Goldman Sachs Backs Unusual $1.4 Billion Spin-Off Fund of VC Assets

(Bloomberg) -- New Enterprise Associates, one of the largest venture capital firms in Silicon Valley, is selling off a chunk of its more mature startup investments to a separate fund run by one of its longtime partners. Goldman Sachs Group Inc., an investor in NEA, bought a stake in the new $1.35 billion fund, which expands the Wall Street firm’s private technology holdings while allowing other NEA investors to cash out.

Ravi Viswanathan said he’s leaving NEA to run the newly hatched operation, called NewView Capital. His mandate was to take startups that were sitting on NEA’s books for a decade or longer and haven’t sold out or gone public. NewView Capital will use leftover money to make new investments in large private companies.

The move, while unusual, is a sign of the times. An abundance of venture capital has enabled more companies to remain private and independent, leaving investors sitting on piles of stock that’s not easily sold. Typically, investors in venture firms expect to get money back after a decade or so. Many of the investments for NewView Capital come from NEA XII, a $2.5 billion fund raised in 2006.  “It was a response to what we believe to be a significant shift in the venture ecosystem,” said Viswanathan.

NewView Capital is backed mostly by investors in NEA funds. Hamilton Lane, a Pennsylvania-based investment management firm, bought a stake, along with Goldman Sachs’s Vintage fund, said Viswanathan. NEA is kicking money into the new fund, too.

Valuing the assets was a challenge, according to Viswanathan and Scott Sandell, NEA’s managing general partner. NewView Capital asked an independent evaluator to come up with a fair share prices for the holdings, which includes 23andMe Inc., Duolingo Inc. and a tiny stake in Uber Technologies Inc. “Both sides are a little unhappy,” Sandell said. “It was the ideal outcome.”

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net

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