The founders of venture capital firm Andreessen Horowitz warned that the arbitrary hammer of what they called Biden’s administrative state threatens to crush startups or “Little Tech” and reduce the United States to the status of a rapidly declining power like Germany—or worse, a has-been like Argentina.

“The future of our business, the future of new technology and the future of America is literally at stake,” said Ben Horowitz during a 90 minute-podcast made specifically to articulate their reasons for endorsing the twice-impeached former president to partners, friends and even their family. “For Little Tech, we think Donald Trump is actually the right choice—sorry Mom, I know you’re going to be mad at me for this, but we had to do it.”

Read more: Why I started ‘VCs for Kamala’

Partner Marc Andreessen, whose Netscape Navigator internet browser helped launch the dotcom boom decades ago, argues a rising anti-capitalist wing in the Democratic Party threatens to tax into oblivion the startup and venture capital ecosystem that guarantees American dominance. 

The duo joined a growing list of wealthy tech entrepreneurs like Peter Thiel, David Sacks and Chamath Palihapitiya willing to look past Trump’s attempt to overturn the 2020 vote in order to support his renewed bid for the White House. (The podcast, posted Tuesday, did not address Trump’s running mate, tech-investor-turned-senator JD Vance, whose anti-big-tech credentials have cheered some in the startup community).

Ben Horowitz
Bill Ackman
Cameron Winklevoss
Doug Leone
Elon Musk
Eoghan McCabe
Ken Howery
Kyle Samani
Marc Andreessen
Jacob Helberg
Joe Lonsdale
Palmer Luckey
Peter Thiel
Shaun Maguire
Trevor Traina
Tushar Jain
Tyler Winklevoss

Come on in, the water’s warm. pic.twitter.com/tf09tsM6fg

— David Sacks (@DavidSacks) July 17, 2024

Three core arguments: taxes, AI and crypto

Andreessen and Horowitz provided three main examples to claim that the Biden administration would completely stifle innovation, choking off the economic growth needed to finance U.S. military might: taxes, AI and the blockchain. 

Chief among them is a proposal from Biden’s Treasury Department to begin taxing unrealized capital gains at 25% annually from next year.

“This is sort of the final straw for me, this is the thing that tipped me hard on top of everything else,” said Andreessen. 

While the policy is billed as a tax on billionaires, Andreessen warned the $100 million threshold would affect startup founders as well, via rising valuations during funding rounds. Since founders’ asset, their company, is by nature illiquid but the tax must be paid in cash, entrepreneurs would be forced to repeatedly sell off slices of equity just to meet IRS demands.

“This makes startups completely implausible, because why on earth is anyone going to do this instead of going to work for Google and getting paid a lot of money in cash,” he said. Moreover history suggests the $100 million threshold will gradually decline while the 25% percent cut will creep higher over time. 

“Number two, venture capital just ends—it’s just over. Firms like ours just don’t exist,” Andreessen added. This in turn would decimate Silicon Valley, creating a devil’s circle which erodes a large chunk of the tax base needed to fund social services for lower income households, the argument goes.

“Presto chango, we’re Argentina,” Horowitz said.

AI regulation could ban entire fields of higher math

When it came to AI, the duo were alarmed by a recent executive order that would regulate who could operate supercomputers capable of speeds only found with Big Tech firms like Microsoft and Google, de facto gifting control over to a handful of oligarchs.

“They’re going to enshrine basically an OPEC of AI straight out of the gate,” Andreessen warned. “Is this ignorance or is this malevolence? Do they not understand what they’re doing or are they doing this deliberately to put a cartel in place.”

It gets worse. They told the Biden administration regulating AI by technology rather than application ultimately means they might need to ban certain types of higher math itself. The response from the White House was equal parts bizarre and chilling, they said. 

“This was verbatim: ‘we classified whole entire areas of physics in the nuclear era and made them state secrets and that research vanished. And we’re absolutely capable of doing that again for AI—we will classify any area of math that we think is leading in a bad direction, and it will end,” Andreessen said. “I just personally can’t tolerate the idea hanging out there that literally we could have linear algebra being declared a state secret.”

Trump’s legislative agenda has promised to repeal this executive order, since in the words of Andreessen, the former president realizes the country must win the AI race with China and cannot deliberately hamstring its tech sector through such onerous regulations. Anything else and they risk ending up falling behind. 

“We’ve seen that in Europe, where they basically eliminated almost all innovation through this idea of the precautionary principle, trying to stop the future before it happens. That’s probably the most concerning thing for me,” Horowitz said.

Unprecedented attack on blockchain and crypto

Finally, they praised Trump for taking a diametrically opposite view on the crypto industry. The duo, who have been massive investors in blockchain technology, argued Biden’s SEC is “going outside the law using the administrative state to basically try to crush an industry” through the use of ad hoc enforcement on a case-by-case basis. 

For example, Biden vetoed legislation that would facilitate the custody of client crypto holdings by banks even after Senate Democrats like majority leader Chuck Schumer approved it.

“This has been a brutal assault on a nascent industry that I’ve just never experienced before, I’m in total shock that it’s happened,” Andreessen said. “It’s been impossible to make progress in this with the White House. It’s a totally intolerable situation.”

Neither mentioned, however, that Silicon Valley and crypto-backing VC firms like Andreessen Horowitz contributed to the greater scrutiny in late 2022 and early 2023. First came the bursting of the alt-coin bubble, peaking with Sam Bankman-Fried’s criminal fraud that came to light after the collapse of his FTX exchange. Then VC firms were directly culpable in triggering the biggest run on deposits in history, helping topple their own Silicon Valley Bank that sent shockwaves as far away as Credit Suisse in Zürich.

While Andreessen and Horowitz pined over the Democratic Party’s departure from the pro-business era under Clinton and Obama, they did not address problems these administrations either created or failed to fix, such as the excessive financialization of the economy and offshoring of middle-class jobs. 

Trump recognized the widening income gap that resulted from the decimation of America’s blue-collar manufacturing industry and won in 2016 by flipping blue states red in the country’s industrial heartlands, primarily through the promise of punitive tariffs. Bidenomics was an attempt to win them back by emphasizing Main Street over Wall Street, delivering real higher wages with the help of reinvigorated unions.

Nevertheless, they argued without a thriving venture capital scene that forces Big Tech to compete and innovate, productivity growth would drop, undermining the country’s ability to maintain the very defense spending needed to protect it from foreign enemies.

“American technological pre-eminence lives or dies on the fate of whether startups can succeed or not and whether there’s fertile ground for it,” Andreessen said.