By Bitwave 
New Enterprise Associates (NEA), a renowned venture capital firm with a history spanning over four decades, has made a significant move by closing two new funds. The early-stage and growth-stage funds, each totaling around $3 billion, bring NEA’s total assets under management to a substantial $6.2 billion. This development marks the first time that NEA will employ a dual-fund structure, which signals the firm’s willingness to adapt and evolve in response to the rapidly changing investment landscape.
A New Status: Registered Investment Adviser
In a move that is likely to have far-reaching implications for the industry, NEA has filed an application with the relevant authorities to be considered as a registered investment adviser. This would grant the firm a status akin to other prominent players such as Andreessen Horowitz, SoftBank, and Sequoia Capital. If successful, this designation would enable NEA to expand its range of activities, including investing in public stocks, participating in secondaries, and interacting with limited partners (LPs) in new ways.
The Benefits of a Dual-Fund Structure
According to Scott Sandell, NEA’s general managing partner who has been with the firm for nearly three decades, the dual-fund structure is designed to cater to the diverse needs of investors. "We want to take up more room in the industry," Sandell explained during an interview with TechCrunch. The firm aims to allocate one-third of its capital to existing growth-stage portfolio companies and invest in new growth-stage companies with the remaining two-thirds.
The Significance of NEA’s New Approach
NEA’s shift towards a more blended approach is significant, as it reflects the firm’s willingness to adapt to changing market conditions. In recent years, the tech industry has witnessed unprecedented uncertainty, with many startups struggling to secure funding and scale their businesses effectively. Sandell emphasized that NEA recognizes the need for capital-efficient companies, which are better equipped to navigate the current landscape.
The Future of Investment: More Flexibility
One of the key benefits of becoming a registered investment adviser is the increased flexibility it would offer NEA in terms of its investments. As Sandell noted, "We haven’t had as much flexibility historically to do some things." The firm may consider alternative fee structures, such as charging LPs fees only on invested capital, as explored by Sequoia Capital.
LPs and Capital Calls
Contrary to the prevailing perception that capital calls have become increasingly challenging for venture firms, Sandell refuted this notion. "We’ve never had an issue with that," he stated confidently. This assertion is particularly relevant given the current market conditions, where dry powder has reached unprecedented levels.
A History of Returns: NEA’s Track Record
When asked about the firm’s track record on returns to investors, Sandell did not provide specific figures but asserted that "I’m virtually certain we have returned significantly more capital than we’ve ever raised." This statement reflects NEA’s commitment to delivering strong performance for its LPs, a testament to the firm’s enduring reputation as a trusted partner in the investment community.
The Road Ahead: Navigating Uncertainty
As the venture capital landscape continues to evolve, NEA is poised to capitalize on emerging trends and opportunities. With its dual-fund structure and new status as a registered investment adviser, the firm is well-positioned to navigate the challenges of the current market while delivering exceptional returns for its investors.
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