Venture Funds Aren’t the Same Product as Each Other Anymore
I used to think raising from LPs was something you did every three years. A checkbox, basically. Tell the story, refuel the tank and get back to investing.
Part of that was the benefit of a small fund with a track record. But also when we started we had a unique product almost by default. A small, deliberately capped, founder-aligned seed fund was a novel product (still is IMHO).
Yet the LP-GP dynamic seems much more nuanced these days.
On our side, we’re not really the same product as each other anymore. A solo GP, a sector specialist, a small seed fund like ours, a multi stage platform with an evergreen vehicle attached, continuation funds, SPVs. Even the basic shape of a fund is a choice now, and everyone is choosing differently. Which means being different doesn’t say much on its own anymore. The marketplace of venture products is more like a bazaar.
On their side, the institutions have been moving just as much. LPs have spun out, merged into bigger ones, changed strategy, shifted who covers what. Asset sizes have moved in both directions, and an institution that has tripled sometimes can’t write a check small enough to fit a small fund. And the person I built the relationship with is sometimes gone, so you can have a great decade with an institution and still be starting over with whoever inherits the account.
Peers have points of view on LPs now, which I don’t remember much of ten years ago. We compare notes on who’s a good partner, who asks good questions, who sticks around when a year is ugly. Money used to just be money. Some have dedicated IR teams, and others are spending time thinking hard about LP diversification and strategy.
The LP job got harder in a way I underrated for a long time. They’re comparing genuinely different products in the same meeting. The AI boom widened the spread further. Power law seems to work between funds and not only inside them, so if returns concentrate into a handful of companies then LP dollars concentrate too. But that could be a lagging indicator so 🤷
Which makes me wonder if access, not returns, is becoming the product for some LPs. That’s a strange dynamic but you can see it play out in the noise on X. And others are asking a bigger question, whether venture still earns a place for them at all.
Selling LPs isn’t new, I’ve written before that it’s a big part of this job. What’s new is that the business looks very different from when we started, on both sides.
Curious the LP perspective here, it’s still somewhat of a black box for me.
