Why a16z Launched the Machine Age Fund | Jen Kha

a16z Managing Partner and Head of Global Partnerships Jen Kha joins MTS hosts Theo Jaffee and Sophia Dew to discuss a16z's Machine Age Fund and the investment thesis behind rebuilding the physical infrastructure that powers AI. Jen explains why chips, networking, memory, cooling, data centers, and other parts of the physical computing stack are becoming investable again after decades in which software captured much of the industry's attention. As AI demand pushes existing infrastructure to its limits, she explains why a16z created a dedicated fund and why hardware founders are increasingly rethinking the stack from first principles. They also discuss the global race to adopt AI, what hardware startups need beyond capital, the backlash against data centers in the U. S., and why experienced systems builders are returning to entrepreneurship as a new generation of infrastructure gets built.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  South Korea, by the way, just announced that they're giving premium AI to every citizen as sort of a public utility thing. So very topical.

• 0:09Jen Kha

  But by the way, it's not just them. It's El Salvador. They implemented Grok in their schools, for example, for free, and they're utilizing AI doctors, for example. And you see these different examples around the world where they're accelerating their AI development and adoption way faster than in the US. And we might also see the influx of a lot of this data center supply chain bill that happened overseas because of this sentiment in the US as well.

• 0:36Erik Torenberg?

  For decades, venture capital moved further and further away from hardware. AI is pulling it back. Jen Kow, managing partner and head of global partnerships at A16Z, joins Theo Jaffe and Sophia Do on MTS to discuss A16Z's machine age fund and why the physical infrastructure underneath AI is suddenly one of the most active areas for founders. They get into why the existing stack wasn't designed for today's AI workloads, what needs to change across chips, networking, memory, cooling, and data centers, and why hardware has gone from a tiny fraction of the pitch's A16Z sees to more than 20%. Jen also explains why this infrastructure race is increasingly global, how governments and institutional

• 1:21Erik Torenberg?

  investors are thinking about AI as a national priority, and why, as she puts it, what's old is new again.

• 1:30Speaker 03

  Hello, everyone, and welcome back to MTS. Andreessen Horowitz just launched a new $1.1 billion machine age fund focused on the physical infrastructure underneath AI, from chips and networking to data centers, robotics, and energy. And joining us today is Jen Kow, who's a managing partner and head of global partnerships at A16Z, to talk about the machine age fund and the investment thesis behind it. Jen, welcome to MTS.

• 1:56Jen Kha

  Hello, hello. It's good to be here.

• 1:58Speaker 03

  Great to have you here. I know Theo just said a big woo, but it's pretty exciting. And we wanted to talk about why this machine age fund, why now?

• 2:07Jen Kha

  For sure. By the way, the classic adage is sell in May and go away. This has been the most prolific summer. And all the fact that we're announcing a fund on August 28th, when typically, you know, Wall Street is dead, is like a classic sign of where we are in the cycle and the time, which is just, there's so much going on. But we announced this $1.1 billion machine age fund to invest into all of the physical constructs of the world that is now so bottlenecked, given all of the demands in AI. And think about it as everything below the software stack. So we've got our infra fund, which invests into products for developers. We've got our apps fund, which sells into, you know, business to business and business to consumer. This is below all that. All the physical parts

• 2:50Jen Kha

  of enabling AI, from data centers to chips to custom silicon, networking, racks, all the stuff in the physical world, that was honestly largely an uninvestable category for the most part for the last 30 years, because we kind of built that infrastructure out for the last era of the internet and then, of course, of SaaS. That's all now getting rebuilt because AI is way more mathematically intensive and compute intensive. And all that infrastructure, sort of the poor man's version that we're limping along with today, needs to be repurposed for the AI age going forward.

• 3:25Speaker 00

  So why a separate vehicle rather than doing this investment through like the main like growth infra and other funds?

