Norwest Venture Partners on Tuesday unveiled a hefty $1.2 billion venture capital fund to stake a wide range of investment stages globally.
Palo Alto, California, NVP plans to unleash the capital domestically as well as internationally as it launches new offices across India and Israel.
“We believe now is a great time to invest, and we are seeing significant opportunities amidst a challenging economic environment – particularly in growth equity and in emerging markets such as India and China,” Promod Haque, managing partner of NVP, said in a statement.
The $1.2 billion fund comes amid growing industry concerns over the performance and motivations behind such monster funds compared with smaller, more closely managed ones.
Still, targeting emerging markets of India and China holds the promise for higher returns on investments compared with U.S. counterparts. Martin Haemmig, who teaches global VC at 15 business schools worldwide, including UC Berkeley and Stanford, told Red Herring in a recent interview that the capital efficiency of these countries bodes well for VC returns.
Considering the results from 2004 to 2007, for example, VC returns in China ranged 30 to 60 times investments for the top quartile of performers, he said.
"China's bottom quartile exceeded the U.S.'s top quartile every year," he said.
NVP opened offices in Mumbai and Bangalore, where it hired five venture capital professionals for venture and growth equity investments. The firm also opened an office in Herzelia, Israel, where it added two VCs.
The size of funds has shot up in the past decade as limited partners, those that manage vast pools of money, pump more capital into creating bigger venture funds in the hopes of returning more money to public pension funds, endowments, sovereign wealth funds, funds of funds, and others.
That's not always proven to be a profitable strategy as these over-sized funds also promise whopping management fees to the general partners of venture capital firms, some say serving as a disincentive to making the money maximizing returns on capital.
The $1.2 billion fund, NVP's largest to date, marks the firm's eleventh and brings its total capital under management to more than $3.7 billion. It comes after NVP announced a $650 million fund that closed in 2006.