Brand-name growth funds may dominate the headlines, but an industry secret is that the best return profile in venture capital has historically been produced by the newcomers and at the early stages of investing. Data from Cambridge Associates shows that new and developing firms are consistently among the top 10 performers in the asset class, accounting for 72% of the top returning firms between 2004–2016.

The early stage is where you’ll find the most emerging managers, by virtue of the fact that <$150m funds investing in pre-seed and seed companies are often earlier in their lifecycle. First funds are on the rise: the majority are <$25M and backed by individuals and families who are willing to take the risk on a manager with a shorter track record. It’s a smart bet, because the first three funds are when a manager has the most to prove and is working the hardest. They run a different calculus than later-stage funds: they’re optimizing for outsized returns to build their reputation, not for management fees.

They’re also likely starting their own fund because they see an opportunity they believe others are missing — which is what venture capital is all about.

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