Limited partners (LPs)—the "people behind the money"—who fund venture capital funds are now feeling quite good. They find themselves in an unprecedented position in many ways and may be on the brink of exceptionally lucrative return opportunities.
Typically, LPs diversify their investments across many funds to spread risk within their portfolio. They allocate capital to both emerging and established managers, as well as to diversified and specialized funds, aiming for steady returns while minimizing risk.
This is usually standard practice. But now, the usual approach no longer applies. OpenAI and Anthropic have risen in valuation so rapidly that nearly everyone has bet on both companies during the surge—often holding positions in multiple funds within the same venture capital firm, despite the industry’s long-standing avoidance of conflicting investments. No one has complained. Rather than concern, LPs are focused on potential returns, seemingly anticipating a bountiful harvest.
However, they did recognize the risks, even if they referred to this as a "yellow light" status; they were also uneasy about how quickly VCs returned to raise new funds.
I recently interviewed Beezer Clarkson of LGT Capital Partners, a diversified asset management firm based in Zurich, and Amit Bhatti of TrueBridge, a venture capital-focused firm, on these topics. Below is the edited transcript of the interviews.
These days are strange—both exciting and frightening. How do you see your role and your place within the startup ecosystem right now?
Beezer Clarkson: I’m very busy, but I’m not afraid. There’s a lot of change and many variables. I love venture capital, so I find this chaos interesting. I’ve been in this industry for over twenty years, so seeing these cycles come and go doesn’t scare me anymore. You come to realize that these things always happen—we should enjoy the upswings, because there are also downturns, and the upswings are far more exciting.
Amit Bhatti: If I had to put it in one word, it’s excitement. Venture capital has sometimes been seen as a niche field, but now that AI is everywhere, all the attention is focused on venture capital. This feels more like our moment, rather than “Oh my goodness, what’s going to happen?” The pace of investments and valuations may have changed, but something truly significant is happening, and all the attention is on this corner of private equity.
Your funds currently all hold the same brands—OpenAI and Anthropic—repeated across the different funds you support. How do you view this situation? It’s clearly beneficial now, but it could be problematic if the tide turns.
Amit Bhatti: Venture capital has always been a “power law” business, so I actually view this concentration as a positive sign. If a fund has reached maturity but still contains many very small positions, that indicates something is wrong. Our funds that have been around for over a decade are gradually becoming more concentrated in a few key names—lots of Databricks, lots of SpaceX, lots of Stripe. For this generation of funds, I hope Anthropic and OpenAI will also represent a significant portion. This is a feature, not a flaw. Not every company will succeed, but this kind of concentration is normal. The difference is that it’s happening much faster. I don’t think this immediately signals danger.
Beezer Clarkson: In the early stages, you’ll still see a much wider range of opportunities, and the investment amounts are smaller. You’ll eventually end up with the same companies, but early-stage funds clearly don’t make large late-stage investments, so if you’re looking for diversity, there’s more of it there.
Funds that were originally structured for a four-year investment cycle are now compressing their timelines to three years, two years, or even 18 months. Is this pace normal, or is it cause for concern?
Beezer Clarkson: We’ve seen some funds return to a one-year pace, which is fast. The norm is typically two to two and a half years. Some funds deploy capital much more quickly because they make concentrated, large bets. This could be a concerning signal. The outcomes might be great—we don’t know—but it’s generally not easy to get things right in a one-year fund.
Amit Bhatti: It’s similar for us. I would have said 24 to 36 months was roughly normal; now, for some funds moving quickly, 12 to 18 months isn’t unusual. Many funds have increased their fund size midway through the cycle, which is certainly unusual. Part of the reason is that financing rounds have become much larger. If Anthropic is raising a huge amount and you allocate 20% of your fund to it, you’re clearly moving faster. Seed round sizes have nearly doubled as well, so if you want to lead, your check size has to double too. This is definitely a yellow light that gives us some concern.
But the picture changes when you look at what these managers are actually buying. The last time we saw an acceleration in investment activity, a lot of money went into revenue-less crypto “moonshots.” Now, we’re seeing many companies grow from zero to $100 million in revenue—something that was completely unimaginable before.
