Norwest Venture Partners, a 60-year-old venture and growth equity firm financed wholly by Wells Fargo, today announced the launch of its sixteenth fund; it is the largest to date at $3 billion. It is easy to dismiss the development, but this new pool raises Norwest’s total assets raised over the years to $12.5 billion. To put it another way, despite the fact that massive fund announcements have become commonplace, this one is a major event and yet another sign that the market is considerably different now than it was even five years ago.
In a fast-paced setting, it is easy to see why Wells would agree to such a commitment. For one thing, unless you have massive money cannon, it is no longer viable to compete in the growth equity space. According to Bloomberg, Tiger Global Management alone had the first closure of $8.8 billion on its largest fund ever in October. (As a reminder, it only closed its previous fund six months ago with $6.7 billion.) To win transactions, you must be able to push aside at least some of the other multibillion-dollar funds that are already signing cheques.
Norwest’s team may brag about many hits as well. Almost 30 of Norwest’s previous bets had “expired” in some way during the last couple of years while it was busy deploying its latest fund, a $2 billion pool that it closed in 2019 and used to support approximately 60 enterprises. According to Crunchbase records, the security firm Shape Security sold to the application delivery business F5 for $1 billion in late 2019 after receiving $183 million in investment.
According to Crunchbase, Aporeto, a machine identity-based micro-segmentation company, sold to Palo Alto Networks in 2019 for $150 million in cash after raising around $35 million from investors. In the meanwhile, a third portfolio business, Galvanize, a Canadian risk and compliance software provider, sold to corporate governance software manufacturer Diligent for a reported $1 billion. Norwest led a $50 million round of funding for Galvanize.
A number of Norwest’s consumer-facing investments have also been listed on the stock exchange. Two of these companies used SPAC: Opendoor, a real estate firm, and Talkspace, a digital mental health startup. After a typical IPO, Udemy, a third portfolio business, began trading publicly in October. (As of this writing, its shares are selling at around one-third of their initial offering price.)
Norwest is based in the Bay Area, but it also has offices in Tel Aviv, Israel, and Mumbai, India, giving it a global reach. The company also invests in a variety of businesses. Some of these businesses are involved in the biological sciences. Some of them are retail-to-consumer businesses. Others include fintech businesses such as Plaid, which Norwest invested in during its Series C round in 2018, and Dave, a consumer finance startup that intends to complete a merger with a blank-check company soon and begin trading publicly in January.
Norwest’s interest in this particular area, according to longstanding partner Lisa Wu, who spearheaded the Plaid purchase, is solely based on the upside it sees in such firms. She makes it plain that Norwest is not a strategic investment.
“Wells offers us a competitive edge,” she continues, “but we have an arm’s length connection with Wells.” “Our investing practices are completely autonomous and we have total investment authority.” The realm of cryptocurrency is one area where Norwest has yet to make a deal. When asked about this, Wu says it is only a matter of time. “Every day,” she continues, “We talk about it.” “We believe in momentum… it’s arriving [now] in Fund XVI,” said the company.