VC board seats under antitrust microscope

The Justice Department is investigating Andreessen Horowitz over its partners sitting on the boards of competing companies, a move that has caught many in venture capital off guard. The probe, reported by Bloomberg, centers on board seats at Databricks and Fivetran—two firms that now compete in the data pipeline space.

A probe years in the making

According to Bloomberg, the investigation has been running for nearly a year. It zeroes in on the firm's board positions at Databricks, valued at $190 billion, and Fivetran, which merged with dbt Labs in June. Ben Horowitz, co-founder of Andreessen Horowitz, sits on Databricks' board, while partner Martin Casado holds a seat at Fivetran.

The timing is notable: Databricks and Fivetran were not competitors when the venture firm first invested. They have since grown into rivals, with Databricks expanding from its cloud storage roots into AI data pipelines and application connectors—Fivetran's core business—through its Lakeflow product.

Surprise and skepticism from VCs

Several venture capitalists told TechCrunch they were surprised by the news. One Databricks investor, speaking on condition of anonymity, pointed out that the two companies weren't rivals when a16z put money into them.

Given that Andreessen Horowitz has backed hundreds of companies, it's almost inevitable that some startups will pivot or expand into the same markets, becoming competitors. The reaction suggests many in the industry see this as an overreach by regulators.

The conflict of board seats

While backing direct rivals has become more acceptable recently—as evidenced by the many VCs that funded both Anthropic and OpenAI—holding a board seat on competing startups creates a far greater conflict of interest. Directors are generally privy to much more sensitive strategic information than non-board investors ever see.

Such conflicts can be resolved by having a partner step down from one of the boards. However, because Databricks and Fivetran have different individuals from the same VC firm on their boards, a16z can institute a so-called Chinese wall between Horowitz and Casado, which would prevent the two partners from sharing confidential information about the two companies with each other, one investor said.

An old law, rarely used

The investigation invokes Section 8 of the Clayton Act, a 112-year-old law stating that an individual or entity is barred from serving on the boards of competing companies. Since regulators have rarely targeted venture capital with this rule, the industry is watching the DOJ's probe closely.

If a16z is forced to surrender a seat, founders may place less value on board commitments from top-tier VCs, given that those investors might be forced to step down if a portfolio overlap creates a future conflict.

No comment from key players

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

What this means for the industry

The probe could reshape how venture firms approach board seats, especially as startups increasingly pivot into adjacent markets. If the DOJ forces a16z to give up a seat, it might set a precedent that other regulators follow, making board commitments less attractive to founders who fear future conflicts.

For now, the industry is left guessing how far the DOJ will go. The outcome could have ripple effects on how VCs manage overlapping investments and board participation, potentially changing the dynamics of venture funding in the long run.