The eight tests at a glance
Every allocator we interviewed has their own process, but the questions they're trying to answer are remarkably consistent. We've grouped them into eight tests. A manager doesn't need a perfect score on all eight, but a clear fail on any one usually ends the conversation.
| # | Test | What the LP is really asking | What passes |
|---|---|---|---|
| 1 | Focus | Why will you win? | A narrow focus and an advantage you can prove |
| 2 | Picking | Can you choose, not just see? | Clear reasoning on the deals you passed on |
| 3 | Skill or luck | Will it happen again? | A deal-by-deal story that matches your strategy |
| 4 | Attribution | Is the record really yours? | References that confirm your actual role |
| 5 | Fund construction | Does the fund fit the strategy? | Earned ownership and a size planned around it |
| 6 | People | Would I want you beside me in a crisis? | Behavior, not promises, that shows alignment |
| 7 | The numbers | What's behind the IRR? | Clean cash flows, conservative marks, a liquidity plan |
| 8 | Conviction | Is this expertise or a trend? | Evidence you were there before the theme got hot |
How LP diligence actually runs
Short answerFrom a cold email or intro, to a short screening call, to a deep dive on the portfolio, references, operations, time with the partners, and finally the investment committee. Most managers are filtered out in the first two steps.
Not every LP runs every stage, or in this order, but this is the sequence our guests described. The tests in the rest of this playbook happen inside these stages.
- First contact
Cold emails do get read. Jessie Jia Guo of Next Legacy Partners replies to every one, and looks for conviction, homework on the LP's mandate, and a request for a relationship before a request for money.
Ned Brines's office sends an automatic reply explaining its process so managers know when to expect an answer.
- The screening call
Usually about 30 minutes. Brines expects a manager to explain within the first five minutes how they differ from every other fund raising that year.
Matt Curtolo advises managers to use the first call to listen and check whether the LP is a fit before pitching.
- The deep dive
The LP reads the materials beforehand and spends the meeting on questions and individual portfolio companies (see Test 3).
- References and attribution
LPs check what the manager actually did at prior firms, often through their own network rather than the references provided (see Test 4).
- Operational due diligence
Compliance, fund administration and back office. At StepStone Group this is run by a team independent of the investment team.
- Time with the partners
Unstructured time to understand how the partners think and behave under pressure (see Test 6).
- Investment committee
The partner bringing the deal has to explain their conviction and show they've tested every assumption.
You only bring things to the table when you have one hundred and fifty percent conviction… Did you really look at the assumptions that you're making? Did you really test these assumptions?
Where the paperwork fits in
Decks and due diligence questionnaires still exist, but our guests trust them less than they used to, largely because of AI.
Increasingly DDQs have become less useful, honestly, because… they're probably AI generated. And the response is also AI generated. So I'm not sure how much of the voice of the manager is actually coming through there.
Curtolo, who expects to review around 400 decks this year, says the buzzwords have become repetitive, and cites a DocSend figure that people spend about two and a half minutes on a deck. The practical consequence for managers is that the written materials only need to earn the meeting. The meeting is where the evaluation happens.
One warning for after the meeting, from Slava Darkhaev, who allocates to venture for a single-family office: chasing an LP for feedback is “a big red flag” that signals desperation.
Test 1 of 8 · Focus
Why will this manager win?
Short answerLPs start by asking what a manager is focused on and why the best founders in that area should choose them. Broad strategies and borrowed themes rarely survive this test.
Almost every fund says it has access and helps its founders, so those claims tell an LP very little. What allocators want is something specific: a part of the market the manager knows better than anyone, and evidence that founders in it pick them. Two guests offered useful ways to test for it.
Technique · Tom Duffy, TIFF
Score four traits: focus, advantage, partnership, judgment
Duffy invests in early-stage managers through TIFF's venture fund of funds, which the firm started in 1997. He describes the best managers with four traits:
- Focus. Deep expertise in one area, which matters more now that information is cheap.
- An unfair advantage. For example, a GP founders already follow as a thought leader in their field.