• 3:33Jen Kha

  Yeah, so our view is, you know, our job is to follow the entrepreneurs, right? My partner, Chris Dixon, calls it following the nerd energy. Like, what is the nerd doing on nights and weekends is probably what us normies will be doing in the future. And oftentimes entrepreneurs are that early signal into that. And so the reason why we decided to establish a separate fund is, one, there's just a groundswell of opportunities. So we went from, you know, market famously said software's eating the world. Turns out, AI has solved software, right? Any software need you have today, AI can actually do it. But we have to solve for all the physical constraints in order for AI to actually solve for software. And so by creating a separate fund, we're putting out the back signal to

• 4:15Jen Kha

  the world to entrepreneurs who are building to spend time with us, first and foremost. Second of all, just from an organizational perspective, it's very helpful to have a dedicated pool vehicle for these type of investments. Because if you think about, you know, when these companies typically raise capital, they will raise quite a bit of capital to kind of get off the ground. And typically, what happens is if you put it like for like against another, let's just say, infra deal or apps deal, for example, there's so much in the way of investment you have to do ahead of time, that if you do the like for like, you're almost always going to bias towards that sure thing with infra, what it's doing, you know, a billion, $2 billion in revenue, like off the bat and off the cuff. And so

• 4:59Jen Kha

  by separating it into a fund, we're kind of staking in the ground, A, our commitment to the space, and then, more importantly, B, from an organizational portfolio construction perspective, that the intention of this is to capture those winners at the earliest stages, maximize ownership. And then when you have that, you know, $75 million check that you're going like for like, you have that dedicated pool of capital to really pursue after that category.

• 5:19Speaker 03

  Yeah, Jen, one thing I'm curious about is your specific role, because I know you lead the partner relationships and you're in charge of almost the entire capital raising strategy. Have conversations with institutional investors change? What are the conversations like? What makes them want exposure to the AI hardware now?

• 5:37Jen Kha

  Yeah, it's a great question. So first of all, we raised, I think the number's close to over 23% of all venture capital this year.

• 5:44Speaker 03

  Wow.

• 5:45Jen Kha

  We've been on a

• 5:46Speaker 03

  That's amazing.

• 5:48Jen Kha

  But as a part of that, you know, I think this is representative of a few things. One, if you look at most of the value accrual in AI, that's largely been on the private side, not the public side. And so people are just starting for private capital in general, because that's where all the growth is. Two, if you think about most of the data center supply stack on the public side, those stocks have been ripping. We were joking around internally on our all hands, you know, Sanjay, the CEO, has become the Taylor Swift of the industry, right? Like, he has made much credit to him. He's been grinding the grind for a very long time. But, you know, companies also like SK Hynix, like Samsung, these are all kind of companies along the data center supply chain that have gotten so much interest because

• 6:33Jen Kha

  we're so constrained on the supply side. And, you know, entrepreneurs are looking at and saying, gosh, I know those are inefficient ways to build for the future with AI, because it's not, again, configured appropriately to it. And if you were to rebuild from a blank sheet of paper, it would look very much differently than kind of shoehorning the current infrastructure today. And so we kind of follow, you know, the entrepreneurs, as I was alluding to earlier, as a part of that. And all of that is at the earliest stages. And then the last one I would say is, you know, we've seen in the last couple of months, so obviously with SpaceX going public, Anthropic coming shortly, you know, OpenAI just on the tails, I think

• 7:11Jen Kha

  people are now seeing this shift from what has historically been private staying longer and longer, no liquidity coming out, and now you're going to see multiple trillion-dollar businesses go public. And so people will have access to that. But there's a whole swath of companies on the private side that are not yet public. And so people want exposure to that. And they don't want to, quite frankly, continue to invest into other asset classes like private equity, et cetera, that are built off the prior technology cycle. And so this momentum shift, again, it would have been, when I started my career off, it would have been impossible to close a fund effectively in two months over the summer, right? People are off on vacation, et cetera. Like, the fact that this happened so quickly was a

• 7:56Jen Kha

  reflection of the fact that there's so much demand for this from the private pool capital side and from LPs who recognize where the puck is going.

• 8:04Speaker 00

  Absolutely. One thing I'm curious about is, you know, $1.1 billion is a lot of money. But on the scale of like the global hyperscaler build out, I think like American companies are going to be spending something like a trillion dollars this year, 1,000 times as much. What is the specific niche of what the machine age fund is going to be doing at this scale?

