NEA Closes in on Target

New Enterprise Associates has closed on $2.45 billion for its 13th and apparently wants to add to that total.

Asked if the firm had held a final close, an NEA spokesperson told VCJ on Nov. 18: “We’re still in a state of no comment. It is our policy not to comment on fund-raising and the world will know about it when it’s done.”

NEA reportedly started raising the fund in the second half of 2008. As of January of this year, it had a stated goal of raising $3 billion and had raised a little over $1.2 billion at that time, according to a regulatory filing. By April, the firm cut its target to $2.5 billion and reported that it had raised a total of $2.15 billion.

It took another six months and the help of a placement agent to bring the total to the current $2.45 billion, a regulatory filing shows. NEA hired Greenhill & Co. and paid the placement agent $1.2 million to help with fund-raising, according to an October SEC filing. It isn’t clear if it was the first time NEA used a placement agent.

Limited partners that have committed to fund 13 include the Alameda County Employees’ Retirement Association, Fire & Police Pension Association of Colorado, Indiana State Teachers’ Retirement Fund, Kansas Public Employees Retirement System, Nebraska Investment Council, San Francisco Employees’ Retirement System and the Teacher Retirement System of Texas, according to VentureWire.

The new fund clocks in at about the same size as NEA 12, which held a final close on $2.52 billion in June 2006.

NEA 12 is in the black, according to records kept by the California Public Employees’ Retirement System. NEA has called down $29.5 million of CalPERS’ $50 million commitment. It has returned $2.4 million in cash and estimated the cash out and remaining value of CalPERS’ commitment at $29.7 million as of the end of March, according to CalPERS.

So far this year, the firm has invested $350 million in 61 companies, according to Thomson Reuters (publisher of VCJ). The firm will likely finish the year committing less capital than it did in 2008, when it put $574 million in 93 deals.

I’m seeing more high-quality deal flow than I have in a long time—in years. Times like this tend to chase away the weekend entrepreneur.

Peter Barris

Mergers, acquisitions and IPOs are all picking up, says Managing General Partner Peter Barris, who’s predicting better times for the venture industry next year.

“I have no doubt that there’s opportunity out there,” he says. “I’m seeing more high-quality deal flow than I have in a long time—in years. Times like this tend to chase away the weekend entrepreneur.”

The firm has had a few exits recently. Portfolio company Echo Global Logistics, which provides transportation and shipping services, launched an $80 million IPO in October. NEA holds about 2.4 million shares, which were worth about $32 million at the end of October. The firm previously invested $17.4 million in Echo Global in a single round in June 2006.

Barris says that the firm has also done more than a dozen mergers and acquisitions this year, most notably Data Domain (Nasdaq: DDUP), which was sold to EMC for $2.4 billion. Data Domain had raised $41 million from NEA, Greylock Partners, HRJ Capital and Sutter Hill Ventures before going public for $15 a share in June 2007. NEA held 12.9 million shares at the time of the IPO. It currently holds 8.7 million shares worth about $290 million at EMC’s purchase price of $33.50 per share, according to a proxy statement filed in July.

“The M&A market has been at a reasonable level all year long, but it’s been particularly strong the last three several weeks [of November],” Barris says.

NEA invests in “growth” stage companies, looking for large deals where it can deploy tens of millions of dollars at a stroke. The firm does not have a separate growth fund, a structure that firms such as Sequoia Capital have opted for, but NEA allocated $1.5 billion of its previous fund to large deals. About 65% of the investments from NEA’s previous fund were expansion stage or growth stage financings and 35% were seed or early stage deals, according to data from Thomson Reuters.

The firm added several investors in 2008. It hired Partner Tony Florence from Morgan Stanley and Paul Walker from MPM Capital to work on its growth investing practice. It also added David Mott, former president and CEO of MedImmune, as a general partner, Bala Deshpande as a senior managing director of NEA India, and Hugh Panero, co-founder and former CEO of XM Satellite Radio, as a venture partner.

NEA maintains an information technology focus. More than 60% of the deals it did in NEA 12 were IT companies. Health care and biotechnology companies accounted for one-fourth of the firm’s portfolio, while industrial and energy companies accounted for 10.5% of the firm’s deals, according to Thomson Reuters. —Alexander Haislip and Deborah Gage