If you have an excellent manager who raises funds every year, but the returns are still only on paper, can you say, “Let me know next time,” or will you lose your chance to get a seat at the table?
Beezer Clarkson: It’s very difficult to leave a manager and then come back. While it does happen, it’s more common to reduce the check size. In 2021, many LPs would say, “If I was originally going to give you $10 million, I’ll give you $5 million instead, because $10 million was meant for two years.” In our portfolio, we front-load the capital rhythm, so we also consider both our own timing and yours.
Amit Bhatti: We are too. We’re building a calendar to plan when commitments should be made, so if someone deviates from the plan, we need to ensure the capital is still there. You’ll see people reduce their investment or communicate in advance. It’s difficult to say outright that you won’t participate, because then you’re not reliable capital. That’s also why you see increases in commitments; managers don’t want to come back and say they’re raising a new fund, so they simply expand the size of the existing fund.
Beezer Clarkson: People sometimes exit venture capital because capital calls continue to occur, but no cash is being distributed back, while they still have to meet operational commitments—whether they’re university endowments, hospitals, or foundations. This creates significant pressure in these situations.
LPs prefer time diversification, but in recent years, many funds have raised capital during periods of high valuation, including startups supported during the pandemic. How have those funds performed? How would you describe the situation in 2026 so far?
Beezer Clarkson: The 2021 funds were still early—only five years have passed—but they illustrate that one-year funds are not a good idea. Some funds ended up investing in AI companies that appeared to perform well, but the probability of correctly betting on them within a year was lower, and valuations at the time were extremely high.
Amit Bhatti: If I look at our portfolio over the past 15 years, I wouldn’t bet that the generation of funds from the pandemic era are the best. But a few big winners have emerged from them. OpenAI was founded during that time, and Cursor also started very early, so they’re present in some of our funds. Liquidity has also begun to unlock. The past two years have clearly been slower, but SpaceX has been headline news, Cerebras completed a major exit this year, and there have been several IPOs and numerous acquisitions. We’ve seen over $10 billion in acquisition exits, plus one $60 billion transaction [referring to Cursor]. Liquidity is no longer just about IPOs.
How do your venture capital fund managers view the secondary market? If I were a VC, I would want to cash out part of my position in OpenAI or Anthropic.
Beezer Clarkson: Over the past five years, the secondary market in venture capital has become significantly more mature. It has primarily focused on a small number of top companies, but it is now far more widespread than before—I believe this is positive, as the entire ecosystem needs liquidity options. Venture capital was originally built on this notion of liquidity; waiting 20 years for an IPO is not the structure we originally envisioned. Today, secondary transactions occur at multiple levels: LPs are selling GP stakes, divesting portions of their portfolios, and there is far less stigma surrounding these activities.
Amit Bhatti: It’s now the third leg of liquidity: IPOs, M&A, and the secondary market. Private equity has long had a mature secondary market, but venture capital hasn’t. It used to be almost a dirty word—selling only when you were in trouble. Then, in 2021, many people found themselves holding positions thinking, “I really should’ve sold back then.” Now, more managers are treating it as a tool and using it more deliberately. If you still believe this is a power-law company, you probably wouldn’t sell your entire position. But if you can sell 20% of your stake and recoup your fund’s capital, you probably should.
Many founders sell shares and employees transfer equity very early in a company’s journey. What do you think about this?
Amit Bhatti: We previously discussed the analogy with cryptocurrencies, where things became difficult partly because employees received tokens that were immediately liquid. So what incentive do you have to stay when things get tough? I believe employee transfers are a good thing, especially for long-established companies like Stripe and Databricks, whose financial positions are very clear. Providing employees with partial liquidity is entirely reasonable. However, much of the pressure falls on the lead investors. Investors we’ve supported have told companies, “We don’t want you to do an employee transfer right now.” These conversations happen behind the scenes, and people have learned some lessons from the last cycle. But it all comes down to bargaining power. If founders have extremely strong bargaining power…
Then it's over.
Amit Bhatti: Yes.
When these companies go public and employees gain liquidity, will they become partners or competitors to your venture capital managers? These employees possess remarkable networks.
