Consumer VC: Holiday Highlights with Chuck Newhall (NEA)

Date: December 27, 2022
Host: Mike Gelb
Guest: Chuck Newhall, Co-Founder of New Enterprise Associates (NEA)

Episode Overview

This special holiday highlight episode features Mike Gelb’s illuminating conversation with Chuck Newhall, co-founder of New Enterprise Associates (NEA)—one of the world’s foremost venture capital (VC) firms. The discussion explores the origins and ethos of venture capital, Chuck’s personal journey from military service to VC, the unique NEA founding story, philosophies on partnership and board construction, and the evolution of the industry. Chuck’s reflections are sparked by stories from his memoir, Dare Disturb the Universe.

Main Discussion Points & Insights

The Purpose & Origins of Venture Capital

• VC as a Catalyst for Change:
  Chuck underscores the core purpose of venture capital as a force to "create companies from scratch that change the way the world is."

  • (02:22) “To create companies from scratch that change the way the world is. Do you want an example?” —Chuck Newhall

• Transformational Example—UUNet:
  Chuck highlights UUNet’s journey from a money-losing, bootstrapped startup to an industry behemoth with 70% of Internet traffic through strategic leadership, market focus, and relentless execution.

  • Peter (NEA partner) recruited seasoned execs, focusing on business markets over consumer—a strategy that proved critical for success.
  • UUNet scaled from ~$1.5M revenue to $3-4B in four years, demonstrating how VC guidance and capital catalyze industry creation.
  • (03:00–05:45)

Inspiration & Path to Venture Capital

• Family Legacy & the ‘Romantic Hero’:
  Chuck grew up surrounded by entrepreneurs and VC legends (his father worked with names like Lawrence Rockefeller). Initially enamored with the ideal of the “romantic hero”—from both literature and real-world innovators—he realized his purpose was to support visionaries rather than be one company’s CEO.
  • The Vietnam War shaped his mission; witnessing battlefield innovation brought VC’s importance into sharp relief.
  • (06:48–09:49) “I was sitting in a hamburger hill, which I did the reconnaissance for, and about 60% of my men had been killed or wounded...I said, you know, I’d like to be around those people I was reading about...I call them the romantic heroes slash entrepreneurs. And I’d like to change the way the world is. And that was my vision.” —Chuck Newhall

Founding NEA: How the Partnership Came Together

• Early Career Rejections & Pivots:

  • Rejected by VC firms (e.g., Greylock, ARD); told “English majors really shouldn’t be venture capitalists” by George Doriot.
  • Found a path through T. Rowe Price, eventually advised to start his own firm—which became NEA.

• NEA’s First Fund:

  • Assembled a partnership with close contacts, took huge personal financial risk, and scraped together $16.5M for their inaugural fund, heavily reliant on their own networks and reputation.
  • Early values: deep entrepreneur alignment, limited partner friendliness, low fees, and a unique stance on carried interest that built enduring trust.
  • (10:28–14:48)

The NEA Approach vs. Other VCs

• Entrepreneur & LP First:

  • NEA’s model: high carried interest, exceptionally low fees, and a culture of loyalty—entrepreneurs returned for multiple ventures and LPs remained committed over decades.
  • Contrasts with Kleiner Perkins, whom Chuck metaphorically dubs the “Pirates of the Caribbean,” suggesting a less LP-friendly approach.
  • (14:48–17:36) “For NEA, we had the most important people were our entrepreneurs and our limited partners and they came first...I would call them more like I’d characterize Kleiner Perkins in the days as Pirates of the Caribbean.” —Chuck Newhall

• Venture is a Calling, Not a Job:

  • Chuck shares guiding quotes on the moral essence of VC work—from Jim Schwartz (Accel) and Dick Kramlich (NEA)—about putting judgment, perspective, and ethics above wealth.
  • (17:52–19:53)
    • “Venture capital is best practiced as a calling, not as a job. It was never about maximizing wealth. Venture capital must be practiced with absolute integrity and ethics.” —Jim Schwartz (Accel), as quoted by Chuck
    • “Venture capitalism is about having the courage to put your trust in others and the conviction to do the right thing even when it’s hard.” —Dick Kramlich (NEA), as quoted by Chuck

Board Construction & The Importance of Partners

• Choose Partners Thoughtfully:
  • For startups and life alike, the most critical decision is selecting the right partners (co-founders, VCs, board members).
  • Chuck’s own rule: only invest alongside those he’s known and worked with for years—avoiding greed-fueled boardroom conflicts.
  • (20:08–20:56) “The most important thing you pick in life are the partners which you choose... I’ve seen venture capitalists mess more companies up than CEOs because they get into a greed war.” —Chuck Newhall

Evolution of Venture Capital

• Technology & Entrepreneur Profiles Always Shifting:

  • The VC landscape constantly morphs: from aerospace, to computers (IBM’s “Big Blue” heyday), to mini-computers, and now to iconic consumer tech.
  • Backing visionaries increasingly takes precedence over only “proven” execs.
  • (21:03–21:44)

• Anecdote—Apple’s Early Days:

  • Entertaining story of English VC Anthony Montague, who earned his way into Apple by sheer tenacity (and appetite for bad food).
  • He bought 4% of Apple for $400K—demonstrating the outsized bets and conviction early VC requires.
  • (23:02–25:07)

• Legacy & Continuity:

  • Chuck reflects on the multi-generational nature of VC in his family, linking past and present.
  • (25:21–25:36)

Notable Quotes & Memorable Moments

• On VC’s Purpose:

  “To create companies from scratch that change the way the world is.” —Chuck Newhall (02:22)

• On Choosing Venture over Entrepreneurship (formed during combat):

  “I was sitting in a hamburger hill...and I said, you know, I’d like to be around those people I was reading about...the romantic heroes slash entrepreneurs. And I’d like to change the way the world is.” —Chuck Newhall (08:56)

• Difference between NEA and Kleiner Perkins:

  “For NEA, we had the most important people were our entrepreneurs and our limited partners and they came first...I would call them more like I’d characterize Kleiner Perkins in the days as Pirates of the Caribbean.” —Chuck Newhall (14:57–16:43)

• Venture as a Calling:

  “Venture capital is best practiced as a calling, not as a job. It was never about maximizing wealth. Venture capital must be practiced with absolute integrity and ethics.” —Jim Schwartz (Accel), quoted by Chuck (19:16)

• On Board Construction:

  “The most important thing you pick in life are the partners which you choose.” —Chuck Newhall (20:09)

• Persistence in Early Apple Investment:

  “I will not leave this company until you let me invest...Anthony bought 4% of Apple for $400,000.” —Chuck Newhall (24:04–25:07)

Timestamps for Key Segments

• [02:22] — The True Purpose of Venture Capital
• [03:00–05:45] — UUNet: VC’s Transformative Impact
• [06:48–09:49] — Personal WWII/Vietnam Stories & VC Inspiration
• [10:28–14:48] — Founding NEA: First Fund & Founding Story
• [14:48–17:36] — NEA Philosophy vs. Peers; LP and Entrepreneur Focus
• [17:52–19:53] — Venture as Calling; Core Values
• [20:08–20:56] — Board Construction and Partnership Wisdom
• [21:03–21:44] — Shifts in VC and Entrepreneurial Archetypes
• [23:02–25:07] — Early Apple Investment: The Anthony Montague Story

Final Thoughts

This episode distills the core values and motivations behind one of VC’s modern architects. Chuck Newhall emphasizes that the greatest legacies in venture capital are built not on quick profits, but on deep trust, ethical action, and an enduring commitment to both entrepreneurs and investors. The anecdotes and reflections from his career—recounted in both candid and wry tones—offer timeless wisdom for founders and investors alike.