The Brief

ImpactAlpha LP/GP: Many emerging managers are hitting a wall in raising their next funds

ImpactAlpha · May 20, 2026
Credit: Hennie Stander on Unsplash

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In this week’s LP/GP:

  • LPs bridging the “second-wave” capital gap
  • Second and third funds from diverse-led GPs
  • Scaling up deep tech in Europe
  • Platform infrastructure for climate finance

(Some) LPs step up to help emerging managers cross the chasm to their next fund. Raising a first fund is hard. For many emerging managers, raising a second, or even third, fund is even more difficult. With pledges made in the aftermath of the 2020 murder of George Floyd now receding, diverse and first-time fund managers face a “second wave” capital gap. That is slowing their momentum just as many are establishing early track records as investors. Leading LPs are testing new approaches, providing operating capital and anchor investments and even making multi-fund commitments, to help promising managers survive the hardest stretch of institutional fundraising. “We are sticking by our managers,” says Javier Hernandez of the California Wellness Foundation. The $1 billion private foundation has seeded first- and second-time fund managers, including Vamos Ventures, Urban Innovation Fund and Illumen Capital. “These are funds that are top performing,” Hernandez says. “How do we sustain these firms and allow them to mature and graduate? That’s the real test for institutional investors like us.”

  • Hitting a wall. Managers that raised funds five to seven years ago are coming back to market in one of the harshest fundraising environments in years. Many are folding their tents. Their failure deprives the impact investing market of diverse talent and hard-won experience. Diverse and women-owned firms reached a peak of 63% of first-time funds in 2020 and 2021, according to Fairview Capital, a minority-owned firm that co-invests with institutional investors in emerging and diverse managers (read and listen to, “Fairview Capital’s emerging wisdom about emerging and diverse fund managers”). For more than a decade, the universe of woman- and minority-owned private equity and venture capital firms raising capital has expanded without interruption, growing from fewer than 50 firms in 2014 to a record high of 537 in 2024. That streak is now broken, according to a new report by Fairview. The number of diverse managers that are actively raising capital fell 12% last year, the first decline since Fairview began tracking the data.
  • Beyond the check. The situation is raising tough questions for impact investors about the depth of their own commitments. Some LPs have taken to seeding new fund managers by taking an equity stake in the fund management business itself. Other LPs are backing intermediaries that support emerging managers with working capital, bridge financing, warehousing and co-investments (see, “Ten ways LPs are going ‘beyond the check’ to help impact managers survive the fundraising drought”). Living Cities, a collaborative of foundations and financial institutions, makes working capital loans to emerging venture capital firms to help them get on their feet through its Blended Catalyst Fund. Living Cities is now in the market with its second Blended Catalyst Fund, which is targeting a $50 million raise. “As allocators that also raise without asset owners, every so often we have to raise,” Fair says. “And so we are in this exact same turbulent capital-market raising environment that all the fund managers that we want to support are. It’s just taking longer.”

🟢 Live on Edge: Repeat GPs

Diverse-led GPs who are toughing out the fundraising challenges. Headwinds be damned. ImpactAlpha Edge includes dozens of profiles of emerging and diverse GPs that have made the jump from first to second and even third funds. Check out Collide Capital, Zeal Capital Partners, Impact America Fund, MaC Venture Capital, Collab Capital, Slauson & Co. and Harlem Capital, for example. In a challenging market, they’ve attracted investment to their follow-on funds from LPs such as MassMutual, The California Wellness Foundation and Goldman Sachs Foundation.

Dealflow: Growth Capital

EQT selected to manage landmark €5 billion Scaleup Europe Fund. Europe’s leading universities and research centers generate breakthrough innovations and promising entrepreneurs. But the continent’s shortage of growth capital has compelled some of its best startup talent and inventions to leave for Silicon Valley. The European Commission’s ambitious €5 billion ($5.9 billion) Scaleup Europe Fund aims to be an antidote: a reserve of capital for growth-stage companies in strategically important deep tech sectors, including AI, quantum computing, dual use technologies, clean energy, space technology, biotech and medical innovation. The EC has selected Swedish private equity firm EQT to manage the fund. “This is a significant milestone for Europe at a critical moment,” said Per Franzén of EQT, which beat out London-based Atomico in the hotly contested mandate. “Europe has proven its ability to create successful early-stage technology companies. The challenge is now to scale those businesses into becoming global leaders while maintaining their European roots.” The EC is anchoring the fund. Novo Holdings, the Export and Investment Fund of Denmark, CriteriaCaixa, Santander and Mouro Capital, Netherlands-based APG Asset Management and Allianz also invested. If it reaches its target, it will be among Europe’s largest ever private funds. 

