A Noteworthy Number in a Changing Market
Norwest Venture Partners (NVP), a 65-year-old firm backed solely by Wells Fargo, has raised its 17th fund at an impressive $3 billion. This amount is notable, considering that NVP last raised the same amount just two years ago in December 2021, which was the peak of the venture boom.
The Venture Boom and Its Impact
At the time of the previous fundraise, NVP stated that it increased its capital pool by 50% (NVP’s 2019 fund closed at $2 billion) due to the need to stay competitive in the dealmaking environment. Round sizes and valuations had climbed to unprecedented levels, making it essential for firms like NVP to adapt and grow.
However, the market has undergone significant changes since then. Investors are now backing fewer companies, and valuations have dropped or may drop further. This shift presents a challenge for venture capital firms, which must navigate these uncertain waters to secure successful investments.
Jeff Crowe’s Perspective
In an interview with TechCrunch, Jeff Crowe, a senior managing partner at NVP, acknowledged that the investment rate in venture and certain sectors is slower than it was several years ago. However, he emphasized that dealmaking in specific strategies, sectors, and geographies remains robust.
Crowe pointed to growth equity, healthcare, and India as areas where deal activity has remained strong. He attributed NVP’s success to its diversified approach, which allows the firm to adjust its strategy when market conditions change.
NVP’s Strategy and Success
Norwest Venture Partners attributes much of its success to operating out of one large global multi-strategy fund. The firm invests in North America, India, and Israel, with a focus on early-stage and growth equity investments. NVP has also recently added a biotech team to round out its existing healthcare practice.
This diversified approach gives NVP flexibility to adapt to changing market conditions. For instance, when the firm raised its last fund, it planned to invest in crypto companies. However, the sector fell out of favor shortly after, and NVP didn’t pursue many deals in the space.
The Benefits of Diversification
Crowe highlighted the benefits of NVP’s diversified strategy: "Our diversified strategy works well through ups and downs of investment cycles… It gives us flexibility. That’s the beauty of it. We react faster to changes."
This ability to adapt is critical in the venture capital industry, where market conditions can shift rapidly.
Recent Exits and Returns
Since closing its previous fund, NVP has helped 36 companies realize liquidity. Not all exits were successful for the firm (NVP’s portfolio company VanMoof filed for bankruptcy protection), but returns from certain exits greatly outweighed the losses, according to Crowe.
He pointed to several notable exits, including:
- The sale of Spiff to Salesforce
- The buyout of Avetta by EQT for a reported $3 billion
- The IPO of Indian-based Five Star Business Finance
Crowe declined to comment on returns but emphasized that NVP’s success is rooted in its ability to deliver strong returns over time.
Conclusion
Norwest Venture Partners’ 17th fundraise at $3 billion is a testament to the firm’s adaptability and diversified approach. As the venture capital market continues to evolve, firms like NVP will need to navigate these changes while maintaining their commitment to delivering successful investments.
In an industry marked by uncertainty and change, NVP’s ability to adapt and thrive makes it a model for other venture capital firms.
About Norwest Venture Partners
Norwest Venture Partners (NVP) is a 65-year-old firm backed solely by Wells Fargo. The firm has raised 17 funds, with the most recent one being at $3 billion.
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