The limited partners ( LP ) who provide capital for venture capital funds – that is, the “people behind the money” – are currently feeling quite well. They are in an unprecedented position in many aspects and may also be standing in front of extremely lucrative return opportunities.

Typically, LP spreads their bets across many funds to diversify their investment portfolio. They issue checks to both emerging and established fund managers and invest in both diversified and specialized funds. The goal is to achieve stable returns while minimizing risks as much as possible.

This is usually the standard practice. But now, that conventional approach no longer applies. The valuations of OpenAI and Anthropic have risen too quickly, to the point where almost everyone has bet on these two companies during the upward trend, and often hold shares in them across multiple funds under the same venture capital firm, despite the VC industry's long-standing avoidance of conflicting investments. No one seems to complain about this. Rather than worry, it seems that those involved with LP are more focused on potential returns, and they all seem to be looking forward to a bountiful harvest.

However, they did indeed recognize the risks, even if they referred to it as a "yellow light" situation; they were also uneasy about the fact that VC returned so quickly to raise new funds.

I recently interviewed Beezer Clarkson from the diversified asset management company LGT Capital Partners based in Zurich, as well as Amit Bhatti from the venture capital-focused company TrueBridge. The following is the edited content of the interviews.

These days have been strange – both exciting and frightening. How do you view your own role now, and where do you see yourself in the entrepreneurial ecosystem?

Beezer Clarkson:I'm very busy, but I wouldn't say I'm scared. There's a lot of change, and many variables involved. I enjoy venture capital, so I find this chaos quite interesting. I've been in this industry for over twenty years, so the cyclical changes don't seem so daunting to me anymore. You realize that these things always happen, and we should enjoy the upward trends because there are also downward periods, but the upward ones are much more interesting than the downward ones.

Amit Bhatti:If I really have to put it into words, it's excitement. Venture capital was sometimes seen as a niche field, but now AI is everywhere, and all the attention is focused on it. This feels more like our moment, rather than "Oh my God, what will happen?" The pace of investment and valuations may have changed, but something truly important is taking place, with all the focus directed towards this corner of private equity.

Your funds currently hold the same brands – OpenAI and Anthropic – and these appear repeatedly in different funds that you support. What's your opinion on this situation? Obviously, it's good now, but if the situation reverses, it won't be so favorable.

Amit Bhatti:Venture capital has always been a “power-law” business, so I actually see this concentration as a good thing. If a fund reaches a mature stage and still has many very small positions within it, that indicates there is a problem somewhere. Our funds that have been established for over 10 years are gradually concentrating on a few select names. There are many Databricks, many SpaceX, and many Stripe. For this generation of funds, I hope that Anthropic and OpenAI will also account for a large proportion. This is a characteristic, not a flaw. Not every company will succeed, but such concentration is the norm. The difference is that it is happening too quickly. I don’t think this immediately signals danger.

Beezer Clarkson:In the early stages, you will still see a great variety of opportunities, and the amount of investment required is also smaller. Eventually, it will all converge towards the same companies, but obviously, early-stage funds will not make those large later investments. So if you want diversity, there will be more of that available at that time.

Funds that were originally invested on a four-year cycle are now having their cycle compressed to three years, two years, or even 18 months. Is such a pace normal, or is it cause for concern?

Beezer Clarkson:We see that some funds have returned to a one-year cycle, which is quite fast. Normally, it takes about two to two and a half years. Some funds, due to their strategy of making large, concentrated bets, have deployed their funds much more quickly. This could be a concerning sign. The outcome might be good; we don’t know for sure, but generally speaking, it’s not easy to do well in a one-year fund.

Amit Bhatti:The same is true for us. I would have said that 24 to 36 months is roughly normal. But now, for some funds that are advancing very quickly, 12 to 18 months is not unusual at all. Many funds have increased their scale halfway through their cycle, which is definitely not typical. Part of the reason is that the financing rounds have become much larger. If Anthropic needs to raise a large amount of capital and you invest 20% of your fund into it, then you will obviously be moving at a faster pace. The scale of seed rounds has almost doubled as well, so if you want to lead the investment, the check you write also has to double in amount. This is definitely a red flag that makes us a bit worried.

But if we look at what these managers have actually invested in, the situation is different. Last time we saw an acceleration in the investment pace, a lot of money was directed towards income-free cryptocurrencies known as “moon projects.” Now, we see many companies growing from scratch to achieving revenue of 100 million dollars, which was completely unimaginable in the past.