  • Self-reliance. Several years of energy crises and security threats have forced Europe to confront its self-sufficiency. The 27-country European Union is overly dependent on imported energy, foreign-controlled supply chains and overseas technologies, Berlin-based venture capital firm World Fund warned in a report last month. The Scaleup Europe Fund “is proof of what Europe can achieve when we align our resources,” said Ekaterina Zaharieva, Europe’s commissioner for startups, research and innovation. EQT was reportedly chosen over private equity peers Atomico, Eurazeo and Vitruvian to manage the fund. The Stockholm-based firm has €269 billion ($312 billion) in assets under management. It will make “a significant commitment” of its own capital in the fund.
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Dealflow overflow. Investment news crossing our desks:

  • Copenhagen Infrastructure Partners and British International Investment each committed $150 million to launch North Star, a new investment vehicle for renewable energy projects in India. The partnership is BII’s first investment from its new British Climate Partners initiative. CIP’s commitment comes from its second Growth Markets Fund. (BII)
  • MSquared secured a $20 million investment from BMO for its second Equitable Housing Solutions Fund to support the development of mixed-income housing in the US. (BMO)
  • Spain-based Plus Partners raised €45 million for its first fund, which invests in pre-seed and seed-stage startups tackling “the issues that shape society: health and nutrition, money and property, and the future of work and productivity.” (Plus Partners)

Impact Voices: Catalytic Capital

Mind the pioneer gap: Building platform infrastructure for climate finance. When the Trump administration froze $20 billion in Greenhouse Gas Reduction funds, it orphaned approved loans for electric drayage trucks for US ports, and solar projects for universities. The MacArthur Foundation, along with the Packard Foundation, ImpactAssets Capital Partners and five family offices seeded a $50 million Energy Catalyst Fund to make low-interest loans to green projects in low-income communities affected by the federal freeze. “This is the impact field at its best,” Conduit Capital’s Robert Zulkoski writes in a guest post. “Catalytic capital absorbing risk; blended structures making the senior tranches viable for family office capital; and patient infrastructure being rebuilt from private resources because public infrastructure has been disassembled.” Much more than $50 million is required, of course. Beyond project finance, Zulkoski says, “the fund managers and platforms that originate, underwrite and distribute those projects need an instrument of their own.”

  • Funding vacuum. The need for climate transition finance has never been greater, yet critical market builders are languishing from being underfunded. First-time fund managers, blended finance vehicles, and impact measurement platforms are stranded in an 18-to-36-month “pioneer gap” between validation and institutional readiness, explains “The builders of our sector’s infrastructure are dying in a structural funding vacuum,” Zulkoski writes. He makes the case for a new generation of catalytic capital vehicles designed to seed impact fund managers and finance the connective tissue of the market itself.
  • Impact platform fund. Conduit is launching a $20 million blended-finance fund – 20% philanthropic first-loss, 30% junior equity, 50% senior equity – with the intention of starting to bridge the gap. The pilot fund could seed a half-dozen emerging impact fund managers raising their first funds. Perhaps more unusual, Zulkoski wants to invest in the impact investing’s field infrastructure itself, including blended finance structuring vehicles, impact measurement infrastructure, and fund distribution platforms. He calls for building such platform infrastructure, “before the climate transition’s most consequential builders are lost to a funding vacuum the field has known about and not yet closed.”

Agents of Impact: Follow the Talent

John Ellis of Woodforest National Bank joins the board of Alleviate Impact Capital… Asset manager Aurora Sustainable Lands has restructured its leadership team, bringing former carbon operations vice president Cakey Worthington into the new role of sustainability and natural capital senior vice president. Mike Phelps, previously vice president of portfolio management, becomes chief operating officer, while Blake Stansell stays on as the company’s president… Alena Redeker is promoted to principal at Auxxo Female Catalyst Fund… Habib El Magrissy, formerly with CrossBoundary Group, joins Hatch Africa as head of strategic finance.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– May 20, 2026