Are LPs pulling back from new fund commitments, or merely becoming more selective while remaining active?

Jason Lemkin · Jan 13, 2023

Experienced LPs are currently relaxed about the downturn, still viewing venture as the best asset class in their portfolio and treating this as part and parcel of it, though none of them want to add another manager.

Distributions from 2021 exits and IPOs lag by many months, so cash collections landed deep into 2022; LPs are judged annually

Scope: 'this is what I've heard'; cites his own Salesloft exit closing 12/31/2021 with distributions arriving in 2022

32:57 20VC: WTF is Going On in VC? Are VCs Still Investing? How Has What VCs Want in Investments Changed? Are LPs Investing in New Funds? Why VCs That Invest in Public Markets Are Losers? Dec 2023; Will It Be Better Or Worse with Jason Lemkin

Beezer Clarkson · Oct 18, 2023

It is false that LPs have stopped making new commitments; they are being more selective but are absolutely still investing

Data isn't all in, but dollar volume into funds this year is nowhere near last year's peak, which is unsurprising given last year was a peak

Scope: dollar volume well below 2022; full data not yet available

7:40 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Harry Stebbings · Nov 3, 2023

LPs are not dropping strong existing managers; they are downsizing commitments where they have mandated outflows, and the managers who are struggling are undifferentiated ones without existing relationships

He speaks to roughly two new LPs a week and has seen ~50 since the correction

Scope: endowments and hospital institutions with mandated outflows are downsizing significantly

26:16 20VC Roundtable: Why Early Stage Founders Should Not be Investing, Why Great Founders Have Low EQ, How the Structure of VC Firms Will Change, Will Founder-Led Funds Compete with Sequoia & Is Investing a Team Sport?

Tomasz Tunguz · Apr 21, 2023

The biggest reasons LPs passed were solo GP key-person risk and timing — with public markets down but private marks not yet written down, LPs couldn't tell their true allocation and needed more time

A 50/50 public-private LP who saw publics halve became three-quarters private on paper while pending private write-downs made real allocation unknowable, freezing new commitments

10:23 Denominator effect and solo gp risk explain lp pullback