Venture Funds

Venture funds primarily obtain their capital from institutional investors like family offices, sovereign wealth funds, universities, and charitable foundations. Historically, pension funds played a significant role, but their involvement has decreased due to the long commitment periods that venture funds require, which can span 10-14 years 1.

Institutional investors expect a return premium for their investments in venture funds due to the higher risk and illiquidity. These expectations typically range from 300 to 500 basis points above what they might achieve in public markets, equating to an expected return of 9-11% if public markets yield about 6% 1.

The median size of venture funds has been growing, reaching $37.4 million in 2023, even as the total capital raised has declined significantly. This reflects a challenging environment for raising capital, with a marked flight to quality where established fund managers are more likely to secure funding 2.