NEA runs large strip sale on numerous assets as GPs hunt for liquidity

Strip sales, along with tender offers, structured/preferred equity and secondary directs, represented around 20% of the about $18bn in GP-led volume in the first half.

New Enterprise Associates is running what could potentially be a large sale of stakes in numerous investments across funds, sources told affiliate title Buyouts.

The deal, still relatively rare in the venture capital world, is among a slew of GP-led processes that have hit the market this year in what has been a slower overall environment. Strip sales especially are not as popular as some other so-called GP-led processes such as single-asset continuation funds.

Strip sales, along with tender offers, structured/preferred equity and secondary directs, represented around 20 percent of the about $18 billion in GP-led volume in the first half, according to Jefferies’ first-half volume report. Total secondaries volume came in around $43 billion, Jefferies said.

Venture managers have yet to fully embrace GP-led secondaries as a way to deliver liquidity to limited partners in older funds. A few headline-grabbing deals over the years seemed to point to an opening of the market in venture, but that’s never emerged in a material way.

NEA is working with Jefferies as adviser on the process. The deal, which hit the market in November but has been quietly taking shape for several months, could total more than $1 billion depending on its final structure.

The firm has continually adjusted the portfolio of investments involved in the sale after feedback from potential market participants, one source told Buyouts. It will involve partial and full stakes in numerous investments – potentially 20-plus – across multiple funds, sources said. It’s not clear which assets or funds are involved. An NEA spokesperson declined to provide details.

Existing LPs in the older funds will be cashed out of the stakes involved in the sale. The investments will be housed in a special purpose vehicle, where NEA will continue to manage them, sources said. The structure gives the process something of a continuation fund flavour, though it is not clear if the process envisions a full “roll-over” option for existing LPs.

NEA is no stranger to secondaries. The growth and early-stage venture investor completed a $1.35 billion GP-led secondary deal in 2018. NEA moved 31 assets out of four older funds with vintages from 2006 to 2015 and into a continuation fund to be managed by a newly formed firm called NewView Capital, Buyouts previously reported.

NEA general partner Ravi Viswanathan left the venture firm to run the new business, which was backed by a group of investors led by Goldman Sachs and included Hamilton Lane among 19 others. Companies in that deal included 23andMe, Duolingo and Uber, Buyouts reported. Lazard worked as adviser on the process.

NEA’s deal is one that will likely close next year. Other processes are just coming to market with the intention of closing in 2024, though several large deals are targeting closure by or around year-end, including a continuation fund deal from JMI Equity.

Deal volume this year is unlikely to match the record of the past few years, though activity was still meaningful, helped along by a surge in LP portfolio sales.