NEA's Return to Venture Capital Secondaries

New Enterprise Associates (NEA), a prominent Silicon Valley-based venture capital firm, has re-entered the secondaries market after a brief hiatus. The firm has raised over $468 million for its NEA Secondary Opportunity Fund, marking a significant return to this asset class. The fundraise closed on July 3rd, and while it has attracted considerable attention, NEA has not yet commented publicly on the matter.

• The fund secured investments from over 60 limited partners, including the San Francisco Employees’ Retirement System, which committed $20 million.
• NEA's foray into secondaries is a strategic move, capitalizing on the increasing appeal of this segment within the venture capital landscape.

NEA's Secondaries History

NEA's return to the venture capital secondaries market is a notable development, given its past involvement in this space. The firm was previously a major player in the secondaries market, but its activities were curtailed in 2018 due to regulatory restrictions.

• In 2018, NEA spun off its secondaries practice into NewView Capital, led by Ravi Viswanathan, a long-time NEA investor. This move was necessary because NEA was not a registered investment adviser at the time, and regulatory limitations prohibited it from holding more than 20% of its assets in the secondary market.
• However, NEA obtained registered investment adviser status in 2023, allowing it to re-enter the secondaries market with an in-house fund, showcasing its commitment to this strategy.

The Rise of Venture Capital Secondaries

The venture capital secondaries market has experienced substantial growth in recent years, fueled by a number of factors. This market, which involves buying existing stakes in companies or funds, has become an increasingly attractive option for investors.

• Recent data from Caplight, a secondary data tracking platform, reveals that more than $706 million was invested in direct secondaries deals, representing transactions involving company stakes, during the first half of 2024. This momentum suggests a robust market and significant investor appetite for secondary transactions.
• The robust trading volume in the venture capital secondaries market can be attributed to the emergence of new methods of accessing these deals. Investors are leveraging special purpose vehicles (SPVs) to gain exposure to secondaries deals involving high-growth companies.
• In some cases, investors are even participating in SPVs created by other firms, further demonstrating the competitive nature of the secondaries market. These SPVs provide a mechanism for smaller investors to access a wider range of deals, fostering greater participation and diversification.

Other Venture Capital Firms Entering the Secondaries Market

NEA's foray into the venture capital secondaries market is not an isolated event. Other prominent venture capital firms are also actively pursuing this strategy, reflecting the increasing attractiveness of this market segment.

• StepStone, a leading private markets firm, raised $3.3 billion for its latest venture secondaries fund, setting a record for the largest dedicated venture secondaries fund.
• G Squared, a venture capital firm focused on late-stage investments, raised $1.1 billion for its sixth flagship fund, with a significant portion of the capital allocated to secondary transactions.
• Industry Ventures, a venture capital firm specializing in secondary investments, raised $1.45 billion to further expand its portfolio and acquire more stakes in venture-backed companies.

Conclusion: The Future of Venture Capital Secondaries

The resurgence of interest in venture capital secondaries is indicative of a broader shift in the investment landscape. Investors are increasingly seeking alternative avenues to gain exposure to high-growth companies, and the secondaries market offers a compelling solution. As more venture capital firms establish dedicated secondaries funds, the market is likely to experience continued growth and innovation.