Welcome to Chris Harvey
I have had the privilege of knowing Chris Harvey for a few years now, and one of the things that makes him somebody who I repeatedly stay in touch with, is his integration of insight with integrity.
Chris provides excellent insights to both GPs and LPs on all things “Law of VC” through his newsletter and social platforms. If you are looking for legal counsel and are in the emerging manager / venture space, I can only recommend reaching out to Chris, working with him on a few projects has been very helpful to me!
We’re all aware of how incredibly difficult it is for the majority of Emerging Managers to raise capital from LPs - especially from institutional LPs, i.e. Fund of Funds.
I have seen institutional LPs unlock a wave of “considering” or “undecided” LP checks for the Emerging Managers they invest in. Oftentimes simply by being a more sophisticated signal in a time where venture is undergoing a lot of shifts.
This is why I asked Chris if he would be willing to share his insights on what Emerging Managers or investors who are contemplating to start their own fund should be considering operationally and legally to set themselves up for raising from more institutional LPs.
Enjoy!
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Table of Contents
Introduction
In 1972, Don Valentine launched Sequoia Capital with a $3 million fund. Today, Sequoia has shed its venture capital origins and registered with the SEC as an investment adviser. It now manages $60 billion across dozens of funds, including its flagship $20 billion evergreen fund that has “patient capital” attracted to it.
Sequoia's transformation from an emerging fund to an institutional powerhouse mirrors what's happening in venture capital today. "Blackstone in a hoodie" is how some people are describing it. But it all started with the public markets.
Public Markets <> Private Markets
When Amazon went public in 1997, it had just $30 million in annual revenue. Today, startups have to reach $300-$400+ million in ARR to launch an IPO. U.S. public companies have been halved over that same period—from 8,000 listed companies in 1999 to ~4,000 in 2024. Nearly 90% of companies generating $100+ million ARR are staying private.
Meanwhile, over the past quarter century, the venture industry has been transformed from a $100 billion cottage industry into a $1.25+ trillion asset class. At the same time, the number of VC firms has exploded from less than 1,000 to 4,000+ globally. Today, venture represents ~25% of all private capital.
Matt Levine explained it best:
“Private markets are the new public markets.”
The VC Industry Splits in Two
As public markets became increasingly less accessible for new companies, capital flooded into private markets and split the VC industry into two:
The Mega-Platforms: Large, multi-stage funds started to grow and eventually began to operate more like Blackstone than a traditional VC firm. In 2024, just 30 of these firms captured 74% of LP commitments in venture capital. One firm in particular—a16z—pulled in $7.2 billion (11%) alone:
Experienced and Emerging Firms: The remaining 26% of capital is being fought over by experienced VC firms (14%) and emerging VC firms (12%), including solo GPs, seed-stage firms and other venture firms through Fund III.
A massive consolidation of the VC industry is underway:
This is opening up the doors to a new class of fund manager.
The New Kingmakers
Bill Gurley saw it coming:
“When I first started, everything was bespoke…. Today, branded firms have moved from $500 million commitment every three or four years to $5 billion, so 10x. And they're participating actively in what we would call late-stage—although I've always thought late-stage was a euphemism for a big check. There are people willing to put $300 million in an AI company that's 12 months old. So that's not late-stage, it's just a big check.”
But there are three key insights that many people seem to miss to the story:
Not only are the mega-platforms writing bigger checks, they’re also operating with far more flexibility than traditional venture firms. Dozens of firms like a16z, Sequoia, and General Catalyst have all become RIAs with the SEC, which allows them to invest and manage a broad range of assets beyond equity stakes in startups—including crypto, secondaries, and fund-of-funds.
They’re also pioneering new fund structures, offering periodic liquidity to LPs, running tender offers, participating in secondaries, creating wealth management divisions and launching evergreen structures that can hold capital indefinitely. These capabilities let them play a fundamentally different game than the traditional 10-year venture fund.
With their expanded resources and capital base, these firms need deal flow at every stage. Rather than sourcing every new opportunity, they’re underwriting the next generation of emerging managers:
General Catalyst invests in up-and-coming GPs;
Sequoia Capital runs a highly selective fund-of-funds program; and,
Marc Andreessen’s family office backs top emerging fund managers.
