DealMarket Digest asks Preqin: What are the prospects for first time VC funds?
Preqin Answers: Conditions for first-time and emerging venture funds of all types coming to market are undoubtedly tough, with investor attitudes colored by the fact that recent venture capital fund median performance is lagging behind its historical heights and other private equity fund types. The fundraising market remains extremely competitive and so first-time and emerging fund managers who want to be successful in the venture space need to target the most appropriate investors for their offering and be able to demonstrate strong qualities – particularly a history of specific-industry expertise and/or a novel and exciting investment approach – in order to encourage potential LPs that they can find and develop that ‘home run’ investment and generate attractive returns.
Despite fundraising conditions being depressed, there are still many successful managers who are able to attract large amounts of capital quickly and this trend will likely continue through 2012. Investor appetite in the venture space remains, but LPs are now more cautious and discriminating in their fund selection.