According to Fortune, there are management fees required on the full $1.5B. It's a huge fund (same article pits the average American venture fund at $107mm), but given the fees and the assumed ease of the fundraising process, it's easy to understand why they went this far.

For all the tension between Andreessen and Icahn, they share one quality that few investors can claim. When Icahn buys AAPL and let's people know, the lemming effect allows him to profit merely from announcing his own optimism (note he doesn't sell off of this, but his shares are still more valuable). At this point, a16z essentially has the same star power. Their blessing can give a serious push to companies pursuing an IPO or acquisition, to the point that the boosted exit value overweighs any "overpaying" a16z might do on the entrance.

You are thinking small, seed or maybe round A. Rounds B and C funding is what you need to scale up a company to Dropbox or Twitter level of infrastructure. That can easily be 150-450m.

Granted not all of companies would need that kind of investment, but every once in a while...

Thanks - just thinking on the message handling front:

432 councils in UK, handling 22m households with avg 120 interactions per year : ~2bn transactions or 40m per council per year. As a shared infrastructure that's on the order of 40m per day. It's big - yes I could see how you could spend 100M usd, but that shared infrastructure approach is a big leap of trust - put it this way, Kent the council I live in is spending 40m on shared Citrix and shared firewalling for police, councils, fire etc in the area.

I just think we could do the next layer up a lot cheaper

You could and you should pitch it as Silicon Roundabout.

It is still expensive to build big companies, and $1.5B is tiny by financial markets standards. Bond firms like Pimco and Blackrock measure things by $100Bs and trillions.

Let's say you invest in 50 startups per year for 5 years. That is 250 firms, averaging $6M/firm.

1.5 is small compared to the war chests Apollo, KKR and the like amass, but it's huge for a VC accustomed to writing smaller checks. Average US VC find is 107mm.

They're either going to be doing way more deals or shifting some of the fund focus to later stage. I expect the former, given that investors seem to like the granularity of separate venture and growth funds to pick from.

You're forgetting money that they can leverage from banks with the money they raised.

I've never heard of a VC leveraging up with borrowed money. Who would be on the hook if the fund loses money?

VCs' portfolio companies often raise debt. This is called venture debt and the lenders are banks like Silicon Valley Bank.

VCs tend to have a love/hate relationship with venture debt. On the one hand, it means they suffer less dilution as the company grows; on the other hand, it means their investment gets riskier just at the point where they are finally de-risking the company.

It's not out of line of their current rate. In 2013 they had 56 new deals and 81 total investments[1]. Over a few years that could cover 1.5B.

[1]http://blogs.wsj.com/venturecapital/2014/02/04/500-startups-...

How many of their funds were active in 2013?

Pays the rent at least... Rents are going up!