Key Takeaways
- Attribute the record to the people: Experience at a recognized platform matters only when the current partners can show what they personally sourced, selected, won, supported, and exited.
- Look for a specific reason to win: A narrow, evidence-backed advantage is more useful than a broad claim about network or access.
- Keep fund size tied to the opportunity set: Too much capital may change the strategy, while too little may limit follow-on support and firm development.
- Underwrite the organization as well as the portfolio: Team stability, partner economics, controls, valuation, reporting, and conflict procedures all matter.
A Public Example
ILPA's DDQ gives emerging-manager diligence a useful structure without assuming every manager has a long institutional history.
- The team record has to be rebuilt: LPs should connect prior investments to the people, decision rights, sourcing role, and economics that actually produced them.
- The operational lesson: Smaller managers still need credible answers on compliance, reporting, valuation, conflicts, and key-person risk.
- Useful number: A new fund may not show meaningful fund-level performance for five to six years, so attribution and references matter early.
Venture fund outcomes are widely dispersed, which makes manager-level evidence more important than broad asset-class averages. 2019-vintage TVPI percentiles as of Q4 2025 across venture funds tracked by Carta. More recent vintages remain immature.
2019-Vintage Venture Fund TVPI Dispersion
Venture fund outcomes are widely dispersed, which makes manager-level evidence more important than broad asset-class averages.
View chart data and assumptions
| Percentile | TVPI |
|---|---|
| 25th | 1.02x |
| Median | 1.33x |
| 75th | 1.90x |
| 90th | 3.01x |
Separate Individual Attribution From Firm Brand
Benchmark gap: For 2019-vintage Carta funds, 90th-percentile TVPI was 3.01x, versus 1.90x at the 75th percentile and 1.33x at the median. Attribution work needs to explain movement across a very wide range.
Many emerging managers built their experience at other investment firms. LPs should separate the previous platform's reputation from the current team's direct contribution.
- Sourcing: Which opportunities did each partner originate?
- Underwriting: Who developed the investment case and led the decision?
- Winning: Who secured access and allocation?
- Portfolio support: What did the partner contribute after investing?
- Exit involvement: What role did the partner play in realizing the investment?
A firm-level track record is not the same as partner-level attribution.
Test the Reason the Firm Should Exist
An emerging manager needs a clear and defensible reason to win.
That advantage may come from:
- Founder relationships: A network that provides early or differentiated access.
- Technical expertise: The ability to assess a specialized domain.
- Geographic focus: Local access or knowledge that broader firms may lack.
- Stage specialization: A process designed for a particular point in company development.
- Operator experience: Practical knowledge valued by founders.
- Structural access: A repeatable route to opportunities through a market, community, or transaction type.
The narrower the claim, the easier it is to test with investments, passes, funnel data, and references.
Review Fund Size Discipline
Fund-size context: NVCA reported a $21.3 million median US fund size in 2024, compared with $10 million outside California, New York, and Massachusetts.
Emerging-manager strategies often work best when fund size closely matches the opportunity set.
- Too large: The manager may be pushed toward later-stage rounds, larger checks, higher prices, or lower ownership efficiency.
- Too small: The fund may struggle to support successful companies or finance a durable organization.
- Appropriate size: Check sizes, company count, reserves, and operating budget support the stated strategy without forcing it to change.
Evaluate Institutional Readiness
Reporting expectation: CalPERS' public review describes 120 days for GP financial reporting and a typical two-quarter performance lag. An emerging manager should show it can meet a defined institutional calendar.
A small fund still needs dependable institutional foundations.
- Fund administration: Who maintains the books, capital accounts, and investor records?
- Audit and counsel: Are appropriate external providers in place?
- Valuation: How are private holdings marked and approved?
- Compliance and cash controls: Are responsibilities separated and transactions properly authorized?
- Reporting: Can the manager provide clear and consistent quarterly information?
- Conflicts: How are personal investments, SPVs, co-investments, and cross-fund allocations handled?
Understand Team Risk
Carry-allocation example: In a 3-partner team splitting carry 50%/30%/20%, the departure of the 50% partner is not equivalent to losing one-third of capacity. Key-person analysis should follow economics and decision rights.
Key-person dependency is often greater in a smaller firm. LPs should understand how the partnership works before committing capital.
- Decision rights: Who can approve or block an investment?
- Partner economics: How are ownership, management-company income, and carry divided?
- Vesting: What incentives encourage the team to remain through the fund's life?
- Succession: Who can assume responsibility if a partner becomes unavailable?
- Departure provisions: What happens to the portfolio and economics if someone leaves before investments mature?
Ask What Would Prove the Thesis Wrong
A credible manager should be able to identify evidence that would challenge its strategy.
- Weak sourcing conversion: The pipeline does not produce enough investable opportunities.
- Low win rate: The firm sees attractive companies but cannot secure allocations.
- Limited follow-on access: The manager cannot maintain positions in its strongest companies.
- Pricing pressure: Competition makes target ownership uneconomic.
- Insufficient opportunity flow: The stated market does not generate enough institutional-quality investments.
The ten largest US venture funds captured 32.9% of capital raised in 2025, compared with 13% in 2021. Share of annual US venture capital raised by the ten largest funds. Fundraising concentration is market context, not evidence that larger or smaller managers will outperform.
Venture Fundraising Has Become More Concentrated
The ten largest US venture funds captured 32.9% of capital raised in 2025, compared with 13% in 2021.
View chart data and assumptions
| Period | Share captured by ten largest funds |
|---|---|
| 2021 | 13% |
| 2025 | 32.9% |
When the Risk Can Be Worth It
An emerging manager may fit when the LP can accept firm-building risk in exchange for:
- Strategy focus: A specialized mandate that remains close to its opportunity set.
- Direct GP access: A closer relationship with the people making investment decisions.
- Meaningful alignment: Economics and incentives that connect the team to long-term fund outcomes.
- Differentiated opportunity access: A credible advantage that is difficult for larger or more generalist firms to reproduce.
The diligence standard should remain high because the evidence base is smaller. See the venture fund diligence checklist for a broader review structure.
CalPERS: a $1 billion emerging-manager mandate with explicit objectives
CalPERS publicly announced a $1 billion private-equity commitment in 2023 to identify and support emerging and diverse managers. Its stated objectives combine return, differentiated access, and development of future management talent.
The amount creates room for a portfolio of managers rather than a single selection.
CalPERS says it has run emerging-manager programs for more than three decades.
Risk-adjusted returns, overlooked opportunities, and cultivation of manager talent.
What it shows: An LP can support emerging firms without lowering diligence standards. Attribution, decision rights, team stability, fund size, operations, and reporting still determine whether a manager fits the mandate.
Primary sources: CalPERS, Emerging and Diverse Manager Program. Public transaction evidence only; this is not represented as a Frontierspace investment or result.
Frequently Asked Questions
What qualifies as an emerging venture manager?
Short answer: The term often includes first-time institutional funds, spinouts, and younger firms with limited fund-level history. The relevant issue is how much of the prior evidence belongs to the current team and strategy.
How can LPs verify a manager's track-record attribution?
Short answer: Review investments deal by deal: who sourced each company, led diligence, won access, served on the board, made follow-on decisions, and influenced the exit.
Related Reading
Emerging manager scorecard, Institutional LP questions, and VC GP commitment.