Managing general partner at NEA, NEA
All-In Liquidity: NEA Exec. Chair Scott Sandell Breaks Down Next Horizon of VC
About Scott Sandell
Scott Sandell, chair and CIO of NEA, discussed the state of venture capital and the innovation ecosystem at the All-In Summit in East Palo Alto. Sandell noted that the average time from company inception to IPO has tripled from 3 years to 12 years over the last three decades, and that half of current unicorn companies were founded before 2016. He described a developing capital market that provides liquidity for entrepreneurs, employees, venture capitalists, and limited partners, arguing that without returns, limited partners cannot reinvest in venture funds. Regarding artificial intelligence, Sandell said the industry is at an inflection point, citing the revenue growth of Anthropic as an example. He referenced ChatGPT's rapid consumer adoption and noted that Anthropic's revenue has grown from single-digit billions to an estimated 55 billion in enterprise revenue. Sandell described AI as a long-term trend with potential volatility, including stock price increases at public offerings and possible resets, but distinguished this from the dot-com era, stating that value is being created in current companies. He also mentioned two undisclosed NEA-backed companies, one focused on AI safety and another on solving difficult problems.
Transcript (25 segments)
✨ AI-enhanced transcript with speaker attribution
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Kristin0:05
We're here at All-In Summit in East Palo Alto, California, and I'm pleased to be joined by Scott Sandell. He's a chair and CIO at NEA. Scott, welcome.
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Scott Sandell0:14
Thank you so much, Kristin. Great to be here with you.
K
Kristin0:17
Yes, great to see you here at this summit. What brings you to this event?
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Scott Sandell0:20
I mean, why wouldn't you want to be here, Kristin, right? First of all, we have the All-In guys. They are always interesting. And then they bring an amazing array of guests, not just on stage, but pretty much everybody who's here is really worthwhile. So, it's a lot of fun.
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Kristin0:35
What are the conversations that you're having with fellow attendees here?
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Scott Sandell0:39
They fall in a couple different categories, right? We're a large venture capital firm, 50 years old next year, $35 billion under management. So, some people want to talk to us about investing in our funds. Then there's the other side, the entrepreneurs who would love for us to fund them. And there's a lot of stuff just around the edges. I just talked to a guy who runs Butterfly Network. We sat down next to each other at breakfast. One thing he said, which I thought was really interesting. Butterfly, by the way, public company, makes infrared chips for medical applications, really cool. But he said something to me I thought was interesting. He said, 'At this conference, people want to say hello. They want to meet you. They want to find out what you're doing.' He thought that was unique, and I would agree with him.
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Kristin1:28
Mhm. Yeah, it does seem to have great access, right, to some of the biggest investors and certainly capital allocators out there. When you look at the VC space right now, how would you describe it?
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Scott Sandell1:39
I think it's evolving. I've been at NEA for 30 years, so I've seen lots of cycles. NEA was always one of the biggest firms. Now, there are firms actually bigger than NEA. And there are firms that specialize in a stage of the entrepreneurial journey, which I didn't even imagine 10 years ago. We typically don't invest beyond maybe 10 or 20 billion dollar market cap. That would be a big growth round for us. Now, there are companies like Anthropic raised $900 billion, and there are people who specialize on that leg of the journey. So, I think it's evolving. I think another big way it's evolving, and we can talk about this, is liquidity. This is the liquidity summit, and I think we're on the cusp of a really big wave of liquidity, but it's been a dry spell for our industry for a long time. So, that dynamic also affects investors.
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Kristin2:27
What's driving that liquidity? And I do want to ask because it does seem that the sentiment here is strong, to your last point there.
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Scott Sandell2:36
Well, it's really simple. In the last 30 years, the average time from inception of a company to IPO has tripled from 3 years to 12 years. Half the companies in the unicorn status today were born before 2016. So, there's an awful lot of companies that are still growing, they still require capital. Some of them don't want to go public, as we heard a few hours ago. This team here thinks going public is a great idea. So, I think we're going to see a wave of new IPOs, as everybody knows, but there's still a lot of companies that want to stay private. And those companies also have liquidity needs. There's a whole capital market forming for all the participants in the innovation ecosystem. It's not just the entrepreneurs that need liquidity, their employees need liquidity, the VCs need liquidity, the LPs need liquidity, because if they don't get money back, they don't reinvest it in venture funds.
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Kristin3:31
You know, I will say the biggest theme here does seem to be artificial intelligence, and that of course—
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Scott Sandell3:35
Because of that, Kristin.
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Kristin3:36
Yes, I know, right? We have heard of AI. Such a hot topic. What's your take on the state of AI?
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Scott Sandell3:43
I think we're at an inflection point, and you can see it most recently just in the revenues of Anthropic. First there was ChatGPT, fastest time in history to 100 million consumers. Right now we have Anthropic, I think it's going to do $55 billion or something in revenue, up from single-digit billions last year in the enterprise. So, we have both legs of the stool inflecting in an incredible way. What the general public doesn't see is there are a thousand companies coming behind them pursuing both of those ambitions, both of those markets.
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Kristin4:16
How is NEA positioned in the AI space?
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Scott Sandell4:19
Well, we have the good fortune of having for almost 50 years invested in medical technology and information technology. For the first time in my career, those things have come together, right? So, we have digital health. That's everything from using AI for drug discovery. We have a company Xaira, I'm not sure how to pronounce it, but X I A R A, founded by the former president of Stanford. They're using AI to develop new molecules. You have stuff like that. You have radiology partners, largest imaging business in the world started in our office 10 years ago. That company started out with just regular radiologist physician-owned clinics that they put together when imaging was digitized. A few years later, one of our partners said, 'What about using AI?' That was one of the early places AI really developed was imaging. Just a few weeks ago, they FDA approved them as the first AI use in the medical imaging space. Now for breast cancer, the agent looks at the screens first. Of course, there's a doctor who looks too, but think about the life of that doctor, right? That radiologist for all these years before that, Kristin, has been wondering at the end of the day, 'Did I catch all the cancer?' Can you imagine living with that? Now they have a companion who looks at it first.
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Kristin5:39
I'm sure assistance just in the workload for any healthcare professional is helpful as well.
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Scott Sandell5:43
Oh, well, there's that. So their productivity is massively improved, accuracy is improved. Better outcomes for patients.
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Kristin5:50
Absolutely. What are you most excited about in the current near-term investing cycle?
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Scott Sandell5:55
It's hard to pick one. Honestly, every single week that comes through, we see something exciting. About once a month, we see something where you say, 'Oh my god, that could change everything.' We're involved in a company, for example, which could radically improve AI safety. I can't talk about it yet, stealth mode company. We have another stealth mode company which can solve many of the world's hardest problems today.
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Kristin6:26
Anything more our viewers should know, Scott?
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Scott Sandell6:28
I think the thing that I would emphasize is that this is a very long-term trend, and there will be bumps along the way, right? There will be exuberance. I would expect that when these companies go public that we all know, there's going to be a big pop in the stock and all that stuff. There may be some resets along the way. But I think, as we heard about earlier, those are resets in companies that are creating real value. This is not the dot-com implosion that I would expect. I just think they'll be some bumps along the way.
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Kristin6:56
All right. Scott Sandell, thank you so much for joining us here at the NYSE Media Hub.
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Scott Sandell7:00
Thank you so much, Kristin. Great to be with you.
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Kristin7:02
Great to have you.