Did you know that Andreessen Horowitz has a philanthropic fund?
Yup, they sure do — it’s called the Talent x Opportunity (TxO) Fund, and it’s technically a Donor Advised Fund, or “DAF” (which is similar to a Foundation — check out my last Medium post if you don’t know what a DAF is). This seed-stage fund is designed to invest in underrepresented and underserved founders and was seeded with $2.2 million in donations from the firm’s partners (which, let’s be honest, is probably less than this group’s annual dry cleaning bill — but I digress).
TxO operates like an accelerator, whereby they pick cohorts of early stage companies led by underrepresented founders to fund in exchange for a set amount of equity, and offer resources and networking opportunities during a 10-month long program. However, this program is different, and integrates philanthropy, in the following ways:
The fund’s size will continue to grow based on donations (and Ben Horowitz has pledged another $5mm to it)
The fund is actually a Donor Advised Fund (DAF), offering tax benefits to the donor (so you could choose to donate to your alma mater at the end of this year, or to this venture fund — you’ll get the same tax benefits)
All financial returns from the successful investments are recycled back into the fund, to finance future entrepreneurs (this is what legally needs to happen in a DAF)
Andreessen actually has a second vehicle ($16.5mm fund) that weaves philanthropy into venture — it’s called The Cultural Leadership Fund, and it has the goal of enabling more young African Americans to enter the technology industry. The fund invests in Andreessen Horowitz portfolio companies, and has Limited Partners who are cultural leaders (Chance the Rapper, Quincy Jones, Edith Cooper, to name a few), but is different from a typical venture fund in that all of the fees and carry associated with this fund are being donated to non-profit organizations that enable more African Americans to enter the technology industry.
Would I prefer to see a16z launch a larger, for-profit fund that invests in underrepresented founders vs. smaller donation vehicles? You bet. And I sincerely hope that’s what is coming next.
But I also want to celebrate these unique models integrating venture and philanthropy — and hope that more, bigger funds utilize their brands to do the same. Remember, there is $160 BILLION dollars sitting in DAFs right now, and if we can figure out ways to utilize tax dollars to support entrepreneurs building businesses, who otherwise wouldn’t have been able to — I’m all about that. Teach a (wo)man to fish, if you know what I mean.
My next post will dive into a few other interesting firms that are weaving philanthropy and venture together. Stay tuned.