Pile-ins, payouts, and pacing pressure: the investors behind the VCs open up
The limited partners who provide the capital to venture firms — the “money behind the money” — are feeling great right now. They’re in uncharted territory in many ways, but also potentially exceedingly lucrative territory.
Normally, LPs typically spread their bets across many firms to diversify their own portfolios. They write checks to emerging managers and established ones, to generalist firms and specialists. The goal is a strong return, but also to minimize risk.
That’s the typical playbook. But typical is out the window. OpenAI and Anthropic’s valuations have shot up so quickly that nearly everyone has piled into the same two companies on the way up, often inside the same venture firm, despite the longstanding venture convention of avoiding investments that conflict with one another. No one is complaining, either. The LPs I speak with seem unbothered by this big gamble, given the potential returns; they’re expecting a bonanza.
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