Nextgen Venture Partners, a venture capital firm based in Washington, D.C., is making waves in the investment landscape with its innovative approach to funding and supporting startups. Founded by a core team of experienced investors, NextGen distinguishes itself by leveraging a vast network of hundreds of part-time investors, known as venture partners, to fuel its investment strategy and portfolio growth. Having recently secured $22 million for its inaugural fund, NextGen Venture Partners is poised to significantly impact the early-stage investment ecosystem. This article delves into the unique model of NextGen Venture Partners, exploring its origins, investment philosophy, and future ambitions.
The Evolution from Angel Investors to Venture Capital Fund
NextGen Venture Partners’ foundation lies in a collaborative group of Washington, D.C.-based angel investors. This initial collective was driven by a shared commitment to support promising companies, regardless of individual investment participation. As this concept gained traction, it expanded to include like-minded individuals in New York City, marking the organic evolution of NextGen. Today, this network has grown exponentially, encompassing over 650 venture partners who provide invaluable support in deal sourcing, due diligence, and portfolio assistance.
Jon Bassett, a partner at NextGen Venture Partners, explains, “We began as a group of young entrepreneurs… who agreed to support our companies… Over time, we had friends in New York City who wanted to expand this idea, and from there NextGen began to take shape.” This organic growth from a community of supportive entrepreneurs is a core element of NextGen’s identity and operational strength.
Leveraging the Power of the Venture Partner Network
The $22 million debut fund is backed by 83 limited partners (LPs), a significant portion of whom are also active venture partners within the NextGen network. These venture partners, who invest smaller amounts compared to anchor LPs like Brown Advisory – a substantial asset management firm – are integral to NextGen’s distinctive model. This structure not only diversifies the investor base but also actively engages a broad spectrum of expertise and industry connections. High-profile investors from firms such as Dell, Carlyle, and T Rowe Price also contribute to the fund, further validating NextGen’s promising approach.
While acknowledging the management complexity of a larger LP base, Bassett emphasizes the strategic importance of maintaining this network: “We plan to raise larger dedicated funds over time… but it’s important we maintain what makes our model so unique. Our strength in deal flow and portfolio support comes from our venture partners.” This commitment underscores NextGen’s belief that the expansive venture partner network is a key differentiator and a source of competitive advantage in the venture capital landscape.
Venture partners who actively contribute to portfolio companies and investment committees are incentivized through prioritized allocations in investments and a share in the carry on deals they source. This mechanism fosters active participation and rewards those who bring high-quality entrepreneurs to NextGen’s attention.
Investment Strategy and Focus
NextGen Venture Partners operates with a traditional “2 and 20” fee structure, charging a 2% management fee and a 20% performance fee. Their investment checks typically range from $250,000 to $1 million, tailored to the specific opportunity and stage of the startup. While they do not adhere to strict ownership targets, NextGen maintains flexibility to invest in promising ventures across the U.S., without geographical limitations.
Their investment philosophy prioritizes identifying and supporting exceptional entrepreneurs, often co-investing alongside prominent venture firms. Notable investments include Limbix Health (virtual reality therapy), APX Labs (smart glasses platform now Upskill), Renoviso (home improvement marketplace), and Hyperloop One. These investments demonstrate NextGen’s interest in innovative companies across diverse sectors and their ability to attract deals alongside industry-leading co-investors like Sequoia, NEA, Bessemer, and Founders Fund. The Hyperloop One investment, sourced through venture partners with SpaceX backgrounds, exemplifies the network’s power to access unique and high-potential opportunities.
The Future of Tech Ecosystems and NextGen’s Role
When discussing the tech ecosystems of Washington, D.C., and Virginia, Bassett points out the continued need for “giant tech companies that anchor an ecosystem.” He argues that these anchor companies are crucial for generating wealth, expertise, and the entrepreneurial talent pool necessary for sustained growth and innovation within a region.
NextGen Venture Partners, with its network-driven model and growing fund size, is strategically positioned to contribute to the maturation of these and other tech ecosystems across the United States. By providing early-stage capital and leveraging the collective intelligence of its venture partner network, NextGen aims to empower the next generation of groundbreaking companies and further energize the venture capital landscape.
This unique approach not only benefits the startups they invest in but also offers a compelling model for the future of venture capital – one that is collaborative, network-centric, and deeply rooted in community engagement.
