners have trended up. Sequoia has co-invested with both Tenaya and Norwest in four deals this year. Three of Norwest and Sequoia’s 2013 co-investments were follow-on rounds to cybersecurity startups including MobileIron and recent IPO FireEye.
Who does Sequoia tend to source dealflow from? Using the investment syndicate dashboard, we can see a cross section of the angel investors and seed VCs whom Sequoia has followed on in the past including Paul Buchheit, who has invested prior to Sequoia in companies including Cisco-acquired Meraki. Baseline Ventures was a seed investor in Instagram and website creator Weebly which Sequoia also went on to invest in.
The free PDF available after logging into CB Insights has Investment Syndicate Dashboards for the following 20 hyperactive VCs:
- New Enterprise Associates
- Kleiner Perkins Caufield & Byers
- Sequoia Capital
- Draper Fisher Jurvetson
- Andreessen Horowitz
- Accel Partners
- First Round Capital
- Polaris Partners
- Khosla Ventures
- Bessemer Venture Partners
- North Bridge Venture Partners
- Greylock Partners
- Lightspeed Venture Partners
- Benchmark Capital
- General Catalyst Partners
- US Venture Partners
- Battery Ventures
- Charles River Ventures
- Norwest Venture Partners