• 8:27Jen Kha

  Yeah, so it is, this is the subject of a lot of debates, Theo, when we were chatting internally, how we should size the fund, right? There's a partner who I will name unnamed, who's who said, gosh, we're going to deploy this fund in like six weeks. Like, what are we even talking about here, right? So here's where I would reconcile on the portfolio construction side. So what we want to invest, so we're early stage investors. So we want to come in at the seed, you know, series A, and then kind of invest at the inflection point. And oftentimes, you know, what we are trying to endeavor to do is maximize ownership at the very earliest stages, where we can put, you know, 25, 30, $35 million and have a very substantive ownership. That's very different than if you're a late-stage investor

• 9:09Jen Kha

  and slash or a public market investor that has to come in at these later inflection points to get any ownership, and also ownership that's substantive enough to drive fund returns. And so I think that we're just looking categorically at two different things. So I'll give you an example. You know, we invested in a company called Nextop, which is building kind of AI-first, high-performance networking. And this was a company that was at the series B inflection point, but we put in, you know, 65 million at the growth stage. That's a great opportunity for our growth fund to be coming in at that inflection point where they're taking off. Ideally, though, what we're doing is actually investing into companies like unconventional instead. So this is the Naveen Rao company, who was formerly with

• 9:53Jen Kha

  Databricks, that we've known for a very long time. And this is a company that's actually rebuilding the chip from the design perspective of if you were to design a chip for AI. And so what they're trying to do is target much simpler structure to enhance performance in the chips themselves. And they're kind of going off in the cave, and they're going to go and do this endeavor and project. But, you know, we invested at the seed. And, you know, subsequently, you know, they raised a huge upfront after that. And so like, it's really important to come in at the early stage before these things start to inflect, and then to be able to maximize ownership and therefore put capital work at maybe smaller amounts that we would otherwise not be able to, just waiting.

• 10:33Speaker 03

  Yeah, Jen, one of the things that you explicitly wrote about as well is you are looking for partners that can provide more than just capital. So this includes market access or things like geopolitical relationships. What are the specific needs that you're seeing hardware companies need that maybe prior companies you guys would work with before didn't?

• 10:52Jen Kha

  Yeah, this is a great question because this is now coming to the point where it's at a national level.

• 10:57Speaker 03

  Yeah.

• 10:57Jen Kha

  So a month ago, the president of Korea came to the US. And their first and only stop in the US was in Silicon Valley, which is really interesting, right? If you think about the context of the fact that companies now, Nvidia, you know, at 5.5 trillion is the same size as countries in terms of their GDP. So Nvidia is larger than all of the G7 countries except the US.

• 11:22Speaker 03

  Wow.

• 11:22Jen Kha

  And so that scale is just totally different in terms of Mark, our partner Marc Andreessen calls it, you know, technology is the dog that caught the bus. And as a byproduct of that, you know, we are now a bigger and bigger, technology is a bigger and bigger part of the economy. And as such, countries are viewing this as a national priority and interest to get their citizens, to get their government onboarded into the AI age. And particularly, you know, if you look at countries of the last 100 years that were the most militarily, culturally, economically successful, they were the ones that industrialized first. We think countries of the future are going to be the ones that adopt AI first across fence, across public safety, across healthcare.

• 12:06Jen Kha

  And that infiltrates all throughout the government and then also comes bottom up from their citizens utilizing it as well. And so in that vein, to answer your question, Sophia, how we think about our relationship with our LPs, who are oftentimes global in nature, thinking about these national priorities, is to say, how can we help them, you know, utilize the latest and greatest technologies, which are oftentimes US-based technologies, right? How can we help America and her allies accelerate into the future by not only investing in our funds, but potentially utilizing these technologies, by adopting these technologies, and then also oftentimes coming alongside of us in investing directly in some of these companies as well? And then by doing so, you could actually accelerate the adoption process locally in

• 12:50Jen Kha

  way more ways than the distribution of prior technologies and prior technology cycles as well. And so to your earlier question around, you know, what the intention of global partnership means is, you know, we want to be partners, not just in the capital construct, but also in how a country and government is thinking about technology, if we can help them accelerate that adoption and then also, quite frankly, benefit from the economic development of it as well.

• 13:17Speaker 00

  South Korea, by the way, just announced that they're giving like premium AI to like every citizen as sort of a public utility thing. So very topical.

• 13:27Jen Kha

  Yeah, South Korea is like the most extreme form of democracy. By the way, it cuts both ways because, you know, I don't know if you saw this, Theo, I bet you saw this out, like a third of South Koreans got margin called earlier this summer with a situation.

• 13:41Speaker 00

  Oh, my God.

