FoFs: The Quiet Power Shift in VC Congress just opened the floodgates for billions in new VC capital • Yesterday, two bills cleared House committee (50-2 vote) that will exempt FoFs from SEC registration and massively expand LP & AUM limits • If they're passed into law, Fund of Funds (FoFs) will control who gets access to it H.R. 4429 (DEAL Act of 2025) H.R. 4431 (ICAN Act of 2025) 1️⃣ What are Fund of Funds (FoFs)? • VC FoFs pool capital to invest in other venture funds (not startups). Although they may offer limited direct access deals they prioritize access to VC funds and emerging managers. Think of them as a VC portfolio of funds (as opposed to a VC's portfolio of startups, which VC funds manage). 2️⃣ Who are the Key Players? How to Classify? Four Types: 🎯 Specialist FoFs 💼 Institutional FoFs 🎓 University & Foundation Endowments 🏛️ Pensions & Sovereign Wealth Funds Examples: 🎯 Allocator One (@mstroeck), Foundry (@LDEakman), GEM, @HummingbirdVC / Nomads (@jordsnel), @levelvc (@jbkupperman), @maincharacterHQ (Andrea Lo), @PatternVentures (@johnfelix123), @PlexoCapital (@lo_toney), @RecastCapital (@SaraZulkosky, @courtneyrmccrea), @screendoorvc (@Lady10x) 💼 @CendanaCapital (@MKRocks)*, @FairviewCapital (JoAnn Price), GCM Grosvenor, New Catalyst SP (Jason Howard; Alice Wang) 🎓 Columbia, DUMAC, @MITIMCo, PRINCO (@Princeton), @RockefellerFdn, @Vanderbilt, @Yale 🏛️ @CalPERS, @CalSTRS, @MassPRIM, @MichiganORS, state retirement systems *More of a specialist FoF IMO 3️⃣ Why FoFs? FoFs deliver consistently high median returns vs. direct VC (credit @johnfelix123) ✅ Median TVPI for FoFs (2005–2019) beat direct VC in 12/15 years; bottom quartile 15/15 years ✅ 2011 vintage FoFs top quartile 4.14x TVPI—ahead of direct VC at 3.33x ✅ Professional fund selection & due diligence ✅ Emerging LPs access top performing VCs 4️⃣ What are the Tradeoffs ⚠️ 1% fees + 10% carry + underlying VC fees (2/20) ⚠️ Potential for diluted returns ⚠️ Less transparency into portcos 5️⃣ Why this Matters Now With only 148 first-time VC funds raised in 2024 (-68% from 2022's 466 funds), and established managers capturing ~80% of all LP dollars, FoFs have become the lifeline for emerging managers. In today's liquidity-constrained environment, they offer LPs a smarter way to deploy capital while maintaining diversification. With emerging managers struggling to raise Fund I/II/III, FoFs are the bridges and gatekeepers of institutional capital. Yesterday's vote could cement their role as the ultimate kingmakers in venture's new era. Credit:

Graphic: @alexklein0x

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