#74 Q1'23 Emerging Manager Report - Key Takeaways for VC

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“Life is like riding a bicycle. To keep your balance, you must keep moving.” -Albert Einstein

Our friends at Signature Block are back again with a new report! They collected 5,000 data points by surveying emerging managers in venture capital.

At a high level, “the entire tech ecosystem is adjusting to a new reality in 2023. Dealmaking is down. The rate of investment activity on AngelList, a proxy for the broader market, was the lowest they’ve ever measured. VC-backed companies recorded only $5.8B in exits during Q1 this year, less than 1% of the exit value generated in 2021, building up pressure within the ecosystem.”

“As is VC fundraising. 2023 is on pace to have the lowest fundraising total since 2017. Things are especially difficult for emerging fund managers with commitments concentrated in larger-size vehicles. LPs are moving to risk-off in VC, passing on emerging managers in favor of established managers.”

If you only have a few minutes, here’s a summary of key findings:

  • It’s a difficult time to raise a fund. 91% of fund managers reported that it was difficult or very difficult to close their fund with a majority raising for more than 6 months.

  • Most emerging managers are “breaking out” of existing firms, furthering the rise of the individual brand in VC. That said, solo GP funds are less common than it may seem.

  • There is increased specialization in venture with more emerging managers now identifying themselves as specialists than generalists.

  • While there has been an explosion of investment activity in AI/ML, emerging managers ranked it as the most overhyped space currently. They ranked longevity as the most under-hyped space.

Top Three Takeaways & Insights

If you enjoyed the summary above, I highly encourage you to read the full report. Here are our top takeaways and insights for VC GPs, CFOs/finance pros, and LP investors:

Background: 73% are “breaking out” of existing VC firms.

The majority of emerging managers left another firm to start their own, furthering the rise of the individual brand in VC. Of those that “broke out”:

  • 20.5% were a GP

  • 16.9% were a partner (non-GP)

  • 35.4% held a non-partner investing role

Fundraising: 85% took more than 6 months to close their recent funds. 52% took more than 12 months.

The slowdown in market activity is extending fundraising cycles. Of fund managers who are currently raising, 52% started raising more than 6+ months ago.

One fund manager shared this experience:

“Allocation with VC is low currently and we've had multiple long DD sessions with LPs only for them to go silent or walk away late on due to market conditions or bandwidth challenges - we need quicker decisions, even if its a no.”

Fund Strategy: Investors are most excited to invest in fintech and enterprise SaaS.

These spaces continue to be the “bread and butter” of venture investing. Despite the explosion of activity in AI and ML, it came in third.

That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”