• 13:42Jen Kha

  So they take democracy in extreme forms and also they are, yeah, we oftentimes joke internally, Korea is like the country of the future, right? Like they've got the number one, you know, boy band in the world with BTS, they have the number one girl band with Black Twenty, they have like Squid Games, they had, you know, gosh, K-pop Demon Hunters, right? And so like they're sitting, they're like the new Hollywood of the future from a content perspective, but they're also full board into AI. So it doesn't surprise me that they're rolling this out. But by the way, it's not just them, it's El Salvador, who, you know, President Bukele has been super aggressive around utilizing AI. They implemented Grok in their schools, for example, for free. And they're utilizing AI doctors, for example.

• 14:27Jen Kha

  And there's a lot of countries that you wouldn't expect. And sometimes they're city-state countries like Singapore or UAE, for example, where it's easy, easier, just given the population to adopt technologies and then also, you know, make it subsidized or free, for example, in some of these instances. But you see these different examples around the world where they're accelerating their AI development and adoption way faster than in the US. And unfortunately, you know, in the US, we've been seeing a lot of political tail headwinds with, you know, obviously data centers and, you know, in some instances around surveillance, et cetera, that are just falsehoods. But, you know, we potentially view that as an opportunity as well, where Elon's building

• 15:12Jen Kha

  data centers in space, we might also see the influx of a lot of this data center supply chain bill that happen overseas because of this sentiment in the US as well.

• 15:23Speaker 00

  I'm interested in that aspect of it. Like, how does public backlash against data centers like affect this fund at all? Like, is it, I can imagine going either way, where like maybe it becomes much harder to build data centers and that's bad, but also like I could imagine us being in a regime where like if anywhere in the US allows data centers, then the data centers will just get built there and then things will be basically fine? Or is it something more in between?

• 15:48Jen Kha

  So for the fund itself, I, obviously it would be a much easier process if everyone was on the camp of, you know, being positive on data centers. It's just not the reality of where the world is today. But unfortunately, the narrative has gotten in the way of reality, which is if you look at most data centers, and particularly the modern ones, so I'm talking about, you know, AWS, you know, Meta's data centers, Switch data center, which is one of our portfolio companies, for example, they are actually modern versions of the data center that are built by tech people, not real estate people.

• 16:28Jen Kha

  And they're actually building for all the nuances of the sensitivities people have around data centers. So in the case of Switch, for example, they actually contribute power back to the grid. They don't take away. And they've built their infrastructure to enable that. They use very little water. And then particularly, you know, they're one of the very few data centers that are actually capable of being able to manage around fluidics in the future for chips. And so there's increasingly, you know, everyone paints data centers with a broad brush stroke, but there's a very small percentage of bad actors with data centers. Vast majority have actually configured for the new form factor. And where we are investing is the next generation of those data centers like a switch that

• 17:11Jen Kha

  have optimized for the future on not only some of the politically more sensitive things, but even things like, for example, the next set of chips are going to be DC-powered versus AC-powered. And most data centers aren't actually built for that infrastructure. And by the way, there's less than 2% of electricians in the US that are actually trained on DC power because it's very dangerous and like you could potentially kill yourself and it's very volatile to work with. And so you're just seeing all this, these bottlenecks in the infrastructure that need to get fixed in order for AI to proliferate. And this is where the vast majority of the focus of the fund is oriented around.

• 17:49Speaker 03

  But even expanding beyond just data centers, you know, you guys have a mandate specifically, it includes robotics, home AI hardware, you guys have a broader thesis. Can you share more about what your broader thesis is?

• 18:00Jen Kha

  Yeah, for sure. So it's, everything, think of, again, below the software stack, but you could almost even analogize it to anything in the data center we are focused on. So accelerators, CPUs, custom silicon, memory, storage, again, all things that were forgotten language, if you will, from an investable category perspective the last several decades, liquid cooling, you know, all of that, that physical stuff that needs to get built out. And then related to that, you know, robotics within the data center, for example, system software, et cetera. And so, you know, the thesis around it is, you know, kind of at a very top level, we all know the demand for AI, you know, agents are using five times the amount of tokens

• 18:44Jen Kha

  as humans are, and we just crossed over to agents before on the volume of agents are now more on the internet than humans are. And so that's just going to continue to go parabolic, especially as consumers start to have personal use cases like, for example, with Brockbot or Instate or others. And there's less than still 5% of AI usage today. And so that's the kind of demand side. The supply side is the thesis of this fund, where we want to invest into everything that is guided by computer science on the infrastructure side. So we don't want to invest into regulated industries like power, for example, that's more of our American dynamism team. But everything on the computer science guided side inside the data center is the focus of the fund.

