Emerging Managers

How many Black tech investors / general partners are there in the US?  

The VC ecosystem lacks diversity, with Black employees holding just 3% of investment partner positions, deal origination roles, and board representation, according to the NVCA and Deloitte VC Human Capital Survey. Black women founders are especially affected, receiving only 0.41% of all U.S. VC funding in 2021,  as reported by Fast Company. 

How does having black investors improve health outcomes?

Black investors can help improve health outcomes by addressing the racial wealth gap, which is closely linked to health disparities. Wealth influences key social determinants of health, such as housing, education, and nutrition, and having access to financial resources can reduce stress and increase stability. Health systems, where Black individuals are often employed but underpaid, can play a crucial role by providing wealth-building opportunities for Black communities. These include offering financial education, access to public benefits, and creating pathways for employees and patients to increase savings, reduce debt, and build wealth, ultimately leading to better health outcomes. Wealthier individuals experience lower rates of chronic diseases, reduced mortality, and improved functional status, all of which are important factors in overall health.

What advantages are there in supporting new emerging managers? 

Investing in emerging managers is unlikely to work if it’s treated as an ad hoc, sporadic endeavor. The information asymmetry around deal sourcing, investment alignment, and management style requires rigorous assessment. Supporting emerging fund managers (EFMs) offers several compelling advantages. Research indicates that EFMs often outperform established managers, particularly with their first funds, delivering higher returns and better Internal Rates of Return (IRR). Their fresh perspectives and innovative approaches allow them to identify opportunities and trends that may be overlooked by more experienced investors. Additionally, EFMs benefit from strong community support, which provides valuable connections and networking opportunities, helping them build relationships with both founders and other investors. 

What challenges do emerging managers face in raising Fund 1? 

One of the primary obstacles is the rising costs associated with operating a fund, including expenses related to compliance, IT, cybersecurity, legal matters, and fund administration. These increased costs add pressure to emerging managers, who are already navigating a complex and competitive fundraising environment. Additionally, they often struggle with limited time and resources, making it difficult to manage the extensive due diligence process that investors require. Furthermore, emerging managers face intense competition, with only about a third of applicants to emerging manager programs successfully securing allocations. To overcome these challenges, emerging managers must find ways to optimize fund operations and develop compelling value propositions to attract investors. Partnering with individuals who possess complementary skills can also help alleviate some of these pressures and enhance their ability to manage funds effectively. 

Why might LPs want to consider better returns with emerging managers?

LPs might want to consider better returns with emerging managers because these managers are often able to deliver higher alpha (returns above the market average) due to their unique investment strategies. Additionally, emerging managers are increasingly investing in technology and administrative support, which can enhance their efficiency and performance. As a result, LPs may see an opportunity to secure better returns through these up-and-coming fund managers, who are positioning themselves to stand out in a competitive market.