It has been a difficult several years and those difficulties seem unlikely to correct in 2025. Sixty-two percent of emerging managers told us they had to meet with 100+ limited partners to close their recent round and it is taking all managers an average of 13 months to close a round — 76% longer than it took 10 years ago.

However, to paraphrase Sun Tzu, in chaos there is opportunity. Smart managers are seeing that if the market won’t turn around, it is incumbent upon them to use this to their advantage. They are rethinking their thesis and offering new niche investment strategies better tailored to what they are hearing from limited partners.

What follows are three of the four opportunities we see for private equity and venture capital right now. For the full analysis, download the report.

Opportunity 1: Tell a better story to raise capital and reorganize your fund

In this market, limited partner desires matter more. General partners must pay more attention to their investors’ desires, and revisit their thesis. This is a particularly enticing opportunity for emerging managers and independent sponsors who can offer niche investment strategies larger funds cannot. “Now more than usual, emerging managers must highlight what distinguishes their fund from others by using a more bespoke approach to better engage investors,” says Christopher Brown, Partner at Citrin Cooperman.

Those two classes of managers increasingly offer investors:

1. Diversification: New geographies and specialized deal strategies unavailable at larger funds
2. Innovation: New ideas and trends that established funds lack
3. Returns: The option to take on more risk for superior returns
4. Access: Founders and senior team members with an attractive pedigree

For all funds, there is a great opportunity to reevaluate service providers. Limited partners want assurance that managers have a tight circle around them capable of realizing value in this market. For example, a compliance advisor, a fund administrator, and so on.

Managers can also hire outside partners to help reevalute target business types. These partners can and build models to explore scenarios such as moving from established companies and consistent returns to higher-risk startups which are seeing more movement right now. We have seen established fund managers who historically invested in real estate raising private credit funds because they see that strategy appealing to potential limited partners in the current interest rate environment.

Opportunity 2: Improve pipeline with dealflow

Fund managers can address the deal flow from two sides: First, if there is limited movement within the current portfolio, consider investing in adjacent industries where there is more action. For example, managers should consider technology platforms that support their industry (a “pick and shovel” strategy), or upstream materials providers.

The second side is to investigate why deals are failing. The number one reason deals fail right now according to PitchBook is due diligence. Buyers are going to greater lengths to vet companies and smaller inconsistencies in those findings are having an outsized impact — buyers are now easily discouraged.

Managers can ensure deal success by bringing in outside advisors to do the sell-side quality of earnings (QofE) analysis on a portfolio company to truly understand the financial performance of their investment and maximize potential profits. The QofE report can offer an advantage in negotiations and allow them to identify any issues prior to the buy-side due diligence.

Also, managers should consider strategic outsourcing in what the Harvard Business Review calls an “open talent model.” Some functions such as finance and accounting lend themselves to outsourcing, can improve the quality and consistency of reporting across their portfolio, and can offer better economics.

Opportunity 3: Encourage portfolio companies to use more technology

We advise fund managers to become more involved in their portfolio companies’ technology decisions. Beyond being able to demonstrate to limited partners a strong understanding of each business’ fundamental and intimate operations, those companies likely have significant opportunities to improve their EBITDA with technology. The further that business is from the technology industry, the greater the opportunity.

For example, while it is obvious that technologically advanced companies like manufacturers and distributors are investing in supply chain software, smaller professional services businesses might not yet be considering AI to create new service offerings. This makes strategic managerial insight valuable to those operators.

Across an entire portfolio, this can have a sustained and lasting impact on performance, and the story managers are about to tell around it.

Top opportunities for AI among portfolio companies include:

• AI for customer service, such as chatbots and help articles
• AI-assisted coding to ship new features faster
• A greater investment in ecommerce
• Automated insights from advanced analytics

New technology increased the overall value of one portfolio company of a fund we work with and contributed to a very successful exit.

To see the fourth opportunity and how it can help managers find better deals, download the full report.

To learn more or discuss these topics, please contact Alexander Reyes at areyes@citrincooperman.com.