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NewsMaterial4 min readDisconfirmAI Editorial

Is AI VC Concentration a Power Law or a Yellow Light: Two LP Heads Explain Their Decision Frameworks

Beezer Clarkson of LGT Capital Partners and Amit Bhatti of TrueBridge told TechCrunch why limited partners view concentrated holdings in OpenAI and Anthropic as a normal convergence in venture capital rather than a flaw, while noting that fund pacing compressing from two-and-a-half years to one year and seed rounds nearly doubling are yellow-light signals. They distinguish the current cycle from the previous acceleration by pointing out that this round has actual revenue support (zero to $100 million) rather than zero-revenue crypto concepts. The secondary market has shifted from a taboo to a third pillar of liquidity.

2026-10-31 12:16 GMT+8

Limited partners in the venture capital industry — those who provide capital to VC funds — find themselves in a contradictory position: they feel both excited and uneasy. TechCrunch editor-in-chief Connie Loizos recently spoke with two LP heads: Beezer Clarkson from Zurich-based LGT Capital Partners, a diversified asset manager, and Amit Bhatti from Chapel Hill, North Carolina-based TrueBridge, a firm focused solely on venture capital. Their decision frameworks reflect an attribution logic among capital providers during the AI venture capital cycle.

The most striking argument concerns concentration. Traditionally, LPs manage risk by diversifying across many VC firms. But currently, the underlying portfolios of almost all LPs have converged onto just two companies: OpenAI and Anthropic. Bhatti’s response was surprisingly positive: he believes venture capital has always been a power-law business, and concentration is a good thing, not a bad one. If a fund reaches maturity with many small positions remaining, something has gone wrong. Funds older than ten years are converging toward a few names — lots of Databricks, lots of SpaceX, lots of Stripe — and in this generation of funds, he hopes to see lots of Anthropic and lots of OpenAI. He says this is a feature, not a bug; the difference lies in how quickly the convergence is happening. Clarkson adds that early-stage opportunities still show considerable diversity because check sizes are smaller, and concentration mainly appears in later stages.

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Pacing is a yellow light acknowledged by both. Clarkson notes that the normal fund cycle used to be two to two-and-a-half years, but some funds are now returning to raise new capital on a one-year cycle, which is fast. Some funds deploy capital faster because they take concentrated, large-check positions, which could be a worrying signal. Bhatti says their normal cycle is 24 to 36 months, but 12 to 18 months isn’t crazy for some rapidly advancing funds. Many funds are also upsizing mid-cycle, which is definitely unusual — partly because funding rounds have become so large. If Anthropic is raising a massive amount of capital and you allocate 20% of your fund to it, you will obviously spend your commitment ahead of schedule. Seed-round amounts have also nearly doubled, meaning if you want to lead a round, you must write checks twice as large.

However, they distinguish key differences between the current cycle and the last period of accelerated investing. Bhatti says that last time, when pacing accelerated, much capital flowed into zero-revenue crypto moonshots. Now, they see many companies growing from zero to $100 million in revenue, which was completely unheard of before. Clarkson points out that 2021 vintages are still early (five years in), but they argue against doing one-year funds. Some may catch a piece of an AI company and look excellent, but the odds of getting it right within one year are lower, and valuations at the time were extreme.

Changes in liquidity structure are another important judgment factor. Bhatti says the secondary market is now the third leg of liquidity: IPOs, M&A, and secondaries. Private equity has long had a developed secondary market, but venture capital did not — it was once a dirty word, sold only when distressed. After people got stuck in 2021, they realized they should have sold earlier. Now, more managers use it as a tool and more judiciously: if you still believe it’s a power-law company, you probably won’t exit entirely; but if you can sell 20% of your position and return the fund, you probably should. Clarkson adds that the secondary market has become much more sophisticated in venture over the past five years. Although concentrated in the top handful of companies, it is far more prevalent than before, which is good. LPs are also selling GP stakes and parts of their portfolios, and the taboo around it has weakened.

These judgments’ boundaries come from the two LPs themselves. They call the current situation a yellow light, not a green light. Bhatti says it gives him a little heartburn. Clarkson says one-year vintage funds are typically harder to get right. Bhatti notes that if things turn, concentrated holdings would be less desirable — but for now, no one complains because potential returns are too large. In other words, this framework holds only if AI companies’ revenue growth and valuations continue to materialize; if that premise changes, the power-law convergence logic shifts from a feature back to a risk.

Sources

  • techcrunch.comTechCrunch↗
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