Toughest times for VC newbee's, as established fund's dominates

For newcomers seeking to raise venture capital, things are looking bleak.

While global VC fundraising is on track for its worst year since 2015, the pain isn’t being felt equally. Emerging managers, firms that PitchBook defines as having launched fewer than four funds, are facing their worst environment in 10 years, raising less capital than ever before, according to the latest report.

In the first half, VCs closed 632 funds to raise $80.5 billion, putting this year on track for fewer than 1,300 new vehicles, a far cry from the all-time high of 4,000 set in 2021.

But the industry’s best-known firms, while not immune to the broader struggles, are still raising large sums even as newcomers are iced out. When Countdown Capital, founded in 2020, announced it was closing down earlier this year, founder Jai Malik acidly observed, “The future of this space favors larger firms than mine.”

The potential consequences of a continued emerging managers pullback for the entire venture market could be far-reaching: greater competition between already cash-starved startups, regional schisms continuing to grow, and an overall shrinkage of the VC ecosystem.

These three charts highlight the tough times newcomers and emerging managers are facing.

Emerging managers have captured only 23% of fund value year-to-date, a 10-year low as capital becomes more concentrated among experienced firms. In this difficult, more cautious environment of elevated interest rates and muted exits, LPs are prioritizing experience to an even greater degree.