Emerging VC Managers Defy Expectations in 2023 Fundraising
While 2022’s challenging fundraising environment disproportionately impacted emerging venture capital managers, 2023 has revealed surprising resilience in this sector. Despite ongoing market headwinds, these newer firms are demonstrating their staying power in the competitive VC landscape.
The Numbers Tell a Compelling Story
According to PitchBook data through Q3 2023:
- $11 billion raised by U.S. emerging managers across 170 funds
- Established VCs raised $31 billion across 174 funds
- Emerging managers captured 26% of total capital raised (up from 23% in 2022)
While these figures remain below 2022’s $41 billion peak (itself down 31% from 2021), emerging managers are maintaining their historical share of overall fundraising despite depressed market conditions.
Why Emerging Managers Continue to Succeed
Vincent Harrison, VC analyst at PitchBook, notes this performance aligns with historical patterns: “Emerging managers are seeing as much success as usual in 2023; the numbers are just lower because the overall fundraising market is depressed.”
Key advantages driving their success:
- Niche focus areas that larger firms overlook
- Fresh perspectives on emerging markets and technologies
- Specialized expertise that adds value beyond capital
Standout Emerging Funds of 2023
Several U.S.-based emerging managers demonstrated this trend:
- RevRoad Capital: $61 million for Utah-based accelerator graduates
- Level: $104 million to back both VCs and their portfolio companies
- Geek Ventures: $23 million focused on immigrant founders
International emerging managers also made waves:
- Yellow: €30 million ($32M) for Southern Europe’s secondary tech hubs
- Norrsken22: $205 million debut fund targeting African growth-stage startups
Market Correction Benefits the Ecosystem
The current environment is weeding out less qualified entrants. As Harrison explains: “There is a lot more to being a fund manager than just raising capital. It’s having the expertise to support portfolio companies… It’s a brutal awakening that [emerging managers] are having now.”
This natural selection benefits:
- LPs: Better alignment with experienced managers
- Startups: Access to investors who provide real value
- The VC ecosystem: Stronger foundation for sustainable growth
Looking Ahead to 2024
While a major fundraising rebound seems unlikely, the market appears to be normalizing. As Harrison concludes: “Emerging managers aren’t going anywhere… There are a ton of thoughtful LPs out there who want to put their capital strategically into these spaces.”
This resilience suggests emerging managers will continue playing a vital role in venture capital’s future, particularly as they evolve to meet market demands with specialized strategies and genuine value-add capabilities.
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