So Carta has its latest data out on VC “Emerging Managers” or folks managing $10m-$100m.
And what is shows is smaller VC funds from 2017-2020 are seeing their returns decline dramatically over the past 24 months.
New “emerging managers” were a hot category in the boom times of 2020-2021, but a pretty tough one to raise back for the first solo SaaStr Fund in 2016.
The returns show a decline:
Now there is a lot going on in this chart, and likely several root causes.
But net net what’s clealy happening is lots of unicorn and hot rounds happened in 2018-2021 … and those hot deals in many cases aren’t hot anymore. Leading to no more mark-ups and no more increases in valuation, along with some mark-downs and write-offs. And a drop in net IRR, i.e. average annualized returns over the life of the fund.
And new emerging VC funds are still negative overall, from 2021-2023.
In part that can be due to “fee drag”, where fees are called early, which on a net basis can lead to funds have negative IRR in the first year or two or even longer. But likely a lot of that is that the mark-ups and increases in valuations on those investments haven’t come through.
But will AI change this? So many AI investments are growing so rapidly.
We may see these curves rebound. We’ll see. For now, they aren’t yet.
