Norwest raises biggest fund yet as industry mega-fund pool nears $100B

The year may be nearly over, but 2021's exceptional venture capital fund formation is still going strong.

The latest mega-fund announcement comes from Norwest Venture Partners, which has raised a $3 billion vehicle, the largest in the firm's 60-year history.

Including the new Norwest fund, global VC firms this year have closed 89 mega-funds (vehicles of $500 million or more), totaling just shy of $100 billion, PitchBook data shows. That's the most since 2019, when $111.5 billion was raised across 54 funds.

The three largest funds that closed this year were Tiger Global's $6.7 billion vehicle announced in April, TCV's $4 billion fund that closed in January and Flagship Pioneering's $3.4 billion fundraise from this summer. 

Norwest's fund, which is 50% larger than its previous $2 billion investment pool that closed two years ago, brings Norwest's total assets under management to $12.5 billion.
 
 
The Palo Alto-based firm is sticking with investing from a single vehicle across stages and sectors. Norwest partner Lisa Wu said the primary reason for raising a larger fund is to stay competitive in a dealmaking environment where round sizes and valuations have climbed to unprecedented levels.
 
"This fund allows us to double down on areas where we have seen success, including fintech, proptech commerce, as well as on the enterprise side from vertical SaaS to cybersecurity," Wu said. "But there are also new areas that we want to venture into, such as crypto, where we spend a lot of time right now."
 
Norwest has yet to announce any crypto deals, but Wu said the firm plans to reveal details in the coming months. Norwest has met with consumer-focused crypto startups, but for now, it plans to invest primarily in infrastructure companies that could build more trust in the emerging technology.
 
In addition to raising a new fund from its sole LP, Wells Fargo, Norwest made a few promotions and new hires, most notably bringing on Tiba Aynechi as a general partner. Aynechi, who was previously with the healthcare-focused firm Novo Holdings, aims to expand Norwest's healthcare team by spearheading biotech investments.
 
Although Norwest continues to be stage-agnostic, Wu said that the firm's best returns recently have come from seed and Series A investments, as well as from some late-stage bets.
 
Norwest has realized 29 exits since raising its previous fund. They include public listings of Opendoor, Talkspace and Udemy, along with the acquisitions of Shape Security, a cybersecurity startup, and Galvanize, a company that develops risk management and compliance software –each of which sold for roughly $1 billion, according to PitchBook data.

Norwest's growth equity team writes checks up to $150 million to companies that are bootstrapped and profitable but are still on a fast growth trajectory. 

One such company is Vuori, an athleisure brand that bucked the direct-to-consumer category trend of taking on too much VC funding before reaching profitability. While many other DTC companies have struggled, Vuori raised $45 million from Norwest in 2019 at a $210 million valuation, according to PitchBook data. That bet appears to be paying off. SoftBank recently valued Vuori at $4 billion.

Meanwhile, the firm has formalized its dedication to companies that also care about environmental and social sustainability. "It is inherent in our culture," Wu said. "But we now have ESG clauses in our term sheets."