So A16Z raises commitments of 1.5B from all of these people who have a lot of money that they want to grow. Those people deploy their capital to VC, to Hedge/PE funds, to timber, to public markets, to bonds, etc.
A16Z aren't actually given a pile of cash though, instead A16Z does capital calls on an as-needed basis. Then A16Z deploys that capital to startups and other companies over the life of the fund (often ten years with some extensions).
Most venture funds operate on something like a "two and twenty model" meaning that every year they get 2% of the funds value for operating expenses. In A16Z they have a huge staff of designers, recruiters, BD experts, etc, that help their startups. The 2% goes toward things like that.
The 20% is carry, which is earned as a percentage of net income. So let's say that A16Z invests 5M in a company on a 10M pre-money valuation. A16Z owns 1/3 of the company. The company sells for $30M the next day to Facebook. A16Z now has $10M dollars. They take $2M of that for themselves and then they distribute back to the LPs the other $8M.
(This is lacking a lot of nuance like side funds, but I hope it's helpful).