New Enterprise Associates, until recently one of the largest Silicon Valley venture capital firms, is looking less and less like a venture capital firm. It has transformed into a late-stage private equity firm, doing more buyouts and debt. And thus it becomes another protagonist in the tale of the shrinking — or at least, hurting — VC industry.
Look, for example, at NEA’s $50M investment in Simplex, a distributor of diabetes-testing supplies, based in Tennessee, a story wrritten up by David Hamilton at VentureBeat LifeSciences. What in the world is this Sand Hill Road firm doing?, David rightly asks.
True, NEA has the token partner or two looking at traditional early technology investments (Kittu Kolluri, for example, though even he is investing $4 million a pop), but its focus is largely elsewhere. Its drift started a few years ago, and comes at a time when traditional venture capital is in a crisis mode. [Update: While the bulk of NEAs dollars are being invested in more mature companies, Kittu tells us the company is still doing seed investments at $1 million.]. Despite the talk of the bubble (see the WSJ piece today, for example), VCs firms are showing signs of depression and crisis (see BusinessWeek piece). This is the big difference from 1999/2000, when the bubble and VC fortunes were joined at the hip.
We’ve written about NEA’s recent gutsy moves before.
[Update II: We’ve worked with the company to get more specific data. It says it has made five seed investments of $1 million or less this years, so it certainly has not abandoned early-stage investing outright. Every single one of these companies is stealth, and so the firm is not giving out their names. Kittu says the firm is still committed in this area. However, the firm has 44 investment professionals with $2.5 million in cash to invest from their latest fund; most of it is clearly going later stage.]