Direct Investing Becomes Viable When the Programme Can Repeat
Affording one venture-fund commitment is different from sustaining a direct programme. Several vintages, enough managers to spread risk and a team to oversee them all draw on the allocation.
Manager minimums limit what the LP can buy. Its chosen part of the market sets another limit. Larger funds take most of the capital even though they make up a minority of funds.
In Carta's Q4 2025 sample, funds above $100 million represented 11% of funds but 52% of committed capital. These figures describe market structure rather than fund quality. They show why the scale required for meaningful direct access varies by segment.
Scale Changes the Available Portfolio
A $25 million allocation may support only a few managers. At $100 million, the LP can build a focused set over several years. With $500 million, core funds and specialists can sit beside a co-investment allocation.
These figures describe different operating models, with no universal threshold. Access and minimum cheques still matter, as do concentration limits and the cost of running the programme.
Scale and Direct-Fund Choice
| Allocation | Possible approach | Main issue |
|---|---|---|
| $25M | Two or three direct funds or a pooled route | Concentration and limited vintage spread |
| $100M | Focused direct manager programme across years | Balancing commitment size and relationship count |
| $500M | Core managers, specialists, and selective co-investments | Building staff and avoiding overlap |
The Work Moves Inside the Institution
Removing the fund-of-funds layer transfers selection work to the LP. Sourcing and reference checks come before commitment. Legal review and years of valuation work and capital calls add to the workload.
A pooled route includes some of that work in its fee. Comparing headline fees alone can miss the institution's internal cost and differences in access.
The Useful Commitment Range
Spreading a small programme too widely creates positions that cannot move the result. Concentrating it too heavily makes one manager decisive. A commitment range forces the LP to face both limits.
Spreading commitments within that range across vintages leaves capacity for successor funds. Deploying the whole allocation at once removes some of that room.
Before Building Directly
- Can we reach the desired managers? Access is part of viability.
- Can we write useful cheques? A manager's minimum may be affordable but still leave too much of the allocation in one fund.
- Can we fund re-ups? A direct relationship normally spans several funds.
- Can we monitor look-through risk? Company and sector overlap matter.
- What is the full cost? Staff, systems, legal work and external fees all contribute.
Money for a few direct funds does not ensure enough staff or access for a lasting programme. Repeated work across vintages adds costs that affect the net result compared with other routes.
Commitment Size Creates the Practical Floor
A $25 million allocation can make 2 commitments of $10 million and retain $5 million for timing or a pooled specialist route. With 10 direct funds in the same budget, the average relationship falls to $2.5 million.
At $100 million, 10 equal direct relationships receive $10 million each. That is a more credible starting point, provided the LP can continue supporting the managers in their next funds.
More Scale Creates More Choices
A $500 million allocation supports either 20 relationships at $25 million or 10 at $50 million before any co-investment budget. That scale also reaches the part of Carta's sample where funds above $100 million held 52% of committed capital.
A $25 million allocation can support 2 focused $10 million commitments with $5 million left for timing or pooled funds, while $100 million can support 10 direct fund commitments and $500 million can support 10 larger core relationships.
Direct Fund Commitment Capacity
Direct investing becomes more practical when the allocation can support real commitments without thinning the relationship list.
View viability data and assumptions
| Allocation | Illustrative direct funds | Average commitment | Practical implication |
|---|---|---|---|
| $25M | 2 | $10.0M, with $5M unallocated for timing or pooled funds | Focused access with limited manager coverage. |
| $100M | 10 | $10.0M | Direct portfolio becomes more plausible. |
| $500M | 10 | $50.0M | Core relationships and co-investment access may be possible. |
The First Portfolio Is Only the Beginning
An LP can place $100 million into ten commitments of $10 million and appear diversified on day one. It has also used every dollar. When the first manager returns with a larger successor fund, the programme has no room to re-up.
Successor funds make the programme's later years different from its first. Re-ups may outnumber new relationships and absorb much of the budget. Available cash and the case for each fund determine how many the LP can support.
Frequently Asked Questions
Can a $25 million allocation invest directly in venture funds?
A $25 million allocation can invest directly, though its portfolio will be focused. A few meaningful relationships may offer more value than many cheques below useful manager minimums.
When does a fund-of-funds make sense instead?
It becomes attractive when the institution wants breadth but lacks the scale or staff to construct it directly. The fee buys something useful only when access and selection improve the net result.