I recently met with folks running an emerging fund who shared some interesting insights about their fundraise strategy. Their existing portfolio is performing well, and they’re out raising a new fund. They targeted $50 million, but because of recent market conditions they think they’ll land at $25 million. They’re adjusting the portfolio construction. They plan to do fewer investments and are raising the bar on what it takes for them to make an investment.

I wasn’t surprised to hear that funds are reducing the amount of capital they’re raising, given the macro environment, but the higher bar for investment was surprising given the success of their investments.

Risk aversion has ballooned, and founders should be aware of this and plan accordingly. We’ll eventually move back to embracing more risk, but I believe that will be a gradual process.