Reflections from the BVCA Emerging Managers Summit

As King Charles was delivering his first King’s Speech on Tuesday, outlining the government’s priorities for the year ahead, a group of Limited Partners (LPs) and emerging managers gathered for the BVCA Emerging Managers Summit in London. The event offered a unique mix of insights, networking and engaging discussion around fundraising challenges, best practices that successful fund managers follow when raising funds and what LPs are looking for when deploying capital.
2023 has been a challenging year for fundraising, especially for emerging managers trying to raise capital. Against the backdrop of current macroeconomic environment and liquidity issues, private capital funds are taking longer to close, with capital flowing disproportionally to established fund managers with proven track record. According to Pitchbook data, the share of capital raised by experienced VC firms in Europe has grown from around 40% in 2021 to 60% at the end of September 2023. But here is the good news – the speakers at the summit were confident that emerging managers still had an important role to play.
Among the wealth of advice shared with emerging managers key themes stood out:
- Building and nurturing relationships with LPs – emerging managers should continuously engage with LPs and regularly share case studies to build trust even when not actively fundraising. In the absence of a track record, highlighting successful milestones of portfolio companies is a cornerstone of building momentum and gaining attention of investors. Transparency is key.
- Emerging managers should not limit themselves to a single source of capital but instead consider a broader range of investors from public to private capital investors spanning fund -of- funds, institutional investors, university endowments and family offices as their investment theses and due-diligence criteria may vary. Focus on finding the right partner.
- Patience and creativity – in the competitive world of LP engagement, getting creative when talking to a potential investor is a must. Emerging managers were advised to think hard how they can add value not only to their portfolio companies but equally to their investors beyond seeing them as “passive capital allocators”. Keeping a pitch simple and relevant is important.
- Clear investment strategy or as one speaker put it – “setting up your business from ground up” plays an equally crucial role. This includes the types of startups/companies to invest in, the geographical focus, and how capital will be deployed. The investment strategy will inform the type of investors who are likely to invest in a fund and who emerging managers should be approaching. Differentiation and knowing your unique selling points are crucial to attract capital.
- With ever increasing importance of Environmental, Social and Governance (ESG) factors and higher scrutiny from LPs, emerging managers need to demonstrate their approach to ESG not only on a fund but also firm level. They should focus on metrics that are most relevant to their portfolio companies and be outcome/ impact driven.
- While having a clear and well-differentiated investment strategy is important in attracting investors, emerging managers should also pay close attention to setting up a transparent and robust legal fund structure, giving LPs the necessary confidence to invest.
Looking ahead, the shadow of economic uncertainty continues to loom large over the investment landscape. Geopolitical tensions, high interest rates and elevated inflation have created an environment where investors are increasingly risk-averse, and capital is less abundant. However, emerging managers who can seek out new opportunities, invest at better price points and demonstrate their ability to navigate turbulent economic waters will have the best chance of success. It was a pleasure to attend the Emerging Managers Summit to see the private capital industry coming together to build connections and to share knowledge and experience.
Authored by Ewa Skornas, Research Manager, BVCA