Impact of Emerging Managers on Vc Landscape

Contrary to popular belief, LPs may not always find the best returns among the vanguards of Sand Hill Road. Emerging managers – typically defined as fund managers raising their first, second, or third funds – have consistently outperformed more established managers in venture capital: -60% of the top-performing VC firms in recent years were led by emerging managers, particularly in seed and early-stage investments. -Funds under $500 million, typically managed by emerging GPs, deliver higher returns than larger funds, which tend to underperform in later-stage rounds. -First-time and emerging managers frequently achieve top-quartile returns, with emerging funds often delivering returns of 2.5x or greater compared to larger funds. What’s behind this success? It’s a combination of agility, deep involvement in portfolio companies, and a strong focus on high-growth opportunities, particularly in sectors like AI. It can seem risky for institutional investors to park their capital in emerging managers like Kyber Knight Capital. But the data shows that more often than not, it’s the smart choice. Sources: Preqin, PitchBook, Cambridge Associates #VC #venturecapital #fundraising #SiliconValley

Traditional VC Is Dying and That Might Be Good News for Impact Investing. As Charles Hudson of Precursor Ventures illudes at TechCrunch Disrupt, the classic 7-10‑year, closed‑end venture fund was built for a world of easy IPO exits and patient LPs. That world is gone. What’s killing the old model? -Liquidity drought. Distributions to LPs have fallen to low levels, freezing many investors’ ability (and appetite) to invest in new funds. -Compressed exit math. Seed managers now run “what‑if” models that show a 3× DPI if they sell everything at Series B instead of waiting another 5‑7 years. The result? Secondary sales are becoming a core strategy, not an exception. -Fundraising bifurcation. LPs, stretched for liquidity, are concentrating checks in mega‑platforms and starving emerging managers; 2024 saw the lowest fund count in a decade even as dollars flocked to a handful of brand names. -Algorithmic pattern‑matching. To put ever‑larger funds to work, GPs are defaulting to data filters that miss the outlier founders who historically produced out‑sized returns. Why impact investors should care? -Shift from patience to velocity. If traditional funds must flip winners early, the capital stack needs a new layer of longer‑horizon, mission‑aligned money to shepherd breakthrough solutions through the messy middle years. -Opening for alternative structures. Evergreen vehicles, revenue‑based financing, donor‑advised funds, and catalytic funds suddenly look not just altruistic but competitive – they can recycle cash faster and stay in deals longer. -Diversity dividend. Pattern‑matching mega‑funds will overlook underestimated founders and geographies. Smaller, values‑driven investors can step in and capture both alpha and impact. Traditional VC isn’t collapsing; it’s evolving into an asset class where speed, liquidity, and data have a greater influence. That evolution leaves white space for mission‑oriented capital to do what it does best: back bold ideas too early, too diverse, or too patient for the new math of large mainstream funds. https://lnkd.in/eVym5ykd #VentureCapital #ImpactInvesting #FutureOfVC #CatalyticCapital #StartupFunding #VC #Impact #Innovation #AlternativeInvesting #LiquidityCrunch #NextGenInvestors

