Venture firm Team8 released a report titled The Emerging Manager Paradox, analyzing the decline in institutional capital allocated to smaller venture funds. Data indicates that global limited partners directed only 6% of their 2025 commitments to funds under $50 million, marking the lowest level since the dot-com crash.
The research, authored by partner Aaron Dubin, utilizes data from Preqin, PitchBook, and the Forbes Midas List. Team8, which manages $1.8 billion in assets across cybersecurity, software, and fintech, highlights that first-time funds historically outperformed established managers in median net internal rate of return between 2000 and 2022.
Analysis of 1,000 Midas List entries from 2016 to 2025 shows that nearly 70% of recurring investors had prior operational experience. Meanwhile, global first-time early-stage funds raised a median of $20 million between 2021 and 2025, with only one in three successfully raising a second fund.
Rafi Aviav of WisdomTree noted that high operational costs for small commitments discourage allocators. In 2024, nine firms captured half of all capital raised by U.S. venture funds, with Andreessen Horowitz, Thrive Capital, and Founders Fund securing 48% of fundraising dollars in the first half of 2025.
The report proposes three design principles to support new firms: implementing standardized back-office infrastructure, diversifying exposure across multiple managers, and utilizing milestone-based fund creation to generate performance signals earlier.
