Gutsy venture firm New Enterprise Associates brings home results

It’s time for an update on New Enterprise Associates, Silicon Valley’s largest venture capital firm.

VentureBeat’s last piece about the decades-old firm was critical. NEA’s tendency to make extremely large bets appeared to be backfiring. Witness its backing of large, fizzling companies like Vonage, Alien and SMIC — and its arguably foolishly stratospheric valued bets on early companies SolFocus and SugarCRM. Was NEA out of control?

Afterward, we got a handwritten letter from NEA’s leading partner, Dick Kramlich, saying our article was inaccurate, but did not explain why. He sent documentation showing how seriously NEA treats SolFocus, for example testifying before Congress about SolFocus’ role in providing alternative energy. We also had a phone conversation with partner Mark Perry about NEA’s strategy. We’ve sat on this for four months, in part because of a scheduled interview with yet another partner Kittu Kolluri failed to come through.

With NEA’s latest win on IronPort (see our story here, about Cisco’s agreement to acquire that security firm), its time to offer the other perspective. SMIC, Alien and Vonage are all unfortunate. But NEA has been making big bets for some time, and they’ve been paying off. Perry, for example, cites Teleatlas, where NEA pumped in $70 million of a total $270 million in financing, and Teleatlas ended up doing well. There was also Myogen and
Pharmion, two public pharma companies. They’re all similar: “Large amounts of capital, relatively high valuations, and in those cases, excellent outcomes,” Perry said. The bottom line: NEA’s recent funds 10 and 11 are performing in the top ten percent of the industry, relative to other funds raised in the same years, he said (something that is very difficult for VentureBeat to confirm, because real industry stats are secret).

As regards SolFocus, Perry said its sky-high valuation was not NEA’s own doing. He said the price had been set before NEA invested: “There were numerous termsheets at prices higher than what we ended up paying,” he said.

Meanwhile, NEA continues to make big, unconventional gambles, most recently on IP Unity. Kramlich calls these “venture growth equity plays,” and signaled that NEA will be doing more of these.

With private equity companies becoming more active lately in venture capital, NEA may find itself squeezed — we’ll follow with interest how it manages in this new environment.