New Enterprise Associates

The Washington Post publised an interesting article on NEA yesterday, which included several quotes by Peter Barris (a Northwestern University alum).

Most venture funds split the profits of a fund, the most typical split being 80 percent going to limited partners and 20 percent going to the fund's managers. NEA, Barris said, makes the split 70-30.

Inside the firm, profits from a deal are spread out across the partnership; no one partner takes more than another in a single deal. That promotes a team atmosphere that is necessary in running a big fund, Barris said. In most funds, a partner who leads a successful deal gets a bigger cut of the profits than other partners.

Running a partnership in a democratic manner and sharing success compensation in a socialist way is probably the best way to run any such service business. I tend to subscribe to the philosophy that a whole is always better than the sum of its parts, and fostering genuine collaboration is best path to success. That said, according to most LPs I've spoken to, generally one or two partners in a partnership account for the bulk of the extraordinary returns in any given partnership. I don't know if this holds true for NEA.I wonder if NEA's LP's have a preferred return (hurdle rate) over the GP's 30 percent carried interest. I would really like to see that instrument become more commonplace in the VC alternative asset class.

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