Norwest Venture Partners, a long-standing firm backed by Wells Fargo, has successfully raised its 17th fund at an impressive $3 billion. This comes as a significant achievement, considering that NVP previously raised the same amount in December 2021. During that time, the firm recognized the need to increase its capital pool by 50% to remain competitive in a venture boom where round sizes and valuations were reaching unprecedented levels.
However, the landscape has drastically changed since then. Investors are now backing fewer companies, and valuations have plummeted and may continue to decline. Despite this shift, Jeff Crowe, a senior managing partner at NVP, acknowledges that the investment rate in venture and certain sectors has slowed compared to previous years. Nevertheless, he highlights that dealmaking in specific strategies, sectors, and geographies, such as growth equity, healthcare, and India, remains robust.
Crowe emphasizes NVP’s commitment to maintaining a steady pace despite the evolving market conditions. The firm has already facilitated liquidity for 36 companies since closing its previous fund. While not all exits yielded favorable outcomes for NVP (like the bankruptcy protection filed by portfolio company VanMoof), the returns from other exits far outweighed any losses. Crowe points to successful transactions such as the sale of Spiff to Salesforce, the buyout of Avetta by EQT for a reported $3 billion, and the IPO of Indian-based Five Star Business Finance.
Although Crowe refrains from commenting on specific returns, he emphasizes the importance of delivering excellent performance in the venture world. NVP’s consistent track record over its 17 funds speaks volumes about its ability to stay in business by achieving outstanding returns for its investors.
One key factor contributing to NVP’s success is its operation out of one large global multi-strategy fund. The firm strategically invests in North America, India, and Israel across both early-stage and growth equity businesses. Recently, NVP expanded its healthcare practice by adding a biotech team to its ranks, further diversifying its investment approach.
This diversified strategy has proven instrumental in NVP’s ability to adapt to changing market conditions. For example, although the firm initially planned to invest in crypto companies when it raised its last fund, the sector quickly fell out of favor. As a result, NVP adjusted its strategy and did not pursue many deals in the crypto space.
Crowe highlights the beauty of their diversified approach, stating that it works well through the ups and downs of investment cycles. The flexibility it provides allows NVP to react swiftly to market changes, ensuring that they can seize opportunities and mitigate risks effectively.
In conclusion, Norwest Venture Partners’ successful fundraising for its 17th fund demonstrates the firm’s resilience and adaptability in the ever-changing venture capital landscape. Despite the challenges posed by a downturn in certain sectors, NVP remains confident in the robustness of its chosen strategies, sectors, and geographies. With a history of delivering strong returns and a diversified investment approach, NVP is well-positioned to navigate future market fluctuations and continue delivering value to its investors.