The Penny King's Free and Clear M&A Fund

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Major VC firm raises one of biggest funds since dot-com bust



SAN FRANCISCO (AP) - New Enterprise Associates, a venture capital magnet during the dot-com buildup, has raised one of the industry's largest funds since the jarring comedown, providing the latest sign that investors are ready to take a chance on high-risk startups again.

New Enterprise, best known as NEA, collected $1.1 billion for a fund that is expected to finance about 60 high-tech and health-care companies during the next three years.

It marks NEA's first fund since the Reston, Va.-based firm raised $2.3 billion in September 2000 -- right around the time when the Internet business dreams of the late 1990s began to dissolve into nightmarish losses.

As they sifted through the wreckage, few venture capitalists dared to raise new funds. Things got so bad in 2002 that venture capitalists refunded a total of $5 billion to appease their disillusioned investors.

But a rising stock market has helped lift venture capitalists out of the doldrums.

``People are starting to believe it's time to get back in the game, so they are opening up their wallets again,'' said Corey Lavinsky, chief executive of Growthink Research, which tracks venture capital investment.

NEA's latest fund, the firm's 11th, is the first to exceed $1 billion in several years, said Anthony Romanello, director of investor services for Thomson Venture Economics, a research firm that tracks venture capital trends.

The demand to invest in the fund was so great that NEA probably could have raised more than $3 billion, said Peter Barris, the firm's managing general partner.

NEA is used to dealing with large amounts of money. The firm raised a total of $3.75 billion in three funds from 1998 through September 2000 and has delivered big returns to its partners with past investments in high-tech companies like Juniper Networks, Ascend Communications and Macromedia.

``All the stars seem to be lining up for the venture industry again,'' Barris said.

Other prominent venture capitalists seem to agree.

Palo Alto-based Technology Crossover Ventures closed a $900 million fund earlier this month and one of the industry's best-known firms, Menlo Park-based Kleiner Perkins Caufield & Byers, is reportedly raising a $400 million fund.

The recent flurry of activity continues the momentum that began to build last year. Venture capitalists raised $5.2 billion during the fourth quarter -- the most money flowing into the industry for any three-month period in two years.

Despite the spreading optimism, most venture capital firms, including NEA, have been raising about half the amount that they did during the Internet investment frenzy.

Not as much money is needed to sustain startups now because the companies are worth less than they were during the gold rush days and entrepreneurs are being required to operate under more conservative budgets.

Many venture capital firms also have become more austere. NEA's latest fund will be managed by eight partners, down from 11 partners for its last fund.

The institutional investors that entrust venture capitalists with their money are more circumspect too, Barris said. ``Investors have been through a very difficult period, so they are asking a lot more questions about our strategy, as they should be.''

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On The Net:

http://www.nea.com