A move by Andreessen Horowitz to join Elon Musk's bid for Twitter Inc. threatens to create a conflict for firm co-founder Marc Andreessen, who sits on the board of social-networking rival Meta Platforms Inc.
Andreessen Horowitz agreed to invest $400 million in the Twitter takeover deal, part of $7.1 billion in new financing commitments announced Thursday. That put one of the biggest early backers of Facebook, which changed its name to Meta last year, in position to become a new owner of Twitter.
Firm co-founder Ben Horowitz said in a tweet that Musk was perhaps the only person in the world with the "courage, brilliance and skills" to fix Twitter's problems and "build the public square that we all hoped for and deserve."
Andreessen Horowitz's involvement has raised questions about the VC firm's links to Meta, where Marc Andreessen has served as a board member since 2008. Though it's not uncommon for Silicon Valley investors to have a hand in competing startups, potential conflicts can be more serious with publicly traded businesses, said John Coates, a professor at Harvard Law School.
"It's safe to say that Silicon Valley norms about conflicts -- where they are often tolerated or even encouraged, in a culture along the lines of 'it all comes out in the wash' -- are dangerous to carry over to the world of public companies," he said.
A representative for Andreessen Horowitz said it planned to seek legal advice to ensure compliance with any rules around the sharing of Twitter information with the firm.
Andreessen, 50, has come under scrutiny for previous possible conflicts at Meta, such as investing in companies -- including Oculus VR -- that Facebook ended up buying. At one point he was sued by investors for advising Meta Chief Executive Officer Mark Zuckerberg on how to protect his majority voting control even if he sold his shares.
On Twitter, Andreessen has been publicly supportive of Musk, and he's railed against the content-moderation policies at social media companies. Musk has said he plans to loosen the rules if he takes charge of Twitter.
Since the investor doesn't sit on Twitter's board, his connection to Meta may not be an issue, said David Larcker, a professor at Stanford University. "Although I know of no way to figure this out from public data, I would guess that many executives and board members trade in the shares of their competitors," he said.
Twitter, while far smaller than Facebook, is considered a Meta rival, competing for digital advertising dollars and users' posts. When Twitter's board was evaluating whether to take Musk's bid, they looked at the recent decline in Meta's valuation as part of their deliberations, according to a person familiar with the matter. They ultimately concluded that the billionaire's offer was fair.
Andreessen isn't the only partner at his venture firm whose existing relationships may get more complicated after Musk's deal is completed. Vineeta Agarwala, a general partner at Andreessen Horowitz who invests in biotech and medical companies, is married to Twitter CEO Parag Agrawal. It's unclear if Agrawal will remain as CEO under Twitter once Musk takes over, but Musk has previously said that he made his bid for Twitter in part because he didn't have faith in the company's current leadership.
On Thursday, CNBC reported that Musk plans to take over as CEO for a short time after the deal closes.