Boingo, the southern California company that provides high-speed wireless access to hotel, airports and other public locales, has raised $65 million in a third round of funding.

This is apparently a case of investment creep. Just last month, the company had filed papers with the Securities and Exchange Commission saying it had raised $26M of a planned $60M round (scroll down). But the amount has jumped by $5 million. So what's the big deal with a $5 million here, or $5 million there?

New Enterprise Associates, one of the main investors in this company, is no pushover firm. It has a stellar decades-long track-record, with many hits under its belt. Scroll through its Website, and you will examples of this, with partners like "Kittu" Kolluri, who know how to build companies (Neoteris). We don't know enough about Boingo to second-guess this latest investment. The CEO is even saying that an IPO is in the cards, according to interviews we've seen, so things may be going quite well.

BUT, we couldn't help noticing this is the latest in a string of cases where NEA has helped push huge amounts of cash into companies with business models that make you wonder...

In past stories, we've mentioned 1) SugarCRM, which initially appeared to be a low-burn open source customer relations management (CRM) software start-up, but that raised $18.77 million last year from a group of investors led by NEA, barely a year after being founded, 2) the bidding war over solar company SolFocus, which had planned to raise only $12.5M this year, but ended up with $32M, at a valuation at least five times higher than expected, once NEA got involved, 3) Alien, a radio ID company which pulled its IPO and is now laying people off, but after raising hundreds of millions, in part from NEA, and 4) Vonage, the VoIP provider which also raised hundreds of millions of dollars, much of it from NEA, which went public, but is now its stock tanking.

NEA's Kramlich

NEA has long been among the largest of venture firms, and tends to invest more money than most into companies it backs. Recently, it raised the second largest fund in history, which puts even more pressure on it.

Now take a look at the performance of NEA's two recent funds, via a link (you will have to scroll down) supplied by a commenter on our post yesterday about Crescendo Ventures.

You will see that NEA is showing a negative 13.1 internal rate of return on its 1999 fund, a poor result which is to expected because funds raised in that year were right when the bubble was about to burst. The latter fund on the list, raised in 2000, is showing a positive 5.4 percent internal rate of return, which is pretty good for that rough year. A lot of this return is still "on paper," meaning it is only on NEA's internal books because some of its companies haven't been sold yet. But it suggests the firm is on target to return to its investors a net 5.4 percent each year since 2000. As for NEA's 2004 and 2006 funds, things are way too early to tell.

So in all, the firm isn't doing too badly. And consider Vonage, where NEA invested in the company early, buying shares first at around 40 cents a piece, then again at 80 cents, and then again at $2.60 and a bunch more at $5.87. So NEA is still in the black on this investment, despite the fact that Vonage plunged badly after going public, to around $6.65 today.

SMIC chart

So we will be the last to criticize NEA for its record. It is doing its job, and returning money to investors, at least so far. It is a firm that makes big bold bets, led by the boldest of them all, leader Dick Kramlich, whose own partners think he's crazy. He flew to China in 2002 and began investing $120M into Chinese chip company SMIC right before it went public. At first, It returned a profit for NEA (this almost a first, after centuries of white men losing their shirts over there). This is the glorious side of capitalism, which makes men strive, and should be commended. And yet tragically, the stock has tanked ever since, and we're not sure if NEA ever got its money out.

We've put in calls and emailed the NEA folks over past few days, to talk this over each of these cases, but missed them -- because of vacation schedules and such. We hope to connect with them soon.

We're left sitting here, wondering if the pump and dump is becoming a pattern? In fact, these may be just high-profile exceptions, and quite coincidental. So we could be misguided. But if it is a pattern, the downside, of course, is the pain it takes to get there (as Vonage, SMIC and Alien have shown). Growing too big too quickly is a theme that surfaces during bubbly times such as this. Be warned.

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