20VC: NEA's Scott Sandell on SPACS and Why Liquidity is One of the Challenges of our Time, Why We Are At An Inflection Point For Secondaries & Why There Is Nothing To Suggest The Boom Will Not Continue

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Capital Oversupply
The venture capital industry is experiencing an unprecedented influx of capital, which presents both challenges and opportunities. notes that while companies are staying private longer and require more capital to grow, the abundance of capital can lead to exuberance and difficulty in differentiating oneself in the market 1. He reflects on the industry's evolution, highlighting how the time frame to liquidity has significantly increased from two and a half years in 1999 to six or seven years today 2. This shift necessitates a balance between capital availability and strategic investment decisions.
Pricing Dynamics
The oversupply of capital has led to significant pricing pressures in the venture capital market. explains that while great deals are worth paying a premium for, not all expensive deals are inherently valuable 3. He emphasizes the importance of evaluating whether a company's growth justifies its price, especially in a market where preemptive rounds can inflate valuations. Sandell also discusses NEA's approach to capital concentration, revealing that despite raising $32 billion, NEA only contributed $3 billion, indicating a need for strategic fund scaling 4.
Competitive Strategies
In a saturated venture capital market, maintaining a competitive edge is crucial. describes NEA's decision-making process, which involves a dedicated team making investment decisions to ensure accountability and alignment 5. He also highlights the changing "physics" of company building, driven by advancements in technology and open-source software, which allow companies to scale rapidly and efficiently 6. This evolution requires venture firms to adapt and innovate continually to stay ahead.