Mar 11, 2021 · 37m · 20vc
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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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Scott Sandell, Managing General Partner at New Enterprise Associates (NEA), to explore his 25-year career in venture capital, shifting market dynamics, valuation discipline, liquidity strategies, and firm culture. Sandell shares insights on navigating market cycles, supporting founders, and scaling NEA into one of the world's largest venture capital firms.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 37.5% of the talking time here. How this is scored →
Harry as informed peer 3.4 Guest teaching 2.8 Guest disagreement 0.5 Harry pushing back 1.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 13:38 Rejection of Bill Gurley's capital oversupply premise
Scott directly counters Bill Gurley's view on capital oversupply, noting ironies in Benchmark's business model and re-framing capital availability as a net positive for private company growth.
Hardest push from Harry ▶ 8:56 Harry challenging the long-term capital supply assumptionHarry pushes back on the macro outlook by pointing out that interest rates and LP inflation hedges imply capital supply will continue growing rather than drying up.
Biggest teaching moment ▶ 11:17 Historical analysis of software post-IPO growth physicsScott breaks down three decades of internal growth data to demonstrate how open source tech and distribution models fundamentally changed company growth velocity from 18% to over 50% post-IPO.
Harry holds his own ▶ 17:41 Harry demonstrating micro-fund economics and reserve dilemmasHarry demonstrates keen technical domain expertise by articulating how preemptive rounds skew average holding prices for seed funds and challenging Scott with Peter Thiel's thesis.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Scott Sandell's Journey into Venture Capital | 2 | 1 | 0 | 0 | Harry sets a friendly and welcoming tone, citing personal anecdotes and research from Scott's colleagues. Scott humbly shares his background entering VC in 1996 and lessons from his father. | |
| 25 Years of Venture Evolution and Industry Competition | 3 | 2 | 1 | 2 | Harry cites opinions from other investors like Josh Cochenbrun and asks whether low interest rates mean capital supply will keep increasing. Scott explains how NEA handles macro risk and reserve management. | |
| The Golden Era for the Innovation Economy | 3 | 3 | 0 | 1 | Harry asks Scott to elaborate on how the core physics of company building have changed. Scott educates the host by citing historical software company post-IPO growth metrics across three decades. | |
| Capital Supply, Time-to-Liquidity, and Portfolio Returns | 4 | 4 | 2 | 3 | Harry brings up Bill Gurley's stance that capital oversupply is the biggest industry threat. Scott politely disagrees with Gurley's framing, pointing out that firms like Benchmark rely on later stage capital and explaining how lengthened liquidity timelines impact returns. | |
| Valuation Discipline, Paying Up, and Reserve Allocations | 4 | 4 | 1 | 2 | Harry shares his own tactical struggles with high valuations and reserve allocations, invoking Peter Thiel's advice on follow-on rounds. Scott provides practical guidance on managing average holding price for smaller funds. | |
| NEA's Growth Data and the 'Process Decision' Framework | 4 | 3 | 0 | 2 | Harry cites specific internal deployment stats from NEA and probes into how partnership decisions maintain high quality. Scott details NEA's process decision framework where the full general partnership votes on the evaluation process rather than the asset itself. | |
| Partnership Culture, Trust, and the Role of Managing GP | 4 | 2 | 0 | 1 | Harry asks about maintaining culture and trust across growing partnerships, drawing on insights from Mark Perry and Vanessa Larko. Scott outlines how trust allows rapid decision-making without corporate hierarchy. | |
| Board Leadership Styles and Supporting Entrepreneurs | 3 | 3 | 0 | 2 | Harry asks Scott for advice on board governance and whether compressed timelines and Zoom make building founder trust harder. Scott advises younger board members to observe experienced co-investors and maintain empathy. |
Statements from this episode (24)
NEA manages $23 billion in assets
“Scott Sandell, managing general partner at NEA, one of the leading firms of the last three decades, with now twenty-three billion dollars under management”
Sandell: Only a few VC jobs existed annually in 1996
“There were only a few jobs available in the whole industry in a given year.”
Sandell: VC differentiation is harder as competitors push absurd valuations
“At the simplest level, it's harder and harder to differentiate yourself as a venture capitalist when people will come along and offer valuations that might be, in your mind, sort of absurd, and so we've been facing this challenge now for a number of years, but…”
Sandell: Average venture capital investment holding period is 8 to 10 years
“And one of the things that seems a little frightening is that those things have occurred about 10 years apart, and the average venture capital investment is somewhere between eight and 10 years nowadays.”
