There’s been a lot of back and forth in recent weeks about whether or not the venture firm Andreessen Horowitz is dialing back on certain types of Series A investments. But cofounder Marc Andreessen suggests a bigger shift is the firm’s decision to get out of seed investing, except when presented with “fringe” opportunities. 

Andreessen explained the firm’s thinking during a sit-down last week at his Sand Hill Road office. Our conversation — which we’ll run more of this week — has been edited slightly for clarity.

You think companies have to compete against themselves to stay innovative. How is Andreessen Horowitz continuing to innovate?

Probably the biggest change is that we’re pulling back significantly on the number of seed investments we’re making. We’ve had this policy, which all [venture] investors have, which is that if we invest in the [Series A or later] stage, we’re not going to invest in a competitive company, because that’s very damaging to an entrepreneur. For seed, we’ve always been explicit that if we’re putting in $50,000 to $100,000 [we can invest in competing companies, too].

Which can still create signaling issues, of course. Isn’t that why you’d launched a scouting program, using entrepreneurs to quietly seek out seed deals on your behalf?

We tried for a while to minimize [signaling damage] through the scout program; that was one potential layer of interaction that we thought would help. We also tried briefly to have this A16z seed brand and under that program, we could make multiple bets in one category.

Nobody can really do seed investing with a conflict policy because it’s all so uncertain at that point. You don’t have any idea what these companies are going to be doing in a year, much less whether you’re investing in the right one. And you’re putting very small amounts of money to work, so if you can only invest in one [startup per] category, you could never make many investments.

So what changed?

What we tell everybody is we don’t take the conflict policy with seed investments. But [entrepreneurs] don’t necessarily hear us, and it causes them problems anyway and makes them feel bad.

Also, the outside world doesn’t necessarily understand the difference. So we think there are more and more entrepreneurs at the seed stage who don’t want to talk with us because they think we’re already invested in a competitor. They think we’re conflicted out of the category. And they don’t differentiate between the seed and venture category. So we’re backing off of the number of seed investments we make basically to prevent that problem from getting worse.

What will happen instead?

One, we’re going to work even more closely with a bunch of the top-tier seed firms to be an even better source of deal flow for them. There’s also stuff we’ll do with seed companies to help them out without actually having investment stakes. We’ll kind of do favors, build a relationship [with them].

What we will back is fringe, where you couldn’t even conceive that there will be a competitor. So something that looks really nuts becomes very attractive for that program, which, arguably, is the best thing to invest in at the seed stage, because the whole point of the seed investments is to learn. ‘Here’s a brand new idea: Is it going to work. Is it not going to work? Is this person for real or are they crazy?’ You kind of want to figure that out before you write the big check.

Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.