# Conflicts keep large venture firms from backing every seed winner

Markdown copy of https://realalpha.app/s/conflicts-keep-large-venture-firms-from-backing-every-seed/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Marc Andreessen](https://realalpha.app/people/marc-andreessen/) · Marc Andreessen is cofounder and general partner at Andreessen Horowitz. · Co-founded Netscape and co-created Mosaic, then co-founded a16z, a venture firm backing AI, crypto and frontier tech.
- Host: [Jack Altman](https://realalpha.app/people/jack-altman/) · General partner, Benchmark · Co-founded Lattice and ran it until 2023, then started his fund, Alt Capital.
- Show: Uncapped
- Episode: [Marc Andreessen on The Future of Venture Capital | Ep. 12](https://realalpha.app/v/53FImKtf2i0/), Jun 11, 2025
- Moment: 19:20 to 27:03 of the episode (8 min), playing on https://realalpha.app/s/conflicts-keep-large-venture-firms-from-backing-every-seed/; the episode from there: https://realalpha.app/v/53FImKtf2i0/?t=1160

## Quote

> “the more successful you are as a venture firm, **the bigger the issue** this is going to be”
> — [Marc Andreessen](https://realalpha.app/people/marc-andreessen/) at [25:39](https://realalpha.app/v/53FImKtf2i0/?t=1539) · Uncapped

## Takeaways

1. A board member backing a competitor can feel like a betrayal to founders.
2. Companies that seem to compete can later diverge, or rivals can emerge from pivots.
3. Specialist seed investors can offer the focus large firms cannot always provide.

## About this segment

Marc Andreessen says founder conflicts—not a shortage of investors—are the biggest constraint on a16z’s growth. Because conflicts are emotional and hard to predict, large firms can’t make every seed bet they want.

From “Marc Andreessen on The Future of Venture Capital | Ep. 12”, Jun 11, 2025. [Watch the full episode](https://realalpha.app/v/53FImKtf2i0/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[19:23](https://realalpha.app/v/53FImKtf2i0/?t=1163) do this then like conflicts conflict policy conflicts conflict that's the that's the single biggest issue by really so if you had 50 kill if you had all the great gps all wanted to work here and you had like that would still be the issue yeah there would be issues there will there would be issues for sure to your point that would come with so what's the conflicts thing the conflicts thing. So the conflicts thing is the mainline venture firms forever, meaning the firms that do series A, series B, series Cs, especially series A's and B's. The relationship with the founder is just so- It's too deep. It's too deep. And if you as a venture firm invest in a direct competitor, it's just, it's a giant issue. The founder you're already invested in will be extremely By the way, do you think that's practical? Do you think it's all emotions? Like, do you think it's correct that firms shouldn't do conflicts?

[20:06](https://realalpha.app/v/53FImKtf2i0/?t=1206) I would say when we were startup founders, we felt this very deeply. It's just, it's, it's okay. So when you're a startup founder, I'll channel the other side. When you're a startup founder, the whole thing is so tenuous, right? It's just like, is this thing going to work? There's like 18,000 things going to go wrong. People are telling you, no, every day, no, I'm not going to come work for you. No, I'm not going to invest in you. No, I'm not going to.

[20:23](https://realalpha.app/v/53FImKtf2i0/?t=1223) And then your board member invests in a competitor and you're like dagger to the heart. Dagger to the heart. And then you literally, what happens is the founder is you have to go to the all hands meeting and explain why your investor has given up on you. Yes. Right. And you go in there and you do some song and dance about that. For sure. And they're just, and the employees are just like, your employees, basically your employees look at you and they're just like, you, the founder are so weak and lame.

[20:41](https://realalpha.app/v/53FImKtf2i0/?t=1241) Yeah. Right. You can't even get your board member to not invest in a competitor. Exactly. What about the marginal stuff though? Cause like, you know, all these companies are near each other. They blend, they evolve over time. So like, how does this, how does this play out on a practical level for firms? It almost never plays out the way that the founders think it's going to play out. And I say that in two dimensions.

[20:59](https://realalpha.app/v/53FImKtf2i0/?t=1259) Number one, the company, this historically what we've seen is that the founders who think that they're directly competing with each other generally end up not doing so because one or the other of them changes strategies and then they diverge, which, which by the way is natural because it's like specialization. The company specializes, they end up not competing. But the other thing that happens is two companies that were not competing that you're already invested in pivot into each other.

[21:19](https://realalpha.app/v/53FImKtf2i0/?t=1279) Yeah. And then they're mad at you. And then they're mad. Yes. Yes. And then they're very upset. You have to remind them that like that, you know, you didn't know that that was going to happen and it's not your fault. And then they're still upset. And so I would say the founders are not the founders. And also we have very low predictability of terms of where the conflicts are going to be. But that doesn't ameliorate any of the emotion at the time. So it doesn't actually help. It doesn't help for us to explain to the founder, oh, don't worry about this guy who you think is directly competitive because he won't be in a year. Yeah. Because you can't prove that. And the issue is the issue is in the moment.

[21:49](https://realalpha.app/v/53FImKtf2i0/?t=1309) What does that leave your, how does that impact your strategy? Meaning like if you know conflicts are this huge issue and you've got, you know, a big aggregate fund. And so it's very important to catch winners. And then you invested in, you know, Blue Origin, which is really good, but SpaceX is, you know, bigger or whatever happens. what does that imply for your strategy when it comes to like should we you know doing seeds and as and things like that versus like say you know what let's just wait till like the d let's have d be our early stage that's right so the most obvious thing you do is you're just like oh we just need to wait because we need we need to wait for clarity just don't deal with this whole issue right just wait just wait keep just keep keep delaying and keep delaying until it's

[22:28](https://realalpha.app/v/53FImKtf2i0/?t=1348) obvious what the what the answer is if it's big it's gonna be really big so we can buy later but then the problem with that is all right now you're out of the venture business right because now Now you're doing, as you said, now you're basically doing serious DEs. Now you're a pure growth investor. And by the way, there are very good pure growth investors. But like our determination is to stay a top venture investor because we think that's kind of the whole point.