𝗘𝗺𝗲𝗿𝗴𝗶𝗻𝗴 𝗩𝗖𝘀: 𝗪𝗵𝗼 𝗶𝘀 𝗪𝗶𝗻𝗻𝗶𝗻𝗴 𝗶𝗻 𝟮𝟬𝟮𝟱? While the VC industry is experiencing its biggest set of challenges in over a decade, 𝙨𝙤𝙡𝙤 𝙂𝙋𝙨 𝙖𝙧𝙚 𝙦𝙪𝙞𝙚𝙩𝙡𝙮 𝙤𝙪𝙩𝙥𝙚𝙧𝙛𝙤𝙧𝙢𝙞𝙣𝙜. 𝗧𝗵𝗲 𝗙𝘂𝗻𝗱𝗿𝗮𝗶𝘀𝗶𝗻𝗴 𝗟𝗮𝗻𝗱𝘀𝗰𝗮𝗽𝗲 𝗶𝗻 𝟮𝟬𝟮𝟱: • H1 2025: $26.6B raised across 238 funds (decade low) • First-time fund managers: Only $1.8B raised across 44 funds (⬇️ 32% YoY) • Median time to close: 15.3 months (⬆️from 12.6 months in 2024) • Top 30 VC firms captured 74% of all LP commitments 𝗕𝘂𝘁 𝗛𝗲𝗿𝗲'𝘀 𝗪𝗵𝗮𝘁'𝘀 𝗥𝗲𝗮𝗹𝗹𝘆 𝗛𝗮𝗽𝗽𝗲𝗻𝗶𝗻𝗴: • The Median VC fund from 2018-2024 hasn't returned more than 0.03x DPI • Smaller funds consistently deliver higher TVPI across ALL vintage years • At the 90th percentile, small funds hit 4.17x TVPI vs 2.59x for $100M+ funds (2017 vintage) 𝘛𝘩𝘦 𝘴𝘮𝘢𝘳𝘵 𝘓𝘗𝘴 𝘢𝘳𝘦 𝘭𝘰𝘰𝘬𝘪𝘯𝘨 𝘧𝘰𝘳 𝘥𝘪𝘧𝘧𝘦𝘳𝘦𝘯𝘵𝘪𝘢𝘵𝘪𝘰𝘯 & 𝘵𝘰𝘱 𝘵𝘪𝘦𝘳 𝘱𝘦𝘳𝘧𝘰𝘳𝘮𝘢𝘯𝘤𝘦 - 𝘯𝘰𝘵 𝘳𝘪𝘴𝘬 𝘢𝘷𝘦𝘳𝘴𝘦 𝘴𝘢𝘧𝘦 𝘣𝘦𝘵𝘴 𝗧𝗵𝗿𝗲𝗲 𝗧𝘆𝗽𝗲𝘀 𝗼𝗳 𝗦𝗼𝗹𝗼 𝗚𝗣𝘀 𝗔𝗿𝗲 𝗪𝗶𝗻𝗻𝗶𝗻𝗴:* 1️⃣ Former operators (Joshua Browder, Nik Milanovic) 2️⃣ Tier 1 VC spinoffs (Rex Salisbury ex-a16z, Peter Boyce II ex-GC) 3️⃣ Social influencers (Packy McCormick, Turner Novak) *Several GPs also fit into multiple categories above 𝗧𝗵𝗲 𝗦𝗲𝗰𝗿𝗲𝘁 𝗪𝗲𝗮𝗽𝗼𝗻: • Almost all of these solo GPs started small & worked their AUM up • Most raised from high net worth LPs, which are ~56% of sub-$10M funds • Median commitment size in Fund I under $10M: Just $75K 𝗪𝗵𝘆 𝗦𝗼𝗹𝗼 𝗚𝗣𝘀 𝗔𝗿𝗲 𝗪𝗶𝗻𝗻𝗶𝗻𝗴: • Speed: No partnership politics, instant decisions • Specialization: Deep expertise mega-funds can't match • Founder alignment: Often former operators who get founder mentality • Lower fees: Leveraging technology with smaller teams means more shots on goal, more capital goes to startups, and less legal overhead • Secondaries: Liquidity in a $60B+ secondaries market is a top LP priority 𝗧𝗵𝗲 𝗕𝗼𝘁𝘁𝗼𝗺 𝗟𝗶𝗻𝗲: While everyone chases bigger teams and Blackstone-in-a-hoodie strategy, solo GPs are quietly building the future of venture. They're not trying to be smaller versions of a16z—they're creating an entirely new playbook. Sources: Alex Klein/Nucleus Talent, Carta, PitchBook-National Venture Capital Association Q2 2025 Venture Monitor

