Companies are staying private longer and longer, and New Enterprise Associates (NEA) has a new plan to combat the negative implications of the trend. The storied venture capital firm has invested in a spin-out fund called NewView Capital and sold 31 of its late-stage portfolio companies to the effort.
Former NEA general partner Ravi Viswanathan is leading the fund, which today announced a $1.35 billion pool of capital to invest in growth-stage companies across industries and support the large cohort of former NEA investments now under its purview. Among the companies purchased by NewView from NEA are 23andMe, Acquia, Canopy, Duolingo, Forter and GumGum.
The secondary deal relieves some of the pressure on NEA to provide liquidity to the investors in its older funds, known as limited partners (LPs), without encouraging its portfolio companies to exit before they’re ready. Consumer genetics company 23andMe, for example, was founded in 2006; NEA has been among its investors since 2007, per PitchBook. It typically takes between five and eight years for a VC-backed startup to be acquired or to pursue an initial public offering, making 12-year-old 23andMe long overdue for an exit.
“There’s a lot of congestion on the road to liquidity,” NEA managing general partner Scott Sandell said in a statement. “Market dynamics are compelling companies to stay private longer, which creates growing demand for follow-on dollars and stretches investor holding periods to a decade or more.”
Sandell has led NEA since the mid-1990s. Viswanathan joined him in 2004 and has co-lead the firm’s growth equity investment practice for several years. He’s been focused on the NewView spin-out since the beginning of 2018.
“We are providing liquidity to a set of companies that would require several years longer to get liquidity,” Viswanathan told TechDap. “It’s a block sale that has never really been done and it’s a highly curated basket … There have been GP restructurings in the past; that’s not this. There have also been lots of one-off purchases; that’s not what this is either. This is really a strategic spin-off of a curated set of companies done at scale.”
NEA, founded in 1977, is known for its investments in Snap, Jet and, more recently, The Wing, Opendoor and Casper. The multi-stage investor wrapped its 16th growth fund in 2017 on $3.3 billion.
The firm has been making strategic moves over the last several years to manage changes in the VC market exacerbated by SoftBank’s nearly $100 billion Vision Fund. In 2015, for example, NEA raised its first opportunity fund in addition to a multi-billion flagship vehicle so it could make follow-on investments in its buzziest companies. Doing that gave it the flexibility to pay a bit more for the swelling late-stage valuations some of its best investments had conjured up. The firm was also one of the first to raise a “mega-fund,” or a fund larger than $1 billion, in 2000.
Since then, funds have only become larger and companies more expensive. NEA’s latest decision to separate some of its investments may be especially wise as many are predicting an imminent turn in the venture market.
Joining Viswanathan at Burlingame-based NewView as operating partners are Tim Connor, a former NEA executive-in-residence; and former SigFig chief product officer David Yoo. Prashant Gangwal, the director of finance at SharesPost, joins as chief financial officer and chief operating officer.
NewView’s LPs include Goldman Sachs and Hamilton Lane.