VC bigwigs breaking away to start anew struggle to raise funds

livemint.com:

who have left venture capital firms in the past year to start off on their own are finding it hard to raise capital as they struggle to convince investors who currently favour the public markets that fetch them higher returns. “LPs (limited partners) are very satisfied at this moment with the delivery of returns that are taking place in the public markets," said Sanjay Nayar, former CEO of KKR India, who retired to start his own early-stage fund, Sorin Investments, which closed its maiden fund in May.

“If the stock markets give 25% returns and private about 15%, they wouldn't see much scope here given that it's illiquid and highly risky. Therefore, they are also hedging and allocating to private markets, but at a slower pace." However, Anup Jain, former managing partner of Orios Venture Partners, said a correction in the public markets is imminent.

Jain, along with Rajiv Suri, quit Orios at the same time last year and is in the process of raising the first fund for their new VC firm. “I would expect a sell-off at some point of time based on the US election results," Jain said.

“While the pool of domestic retail money is definitely there, it is currently making the most of the stock market rally." Funds such as Sorin have been able to raise capital in a quicker time frame as the bulk of the commitments came from domestic pools of capital including the Nayar and Banga family offices. Many have, however, struggled or are taking longer to close as they navigate the intensely competitive fundraising arena.

Apart from slower allocations to the private markets, many LPs have a policy of not backing first-time fund managers. Over the years, LPs have chosen to consolidate their funds and invest large sums in fewer managers.