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One of the founding fathers of the Mid-Atlantic’s venture capital industry

Charles (Chuck) W. Newhall III is one of the founders, along with Frank Adams, of the Mid-Atlantic Venture Capital Association. With headquarters in Virginia and DC, MAVA is an organization that represents the interests of the regional investor and private equity community, and which formed a blueprint for similar associations elsewhere. Chuck is also co-founder of New Enterprise Associates, the world’s largest venture capital firm in terms of assets under management, and one of the oldest VC firms in the US. Throughout his long and storied career, Newhall has played an integral role in building the VC industry, with a focus on emerging companies and paradigm shifts in the Mid-Atlantic region. He remains an active investor and advisor, and currently serves as Chair of Greenspring Associates’ Industry Advisory Board.

Chuck Newhall spoke with citybizlist publisher Edwin Warfield for this interview.

EDWIN WARFIELD: Taking a long view, how has the VC industry changed because of MAVA and NEA?

CHUCK NEWHALL: Let’s talk about the economic importance of what we’ve done in the region. When we started MAVA, there were four firms. By the mid-90s, there were 150 venture capital firms. You had healthcare ventures, which raised big funds; you had NEA; you had Rotech; T. Rowe Price; a whole bunch of others. And you also had satellite offices of other firms coming into the region. So, not only did you have growth in the region, but because of the venture fairs, we were attracting a lot of people from California and Boston to come to our fairs.

I would guess that the job growth was enormous. Between 1991 and 1994 the compound annual growth rates of venture-backed companies in the region was 74%, and the compound annual growth rate of dollars flowing into the region was 80%. In the 1990s, San Francisco had 879 venture-backed companies around that two and a half hour drive on both sides of San Francisco. Boston had 365. The Mid-Atlantic had 475. We had surpassed Boston as a center of venture capital activity.

Between 1990 and 1995, Mid-Atlantic IPOs exceeded Boston IPOs three out of the five years. The job growth is also astounding. The figures that I have track only the Maryland jobs, but in 1992 there were 40,000; in 1993, 60,000; in 1994 ,110,000 jobs created. But you see that doesn’t track jobs created in other parts of the country. I know that one of my companies, Integrated Health, had an employment of 100,000 people. So I would say that if you look at the jobs created in the region and outside of the region, it would be in the millions.

Q. Do you think a massive undertaking like MAVA or NEA could be started successfully today?

A. Yes, I think a new enterprise could be started today. I think Peter Thiel has done a pretty good job in building a major franchise in the last 10 years. I think if you really get involved with the right companies, you can build a franchise. What makes your venture capital unique? It’s the fact that you have a unique deal flow. Because you funded, like in NEA’s case 800 companies, you get these companies coming back to you, back to you, back to you, when they start new businesses. And so if you can build that coterie of what I call legacy venture deals, they will provide their own deal flow to you over time.

Q. Tell us about VC’s role in getting the internet off the ground.

A. We—Peter Barris, one of my partners, and I—financed UUNet which became the basis for the internet. It accounted for 70% of the traffic over the internet. Basically, it became the largest customer for Juniper, which was one of our data center companies that made communications equipment. That type of network allows you to attract companies to come to you because of what you can do for them.

Q. What advice do you have for newer venture capitalists? Is there still a place for generalists like yourself?

A. I still believe there is a role for the generalist, because my son started Greenspring Associates and he was a generalist as well. The technical background is absolutely invaluable, but you have to have common sense as well. I think a lot of people who are specialized tend to go into the business and they think they can make scientific judgments better than the entrepreneurs can. Or, you get operating people who go into the business and they think they should be running the business rather than letting the entrepreneurs run it. So I think, as always, venture capital will attract people who can see around the corner and see the way the world is changing: identifying paradigm shifts, because that is the true thing that makes you successful, and then combining a paradigm shift with a management team that builds a truly great company.

Edwin Warfield, CEO of citybizlist, conducts the CEO Interviews.

If you're interested in reaching CEOs, please contact edwin.warfield@citybuzz.co

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