Sandell: Startups must maintain reserves because capital vanishes during market busts
“Not only do valuations come down, but in the busts, usually there just isn't capital at any price. So you have to make sure you always have a reserve on your balance sheet, and I think you also have to have a business plan that allows you to make rapid adjustm…”
Sandell: Tech startups founded today will rival ExxonMobil and GM
“The result will be that some very iconic companies are being built today that will be the Exxon's and General Motors of tomorrow, or the IBMs, and we've already seen a handful of examples. The FANG companies have already shown us what kind of upside is availab…”
Sandell: Software post-IPO growth accelerated from 18% to 50% over two decades
“But interestingly enough, in the seven quarters after the IPO, the average company grew 18%. And that was considered fantastic. You couldn't get funded today if all you were doing was growing 18%. In the decade that followed, they grew 28%, and the decade just…”
Sandell: Software development productivity has increased fivefold due to open source
“Just the development of software is now about five times more productive than it used to be.”
Sandell: 'Free' is the most powerful business model in the world
“And that business model of free, which I think is the most powerful business model in the world, is transforming one business after another.”
Sandell: Benchmark would be in trouble without abundant downstream capital
“A firm like Benchmark would be frankly in real trouble if there wasn't enormous amounts of capital because they only do series A and series B deals and they hope other people are going to come along and carry their companies after them.”
Sandell: Startup time to IPO grew from 2.5 to 6-10 years
“In 1999, it was something like two and a half years from inception to IPO. And now it's more like six or seven. And at one point it was nine or 10.”
Sandell: Longer private holding periods drive higher returns for VC funds
“Those longer holding periods are precisely why venture capital firms like ours are able to generate much larger returns because we're not giving those away to public market investors.”
Sandell: Secondary markets will become vital for managing early-stage funds
“Well, I do think that the secondary markets Are really at an inflection point, and there's more and more capital flowing into the secondary markets. You know, we've seen it, of course, first for entrepreneurs. There's been a pretty robust secondary market avai…”
Sandell: 100%+ software growth justifies paying premium entry valuations
“If it's a software company growing over a hundred percent a year, and I really believe that that's going to continue to happen for some period of time. Then I can justify paying a price that not too far down the road, maybe 18 or 24 months, or maybe even a yea…”
Sandell: Small funds should rely on deep-pocketed follow-on investors over pro-rata
“If you have a small fund, I think you want to be super sensitive about getting people who can carry the freight for a long time and not look for you to do your pro rata along the way.”
Sandell: NEA's top growth basket returned 36% annually over a decade
“This particular collection of companies has raised thirty-two billion dollars in total, and we've only been responsible for three billion of it. So that's kind of great. Our companies have had access to all this company. The problem is that that particular bas…”
Sandell: NEA plans to raise bigger and different kinds of funds
“Well, I think there's certainly an opportunity to raise bigger and maybe different kinds of funds to meet these needs, and that's something we plan to do.”
Sandell: NEA grew flagship fund size from $2.3B to $3.6B in 20 years
“We've been growing actually relatively slowly, Harry, 10 or 15% fund to fund. We started with the first big fund, NEA-TEN, in 2000, a 2.3 billion dollar fund, so we've been growing on a large base since then, and our latest fund is 3.6 1,000,000,020 years late…”
Sandell: The best venture investment decisions are made in small groups
“We are firm believers that the best decisions are made in relatively small groups.”
Sandell: Cultural mismatch is the main reason people leave NEA early
“Once we've hired people, we're watching very carefully to see whether their behavior matches our values and our culture, and really that's the one thing that causes people to leave NEA on a relatively premature schedule.”
Sandell: NEA makes all firm decisions in a weekly three-hour meeting
“The only reason NEA could have scaled to the size it is, is because of the trust that we have in the partnership, which enables us to meet for three hours a week, make all the decisions necessary, and then have the confidence that they would be executed well.”
Sandell: Light-touch leadership attracts venture talent who reject rigid hierarchy
“So if you have a light touch, you're more likely to attract, I think, people who probably would chafe under more rigid forms of leadership.”