Follow me @samirkaji for my random, sometimes relevant thoughts on the world of early stage venture and start-ups. Recently, I received an email from a seed fund manager inquiring about current Limited Partner appetite for investing in new seed fund managers. The query was in response to a declaration made by someone closely connected to LP’s that the current fundraising environment for venture is worse than what we saw following the housing bubble collapse of 2008. I’m not sure I fully agree with the statement when juxtaposing 2009 with today’s macro environment. Even with the recent public equities sell-off, the Dow is 3.5X larger than during Q1 2009. The current unemployment rate of 4% is less than half of what it was in 2009, and economic fundamentals appear to be robust. And with four consecutive years of $30B raised by US venture funds, it appears to be a very strong fundraising market for venture. However, putting aside these macro fundamentals, I do believe that the statement has merit within the emerging manager circuit, and for many new firms (particularly unproven Micro-VC’s) raising in 2018, the chill may be similar to what all of venture faced in 2009 and 2010. So why do I think that this will be the case? Many Limited Partners made their Emerging Manager bets during 2013–2016. As shown by the chart below from May 2017, 480 sub-$100MM fund I offerings were raised between January 2013 and December 2016.  During this time, both family offices and institutional investors (Fund of Funds, Endowments, and Foundations) actively invested in new emerging manager funds in hopes of landing an early spot with the next First Round Capital, True Ventures, or Felicis Ventures — note that many LP’s have had active emerging manager mandates over the past 5 years. However, beginning in early 2017, I’ve observed large masses of institutional LP’s recasting strategy and becoming content with simply following on to the bets they made in 13’-16’, and only opportunistically adding new names (often only 1–2 names/year). With many existing Micro-VC firms coming back to market in 2018, a significant portion of institutional allocation is already be spoken for. Higher opportunity cost For most new managers without existing and transferable investing track records, the family office market has served as the primary source of capital.Aside from the difficulty of finding family offices that are allocating into venture funds (most do not publish investing strategies publicly), the bar for meaningful allocations ($2MM+) has dramatically moved upward in recent quarters. Much of this reality centers on rising opportunity costs, both with other venture investment opportunities and other asset classes. On the former, Preqin pegged nearly 600 1st time funds in market globally in their recent report. This level of competition ensures that securing...

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