Emerging managers or smaller funds?

Mega funds raise most of the money and invest it into expensive seed rounds (and every round after). Emerging managers raise…less…of the money, invest it into seed rounds with more reasonable entry prices, and often suffer more dilution over the journey.

And yet - both can work. And they are fundamentally different products to be sold to LPs.

I think part of this never-ending debate comes down to language. Venture capital used to refer to a specific, adventurous type of risky investment into companies without much proof. Now it covers that + billion dollar slugs of capital into the most proven companies outside of the S&P500.

Perhaps the biggest change is simply the number of funds. If an LP needs to be in the top quartile (cough top decile cough) to outperform public markets in early-stage venture, they may need to consider 1,000+ funds in order to see enough of the market to make the best manager selections.

In any case, run your strategy. Find your believers in the limited partner world. Multiple games can be played in startups!

Onwards.

Recent Episodes of The Data Minute Podcast

• Why VCs Should

• Be Pirates

• Peter chats with Arian Ghashghai (Earthling VC) about investing in weird things early!

• Watch here

• Is "2 and 20"

• Still the Standard?

• Peter and Hamza talk about fund economics, including fees, expenses, and deployment rates.

• Watch here

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Cheers,

Peter Walker

Carta Insights