[tomhoward]

wpennington answered the overall question better than I could, but one clarification on this:

> Isn't VC the person with the money, so they are more in control.

Most of the money VCs invest isn't their own. The money is allocated by "limited partners" (entities such as pension funds, endowment funds, sovereign wealth funds, rich individuals/families), and the VC firm uses their expertise and network to invest the money on the LPs' behalf, in exchange for a "management fee" and a cut of the returns.

The VC firm's partners do usually invest some of their own money (to have some "skin in the game"), but it's a token amount compared to the outside money they're investing.

Due to their role as custodians for huge amounts of other people's money (which, particularly in the case of pension funds, ultimately belongs to ordinary people), there are substantial regulatory controls and requirements.

[wpennington]

Totally--and this is a really good point to clarify, especially if one would like to understand more broadly how VC works. I intentionally abstracted the "where does the money come from" in my original reply to focus on the classification itself, but that admittedly left the comment lacking this useful context. LP and venture dynamics are both interesting and important to understand the full picture.

> Most of the money VCs invest isn't their own.

To underscore tomhoward's point--VCs are largely (already) stewards of other people's money (their LPs). So while they are set up to be "the person with the money" from the market's perspective (e.g., if you are looking to get your company funded), they are acting as investment advisors (e.g., where and how to spend the fund's money--and by extension the LP's money--for a fee). Albeit with a specific legal exemption set forth in the Investment Advisers Act that governs certain activity depending on how they are registered* (this is what is changing for a16z). No matter how they are registered, they do have compliance requirements as custodians of other people's money.

*Under the Investment Advisory Act, they can be registered as: (1) ERA - exempt reporting advisor (what we are referring here as a VC in the traditional sense), or (2) RIA - registered investment advisor.

As it relates to a16z, they are giving up their IAA exemption as a fund (registering as an RIA vs ERA). No need to get into why that matters again (see other posts that have already addressed it well). The point being, VCs are already in many ways "investment advisors" as custodians of other people's capital (and sometimes their own) through their funds and they have compliance requirements, just different depending on how they are registered.