The Future of Venture Capital

The venture capital landscape is experiencing a seismic shift as emerging managers consistently outperform established firms, generating superior returns through specialized investment strategies and hungrier approaches to value creation. With traditional VC firms growing larger and more removed from early-stage opportunities, emerging managers – typically raising funds under $100M – are perfectly positioned to capture the most promising deals at attractive valuations. Recent data supports this transformation. According to Decile Group, which has helped launch over 600 emerging manager funds globally, these specialized managers are raising an average of $12MM for their first funds and securing impressive early returns. These smaller, focused funds are often led by operators-turned-investors who bring deep domain expertise and strong founder networks in specific sectors or geographies. Key advantages of emerging managers include: • Greater alignment with founders due to smaller fund sizes • More hands-on value addition and personal attention • Access to proprietary deal flow through specialized networks • Higher motivation to prove their investment thesis • Ability to move quickly on promising opportunities Fresh perspectives and innovative investment approaches However, identifying and evaluating emerging managers requires a different approach than traditional due diligence. The lack of extensive track records means investors must rely more heavily on qualitative assessment and forward-looking indicators. This is where programs like the LP Institute come in, offering structured frameworks and hands-on experience in emerging manager evaluation. Through an 8-week intensive program, limited partners gain direct access to hundreds of vetted managers while developing the skills needed to make confident investment decisions in this exciting space. Whether you’re a seasoned LP looking to diversify your venture exposure or a new investor eager to tap into the next generation of venture talent, this guide will walk you through the essential strategies for successful emerging manager investments. We’ll explore evaluation frameworks, risk mitigation techniques, and practical tips for building a high-performing emerging manager portfolio. Why Do Emerging Managers Outperform? The data consistently shows that emerging managers generate superior returns compared to established venture firms. This outperformance isn’t just luck – it’s the result of structural advantages, increased motivation, and the ability to capitalize on opportunities that larger funds simply cannot pursue. Through Decile Group’s experience with over 600 emerging manager funds, clear patterns of success have emerged. The Power of Small Fund Economics First-time funds averaging $12MM in size can generate outstanding returns by focusing entirely on pre-seed and seed-stage investments. These smaller funds succeed because: