Fenwick private investment funds practice chair Byron Dailey talked to The Wall Street Journal about the increased likelihood of venture firms lifting or rejecting caps on fund sizes to respond to demand and gather more capital to put towards startups.
This trend can sometimes mean funds become significantly larger than originally anticipated, frustrating some venture-fund backers who fear it could lead to a decrease in focus.
Venture funds typically have what is called a target, or a nonbinding estimate of how much they expect to raise, as well as a hard cap, which is the amount they agree not to cross without getting permissions from their investors, Dailey told the publication.
When it comes to fund size, LPs typically want the size to match strategy, he said. “They don’t want the fund to have more money than they can reasonably manage in a given period of time,” Dailey noted.
Read the full article in The Wall Street Journal (subscription required).