• 19:27Speaker 00

  So relatedly, I'm also curious about, like you said earlier, like people are saying you might deploy the entire fund in six weeks. I'm not sure like how joking that was, but like, how long does it actually take?

• 19:38Jen Kha

  For my LPs listening, that is joking.

• 19:39Speaker 00

  Okay.

• 19:40Jen Kha

  There's just so much opportunity, right? And in ways of which, you know, we have, again, seen this, this groundswell of entrepreneurs coming out the woodwork and saying like, I know that this process is incredibly inefficient for what I see in terms of demand, like I want to build a company after this. And so, you know, I think Martina was quoted saying, you know, we went from seeing basically nothing in terms of hardware pitches to over now 20% of our pitches are hardware, kind of physical world related side. And so that's really the impetus also behind some of this groundswell of entrepreneurial enthusiasm as well.

• 20:14Speaker 00

  So how long does it take to like identify and diligence these things, especially deals of this scale? Is it like different from more traditional like software VC deals?

• 20:24Jen Kha

  Yeah, so it's interesting that the founders in this category are sort of like a throwback in some respects, like you're unlikely, although I'm sure there's some entrepreneurizing, you know, young individual coming out of university who are wanting to go after these categories, but because it requires so much in the way of relationships with the hyperscalers, with customers, really understanding the physical dynamics of how to get something like this off the ground, you are seeing a generation of talent that are from a prior era, sometimes spinning out from, you know, some of the incumbents to start companies as related to that, you know, the company that I was referring to earlier, Nextup,

• 21:07Jen Kha

  were former folks from Arista, for example, that had recognized this problem and decided to start a company to go actually after the new version in form of this. And so what you're seeing is a new generation of oftentimes people who have the benefit of experience and prior errors of the build out that had been effectively kind of incubating for the last 30-plus years, 20, 30-plus years, and now saying, I'm going to go build the company around this. So it looks very different than in the past. And the diligence to your point, you know, the diligence cycles on these, you know, our team is maybe just to spend a second here. So Martin Casado, you know, formerly CEO and founder of a company

• 21:48Jen Kha

  called Nacera, which sold into VMware, Raghu Ragaram, who was a former CEO of VMware, who actually acquired Nacera and then was Martin's boss while at VMware. It comes, both of them come from a very deep kind of selling into the data center background. And then Guido Appenizer, who is actually the former CTO of Intel, is also someone who is very, very technical, sold into and ran kind of the data center business for Intel as well. And so you're seeing folks who, you know, for maybe the last 10, 15 years, became more pulled into software, come back into the hardware side of the world and leveraging that experience as a part of it. And so from a diligence perspective, it's obviously, you know, a very, almost finite world of the folks who could actually

• 22:33Jen Kha

  go after this massive problem and also build a customer base and sell into and actually build companies of this scale and size. So from a diligence perspective, it's oftentimes people we know and have gotten very close to over the years and then also know all of the customers, i.e. either our portfolio companies or the hyperscalers and can actually do the diligence around it to really assess to whether something can get off the ground.

• 22:54Speaker 03

  Definitely. Jen, really wanted to thank you for coming and joining us today on MTS to share more about the Machine Age Fund. Congratulations to all of you on launching this. Congratulations. This is so exciting and So huge. Yeah. It's going to be really fascinating to see how venture capital and A16Z, how you guys changed the game. So looking forward to it.

• 23:16Jen Kha

  What's old is new again. Yes, this is, we're almost thrown back to where venture capital actually started and why Silicon Valley is actually called Silicon Valley.

• 23:24Speaker 03

  True.

• 23:25Jen Kha

  So excited for it. Thanks for having me on. Talk to you folks soon.

• 23:28Speaker 03

  Absolutely. Talk soon.

• 23:32Erik Torenberg?

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening, and I'll see you in the next episode. This information is for educational purposes only and is not a recommendation to buy, hold, or sell any investment or financial product. This podcast has been produced by a third party and may include paid promotional advertisements, other company references, and individuals unaffiliated with A16Z. Such advertisements, companies, and individuals

• 24:13Erik Torenberg?

  are not endorsed by AH Capital Management LLC, A16Z, or any of its affiliates. Information is from sources deemed reliable on the date of publication, but A16Z does not guarantee its accuracy.