Key Takeaways
- • Limited partners interviewed by Fortune-style conversation describe the current venture environment as exciting rather than scary, with LPs expecting large returns from concentrated exposure to OpenAI and Anthropic, often held across the same venture firms.
- • LP Beezer Clarkson of LGT Capital Partners and Amit Bhatti of TrueBridge flag a "yellow light" on fund pacing, with some managers returning on one-year cycles versus a historical norm of roughly two to two-and-a-half years.
- • Managers are upsizing existing funds mid-cycle as round sizes grow, with seed round sizes reported to have risen almost 2x, prompting LP concern about pacing discipline.
- • Liquidity is broadening beyond IPOs, with Bhatti citing SpaceX, Cerebras's exit this year, and $10 billion-plus M&A exits including a $60 billion deal involving Cursor.
- • Secondaries are becoming a more accepted third liquidity leg in venture, and employee tenders are increasingly used by mature companies such as Stripe and Databricks.
Summary
Limited partners, the institutional investors that fund venture firms, are describing the current cycle as unusually lucrative but carrying clear warning signs. Beezer Clarkson of LGT Capital Partners, a Zurich-based diversified asset manager, and Amit Bhatti of TrueBridge, a Chapel Hill firm focused solely on venture, discussed the environment in an interview. Both said they were not scared by the rapid change, with Clarkson describing it as chaotic but enjoyable and Bhatti calling it the moment venture has long awaited, given AI's dominance of investor attention.
Concentration in OpenAI and Anthropic, often across multiple funds and within the same venture firms, has become a defining feature of the market. Bhatti argued that concentration is a feature of venture's power-law economics, noting that older funds are consolidating into a few names such as Databricks, SpaceX and Stripe. Clarkson added that early-stage funds retain more diversity of opportunity, since their check sizes are smaller.
Pacing is the main area of concern. Clarkson said some funds are returning on one-year cycles, compared with a typical two to two-and-a-half years, and Bhatti said 12 to 18 months is now common for some managers versus 24 to 36 months previously. Both described the trend as a yellow light, citing mid-cycle fund upsizes and rising round sizes. LPs have responded by reducing commitments rather than exiting relationships, and Bhatti said his firm maintains a commitment calendar to ensure capital is available.
On liquidity, Bhatti pointed to SpaceX, Cerebras's exit this year, several IPOs and more than $10 billion in M&A exits, including a $60 billion transaction involving Cursor. Secondary sales, once viewed as a sign of distress, are now used more judiciously, with Bhatti saying managers can sell around 20% of a position to return their fund. Employee tenders are viewed as reasonable for long-established companies, though lead investors often bear the responsibility for enforcing discipline on them.
Concentration in OpenAI and Anthropic, often across multiple funds and within the same venture firms, has become a defining feature of the market. Bhatti argued that concentration is a feature of venture's power-law economics, noting that older funds are consolidating into a few names such as Databricks, SpaceX and Stripe. Clarkson added that early-stage funds retain more diversity of opportunity, since their check sizes are smaller.
Pacing is the main area of concern. Clarkson said some funds are returning on one-year cycles, compared with a typical two to two-and-a-half years, and Bhatti said 12 to 18 months is now common for some managers versus 24 to 36 months previously. Both described the trend as a yellow light, citing mid-cycle fund upsizes and rising round sizes. LPs have responded by reducing commitments rather than exiting relationships, and Bhatti said his firm maintains a commitment calendar to ensure capital is available.
On liquidity, Bhatti pointed to SpaceX, Cerebras's exit this year, several IPOs and more than $10 billion in M&A exits, including a $60 billion transaction involving Cursor. Secondary sales, once viewed as a sign of distress, are now used more judiciously, with Bhatti saying managers can sell around 20% of a position to return their fund. Employee tenders are viewed as reasonable for long-established companies, though lead investors often bear the responsibility for enforcing discipline on them.
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