DOJ’s probe into Andreessen Horowitz over board seats baffles VCs; plus, Etched’s valuation doubles to $21B in a month

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0:29one. Or a few. Head to Sierra or Sierra.com for the brands you want at the prices that let you do it all. From athletic to athletic-ish, Sierra's got it. The Justice Department has launched a probe into Andreessen Horowitz regarding the firm's partners serving on the boards of competing companies. That's according to a Bloomberg report. The nearly year-long investigation focuses specifically on the firm's board seats at Databricks, which is valued at$190 billion, and Fivetran, which combined with DBT Labs back in June. The firm's co-founder, Ben Horowitz, serves on the board of Databricks, while partner Martin Casado serves on the board of Fivetran.

1:15Several VCs told TechCrunch they were surprised by news of the probe. Databricks and Fivetran are competitors now, but the two companies were not rivals when Andreessen Horowitz invested in the startups, 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, it has expanded into AI data pipelines and application connectors. That's Fivetran's main business. Now, 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.

1:56While 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 5Tran have different individuals from the same VC firm on their boards, Andreessen Horowitz can institute a so-called Chinese wall between Horowitz and Cassano, which would prevent the two partners from sharing confidential information about the two companies with each other.

2:46The 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 Andreessen Horowitz 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. On Tuesday, Etched announced that it has raised another$700 million at a$21 billion valuation led by Jane Street after the famed Quant Fund tested and bought the startup's AI hardware.

3:39Even by AI standards, this valuation step-up is jaw-droppingly fast. Etched was valued at$5 billion back in December. It raised a$300 million Series C at a$10.3 billion valuation in July. Now investors have doubled its valuation to$21 billion, up nearly$11 billion in a month. Etched delivers its AI tech as full systems that it calls frontier inference clusters. Co-founder and COO Robert Walken told TechCrunch that investors are so enthusiastic because Etched has designed two new components from scratch to speed up inference, the computing process that happens after a user submits a prompt. He said, Inference is built in two stages, pre-fill and decode.

4:29In the mathematically and compute-intensive pre-fill phase, the system must understand the prompt, including context. In the memory-intensive decode phase, the system generates output tokens, meaning the actual answer the user sees. Etched created a pre-fill chip that operates at low voltage, allowing it to pack in more transistors without the typical heat problems of other high-end AI chips. It can, therefore, process more tokens faster. Etched created a new type of memory and an interconnect for the decode process that the company calls cluster-scale memory. Watkins said, It allows many chips to connect together and use a shared memory pool at a very, very fast low latency.

5:15The result, Etched promises, is higher speeds and lower costs. Etched is still battling the perception from its early days that it etches a particular model into its chips, meaning that each chip is somehow custom-designed to run one frontier model. That was its original intention, but it's no longer the case. Etched systems can run on any frontier model. In the blog post announcing the new round, investment firm Jane Street said, we tested the chip and are pleased with the early results. Etched's unique approach to inference delivers the precision we will need to support our most demanding workloads.

5:56We're excited to now have our own rack running in our data center. Other investors in Etched include Kleiner Perkins, Sequoia Capital, Andreessen Horowitz, Peter Thiel, Tiger Global, Bain Capital Ventures, NEO, Stripes, Primary, Positive Sum, Diffusion, Argo, and Blackstone. That's all for now for the latest in tech startup news. Go to TechCrunch.com.

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