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Silicon Valley's NEA raises second largest VC fund ever; oh, and the fees!

New Enterprise Associates, the venture capital firm with offices here in Silicon Valley and on the East Coast, has raised $2.5 billion more to invest in new companies.

It is the second largest VC fund, after Oak Investment's $2.56 billion fund. But both of these firms, NEA and Oak, also invest in late-stage companies and in public companies, so neither is a pure venture capital firm.

It is the twelfth fund for this accomplished firm, which has done better than the mediocre performance of Oak. NEA has also moved to charge a set management fee based on a percentage of the fund, according to a report in VentureWire (subscription only). That is significant only in that it moves the industry further toward the percentage fee model. NEA had always negotiated a management "budget" with its investors, and it had no link with the size of the fund. Why investors would agree to a percentage of the fund at a time like this -- when the fund is so large -- is difficult to understand. Even if it is only 1.25 percent, as reported, the fee translates into more than $30 million. Not bad for the dozen partners that work there! They get to split that among themselves -- minus, of course, other expenses for office, exec assistants, etc.

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