Limited partners in venture capital funds regularly fret over rising valuations, as once-mythical unicorns keep evolving into overgrown pigeons. But a related worry has yet to get much public attention: Over-exposure.
Venture capital funds have always “clubbed up” with one another, meaning that LPs would regularly have multiple exposures to the same portfolio company. But LPs could limit it a bit via their own portfolio management, making sure that they had diversity of VC fund type (i.e., a mix of early-stage, expansion-stage, late-stage, etc.). The historical result was that, if an LP had multiple exposures, it was usually spread throughout the cap table (one or two early-stage exposures, one new Series B/C/D, etc.).
