Friday Letter: ‘Anyone with a track record can raise a fund today’

Anecdotally and statistically, first-time fund managers have not had much success amid the pandemic. But their fortunes could certainly turn soon, thanks to an increase in liquidity and the growing presence of family offices.

Since the start of the pandemic, I’ve maintained that emerging managers have had a difficult time raising funds. I felt this stance was on solid ground.

This belief, in part, came from speaking with emerging managers, who told me in 2020 that they extended their timelines to raise their inaugural funds due to the inability to meet prospective LPs in person amid the pandemic.

The numbers, provided by PitchBook, also indicate a decline. In the US last year, only 174 venture fund managers succeeded in closing their debut vehicles, the second year in a row that fundraising figures for new US GPs dropped, according to PitchBook. In 2018, a high of 218 US first-timers closed their funds.

PitchBook data released this month shows that through the first nine months of the year, only 113 first-time funds in the US have closed, indicating that the numbers once again are an indication of a reduction in emerging managers. All this is hard to fathom, given how overall fundraising worldwide is spiking, and firms, from solo GPs to multi-stage behemoths, are raising a record amount of capital.

Well, I’m starting to change my tune. And it’s from ignoring the PitchBook data on first-time funds.

First off, LPs tell me they’re constantly hearing from emerging managers, sometimes a dozen a week. A couple of weeks ago, I spoke on the phone with longtime venture banker Samir Kaji, who regularly blogs and tweets about GP-LP relations and trends. This year, he launched Allocate, with co-founder Hana Yang, to help LPs find compelling fund managers.

Kaji said emerging managers are growing and that there’s a lot of correlation with their numbers and the growing interest of family offices. Kaji said family offices are the dominant source of capital for emerging managers. And he added that a lot of these GPs raising from family offices have not yet officially closed their vehicles, and so they are not yet counted by PitchBook and other market researchers.

Then I met this week (in person, by the way) with an emerging manager who is nearing the final close on his third fund. This longtime Silicon Valley VC waved away my assumption when I said first-timers can’t close their fund.

“Anyone with a track record can raise a fund today,” he said, noting a number of GPs who have spun off from their established funds and already have commitments from institutional LPs.

A lot of liquidity is coming to LP portfolios as 2021 is proving a big exit year. I have no doubt that the returns will make their way to more emerging managers in the months ahead.

Let me know what you think. You can hit me up at