Beezer Clarkson: We’ve seen this happen many times before—when a company becomes highly productive, employees may become LPs or even start their own funds as GPs. It’s entirely possible that a wave of new managers will emerge, backed by people who came from OpenAI and Anthropic. This happened during the Google era. But becoming an LP means committing millions of dollars, and it’s a business that spans decades.
Amit Bhatti: The real estate portion will be difficult, especially given San Francisco’s soaring property prices. But these people will remain in the ecosystem, continuing to invest in others, create new companies, and launch new funds. That’s why no other place can quickly replace San Francisco.
Housing costs in San Francisco are rising too quickly. Are we pushing out the next generation of founders? Will the next hub become New York or somewhere else?
Beezer Clarkson: History will show that the Bay Area’s clustering effect is extremely strong. It may shift away from San Francisco and back to the suburbs—YC, for instance, was originally in Mountain View. New York certainly has its own deep-rooted tech ecosystem, but the density here is so high that it’s hard to truly replace.
Today, a small number of venture capital funds have captured the majority of LP committed capital. Do emerging managers still have an opportunity to break in?
Beezer Clarkson: This year, last year, and the year before, there are still first-time, second-time, and third-time funds raising capital. You still need differentiated perspectives and a compelling reason for existence. Raising funds is indeed harder, but we are still seeing them secure capital—just with smaller fund sizes. Perhaps 50% of the money will flow to larger funds, but if an average first-time fund raises between $25 million and $50 million, having enough of these funds can still add up to $1 billion.
Amit Bhatti: Here in San Francisco, raising just $5 million or $10 million might simply be formalizing your angel investments. Many highly reputable funds started with only $5 million in capital. For emerging managers, it’s best to first build a performance track record—use the capital you have to demonstrate your strategy, resources, and judgment—so that raising your second fund becomes much easier. If you try to raise $50 million or $100 million from the start, you’re essentially setting up a mountain for yourself.
Beezer Clarkson: If you've only done angel investing, it's different from spinning out from a platform—the latter usually already has a base of LPs who know you. Those types of managers typically raise more.
Can you discuss the specific types of emerging managers you've supported and why you chose to invest in them?
Amit Bhatti: The definition of “emerging” varies widely. We’ve backed founders who are still running their own companies while investing part-time, as well as those who left large institutions to pursue earlier-stage investments. We’ve also supported very young GPs—22 or 23 years old—who have close contact with the next generation of AI-native founders. They launched an accelerator program at MIT, Harvard, and Stanford, and some of the earliest cohorts included Cursor and Mercor. They’re young, but they’ve assembled an incredible density of talent. The job of a VC is to source, screen, and win deals—and they’ve already done a remarkable job without any capital behind them. In venture capital, success begets more success, so we’re eager to give them a chance.
Beezer Clarkson: There’s now much greater flexibility. I remember that in the past, LPs wouldn’t fund people who had full-time jobs while also investing, but now people are much more open-minded. I’ve been investing in emerging managers for 14 years and have also invested in established managers across a wide variety of types—from operators transitioning into investing who raise $10 million, to teams spinning out from platforms raising hundreds of millions. Those still actively operating are especially interesting because they bring unique insights. The key is whether they’re doing the necessary things to qualify for inclusion in the optimal capital structure.
Amit Bhatti: Especially in the early stages, there is no one-size-fits-all model. You can work part-time, diversify, or focus. There are more paths to break even, even if you just do small, experimental things.
What is the smallest check you are willing to write for a fund? What is the maximum percentage you would hold in a single fund?
Beezer Clarkson: Given our project structure, it’s difficult to do anything below $5 million. If my stake in a fund is too high, it could create challenges for the GP in the future, so I’d prefer not to exceed 20%. Of course, there are some situations where I might consider more.
Amit Bhatti: We typically invest between $3 million and $5 million, though in certain very specific cases it can be smaller. If the scenario is right, we don’t really mind concentration—we can invest half, or even all of it. But as Beezer pointed out, this isn’t ideal for GPs, so we advise them upfront to diversify their LP base. We once funded a fund where we took on half the capital; in the next fund, our stake was closer to 20% because they performed well.