When Ashish Agrawal, Ishaan Mittal and Tejeshwi Sharma quit Peak XV Partners earlier this year, it revived the debate around carry-share and power dynamics in the VC ecosystem. The departures came on the back of a monumental year for Peak XV which saw it get exits from notable portfolio companies, including Groww.
Agrawal in fact led Peak’s first ₹30-35 Cr investment in Groww in 2019. Overall, Peak XV invested close to $50 Mn (around ₹400 Cr) over many years in Groww, which delivered more than 50X returns at the time of its IPO in November 2025.
Despite this success, all of a sudden, Agrawal was stepping away, along with two other partners.
This past week, the trio announced their next VC firm, Mettle Capital, just a few months after the Peak XV departure. It’s the latest in the line of new funds from fund managers at established firms breaking away to wrest more control on where they invest and who is calling the shots.
As highlighted in past reporting by Inc42, the VC ecosystem has seen several such cycles where fund managers break away to launch new funds. The first one came about in 2022 and 2023 when the post-Covid frenzy resulted in several notable exits.
Then came the early 2025 wave, where more new funds were floated for early stage investing. And now there’s another wave; notably, the exodus of partners and investment analysts from Peak XV has resulted in multiple new funds sprouting up.
Another former Peak XV trio has launched Ambition Capital and is looking to raise $250 Mn for the maiden fund.
And it’s not just Peak XV of course. Over the past two to three years, India’s startup ecosystem has witnessed a steady stream of senior partner exits from top-tier VC firms, including Peak XV Partners, Z47, Elevation Capital and others.
So what’s driving this transition? Simply put, it is about a share of profits from fruitful investments or carry and greater autonomy in investment thesis.
But along with these internal factors, more and more limited partners are also realising that betting on new funds launched by the real “rainmakers” in existing large funds may not be an unwise strategy.
Let’s dive into all three factors.
Who Gets The Carry?
The primary breaking point for fund managers at larger firms is carry share.
“Fund managers are primarily leaving either for a larger share of the carry, greater autonomy, or divergence in investment philosophy,” said a senior partner at a VC firm.
Carry, also known as carried interest, is the wealth generation mechanism in the VC world; it’s the percentage of the profits that is paid to the fund manager. Most funds in India are structured as limited liability partnerships and these partners or fund managers are ones that will get the biggest share of the carry.
Other partners in the fund may have some share of the carry, but this is usually limited and never an obligation. Carry is not just a compensation, it also shapes influence for the next fund raise, hierarchy, and long term incentives within a VC firm.
A large firm may have multiple fund managers, but only a handful of partners get the full benefit of profitable returns. As Inc42 reported during the exit of Agrawal, Mittal and Sharma, one of the key factors was that Peak XV’s leadership was allegedly unwilling to extend favourable carry terms of new fund managers.
And even in previous instances, we have noted similar disenchantment among fund managers, whether it is over carry or investment thesis. Which leads us neatly to what fund managers want more autonomy in where to invest.
The Thesis Shifts
It’s the age of AI, but VC giants in India don’t seem to have a major AI-native portfolio. In fact, many of the large funds continue to bet big on traditionally large businesses like new-age retail, consumer services or fintech.
But this is not just about AI. It’s about general agility in investments.
As VC firms grow in size and corpus, they often become slower and more bureaucratic. The size of large funds also means that they need to have a structure with multiple fund managers and this increases the turnaround time for investments in many cases.
Plus, the biggest venture capital returns come from early stage conviction bets, where smaller and more agile funds have an advantage.
“In venture capital, track records are shown at the firm level, but returns are often created by a small group of individuals inside those firms also known as the rainmakers. As these investors leave to launch their own funds, LPs are increasingly asking not just which fund performed well, but who actually led the investments that generated those returns,” a founding partner of an investment firm said.
A growing number of investors believe large VC firms have become too slow and too driven by consensus to generate outsized returns. “The real risk in venture capital is often not backing an emerging manager. It is backing the track record of an established firm where the current team may not have created those returns,” another founding partner said.
Many emerging managers now argue that smaller funds are structurally better placed to generate higher returns because they can move faster, take concentrated bets and build stronger founder relationships early in a startup’s journey.
“Global data shows that while established funds usually deliver more predictable, beta-like returns, emerging managers dominate the high-return end of venture capital,” said Anup Jain, founding manager of BlueGreen Ventures. Jain, who was previously a partner at Orios Venture Partners, left the firm in 2023 to launch BlueGreen Ventures.
BlueGreen’s research cites Carta, Preqin, Pitchbook and other data sources to claim that “performance advantage is strongest when fund managers are early in the fund lifecycle”. According to one data point, cited by Jain and BlueGreen, smaller funds ($25Mn – $100 Mn) demonstrate stronger outcomes relative to larger funds (over $100 Mn).
In India, the view that new fund managers and differentiated early stage funds can have outsized outcomes gained traction, especially after the post-2021 market correction exposed weaknesses in large horizontal investing models.
The pressure on traditional VC firms has increased further after the public market correction and markdown cycle of the past few years. After the peak of $42 Bn invested in 2021, VCs are now facing greater scrutiny from LPs over returns and portfolio performance. But in many cases, LPs do not have a choice but to choose a new fund.
“Some LPs put money in new funds because they do not have enough dry powder that older funds demand,” said an investor, requesting anonymity.
The LP Base Is Evolving
This is unfolding at a time when India-focused VC fundraising has rebounded sharply in 2025, with LP interest returning after a prolonged slowdown. As per Inc42 reports, in 2025, $12.1 Bn worth of new VC/PE funds launched, up 142% from 2023.
However, LPs are now becoming far more selective and are prioritising strong track records and consistent returns over the brand value of a VC firm, said a fund manager asking not to be named.
Further explaining, he said, “Historically, LPs preferred backing established VC firms with long operating histories. But that mindset is changing. Instead of betting only on the brand, LPs now want to know which individual partner actually made the winning investments.”
Large VC firms operated on institutional reputation. Founders wanted well-known names on their cap tables, while LPs allocated capital based on the overall performance of the firm. But, LPs are now asking a different question: who generated those returns?
This shift has become a key driver behind the rise of emerging fund managers.
Venture capital has traditionally operated on a power law distribution. Thus, a small number of breakout startups generate a disproportionate share of overall fund returns. As a result, even a single successful bet out of a dozen can at times generate enough returns which can be larger than all other investments combined.
As a result, the spotlight naturally falls on the partner who sourced and backed those bets, often making the individual investor more important than the organisation itself.
Will New VCs Hit A Wall?
While emerging managers may enjoy greater autonomy in both investments and carry, they also face significant operational and fundraising hurdles, particularly from large institutions.
For one, institutional fundraising remains relationship-driven. Even experienced investors with strong portfolios often struggle to secure anchor LP commitments for a first-time fund.
Moreover, new funds face the challenge of building support infrastructure from scratch. Beyond capital, established firms offer platform teams, security support, analysts, legal sources, founder networks, and follow-on capital capabilities that independent fund managers may initially struggle to accumulate.
Also, in sectors like AI and deeptech, where startups require multi-stage capital support, founders may prefer large institutional firms capable of participating across multiple rounds.
Competition is another challenge. With a number of micro VCs cropping up over the past few years, differentiation has become a problem. Even those fund managers who have made impressive exits in the past aren’t guaranteed to get the next big thing.
So the pressure on new fund managers is still quite great, despite the fact running one’s own fund is seemingly less strenuous for them than being in a large big brand fund.
Edited By Nikhil Subramaniam