Managers put more of their own money into VC/PE funds to woo limited partners

With competition for investor capital intensifying, Indian managers are committing substantial amounts of their own money to new venture capital and private equity funds to attract limited partners (LPs), going well beyond the regulatory minimums to signal conviction in their investment strategies.

Motilal Oswal Private Equity and its leadership team have consistently committed 10-12% of each fund raised over the past two decades as fund sizes grew from ₹550 crore in 2007 to ₹8,500 crore this year.

Boutique investment firm Carnelian Asset Management & Advisors is committing more than ₹100 crore of its own capital to a ₹2,000 crore private equity fund.

Mettle Capital, founded by former Peak XV managing directors Ashish Agrawal, Ishaan Mittal and Tejeshwi Sharma, is planning a sponsor commitment well above the minimum for its about ₹3,000 crore maiden fund, a person aware of the fund’s plans told Mint.

The Securities and Exchange Board of India mandates sponsor or manager commitment at a minimum of ₹5 crore, or 2.5% of the total fund corpus, whichever is lower, for all fund sizes.

LPs are passive institutional or high net worth investors who supply capital but leave investment decisions and active management to fund managers, known as general partners (GPs). Their financial risk is capped at the amount of capital they have committed.

The push comes as fundraising becomes concentrated in fewer, larger vehicles. In the first half of 2026, 48 funds raised $21.17 billion, more than double the $10.14 billion raised by 55 funds in the year-ago period, according to an EY report in September. In July, eight funds raised $2.5 billion, compared with 14 funds that raised $1.5 billion in July 2025.

Many Indian incumbent and new VC/PE funds are in or planning to enter the market to raise new funds such as ValueQuest Tristar, Waterbridge Ventures and Lightspeed India. Renuka Ramnath-led private equity firm Multiples is in talks to launch its next fundraise next year, targeting $1 billion-1.2 billion, Mint reported last week.

Funding their commitments

For established firms, capital generated from earlier funds can help finance commitments to subsequent vehicles.

“With multiple fund vintages, the team’s ability to put in money comes from the carry they generate in earlier vehicles. That money is then reinvested into the fund. So, the team’s capacity increases over time as the number of vintages grows,” said Rohit Mantri, co-head and managing director of Motilal Oswal Private Equity. “Naturally, limited partners feel more comfortable when fund managers put their own money into a fund, particularly in a difficult fundraising environment.”

For newer managers without an established track record, a sizable commitment can help demonstrate conviction in a strategy. In September, Mint reported that Carnelian was raising its first dedicated private equity fund of ₹2,000 crore.

“We are investing more than ₹100 crore of our own capital in the fund,” said Umesh Agrawal, managing partner for private equity at Carnelian Asset Management, adding that GP contributions usually stop at ₹15 crore-20 crore for newer funds. Mint reported that the fund is aiming for a final close by December.

The push for larger commitments comes amid mounting concerns among LPs about fund performances and delayed returns. Some private equity funds have extended the timelines for returning capital to investors while continuing to charge fees during the extended period.

“Private equity funds’ history has been that the experience has been a mixed bag because of which there has been a pushback in the market,” Agrawal said. “It (sponsor commitment) should be a big number. It should be a number that will hurt me if the fund doesn't do well.”

Does more money help?

A larger commitment can reassure investors that fund managers have their own capital at risk alongside LPs, said Rohit Bhayana, co-CEO and co-founder of a fund of funds that invests in venture capital and private equity funds.

“Putting in a large amount is a huge sign of confidence and skin in the game. Once you put your own money at risk, investors feel much more comfortable,” said Bhayana.

In a recent instance, Bhayana said a fund manager put in as much as ₹200 crore in a ₹1,700 crore-2,000 crore fund.

“A higher sponsor contribution is the fastest magnet for attracting investors,” he said, comparing it with factors like preferential fee and carry terms for larger LPs, deal access, risk assessment, and co-investment opportunities.

What can go wrong?

However, a large commitment can raise questions about how much of a fund manager’s personal wealth is tied up in the fund and whether the manager’s own financial interests could begin to outweigh the needs of external investors.

“A fund manager who puts in too much of their own capital risks turning the business into a family office, with employees effectively managing the founder’s wealth rather than focusing on external investors,” a fund manager raising a new fund said on condition of anonymity.

“A large personal stake can also create a sense of entitlement, with some founders expecting greater control over decisions because of the money they have invested. This, however, depends more on the individual’s personality than the size of the commitment.”