If you have an excellent manager who comes back every year to raise funds, but the returns are only on paper, would you say "I'll contact you next time," or will you miss the opportunity to be part of this deal?

Beezer Clarkson:It's very difficult to leave one manager and then come back to them again. Although it does happen, it's more common for the amount of a check to be reduced. In 2021, many LP would say, "If I was supposed to give you 10 million dollars, I'll give you 5 million dollars instead, because 10 million dollars is a two-year amount." In our combination, the pace of funding is accelerated, so we also take into account both our own pace and yours.

Amit Bhatti:So do we. We are building a calendar to plan when commitments should be made, so if anyone deviates from this plan, we need to ensure that the funds are still available. You will see some people reducing their investment amounts or communicating in advance. It's hard to say outright that they won't participate at all, because then they wouldn't be considered reliable capital. This is also why you'll see capital increases; managers who don't want to come back claim they need to raise a new fund, so they just expand the scale of the existing fund.

Beezer Clarkson:People sometimes also withdraw from venture capital because calls for capital repayment keep happening, but the cash that is allocated back does not follow. At the same time, they still have to fulfill their operational commitments, whether it's to university endowment funds, hospitals, or foundations. This puts a lot of pressure on these situations.

LP prefers to spread investments over time, but in recent years, many funds have been raised during periods of high valuations, including those that supported startups during the pandemic. How have those funds performed? How would you describe the situation from 2026 to the present?

Beezer Clarkson:2021 was still quite early for funds; only five years have passed since then, but it has become clear that one-year funds are not a good option. Some funds may perform well when they invest in a AI company, but the probability of making the right bet within a year is even lower, especially when the valuation at that time is extremely high.

Amit Bhatti:If we look at our investment portfolio over the past 15 years, I wouldn't bet that the foundations established during the pandemic era are the best among them. However, there have been a few big winners. OpenAI emerged during that time, and Cursor also got off to a good start early on, so they are included in some of our funds. Liquidity has started to increase gradually over the past two years. SpaceX has been a highlight, Cerebras completed a major exit this year, and there have also been several IPO transactions, as well as many mergers and acquisitions. We've seen mergers and acquisitions that resulted in exits worth over $10 billion, including one deal worth $6 billion [referring to Cursor]. Liquidity is no longer just an issue for IPO.

What do your venture capital fund managers think about the secondary market? If I were VC, I would want to cash out a portion of my investment in OpenAI or Anthropic.

Beezer Clarkson:Over the past five years or so, the secondary market in venture capital has become much more mature. It is mainly concentrated among a few leading companies, but it is more common than before, and I think that's a good thing because the entire ecosystem needs liquidity options. Venture capital is inherently built on such liquidity; if you have to wait for 20 years to get IPO, that's not the structure we originally envisioned. Now, secondary transactions also occur at multiple levels. LP sells shares of GP, sells parts of their portfolios, and there are fewer taboos surrounding these transactions.

Amit Bhatti:Now it has become the third leg of liquidity: IPO, mergers and acquisitions, and the secondary market. Private equity has always had a mature secondary market, whereas venture capital has not. In the past, it was somewhat of a taboo topic; assets were only sold when in dire straits. Later on, many people in 2021 held onto their positions, regretting that they should have sold earlier. Nowadays, more managers regard it as a tool and use it more cautiously. If you still believe in the potential of this company, you probably won't sell off your entire position. But if you can sell 20% of your position and recoup the cost of your fund, then you probably should do so.

Nowadays, there are many founders selling their shares and employees transferring theirs, and this often happens quite early in a company's “journey.” What are your thoughts on this?

Amit Bhatti:We previously discussed the analogy with cryptocurrencies, and one of the reasons why it becomes difficult is that employees receive tokens that can be immediately traded. So what motivation do they have to stay when things get tough? Therefore, I think employee token transfers are a good thing, especially for companies that have been around for a long time, such as Stripe and Databricks, which have very clear financial situations. It’s completely reasonable to provide some liquidity for employees. However, much of the execution pressure falls on the lead investors. Investors we support have told the companies, “We don’t want you to carry out employee token transfers right now.” These discussions take place behind the scenes, and people have learned from previous experiences. But all of this depends on bargaining power. If the founders have strong bargaining power...

Then there's no chance of it.

Amit Bhatti:Yes.

When these companies go public and their employees gain liquidity, will they become partners of your venture capital managers or competitors? These employees have an impressive network of contacts.

