One cabinet, headed for a megawatt
It's Tuesday, September first. Andreessen Horowitz raises one point one billion dollars for a fund that buys chips and power. Three days later a16z tops its fifth Growth fund to a total of eight and a half billion dollars. Two announcements, four days, one reason. The thing that limits AI stopped being the size of the model and started being the electricity.
The Machine Age Fund
On Friday, August twenty-eighth, a16z posted that it had raised one point one billion dollars for a new fund, the Machine Age Fund. A venture fund is a pot of money a firm raises from outside investors and then spends buying stakes in companies. This one is pointed at hardware. Chips, memory, networking and storage, and the systems built from them, from data centers to robots to AI appliances in the house.
Raised, and a running total
On Monday the thirty-first, a16z Growth said it had closed additional money, bringing its fifth Growth fund to a total of eight and a half billion dollars. That is a total after a top-up. Existing investors put more in, and a16z published the new total and not the amount added, so there is no new-money figure to give. Both numbers are the firm's own announcements. Neither one is on file with the securities regulator today.
The cabinet
A rack is one cabinet of computers in a data center, about the size of a refrigerator. a16z says the computing packed into one of them goes up twenty-eight times across two hardware generations. The wiring inside has run out of headroom. And the power went with it. a16z puts a rack at roughly five to ten kilowatts not long ago, a hundred to two hundred fifty kilowatts for today's systems, and a full megawatt within three years. Ten kilowatts is a few household ovens. A megawatt is closer to a small town's worth of draw, in one cabinet.
The building
So the building changed. a16z says data centers are moving from tens of megawatts to hundreds, and in some cases to campuses measured in gigawatts. At that size the grid stops being a given. a16z describes power coming from the grid plus generators sited alongside the building. The question stopped being how big a model you can train. It became where the electricity comes from.
The supply side
Chips, memory, networking and storage all have to be manufactured first. a16z says the hardware supply side is used to growing twenty to thirty percent a year at most. a16z says catching up with AI demand takes triple-digit growth. Money flows into the gap between those two growth rates.
The deal flow
a16z says hardware startups went from a small amount of its deal flow to over twenty percent in the last couple of years. Deal flow is the stream of companies a venture firm looks at and writes checks into. One in five deals, at a firm known for software. If you build something physical, power gear, cooling, networking, robots, the money that used to walk past you is now looking for you.
The tape
The numbers, each one a16z's own. One point one billion dollars, the Machine Age Fund, August twenty-eighth. Eight and a half billion dollars, the fifth Growth fund's total after Monday's top-up. Five to ten kilowatts, to a hundred to two hundred fifty, to one megawatt, the power one cabinet draws. Over twenty percent, hardware's share of the deal flow.
Zero filings
And zero. That is the number of these two funds on file with the securities regulator today.
Six hardware companies
Unconventional AI, Nexthop, Volta, Atoms, Heron Power and Mind Robotics. Six names out of the August twenty-eighth post, and this is the part of the industry that does not do consumer launches.
2016, 2019, 2020
a16z led an early round in Skydio in twenty sixteen, wrote its first check into Anduril in twenty nineteen, and was among the first venture investors in Waymo's twenty twenty raise. Drones, defense and self-driving cars. All three are hardware companies, and all three predate this fund by years.
Two posts, four days
a16z Growth says it has helped over a hundred companies through the growth stage in seven-plus years. Its August thirty-first post counts six trends worth funding, and the sixth is the computer stack being rebuilt for AI.
One to watch: a Form D
The thing to watch is a Form D. A Form D is the short notice a fund files with the securities regulator after it raises money, and EDGAR is the public database those notices land in. Today, EDGAR has no Form D for the Machine Age Fund and none for a fifth Growth fund. When one appears, it will carry a date and a dollar figure that either matches the posts or does not.
Sources
Everything in this episode comes from two a16z posts, August twenty-eighth and August thirty-first, and one search of the securities regulator's public database. Back Tuesday.