The Evolving Landscape of Venture Capital: Are Emerging Managers DOA? There’s been a lot of debate lately around whether the VC ecosystem is being negatively impacted by the largest firms hoovering up LP money at the expense of Emerging Managers. The observation is real and it’s becoming increasingly clear that the venture capital industry is at a critical inflection point. But the phenomenon isn’t new. It’s been unfolding for years and was easy to spot. I wrote about it a few years back in a presentation titled “The Three Body Problem: Finding The New Stable Points In Venture Capital” and I’ll add a link in the replies if you’re interested in learning more. With this said, other experts have been writing about it as well. For instance, @wolfejosh ’s recent prediction that 30-50% of venture firms may cease to exist in the coming years is not just a provocative statement, but a stark warning to Emerging Managers and many established VC firms. When we consider that only 17% of venture funds make it to fund 4, and that 44% of VC capital raised this year went to just two firms, it becomes clear that the industry is starting to consolidate. This consolidation is not just a theoretical concern to Emerging Managers - it's a very real threat to the diversity and dynamism that has long been the hallmark of the very early stage VC ecosystem. However, while the outlook may seem bleak for many Emerging Managers, I believe there is a path forward. The key lies in understanding what Founders and LP are struggling to find within the "established" VC ecosystem and aligning with these unmet market needs. For Emerging Managers, the writing is on the wall: adapt or perish. The days of simply working hard and expressing a desire to LPs that you deserve to be a VC are long gone. Today's landscape demands true differentiation and specialized skill. Emerging Managers will do best if they position themselves firmly within one of two key boxes: The Solo VC or the Non-Consensus Alpha seeker. Hunting in thematically consensus spaces or chasing serial Founders with many options is a good way for an Emerging Manager to fail. The Solo VC Option Not all Emerging Managers fit in the Solo VC box. It requires a unique combination of skills, experience, and network that can provide outsized value to founders. Solo VCs win deals not because they can write the biggest checks, but because they can provide the most value per dollar invested. They are often industry veterans, serial entrepreneurs, or individuals with deep expertise in specific sectors. Their ability to provide hands-on mentorship, make crucial introductions, and offer strategic guidance is their competitive advantage. They need to be a “brand” in and of themselves, and if they aren’t, they’ll struggle to source and win deals. (For the full post click on the link that follows. LinkedIn limits word count!) https://lnkd.in/e_jqxhks

There are clear pros and cons of investing in Emerging Managers. Here are 12 succinct reasons why to investing in Emerging Managers: 1. Attractive Risk / Return Profile - From 2004 to 2016, the top-performing Venture fund was a new or developing fund (Fund 1-4), 9 out of 13 times. Out of the Top 10 funds over the observed vintage years, only 35 out of 130 were established funds. (Cambridge, see image) - A portfolio of smaller funds (up to $50M) has the potential to outperform a portfolio of larger funds (funds above $150M) by 45-60% (Pattern Ventures) 2. Fund-of-Fund Approach as Extra Sauce - When analyzing fund performance for FoFs investing in the US and Europe, the data shows that early vintages show strong financial returns across both the top quartile, median, and third quartile. (Preqin, as of Sept. '23) - see 2nd image 3. Access - Gaining the desired access to the best Emerging Managers is easier vs. getting access to the best startups. 4. Alignment - The mgmt. fee is often bigger in established funds vs. emerging funds (even though Emerging Managers give up substantial income) - see 3rd image 5. Co-Investment Opportunities - Co-investment opportunities can give LPs the desired reps in conducting due diligence on startups, provide de-risked access to outlier companies, compound your return potential, and open a seat at the table with other investors you otherwise would never meet. 6. Access to Top Talent - Investing in Emerging Managers with the mandate of introductions to talent, especially founders, can be a significant pathway to industry insights and learnings. 7. Insights - Whatever industries the Emerging Managers invest in, they usually have a lot of expertise and a unique network in this industry. A good relationship with an Emerging Manager can provide unique insights and learnings about an industry of interest for LPs. 8. More Time to Build Trust - The benefit for LPs to investing in Emerging Managers, in comparison to investing directly in startups, is the timeframe you have to build a trusted relationship with the GP and vice versa. 9. Time Efficiency - This is the least sexy reason, but it is true. The amount of time you have to spend to find and invest in the best startups vs. finding and investing in the best Emerging Managers is substantially different. 10. Access to Strategics - Experienced Emerging Managers will often have built out a network with companies, firms, and other family offices that can strategically align with the LP’s thematic investment strategy. 11. “Influence-to-Investment Ratio” - Emerging Funds are a great opportunity to get a seat at the table and to be in proximity to the GP, while writing reasonable check sizes. 12. Impact - There are several different pathways to achieving the desired impact through investing in Emerging Managers.