BALTIMORE, Md. – With a $1.5 billion first close two weeks ago on its tenth venture capital fund, it looks like New Enterprise Associates will, indeed, nearly double the final cap of its two previous funds with a total of $2 billion.
Launched in late-July, the firm will follow its traditional routine of holding a large first close near the end of the year, with a final event coming a few months later – early January in this case – so as to accommodate the investing calendars of certain existing limited partners.
“We’re looking at NEA 10 as the size of NEA 8 and NEA 9 together,” said Nancy Dorman, administrative general partner at the Baltimore-based firm. “This is the third year in a row that we’ve raised a fund. NEA 8 was invested within a year. NEA 9 was invested in a year. We wanted to stay with the same strategy, but maintain a fund that would last at least two years and possibly three.”
NEA will continue to target start-up companies and expects to invest about 85% of its capital in information technology plays, moving into the communications, software, B-to-B e-commerce and semiconductor sectors. The remaining 15% will be dedicated to medical, biotech and life sciences companies. While previous NEA funds have focused their investments in the same two sectors, the new vehicle spread more weight along the information technology sector.
“Prior to NEA 8, we were more equally divided, but we’ve gotten fabulous returns in that arena and continue to see great opportunity there,” Dorman said.
Juniper Networks Inc., a Sunnyvale, Calif.-based developer of LAN systems, for example, priced an initial public offering at $34 in June 1999. The stock currently trades at approximately $208 per share. NEA first invested in the company’s $5 million Series B round in 1996, when the company was valued at $32 million. Today, the company has a market cap of $65.6 billion. More recently, NEA participated in three of Baltimore-based LAN developer Accelerated Networks Inc.’s four rounds of private financing before the company went public in June.
NEA plans to invest the new vehicle in about 70 to 80 companies throughout the U.S., focusing on both the East and West Coasts. The firm does consider investments outside of the U.S., she said. Additionally, NEA prefers to be an active investor taking seats on the board of directors of most of its portfolio companies, Dorman said.
The firm’s limited partners include fund-of-funds, colleges and universities, foundations and private and public pension funds, including some foreign investors. Most of the limited partners in Fund 10 have invested in a number of previous NEA vehicles, but some newcomers will join. Dorman would not reveal the firm’s management fee and carried interest structure.
NEA’s previous vehicle, the $880 million New Enterprise Associates 9 LP, which closed in 1999, is completely committed to approximately 60 companies, Dorman said.
NEA has 18 investment professionals spread throughout its three locations: Baltimore, Reston, Va. and Menlo Park, Calif. The firm is contemplating hiring one or two additional investors, probably at the partner level, in time to invest Fund 10, Dorman said.
The firm will not begin raising funds for an eleventh investment vehicle until its newest fund is almost fully committed.