DOJ probes Andreessen Horowitz over board seats at rivals

The Justice Department has launched a probe into Andreessen Horowitz over the firm’s partners serving on the boards of competing companies, Bloomberg reported. The nearly year-long investigation focuses specifically on the firm’s board seats at Databricks, valued at $190 billion, and Fivetran, which combined with dbt Labs in June. Andreessen Horowitz co-founder Ben Horowitz serves on Databricks’ board, while partner Martin Casado serves on Fivetran’s.

Several VCs told TechCrunch they were surprised by news of the probe. Databricks and Fivetran are competitors now, but the two companies weren’t rivals when Andreessen Horowitz invested in them, according to another Databricks investor who spoke on condition of anonymity. Databricks is largely known for its cloud storage products but, with its Lakeflow product, has expanded into AI data pipelines and application connectors — Fivetran’s main business.

Given that Andreessen Horowitz has backed hundreds of companies, it’s almost inevitable that some of its startups will pivot or expand into the same markets and become competitors. Backing direct rivals has become more acceptable recently, as shown by the many VCs that have funded both Anthropic and OpenAI, but holding a board seat on competing startups creates a far greater conflict of interest, since directors are generally privy to far more sensitive strategic information than non-board investors ever see.

Such conflicts can typically be resolved by having a partner step down from one of the boards. But because Databricks and Fivetran have different individuals from the same VC firm on their boards, Andreessen Horowitz can instead institute a so-called Chinese wall between Horowitz and Casado that would prevent the two partners from sharing confidential information about the two companies with each other, one investor said.

The investigation invokes Section 8 of the Clayton Act, a 112-year-old law barring an individual or entity from serving on the boards of competing companies. Regulators have rarely targeted venture capital with this rule, so the industry is watching the DOJ’s probe closely; if Andreessen Horowitz is forced to surrender a seat, founders may place less value on board commitments from top-tier VCs, since those investors could be forced to step down later if a portfolio overlap creates a conflict.

Andreessen Horowitz did not immediately respond to a request for comment, nor did it respond to Bloomberg. Databricks and the DOJ declined to comment.

Why it matters

A DOJ win could reshape how top VCs approach board seats industry-wide, given regulators have rarely enforced this century-old rule against venture capital before.