[22:45](https://realalpha.app/v/53FImKtf2i0/?t=1365) Why is it so important? Is it just because it's what you like or is there a strategic reason that it's important to stay doing early? So we've always wanted, I mean, that's the way we've always thought about it is we've always wanted to kind of be the founder's best partner. And like to be the one who's like the closest in, the one that can really be relied upon, the one that's going to be around for the longest amount of time, the one who they can really trust.

[23:03](https://realalpha.app/v/53FImKtf2i0/?t=1383) And it only happens early. Yeah. Like it's, yeah, it's your, it's your early guys. And so it's hard to insert after that. And then look, the other thing is like, there are great growth firms that do invest later and have done very well, but I, we just think there's so much information at the early stage. Like, so for example, when we, when we make a growth investment, because we have the active venture business that we have, by the time we make a growth investment, you know, we have either invested in the company for several years, or at the very least, we've met with them repeatedly over time. And so we just, we end up with just like enormous amounts of, of information.

[23:30](https://realalpha.app/v/53FImKtf2i0/?t=1410) And then the other thing, by the way, is, you know, there's, there's, there's kind of time, time arbitrage, which is, you know, sometimes the right, the right answer is just like, okay, just invest in SpaceX or whatever later on. But sometimes the answer is no, there's actually a new thing, you know, totally. Do you invest in the MySpace growth round or the, you know, the Facebook, the Facebook seed round? Like, and if, if, if you're not in the early stage, you won't know that because you won't see the, you won't see the early things.

[23:50](https://realalpha.app/v/53FImKtf2i0/?t=1430) Yeah. And then, by the way, the other thing I just say is financially one of the one of the things people say that is inaccurate, as they say, if you're running a big fund, you're not going to have the time to spend on the early stage opportunities because you can't just. it before you're putting the money that's actually not true in venture because the aggregate dollar return opportunity on early stage is just as high as any growth investment right because if you get the right venture investment and you can make 10 billion dollars on the upside case it's definitely worth my time to spend with so i spend as much time as i can with the early stage founders you know for that reason so the barbell there's you know there's big on one end there's something sort of like me on the other end selfishly i'd love to know like you know i would assume you

[24:24](https://realalpha.app/v/53FImKtf2i0/?t=1464) think it's better to be the big version but you know if you were conditioned on needing to be me at the small end of the barbell, like how would you approach it? They're both good. They're both good. This is the thing is they're both good. They're both good. And if I were for some reason not doing this, I would immediately do what you're doing, right? So- Okay, that's good to hear. Yes, 100%. And then I would say, I actually invest this way.

[24:42](https://realalpha.app/v/53FImKtf2i0/?t=1482) So my liquid assets are basically tied up in either A16Z funds on the one side, or I run a very aggressive personal investment program in basically angel and early stage seed funds. And it's because I believe in the barbell. I believe in the barbell so much. And so, but the conflict thing I wanted to explain because that's the issue. So the big firm, like we do seed investing. It's just we have this problem every single time we're looking at a seed investment, which is like, are we really fully convicted that this is going to be the winner?

[25:08](https://realalpha.app/v/53FImKtf2i0/?t=1508) Even at seed, it creates a conflict for a board seat. There's debates. There's always debates on this. It's like, you know, do the seed ones care as much? Do the growth ones care as much? Do the group ones care as much? What I tell you is it's not a logical question. It's an emotional question. And we're just very sympathetic to the founder that needs to be able to justify their authority. You also definitely can't ask while you're making, like if somebody asked me while they were making an investment, hey, is it okay if we invest in a conflict in a couple of years?

[25:30](https://realalpha.app/v/53FImKtf2i0/?t=1530) I'd be like, what are you talking about? You know, and we've done these things. We've tried that. We used to have this thing. We used to have this separate branded thing called A16C seed. And we were like, well, we have a different conflict policy on this. And it's a great in theory, but it's like, no, it's A16C. And so the way I think about it basically is like the more successful you are as a venture firm, the bigger the issue this is going to be because the more the people that you were investing in are going to care.

[25:50](https://realalpha.app/v/53FImKtf2i0/?t=1550) And so it's just, it's like the downside of success, but like success, you know, right. Right. is if they, literally, if you don't care what they think about anything, right? If they just don't matter at all and everybody knows that they don't matter at all. So there's that. So therefore, it can be simultaneously, both of these things are true. Number one is we still, we definitely do lots of early stage investing and we will do, we do make seed bets, but it's just also true that we can't structurally for this, we cannot do all of the seed investments that we would like to do. In fact, we can't even do a tiny fraction of them. It's just like, strategically, we just, structurally, we just can't do it. And so, and again, this goes back to the barbell. So, so that means structurally, it was the same reason why Amazon can't give you

[26:29](https://realalpha.app/v/53FImKtf2i0/?t=1589) the champagne, you know, experience, right? It's the same thing. They can't, they're not set up for it. They can't do it. It's not a scaled strategy. Uh, and so what has to happen is there has to be the other side of the barbell. There has to be the specialization and intense focus and deep relationship, um, uh, right. Um, uh, thing. And, and that's, and that's the role of the angel investor and the, and the, and the seed investor. And that's, and of course in startups, that's incredibly important because that's the most formative, right.

[26:54](https://realalpha.app/v/53FImKtf2i0/?t=1614) fraught time in the life of these companies is when they're first getting started right and as you know right half the time these are people who haven't you know they haven't started a company