Doctors and lawyers—alongside other members of the private wealth set primed to deploy trillions to private markets over the coming decade—are dangling a lifeline to emerging venture managers.
Upstart VC firms have struggled to ink commitments from large limited partners like pensions and endowments, adding pressure to a group already contending with higher startup valuations and round sizes that benefit larger firms.
But in recent years, high-net-worth individuals and even retail investors have flocked to emerging micro funds, which have smaller investment minimums. Blair Garrou, managing partner of Mercury Fund, said the influx has dulled the brunt of the blow for VCs lacking track records.
The LP pool for Mercury’s latest fund featured three fund of funds catering to wealthy individuals. The Houston-based firm backs early-stage tech startups.
A ‘durable’ source of dollars
The private wealth segment controls $450 trillion in net assets and is projected to deploy more than $7 trillion to private markets by 2033, according to recent PitchBook research.
Portfolios of $5 million to $100 million have solidified a newly “durable” fundraising pipeline, Garrou said. There have been more than 200 fund launches oriented to private wealth since 2019, and those funds now oversee nearly $400 billion.
Yasmine Lacaillade—managing partner of Sinefine and a former and an alum of Drive Capital— said that the “democratization or whatever you want to call it” of lower barriers to VC would never have happened “if you roll the clock back 15 years.”
The fact that retail investors are now in play underscores how VCs are racing to “get capital in the door at all costs,” she said. Lacaillade’s Sinefine is a fund of funds backing emerging female managers.
Despite rosters replete with the world’s largest LPs, mega fund operators such as Sequoia and StepStone Group have likewise pushed into private wealth.
Correction: An earlier version of this article incorrectly described Mercury’s LP pool. (Jan. 13, 2024)
Featured image by PBNJ Productions via Getty
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