Pile-ins, payouts, and pacing pressure: the investors behind the VCs open up
The money behind the money is thrilled, mostly.
Key points
- LPs are piling into OpenAI and Anthropic across multiple funds, concentrating risk but expecting big returns.
- Venture funds are returning to raise new money faster, with pacing shrinking from 24-36 months to 12-18 months.
- Secondaries have become a common liquidity tool in venture, alongside IPOs and M&A.
Limited partners (LPs) who supply capital to venture firms are enthusiastic about current conditions, despite acknowledging concentration risks and faster fundraising cycles. In a TechCrunch interview, Beezer Clarkson of LGT Capital Partners and Amit Bhatti of TrueBridge discussed how LPs are navigating a market dominated by OpenAI and Anthropic.
Both investors said the concentration in these two AI companies is unusual but not necessarily alarming, given the potential for high returns. However, they flagged concerns about the accelerated pace at which venture firms are returning to raise new funds.
Concentration and pacing concerns
Clarkson and Bhatti noted that LPs typically diversify across many venture firms, but now many funds hold the same AI companies. Bhatti described the concentration as a feature of venture's power law, while Clarkson said early-stage funds still offer more diversity.
The investors also highlighted that funds are coming back on one-year pacing instead of the traditional two to two and a half years. Bhatti called this a 'yellow light' situation that gives him 'a little bit of heartburn,' though he noted that current investments are in companies with real revenue, unlike past crypto moonshots.
It’s definitely a yellow light. It gives us a little bit of heartburn.
— Amit Bhatti
Liquidity and emerging managers
Secondaries have become more sophisticated and prevalent in venture, providing liquidity options beyond IPOs and M&A. Clarkson said the taboo around selling stakes is fading, and Bhatti called secondaries the third leg of liquidity.
On emerging managers, both said fundraising is harder but still possible for differentiated funds. Bhatti mentioned backing young GPs who started an accelerator at MIT, Harvard, and Stanford, while Clarkson noted more flexibility for part-time investors.