Meanwhile, specialist fund of funds (“FoF”) are backing emerging VC fund managers:
Pattern Ventures (invests in top performing GPs in the $5M-$50M AUM range)
Allocator One (a EU-based FoF investing in the top 3% of emerging GPs)
Cendana Capital (a premier FoF, invests in early stage VC funds globally)
Main Character Capital (invests in bold, high-conviction fund managers, with a special emphasis on the top 5% returns among fund managers)
Screendoor (backs GPs with their first institutional check)
Why would FoF firms focus on a segment seemingly in decline? It’s no secret that FoFs have historically offered investors good risk-adjusted returns (2005-2019):
The catch is that to access this institutional capital, emerging managers must meet an increasingly high operational bar. The days of raising a fund on a pitch deck and a hyperlink are over. Emerging managers are expected to be institutional ready.
Emerging managers are executing faster, cleaner secondary deals by making their deals “investor ready” from the start.
According to Sydecar, the median secondary SPV on their platform in Q1 2025 raised approximately $795,000 from 8 investors in just 18 days. That kind of speed is only possible when the deal structure is clear, the manager is prepared, and the infrastructure reduces friction at every step.
Check out Sydecar’s guide to setting up a secondary SPV. It’s packed with best practices and real-world insights to help you run secondary deals that close smoothly and meet institutional expectations.
What does ‘Institutional Readiness’ Mean?
From my experience, FoFs want emerging fund managers to raise the bar and act more like institutional-quality capital:
Audits
Due diligence
LPAC
Regulatory Compliance
Side Letter Management
Now, let's briefly dive into what this practically means for the average emerging fund manager. From audits and compliance to LPACs and sophisticated tax structuring, the expectations placed on emerging fund managers are rising. Here’s a quick checklist:
1. Audits
Start with quarterly reports/reviews for Fund I, transition to audits by Fund II+ ($30M is around the fund size when LPs start to become very curious about audits)
Budget $30-50K+ annually for a nationally recognized audit firm (generally required if your LPs are backed by state agencies and pensions)
Consider the costs of illiquid VC funds, parallel funds, stub years
Maintain clean books from day one using institutional-grade fund admin
2. Due Diligence
Build a clean data room with the basics (firm documents, fund materials, etc.),
Include: Track record analysis, investment memos, portfolio company updates, team bios, and reference lists
Create a comprehensive DDQ (Due Diligence Questionnaire) proactively
Document your investment process, decision-making framework, and portfolio construction methodology
3. LPAC (Limited Partner Advisory Committee) Structure
Create an LPAC before you need it
3-5 seats with LP representation
Consider also adding an optional investment committee/advisory board
Establish meeting cadence: Ad hoc or periodically
4. Regulatory Compliance
Company Act look-through rules, 9.99% voting limits and parallel funds
Implement institutional-grade compliance policies
Conduct annual compliance reviews
5. Side Letter Management
Develop a standard side letter template with the key terms you’re willing to offer (MFN, Co-Investment Rights, LPAC Seat, Investment Committee/Advisory Board Participation, Capacity Rights for Successor Funds, Enhanced Reporting)
Establish clear boundaries on what terms you'll negotiate
Track all side letter provisions in a central location or database
Ensure pre-closing MFN compliance across all LPs
The Path Forward
The consolidation of venture capital is fundamentally raising the bar for what it means to be an emerging fund manager. Emerging managers who recognize this shift and proactively build institutional infrastructure will be best positioned to capture their share of the $75+ billion in annual LP commitments.
The good news is you don't need to build everything at once. Start with the basics—a good fund admin, a clean data room, and an organizational checklist. As you grow, layer in more sophisticated infrastructure. The key is demonstrating to LPs that you understand the institutional requirements and have a clear plan to meet them.
In this new era of venture capital, being a great investor is table stakes. The managers who will thrive are those who combine investment acumen with operational excellence—proving they can build not just a portfolio, but enduring relationships alongside the institutions.