In the past few days, on Linkedin, I have delved into some key numbers related to venture capital fund managers in emerging markets with the data from GPCA. Luckily, we also have our own set of proprietary data at Seedstars so we can compare them to what’s out there.

Since we announced the launch of the "Seedstars Capital" fund platform at the end of last year, we have received numerous applications from venture capital fund managers across emerging markets.

As a reminder, the objective of the fund platform is to partner with and invest in first-time or emerging venture capital fund managers active in complementary sectors in the Pre-Seed to Series A stages across emerging markets, and make direct co- and follow-on investments in their portfolio companies.

My business partner Ben has spent countless hours reviewing venture capital decks and speaking with amazing fund managers. Together, we have crunched the numbers to give you a look and feel of these managers. We consolidated and anonymized the data to share it with you below.

Target fund size

The average target fund size is $34 million. It's interesting to point out that none of the funds are above $100 million, with only a couple of "outliers" targeting $100 million funds. Excluding these outliers, the average target fund size is $30 million. On the other end of the spectrum, the smallest funds have a target of $5 million. Looking at the median, it's very close to the average of all these funds, standing at $30 million.

Please keep in mind that we are looking at the “Target” fund size which can be drastically different than the final fund size.

In most cases, a target fund size of $30 million is too small for institutional capital and is one of the main issues we have identified in our previous post here regarding those fund managers.

We honestly doubt that any of these funds will be able to raise significantly more than that anyway, not because they are not capable, but simply because it would take them too much time to reach their target and/or a decent first close. More importantly, it is difficult to raise more than $20 million without commitments of $2-3 million which can be difficult to obtain without institutional capital.

This reinforces the value proposition of our fund platform, which is to bundle these funds together and offer a diversified, much larger platform for capital that is willing to be deployed in the future emerging stars.

In a previous post here, we highlighted that the average target fund size of venture capital funds from the GPCA database (removing in China and India) was at $38 million.

First-close size

Returning to our numbers, we have an impressive 50% of the funds that have achieved a first close. However, that first close represents only 19% of the targeted fund sizes or about $5.4 million. A standard and better signal would, in my opinion, be above 50%.

Based on our conversations with fund managers, some of them were able to convince a handful of limited partners (LPs) to proceed with a first-close despite not reaching their "minimum viable fund size," in order to establish a track record and gain traction.

In my opinion, given the maturity of the markets, this is a necessary step, and kudos to those LPs who are giving opportunities to the next generation of fund managers.

If we take all of the funds into consideration (including those that are currently fundraising and have not done a first-close) that average drops to $2.6 million.

Unfortunately, we were unable to draw a conclusion on the average time it takes to reach a first-close in the fundraising process, as we did not ask for information on the start of the process or the date of the first-close. Our estimate would be that it takes more than 18 months. We analyze this more precisely during our due diligence process, though not all funds reach that stage.

Types of LPs

In terms of LP types, it comes as no surprise that the majority of first-time fund managers are more likely to work with individuals (high-net-worth individuals or family offices) rather than organizations, which can also explain the target size of their funds. As mentioned earlier, it's indeed challenging to raise a fund size above $20 million without a few commitments in the range of $2-3 million. In addition to individuals, we have observed an increasing number of foundations, asset managers, and corporates, but still relatively few institutional investors such as endowments or pension funds.

Based on a smaller sample size of funds that have undergone our due diligence process, we have observed that the average commitment from individuals is $500k, while it is $3.3 million from institutions.

Looking at some publicily available information (example here), we have seen a trend of fund managers raising their fund publicly with commitments as low as $2k, this is probably the “extreme” and I’d classify those in another strategy. The average check size of individuals is typically more around $50-100k.

Stage of focus

Given the target fund size, we were expecting to see most of the funds active at the Pre-Seed stages which is the case as we can see below:

It’s important to note that we have defined the stages based on the average first-investment of each of the funds:

Below $500k, we considered it as Pre-Seed stage focused fund ;

Between $500k and $1 million as a Seed stage fund

Between $1 million and $3 million as a Series A fund

Regional focus

We have received a significant amount of interest from Africa, which represents almost 40% of our sample. This is followed by Asia, MENA (Middle East and North Africa), and Latam (Latin America).

Interestingly, most of the funds in our sample are active in a broad or specific region, with slightly less than 20% of the funds targeting or focusing on a single country. The usual suspects in this category are China, India, and Brazil.

Looking at the graphic above, we would like to thank the fund managers who have applied with a US strategy. It seems that our own positioning was not communicated effectively.

Sectorial focus

An impressive >85% of the funds in our sample are sector-agnostic.

It means that less than 15% of the funds have a niche sector focus, and although we were expecting these to be primarily in Fin-Tech, we were pleasantly surprised to find a good mix of climate funds as well.

Team

As expected, the average number of General Partners (GPs) is 2.

32% of the funds in our sample are managed by solo-GPs. On the other end of the spectrum, we only have a few funds with 4 or 5 GPs. The good news is that these larger teams show equal gender diversity.

When we consider the proportion of female GPs across all funds, it's encouraging to see that it's at a good 32%, particularly among funds in Africa.

Overall, we are very excited with the applications we have received and look forward to talk to new managers so if you know a venture capital fund manager looking for a new partner, please share the following link seedsta.rs/scform with them and feel free to reach out to [email protected]