Limited partners or LPs — the pension funds, the university endowments, the family offices that largely provide venture firms with their spending money — are receiving a lot of attention from venture capitalists, some of it unwanted. VCs have begun knocking down their doors with requests for fresh capital commitments so they’ll have money to invest if the market cools down.
The problem is, many of these LPs are already over-allocated. LPs traditionally invest in many asset classes, such as public equities, and they allocate a small percentage of their portfolio to venture capital. Suddenly, they’re finding they’ve forked over more than they’d intended to VCs.
There are several reasons for this situation. First, VCs are returning to them ever faster for more capital — sometimes in less than two years’ time — because they are in vesting at such a furious pace.
Compounding the problem, not all LPs have received returns from their VC investments that they can recycle into new venture capital allocations. In some cases, this capital is still tied up in startups that are raising much more money than in the past and staying private longer. “We have some large exposures to blue chip names …read more
Source: Tech Crunch