Why Are Mega Venture Funds Raising Two or Three Times in One Cycle?

Ramtin Naimi says mega platform funds have probably raised two to three times inside a single 18 to 24 month window, so deployment is about 3x faster than the firms expected.

A venture fund normally raises for an 18 to 24 month initial deployment period, the cash it wants to put into first checks, and then reserves follow-on money to keep financing companies and maintain ownership. Firms raise an amount that fits a portfolio model: a set number of bets and a set ownership level over an 18 to 24 month period. Every mega firm dramatically underestimated how much capital it takes to get that ownership. A larger number of companies looked worth backing, prices were higher, and the checks required to buy the ownership were much bigger than the model. Funds are coming back to market sooner than they anticipated and raising much larger sums.

LPs then see two paths. A fund can maintain ownership and take way fewer shots on goal, which means it has to be a better picker, while core positions in the companies it most wants can still produce outsized returns. Or a fund can keep the same shots on goal and end up with way less ownership, which caps the upside. Shots on goal are the hedge against not being a great picker.