Beezer Clarkson:We've seen this situation many times before: when a company becomes highly productive, employees may become LP, or they might themselves become GP. It's entirely possible that a new generation of managers will emerge, supported by those who were OpenAI and Anthropic in the past. This happened during the Google era. However, becoming a LP requires a commitment of millions of dollars, and it's a business that spans several decades.

Amit Bhatti:The real estate sector is going to be quite challenging, especially considering the soaring housing prices in San Francisco. However, these people will remain within this ecosystem, continuing to invest in others, start new companies, and establish new funds. This is why no other place can quickly replace San Francisco.

The cost of housing in San Francisco is rising too fast. Will we drive out the next generation of entrepreneurs? Will the next center become New York or some other place?

Beezer Clarkson:History will tell us that the agglomeration effect in the Bay Area is very strong. Perhaps it will move away from San Francisco and return to the suburbs. In the past, YC was right here, in Mountain View. New York certainly has its own very robust tech ecosystem, but the density here is so high that it's difficult to be truly replaced.

Nowadays, a few venture capital funds have taken most of the LP committed capital. Is there still a chance for emerging managers to get in?

Beezer Clarkson:This year, last year, and the year before last, there were still first, second, and third funds raising capital. You still need a differentiated perspective and a reason for your existence. Fundraising has indeed become more difficult, but we have seen that they are still able to secure funds, albeit in smaller fund sizes. Perhaps 50% of the money goes to larger funds, but if each initial fund raises an average of only 25 to 50 million US dollars, then with enough such funds, the total amount can still reach 1 billion US dollars.

Amit Bhatti:In San Francisco, some people raise only 5 million or 10 million dollars, perhaps just to formalize their angel investment. Many well-known funds also started with a fund size of 5 million dollars. For emerging managers, it's best to establish a track record first, using the capital at hand to prove your strategy, resources, and judgment. Then, it will be easier to raise a second fund. If you aim to raise 50 million or 100 million dollars from the start, you're essentially setting a huge obstacle for yourself.

Beezer Clarkson:If you've only done angel investing, that's different from splitting off from a platform; the latter usually already has a base of LP who know you. Such managers can usually raise more funds.

Could you talk about the specific types of emerging managers you have supported, and why you decided to invest in them?

Amit Bhatti:The definition of the term “emerging” can vary greatly. We have supported founders who are still running their own companies while also investing part-time; we’ve also supported those who left large institutions to pursue earlier-stage investments. We’ve also backed very young individuals, like GP and AI, who are in their 22s or 23s and have close connections with the original founders of the next generation. They launched an accelerator program at MIT, Harvard, and Stanford, and among the first batch were Cursor and Mercor. Although they are young, they are surrounded by a remarkable concentration of talent. The job of VC is to find projects, screen them, and secure them, and they have already done a quite good job without any financial investment involved. Success in venture capital brings more success, so we are happy to give them a chance.

Beezer Clarkson:There is much more flexibility now. I remember in the past, LP would not provide funding to those who already had a full-time job and were also investing, but nowadays people are more open-minded. I have been involved in investing as an emerging manager for 14 years and have invested in both mature managers and various types of projects. There have been cases where operators transitioning to investors raised 10 million dollars, as well as those that split off from platforms to raise hundreds of millions of dollars. Those who are still actively operating on the front lines are particularly interesting because they can bring valuable insights. The key is whether they are doing what is necessary to qualify for the best capital structure.

Amit Bhatti:Especially in the early stages, there is no one-size-fits-all model. You can work part-time, you can be decentralized, or you can be centralized. It can be said that there are more ways to recoup your costs, even if it's just by doing some small and experimental things.

What is the minimum check amount you are willing to write for a fund? What is the maximum percentage you would hold in a fund?

Beezer Clarkson:Considering our project structure, it's difficult to proceed with an amount less than 5 million US dollars. If my stake in a fund is too high, GP will face challenges in the future, so I hope it doesn't exceed 20%. Of course, there are some situations where I would consider more options as well.

Amit Bhatti:We usually invest between 3 and 5 million US dollars, and in some very specific cases, the amount can be even less. If the situation is suitable, we don’t really care too much about the concentration of investment. We could invest half, or even all of it. But as Beezer said, that’s not ideal for GP, so we will inform them in advance to diversify their LP base. We managed one fund where we took on half of the capital ourselves; for the next fund, our share was close to 20%, because they performed well.