Not long after New Enterprise Associates Inc. wrapped up $2.3 billion for its 10th fund in September 2000, Richard "Dick" Kramlich, the firm's gray-haired eminence, walked out with Scott Kriens, then chairman, president and CEO of Juniper Networks Inc., to his company's parking lot. Kriens, who had just invested in NEA X, was quizzing Kramlich on other firms' plans to downsize in the wake of the tech downturn.

"You guys are going to do that, right?" Kriens asked.

"I don't think so," Kramlich replied. NEA had a plan, he told Kriens, without delving into any of the details.

Since the Internet bubble, NEA has been a proponent of bigness. With assets of $8.5 billion, it easily dwarfs its peers. While it is unique on that score, NEA believes its style of investing in multiple stages, geographies and industry sectors requires an institutional depth and breadth to deliver attractive returns. Today, even as many firms are scaling back, NEA is targeting $2.5 billion for its 13th fund, same as its predecessor, because, Kramlich argues, opportunities for investing haven't been this good in a long, long while.

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Bubble, trouble, toil and muddle

"This is probably the best time for investing since we founded NEA in 1978, because these funds are dropping, dropping, dropping," says Kramlich, who once partnered with Silicon Valley legend Arthur Rock. "It doesn't make me happy -- I like people to succeed. But the fact is, you really have to have staying power in this business."

Kramlich and his firm spent the post-bubble years, like nearly everyone else, trying to repair the damage. Nine years into it, the fund has made up for some poorly performing early bets, though its internal rate of return is a measly 1.2% as of Dec. 31, according to public disclosures. Its 1999-vintage Fund IX, with $650 million, remains under water at -10.6%.

That NEA's 2000 pool now ranks as "top quartile" for that year speaks volumes of the industry's most calamitous chapter yet. It's a quiet coda to perseverance.

"Never, never, never, never give up," Kramlich quips, invoking Winston Churchill's famous post-blitz exhortation. "We were, I'm sure, just as guilty as everyone. But we were able to get through that whole period of time without too much damage."

The Menlo Park, Calif., firm certainly had its share of missteps. NEA X invested in 122 companies and wrote off about $280 million on 35 companies, or about 12% of invested capital. Kramlich prefers not to dredge up the dogs. The firm had to overcome some "relatively high-priced deals" that the fund invested in the early months, and "built back on those earlier mistakes," he allows.

After the tech downturn, NEA reinvigorated its life sciences forays, which helped offset losses. Specialty pharma company Pharmion Corp. of Boulder, Colo., went public in 2004 and was acquired by Celgene Corp. of Summit, N.J., in 2007. NEA's $38 million outlay had a 6.8 times return multiple. Esprit Pharma Inc. of East Brunswick, N.J., produced a 6.6 times return.

Some technology bets turned out OK after all, such as Data Domain Inc. Two years after a banner initial public offering in 2007, the Santa Clara, Calif., company pitted two buyers -- EMC Corp. and Net-App Inc. -- to raise the latter's takeout offer 34%, to $2.2 billion. NEA extracted a 28-fold profit on its $14 million outlay.

Other wins: wireless infrastructure provider Neutral Tandem Inc. (19 times return), electronic medical records provider Salesforce.com Inc. (3 times) and digital mapmaker Tele Atlas NV (4 times).

NEA X fully exited 55 companies, generating slightly more than $1.6 billion in distributions, or about 72% of contributed capital. It still has 67 portfolio companies, 11 of which are public, with a value of $148 million. Because the fund's shelf life hasn't run out -- NEA funds are 12-year vehicles -- it still hopes to return between 1.5 times and 2 times committed capital by the time it winds down.

Now 74 and still going strong, Kramlich sits on the board of about a dozen companies, besides year-long stints in Shanghai -- NEA owns stakes in 16 Chinese companies.

NEA is all about evolution, Kramlich says. "The whole scope of what we're trying to do retains its initial characteristics but on a broader basis," he says. "Unless you can really give people the knowledge and confidence that what you're doing can cope with this vastly more complex task, you're not going to attract the capital and deliver performance."

Also see:

Bubble, trouble, toil and muddle