Proving that the venture model is working for at least a few select brand name venture capitalists, NEA announced on Wednesday that it’s closed a massive $2.6 billion new fund. The firm describes the fund as “one of the largest venture funds ever raised.”
Not all venture firms have had the ability to raise so much money from Limited Partners — the investment groups that put money into venture firms. In recent years, some well-known venture firms have struggled to raise such large rounds as their investors have pulled back and taken the stance, ‘what have you done for me lately?’ Only a few, like NEA, Khosla Ventures and Andreessen Horowitz have managed to put together these massive funds.
But NEA famously invested in Groupon, which delivered the firm potentially one of the best returns in venture capital history. NEA invested just $4.8 million in Groupon in 2008, before the company was even Groupon. The value of NEA’s investment in Groupon at the time of Groupon’s IPO was $2.28 billion, though Groupon’s stock has dropped considerably since then. The Groupon investment boosted NEA General Partners onto the Forbes Midas List.
NEA’s Groupon investment also enabled it to make considerably more risky bets in yet unproven areas like cleantech. As I wrote last year, massive wins from firms like Groupon have essentially funded the next-generation of cleantech startups. NEA has invested in a variety of struggling cleantech firms like solar companies Konarka (went bankrupt), and Heliovolt, smart grid company Gridpoint, electric car maker Fisker Automotive, and building materials company Serious Energy.
NEA says it will continue to invest across sectors in “information technology, healthcare and energy technology.”
At least for a few firms, the traditional VC model — that one investment makes back the fund — is still alive and strong. For the rest of them, if they can’t find a Groupon, then they might struggle to remain in the top tier. Particularly as upstart incubators, and angel groups start to chip away at the traditional venture model.