It's way too early to say whether Silicon Valley's highest-profile investor is a success or a failure

Michael Kovac/Getty Images for Vanity Fair

In an industry that preaches transparency and trust in data, venture capital is one part of tech that prefers to keep its books closed and data out of the public eye.

That's why a report like the one from The Wall Street Journal's Rolfe Winkler is startling.

According to The Journal, famed venture capital firm Andreessen Horowitz is lagging behind its rivals Sequoia and Benchmark in returns on its investments.

"Since its founding through last year, Andreessen Horowitz had returned a total of $1.2 billion in cash to investors, net of fees. Sequoia returned more money on WhatsApp alone," Winkler wrote.

That sounds pretty damning.

But it's still way too early to tell whether Andreessen Horowitz has lived up to its hype. Money isn't money until you can buy a beer with it (or return it to your investors), and there's a long runway before Andreessen Horowitz's funds can be called a success or failure.

Paper money is play money

Valley insiders have been curious about how the firm has been doing since launching its first fund in 2009.

Despite being a relative newcomer to the VC scene, Andreessen Horowitz quickly developed a reputation for being a top-tier investor and one that can drive up valuations in a deal. Its cofounder, Marc Andreessen, was deemed "tomorrow's advance man" by The New Yorker — "an evangelist for the church of technology."

But because VC firms generally don't disclose performance information to outsiders, it's been hard to judge whether Andreessen Horowitz deserves to be in the same category as famous VCs like Sequoia, which was an early investor in Apple and Google.

The data published by The Journal suggests that Andreessen is trailing its rivals.

Andreessen Horowitz's first fund is only at 2.6x, below the 3x that Marc Andreessen has said top-tier venture capital firm should return.

Some of Sequoia's funds are up 8x, Benchmark's 2011 fund is up 11x, and Peter Thiel's Founders Fund has multiplied investor money by 7x, according to The Journal's numbers.

The only trouble: Most of these gains are still on paper. Most of the companies in these portfolios have not had a liquidity event, so any gains or losses are not yet realized.

For example, Benchmark's 2011 fund has some "blockbuster investments" in Uber and Snapchat. But neither of those companies has gone public or sold.

Making sure that the results are real and not imaginary is the #1 challenge of our time. — Bill Gurley

Even Benchmark's Bill Gurley acknowledges how hard it will be to turn those paper values into real cash.

"The past few years has been remarkably successful for VCs due to the rise of the unicorn ecosystem. That said, these record returns are 'on paper.' In other words, the actual cash returns haven't actually been delivered to the LPs (our customers)," Gurley said Wednesday during a Q&A session on Quora. "Making sure that the results are real and not imaginary is the #1 challenge of our time."

Andreessen Horowitz may be lacking the paper value gains in this moment, but it still has years for the funds to come to maturity (typically a decadelong process). That's plenty of time for some of its companies like Pinterest, Airbnb, or Tanium to mature and go public at an even larger multiple.

It's an equally large window for some of its rivals to see the wheels come off on their most valued companies.

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