SG Venture Partners

Great discussions at the New York State Comptroller’s Emerging Manager Conference, where institutional LPs shared candid insights on the realities of raising capital as an emerging manager. Some key takeaways from the private equity panel, featuring Joe Dawson (New York State Comptroller's Office), Andre Rice (Mueller & Monroe), Edward Powers (HarbourVest Partners), and John Bailey (Knox Lane): - The bar for institutional capital is higher than ever. NEW YORK STATE COMMON RETIREMENT FUND's transition program prioritizes managers with scalable strategies that can grow into larger commitments. Small, niche strategies often struggle to move up the capital stack. - Fundraising cycles are taking longer. The path from an emerging manager program to a direct institutional allocation is structured and requires multiple touchpoints over several fund vintages. GPs need to be prepared for a multi-year process. - It’s not just about the fund—it’s about the relationship. Managers who successfully transition build deep engagement with LPs outside of fundraising, whether through co-investments, strategic insights, or ongoing dialogue. - On NAV loans, LPs were clear—they’re not a positive signal. One panelist likened them to gasoline: useful in the short term, but with real risks if not managed carefully. Several LPs noted they actively avoid managers who rely on them, reinforcing that fund-level leverage needs to be approached with caution. Institutional fundraising today requires more than strong returns—GPs need to align with LPs on portfolio construction, capital pacing, and strategic fit. Understanding these dynamics early makes all the difference.

PitchBook and NVCA report that, for the first time in a decade, experienced managers have closed more funds than emerging managers. LPs are leaning into established relationships, and even top-performing emerging funds are finding it harder to gain traction—particularly with institutions. The reality is that even a strong emerging fund won't move the needle for large institutions. This makes diversifying fundraising channels critical, with a focus on family offices, HNWIs, and smaller allocators who can be more flexible. For those still targeting institutional capital, it’s not just about fund performance. Broader partnerships—offering unique insights, strategic access, or co-investment opportunities—can create the additional value needed to get attention.

AngelList recently published their State of U.S. Early-Stage Venture & Startups 2024 report, confirming what many in venture have been sensing—while the market has stabilized, the constraints on capital remain. - Seed valuations remain strong, despite weak distributions and underperformance from 2021-2023 vintages. - LP liquidity is tight, with valuation overhang keeping allocations high on paper but limiting re-ups. - AI dominates early-stage investing, making differentiation in the space increasingly difficult. For GPs in market, this environment requires a recalibration of fundraising strategy. LPs aren’t just choosing between funds—they’re managing broader portfolio constraints, making allocation decisions within a more rigid framework. This means: - More time spent with each LP, as the bar for conviction is higher. - Longer fundraising cycles, as capital deployment pacing has shifted. - Adjusted expectations on conversion timelines, as re-ups are not guaranteed. Simply put, fundraising today isn’t just about having a compelling strategy—it’s about understanding how and when LPs can actually move.

President Trump’s first day in office brought immediate policy moves, including executive orders and a proposed 25% tariff on imports from Canada and Mexico, set to take effect in February. While this signals some trade priorities, major uncertainties remain—fiscal policy direction, terminal interest rates, and how trade measures will evolve. LPs have expanded allocations to risk assets more cautiously than many expected, waiting for clarity on these macro factors. For GPs, this uncertainty presents an opportunity to engage. LPs are seeking perspectives on how to navigate this environment, and GPs who can frame risks and offer actionable strategies will stand out. Whether it’s showing how your fund hedges against rate or trade volatility, or identifying opportunities in shifting policy dynamics, now is the time to be proactive. Waiting until Q2 to start conversations risks losing momentum in a competitive fundraising landscape.

As we kick off 2025, the private markets fundraising landscape is showing signs of recovery. After a challenging few years, the outlook is shifting, with 34% of LPs planning to increase private equity allocations and 56% maintaining their commitments (source: Coller Capital’s Global Private Capital Barometer). M&A activity is gaining momentum, dry powder is poised for deployment, and the backlog of exits is expected to clear, creating a ripple effect across the industry. However, the competitive dynamics of fundraising are more intense than ever, with a clear shift toward differentiated strategies and proven performance. 2025 will be a year of recalibration, innovation, and opportunity. For GPs, it’s a time to sharpen value propositions, deepen LP relationships, and embrace a more tailored, data-driven approach to fundraising. We’re excited to support our clients and partners in navigating this pivotal moment.