Smaller venture funds are finding a way to manage in the midst of a conservative market.

As with all bear markets, the appetite for risk drops, and although emerging fund managers are often noted to outperform their more established counterparts, some limited partners are weary of bringing on new venture partners. Instead, they retreat to their trusted, established partners.

For some emerging managers, this means the market will become tougher to penetrate. For those with funds that are focused on backing diverse founders who are already working with less capital, the drawback is often the difference between another round or closing shop.

“Risk is also sometimes perceived as anything outside the status quo,” Madeline Darcy, a managing partner at Kaya Ventures, told TechCrunch+. “The pattern-matching we often speak about for founders and young hoodie-wearing Stanford drop-outs has an equivalent in the VC world in the form of spin-outs from large big-named funds who tend to have less diverse teams.”

B. Pagles Minor, a first-time fund manager who launched DVRGNT Ventures seven months ago, told TechCrunch+ the fundraising environment hasn’t necessarily been a walk in the park. They are seeing an increased emphasis on due diligence, with limited partners asking for more metrics and data than Minor expected. Some of these requests have been costly, too.

“For example, certain types of insurances that were not typical before are now being asked for, placing a financial burden on emerging managers who may struggle to afford them,” Minor said. Minor has also noticed a growing trend of limited partners asking to forgo certain management fees or asking for lower carry in the fund, adding more strain on a fund manager’s ability to build and operate the fund, they said.

What happens to the smaller VC firms in a more conservative market? by Dominic-Madori Davis originally published on TechCrunch