NewView Capital
NewView Capital founder Ravi Viswanathan
- Ravi Viswanathan started NewView Capital in 2018 after leading enterprise investing at top Silicon Valley VC firm NEA for nearly 15 years.
- As a registered investment advisor, NewView Capital is able to take large stakes in late-stage companies via growth equity or traditional capital, unlike traditional VC firms.
- Visa's $5.3 billion acquisition of Plaid, a NewView portfolio company, is Viswanathan's third massive exit since starting the firm.
- NewView also invested in Acquia, a cloud services software company acquired by Vista Equity for $1 billion in September, and Scout, a procurement software company acquired by Workday for $540 million in November.
- Click here for more BI Prime stories.
Not every company needs to go public for investors to see a massive payday.
That was Ravi Viswanathan's thesis, especially as more and more of his portfolio companies opted to stay private and raise massive late-stage funding to avoid public markets. But as a career VC at NEA, his hands were tied by the restrictions placed on traditional VC firms.
Instead, he started NewView Capital and registered as an RIA, or registered investment adviser, the traditional distinction for financial institutions like hedge funds or private equity firms that is gaining traction with VC firms. Now, he had the tools to support his companies through buy-outs, acquisitions, or massive late-stage funding rounds from the likes of SoftBank. That bet is already paying off.
On January 13, Visa announced it was acquiring fintech startup Plaid for a cool $5.3 billion. Once cleared, this will be Viswanathan's third massive exit via acquisition since September. NewView also invested in Acquia, a cloud services software company acquired by Vista Equity for $1 billion in September, and Scout, a procurement software company acquired by Workday for $540 million in November.
"If you believe the truism that companies are staying private longer, you need liquidity for institutional investors and also your employees," Viswanathan told Business Insider. "There's a fundamental mismatch if it takes a company a decade to exit, and the venture fund life is also about a decade. If you invest in year three, four, or five, by the time the fund is getting old the company is just hitting its stride. That's where the opportunity is for us on the secondary side."
10'000 Hours/Getty Images
Today's crop of tech startups are staying private longer
NewView was able to get into these three companies, and 28 others, by buying out NEA's existing stake in them back in 2018 when the fund launched.
"A lot of times when you raise a fund, on day two you can breathe a little," Viswanathan said. "But on day two, we had 31 companies to manage."
Many of them were Viswanathan's own investments over his 15 year career at the VC firm, but others were high-growth companies that just weren't getting the dedicated attention needed to help navigate exits, acquisition or otherwise.
"It's unique in venture speak, but it's not rocket science"
"There are so many venture firms, that there's not much missing," Viswanathan said. "The industry has been around for decades. One of the big trends we saw was the generational transition at the firms, and companies were staying private longer so they were raising a lot more venture capital at a much faster clip. When you take this dynamic, the portfolio is quite large at many firms."
To some, NewView may look more like a traditional growth equity firm. Viswanathan said that was "table stakes" when he was considering launching the new fund, but he's purposefully baked in processes and programs he enjoyed while at NEA. And as more private equity firms and hedge funds jump into late-stage tech investing, he thinks that will be what sets NewView Capital apart.
"When we were looking at venture deals and looking at growth equity at NEA, we found that you still have massive company building. It's just different than when you have a smaller startup," Viswanathan said. "We thought 'OK, we have to build a group of operating partners such that we can invest in companies but also add value operationally to help them scale and grow.' It's unique in venture speak, but it's not rocket science."
Even with those headline-grabbing profits, Viswanathan wants to hunker down and keep building. He predicts that an economic downturn is coming, one way or another, and he is intent on having a warchest to help the fund, and its portfolio companies, wait it out.
"I have had the misfortune or fortune, depending how you look at it, of living through two massive downturns," Viswanathan said. "We are trying to make sure we can survive. That's why you see that discipline is starting to creep back into the market and the profitable growth phase is becoming more important to investors."