New Enterprise Associates, identified by the acronym NEA, has closed a brand new pair of early-stage and growth-stage funds, each hovering a bit over $3 billion to a complete of $6.2 billion.
The 2-fund construction is a primary that begets one other first for the 45-year previous agency: TechCrunch has discovered that NEA has filed to be thought of as a registered funding advisor, which, if handed, would give the agency a standing much like the likes of different storied companies together with Andreessen Horowitz, SoftBank, and Sequoia Capital.
NEA’s shift alerts the agency’s curiosity in doing enterprise in a more recent, extra blended approach. Scott Sandell, NEA’s basic managing accomplice who has labored on the agency for practically three a long time, spoke to TechCrunch concerning the agency’s rising remit amid tech uncertainty.
For one, Sandell explains, NEA desires to take up much more room within the trade. Earlier than the tech bubble hit its peak in 2021, the agency’s operations crew uncovered that NEA was doing a 36% IRR on $4 billion {dollars} invested over a decade. The dangerous information? That NEA solely accounted for 10% of the capital that the identical cohort raised in whole.
“It appears like a possibility to me,” Sandell mentioned. The agency thus set off to lift two funds, one that will be used solely to spend money on early-stage bets, and one other that will dedicate one-third of its capital to current growth-stage portfolio firms, with the remaining invested in new growth-stage firms. It helped that buyers have been additionally knocking on NEA’s door, asking for publicity to both early-stage or late-stage, not all the time each.
“What we had heard over and over, not from all people, however definitely from some and a few that mattered, is that they didn’t actually know what to do with us,” Sandell mentioned of LPs. “We had this one huge fund and it had enterprise and development in it…we had resisted going within the [dual-fund structure] for a very long time.”
It seems to be effectively geared up to deal with the incoming homework. NEA presently has 22 funding companions, and round 40 different enterprise operations workers amongst a lower than 100 particular person workers. Sandell famous generative AI and software program as two of the agency’s curiosity areas, including that they’re particularly taken with horizontal know-how.
As a result of the funds had their first shut earlier, NEA has already invested 20% of the capital raised. The most important distinction, Sandell mentioned, in the case of investing the remaining 80% of the fund versus the preliminary 20% is that NEA desires to deal with capital-efficient companies.
“We all know that capital shall be scarce for the foreseeable future – at the least for the interval of the following three or 4 years throughout which these firms shall be shaped and developed and have to lift further capital and so forth,” he mentioned, later including that “a whole lot of the businesses that have been born within the final decade, as a result of capital was so freely obtainable, didn’t develop that effectivity gene.”
If it turns into a registered funding advisor, NEA doesn’t must restrict its stakes, can spend money on public shares, take part in secondaries, and may work together with its LPs in several methods. For instance, Sequoia’s Alfred Lin just lately famous that Sequoia solely charged its LPs charges on invested capital, and whereas NEA is just not doing that this time round – possibly due to its 175 particular person workers – Sandell mentioned he wouldn’t be stunned in the event that they thought of that sooner or later. “We haven’t had as a lot flexibility traditionally to do some issues. And I’m enthusiastic about that,” he mentioned.
On yet another word about LPs, Sandell shut down the concept capital calls have been tougher to get performed on this setting, one issue that has added to the mirage of how a lot dry powder is out there proper now. “We’ve by no means had a problem with that,” he mentioned.
When requested about how a lot capital the agency, a quiet large, has given again to its buyers so far, Sandell didn’t share something concrete however mentioned that “I’m nearly sure now we have returned considerably extra capital than we’ve ever raised.”
He added, “that’s not true of a whole lot of different companies which have grown in a short time.”
