Venture Capital’s Big Shift
In the golden days of zero interest rates, venture capital thrived. Titans like Apple and Google reshaped tech, cloud computing boomed, and years of easy money fueled massive growth. Funds that started right after the 2008 crash delivered incredible returns. By 2021, VC funding hit a record $363 billion as everyone chased a piece of the action. 2021 also happened to be one of the most lucrative years for IPOs.
(Source: https://newsletter.pragmaticengineer.com/p/zirp)
Source: https://docs.preqin.com/reports/Preqin-Special-Report-Venture-Capital-November-14.pdf
Source: https://kpmg.com/kpmg-us/content/dam/kpmg/pdf/2024/venture-pulse-q3-2024.pdf
The Party Ends
Then came the COVID-era hangover. Inflation soared, and the Fed hiked rates faster than ever. The VC bubble deflated. Funds from 2017-2021 underperformed, and big-name firms gobbled up most of the money. In 2024, just 30 firms snagged 74% of venture capital dollars. Investors wanted safety—big names, steady (but poor) returns, reduced liquidity events, and low-risk alternatives offering 5% yields.
Source: https://kpmg.com/kpmg-us/content/dam/kpmg/pdf/2024/venture-pulse-q3-2024.pdf
Why Emerging Managers Matter Now
We’re entering a new cycle. As markets stabilize, savvy investors are asking, “what’s next?” The answer: emerging managers and crypto. Here’s why:
1. History Loves the Little Guys
From 2004 to 2016, smaller funds crushed it. They’re nimble, specialized, and close to the action. Emerging managers build tight networks and often spot opportunities faster than bloated, big-name funds. In 2021, they raised just 4% of VC dollars, leaving plenty of room to outperform.
2. Crypto’s Growing Up
Yes, early crypto was chaotic—big wins, big scams. But now? The space is maturing:
- BlackRock tokenized a fund on Ethereum (Source)
- Stablecoins topped $200 billion in market cap (Source)
- Blockchain tech is faster and more private than ever (Source)
- Big players like Visa and PayPal are all-in on crypto payments (Source)
- DeFi protocols hit record revenues (Source)
- MiniPay onboarded 5 million users in Africa in just one year (Source)
3. Undervalued Opportunities
Crypto funds raised just 4.5% of all VC dollars in 2023. That means less competition and lower valuations. This dynamic offers the potential for outsized returns. Smart investors know this is the time to get in.
Even if you’re not actively investing in crypto startups, building relationships with emerging managers in the space could provide a strategic advantage.
4. Policy Winds Are Shifting
The space is maturing. Beyond macroeconomic shifts, changes in regulatory bodies, the introduction of crypto-friendly policies, and legislation supporting global adoption could finally create favorable conditions for the industry and accelerate crypto innovation at a faster pace.
Picking the Right Manager
If you’re allocating to emerging managers, here’s what to look for:
1. Smaller Fund Sizes
Smaller funds can move fast and don’t need unicorn exits to deliver big returns. This is due to fewer decision-makers and less bureaucracy.
For example, our team here at Verda is made up of 3 GPs who can often make decisions within a week’s time and invest early enough to capitalize on lower valuations before anything else.
2. Strong GP Backgrounds
Look for founders, operators, and investors with real-world experience. They’ll have the best networks of the strongest founders.
At Verda, our team includes former builders who developed a multi-billion-dollar, mobile-first blockchain network and created MiniPay, a mobile stablecoin wallet for emerging markets that scaled to over 5 million users in its first year. We understand emerging market consumers better than most.
3. Niche Focus
Specialists beat generalists, especially in complex sectors like crypto.
At Verda Ventures, we focus on backing teams tackling the $1T financial access opportunity in emerging markets. With Opera as a dedicated partner and anchor LP, we leverage local, on-the-ground resources to invest using real-time data and insights, while understanding critical nuances—such as compliance and consumer behavior—areas that other investors may overlook. This allows us to effectively separate signal from noise.
Footnote: PitchBook data shows that emerging specialist funds have consistently outperformed established generalists in the top decile and quartile.
4. Competitive Edge
What is the fund manager’s unique advantage that provides access to the best opportunities?
With MiniPay, we offer teams access to Opera’s distribution channel, reaching 320M+ MAUs, which has generated significantly high-quality inbound dealflow for us. We’ve secured exclusive investments in high-quality teams at favorable terms and provided them with access to the MiniPay distribution channel to supercharge their growth.
5. Smart Selection
Data-driven tools and dashboards help managers pick winners before others even notice them.
We employ a data-driven approach, supported by proprietary on-chain dashboards that enable us to identify high-performing projects ahead of others.
Why Now?
Emerging markets, crypto, and specialist managers are the future. They’re tackling massive opportunities like financial access for billions. Verda Ventures’ MiniPay Fund, for example, is laser-focused on crypto products for emerging markets. The potential here is huge, and the timing couldn’t be better.
Want to learn more? Let’s talk. Shoot an email to amit@verda.ventures or fill out our contact form on our website.