The conversion rate every emerging GP learns the hard way
A first-time fund manager I know closed her debut $30 million fund last quarter. The story she tells is the one every emerging GP eventually learns. Fourteen months of fundraising. 180 LP conversations. 22 commitments. A conversion rate of roughly 12% — which she now knows is actually above average for a first-time fund in 2025.
She didn't know that going in. She thought a 30% close rate was the bar. She thought the process would take six months. She thought a strong track record and a clear thesis would be enough.
What she learned — and what the ILPA 2025 LP survey confirms in data — is that LP capital in venture has fundamentally changed over the past three years. Slower diligence cycles. More skepticism of fund size escalation. Heavier weight on realized returns over paper marks. A bifurcation between established managers raising in days and emerging managers raising over years.
This is the map of that change, from the people allocating the capital.
What ILPA is and why this survey matters
The Institutional Limited Partners Association represents the global community of LPs in private equity, venture capital, and other private market funds. Their members manage trillions of dollars in commitments. Each year ILPA publishes a survey of LP attitudes, allocation behavior, and forward-looking sentiment.
This survey is the most authoritative public view of how LP capital actually allocates. If you're raising a fund — or trying to understand how funds get raised — this is the dataset that matters.
The 2025 report tells you what LPs are actually doing, not what they say at conferences.
1. LP commitments to venture are down. Emerging managers are getting a larger share of what remains.
Total LP commitments to venture capital declined meaningfully from the 2021-2022 peak. But the picture is more nuanced than the headline suggests. While the largest established funds are seeing reduced re-up rates from existing LPs, emerging managers — first and second-time funds — are capturing a slightly larger share of allocations than they did at the peak.
The reasoning is rational. Established mega-funds delivered weak DPI through the 2022-2024 period. LPs aren't punishing them for that — markets cycle — but they're not racing to write the same check sizes either. Emerging managers, by contrast, are perceived as having better alignment, lower fees, more focused theses, and stronger personal incentive to deliver.
What this means for you: if you're an emerging manager, the market is genuinely open to you in 2025 in a way it wasn't in 2021 when capital flooded toward brand-name funds. Your competition isn't Sequoia. Your competition is the other 50 emerging managers raising in the same vintage.
2. Diligence cycles are lengthening. 6-9 months is normal now.
The most consistent finding across LPs surveyed: diligence is taking longer. Where a 2-3 month process was common in 2020-2021, the typical institutional LP now takes 6-9 months from first meeting to closed commitment.
This isn't bureaucracy for its own sake. LPs are doing more reference checks, more portfolio diligence, more thesis pressure-testing. They've been burned by managers who looked great in 2021 and didn't deliver. The default has shifted from "trust the brand" to "verify the substance."
What this means for you: model your raise timeline around 12-18 months, not 6. If you have 9 months of runway and you're starting a fundraise, you're starting too late. The capital is available, but the cycle to access it is structurally longer than it used to be.
Paper returns built the last cycle. DPI is what will build the next one.
3. Fund size discipline matters more than ever
LPs are increasingly penalizing GPs who raise funds significantly larger than their prior vehicles. The "doubling fund size every vintage" pattern that defined 2020-2021 has reversed. LPs in the 2025 survey consistently flag escalating fund size as a leading concern when evaluating re-ups.
The logic: a $200M fund that returns 3x has a different operational and investment profile than a $500M fund that needs to return the same multiple. Larger funds need bigger exits, faster, in more competitive market segments. Many GPs who raised aggressively in 2021 are now stuck deploying capital at terms they wouldn't have accepted at their prior fund size.
What this means for you: right-size your fund deliberately. A $30M emerging manager fund focused on pre-seed isn't a stepping stone to a $300M Series A fund. It's a strategy. LPs increasingly want to back that strategy explicitly, not extrapolate it.
4. DPI is the new TVPI
The fourth and most consequential shift: LPs care about realized returns much more than they used to. Distributions to Paid-In Capital (DPI) — the cash returned to LPs — is now the metric that drives re-up decisions, even when Total Value to Paid-In Capital (TVPI) looks strong.
The reason: paper marks proved unreliable through the 2022-2024 down cycle. Funds that showed 3-4x TVPI in 2021 are now marking back to 1.5-2x. LPs got burned trusting paper marks and have adjusted. They now want to see actual distributions before committing more capital.
What this means for you: portfolio construction needs to consider liquidity, not just upside. A fund that holds for 10 years before any distributions will struggle to raise its next vehicle even with great paper returns. Secondary sales, dividend recap, partial exits — all of these matter more now than they did three years ago.
The hidden trend: the LP base is consolidating
A finding that ILPA flags more diplomatically than it deserves: the LP base is consolidating. Fewer institutions are writing venture checks. Those that remain are writing larger checks to fewer managers. The number of distinct LPs in the average venture fund has declined meaningfully over the past five years.
This has two implications for emerging managers. First, you need fewer LPs to close a fund — 20-30 commitments can fully subscribe a $30M emerging vehicle. Second, every LP relationship matters more because each LP is a larger percentage of your fund.
The hustle of meeting 180 LPs to close 22 still works. But the leverage in those relationships has shifted. Each one of those 22 LPs is now ~5% of your fund versus ~2% in a prior cycle. Treat them accordingly.
What to do about it
Four concrete actions for emerging fund managers:
Plan for an 18-month raise. Not 6 months. Not 12. Eighteen. Start before you need to. Build LP relationships months before you're formally raising.
Right-size your fund to your actual strategy. Don't raise the maximum LPs will give you. Raise what you can deploy with conviction at the stage you actually invest. LPs will reward this discipline.
Build a DPI story before you have DPI. Articulate the liquidity path for your portfolio — secondary sales, partial exits, dividend recap, distribution strategy. LPs are now asking these questions in first meetings.
Treat each LP relationship as a meaningful percentage of your fund. When 22 LPs subscribe your vehicle, each is a partner for the next decade. Run your LP relationships with the same discipline you run your founder relationships.
The takeaway
Venture fund formation in 2025 is harder, slower, and more selective than it was three years ago. But it's also more open to emerging managers than the headlines suggest. The capital exists. The bar is higher. The process is longer. The LPs writing checks are smarter and more demanding than they were in the easy money cycle.
The fund managers who'll do well in the next vintage are the ones who internalize this and raise accordingly — patient, disciplined, focused on DPI rather than TVPI, and respectful of the LP relationship as a long-term partnership rather than a transaction.
Want to understand venture fund mechanics from the inside? Try the Investor & VC track on Gargiulo — 30 scenarios across fund structure, LP relationships, portfolio construction, and the fund formation process. Sterling has spreadsheets.
Sources: ILPA 2025 Annual LP Survey, Cambridge Associates, PitchBook fund performance data, and analysis from Cendana Capital and StepStone Group.