Should LPs allocate to emerging venture managers?

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The evidence supports looking closely at emerging managers rather than screening them out. Colibrí Institute's White Paper I, Why Emerging Venture Capital Managers Matter, compares performance across 2,471 U.S. venture funds. Under the paper's main definition, emerging managers show a mean IRR roughly 7.2 percentage points higher than established managers. That is a reason to evaluate emerging managers on their merits. It is not a reason to treat emerging status as a quality label, and it does not tell you which emerging manager to back.

What the research found

  • The overall comparison. Under the main definition, the paper reports a gap of about 7.2 percentage points in mean IRR between its emerging and established groups.
  • By stage. The reported average IRRs are 17.2 percent versus 10.0 percent at early stage, and 13.1 percent versus 9.7 percent for general or multi-stage funds, emerging first in each pair.
  • The screening question. Fund size, track-record length and name recognition make screening easier. The paper's argument is that each may also exclude managers whose capabilities deserve a direct review.

What it does not show

  • Averages are not selection. A higher average across a group says nothing about any individual manager. Dispersion among emerging managers is wide.
  • Definitions matter. The paper's main definition combines structural characteristics with founding-team gender. It is not a measure of all forms of diversity, and a demographic-only definition produces different results.
  • Mean IRR is one measure. It is sensitive to timing and to a small number of very large outcomes. Read it alongside multiples and realized distributions.
  • Past samples are not forecasts. The comparison describes funds in the sample period. It does not predict future returns.

How to decide for your program

The practical question is less whether to allocate to emerging managers in general and more whether you can evaluate them well. Emerging managers usually have shorter records, smaller teams and fewer institutional processes, so the work shifts from reading a long track record to testing judgment, strategy fit and operational readiness directly. If your team has the capacity to do that work, the research suggests it is worth doing. If not, a fund of funds or an adviser focused on emerging managers is a reasonable route.

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Sources

The research findings above belong to Colibrí Institute and are reported with the paper's own definitions and limits. The guidance on how to use them is Colibrí Strategies' interpretation. This page is not investment advice.