- Partnership. Someone an LP can trust for a decade. In his words, “the average fund life lasts longer than the average marriage.”
- Judgment. The ability to make the call no tool can make.
Machines let you eat faster, right? They help you process more data and move quicker, but they don't replicate taste. The best GPs still have to make a qualitative call on the people and markets that no tool can really make for them.
Technique · Iren Reznikov, Vintage Investment Partners
Make the manager prove their right to win
Reznikov asks every manager the same question: in a market where so much capital is chasing the same small group of top founders, what gives you the right to win? Acceptable answers vary. It might be specialized access, a distinctive way of looking at the market, or a specific way of helping companies. What doesn't vary is that the manager has to explain it clearly and back it with proof.
If you're the LP
- Ask the manager to state their focus in one sentence.
- Ask for three pieces of evidence for their advantage, such as competitive rounds they won or founders who referred others.
- Notice which claims come without evidence.
If you're raising
- Write your one-sentence answer and test it on someone outside venture.
- Attach proof to every claim in your deck.
- Cut any theme you can't show you knew before it was popular.
Test 2 of 8 · Picking
Can the manager pick, or only see deals?
Short answerSeeing good deals no longer sets managers apart, because top founders talk to the same five to ten funds. LPs now probe decisions: what a manager passed on, where they declined to invest more, and how they win competitive rounds.
Every manager leads with their winners, so winners alone reveal little. The decisions a manager didn't make, and their reasoning at the time, say much more about their judgment. Reznikov, who spent eleven years investing directly in companies before becoming an LP, calls access “table stakes” for top managers: the best founders shortlist the same few funds, so they all see the same deals.
Technique · Iren Reznikov, Vintage Investment Partners
Ask for the deals they passed on
Reznikov says managers rarely think about this question, yet for an LP the answer is “extremely important.”
I would appreciate when these fantastic managers share a specific case where they didn't invest in a company. And why is that? The cases where they decided not to double down on a company.
Framework · Iren Reznikov, Vintage Investment Partners
Follow the chain: access, picking, winning, value creation
Reznikov breaks a venture manager's job into four linked skills and tests each one:
- Access: do they see the best deals? Now the minimum.
- Picking: do they choose the right ones?
- Winning: when the founder has options, why do they choose this fund?
- Value creation: do they help after investing? She says this feeds the other three. A manager close to customers spots the teams solving real problems, and help offered before a round closes is how competitive deals are won.
Technique · Hunter Somerville, StepStone Group
Check that they earn their place
Somerville expects seed managers to earn their allocation by introducing customers, helping recruit and connecting companies with the right next investors. He draws a line between a generic introduction and a useful one.
Everyone can make introductions to VCs, but can you make introductions to the best VCs and to the best people within those VCs and the multi-stage groups?
If you're the LP
- Ask for two deals the manager passed on and one where they chose not to invest more, with the reasoning at the time.
- Call a founder and ask why they chose this fund over the alternatives.
If you're raising
- Prepare honest pass stories, including one that went on to succeed. Lara Nuchowicz of AR Capital says being “vulnerable is sometimes a plus” for her.
- For each top company, be ready to explain why the founder chose you.
Test 3 of 8 · Skill or luck
Was the track record skill or luck?
Short answerLPs take the manager off script and go through the portfolio deal by deal, testing whether the winners came from the stated strategy and whether that strategy will hold for the next three funds.
A handful of companies drive most venture returns, so a strong track record can rest on a single lucky deal. The question LPs are really asking is whether the manager's process would find the next one.
Technique · Jeffrey Blazek, Neuberger
Take the manager off script
- Get the materials in advance and read them.
- Tell the manager you've read them and skip the presentation.
- Turn to the portfolio page and pick companies yourself.
- For each one ask: when did you invest, why, and what was the thesis?
- Listen for contradictions between the answers and the stated strategy.
If you let a manager just tell their best stories on their script in the deck, then you're going to get a very skewed perspective of what their value proposition is.
He's clear it isn't a “gotcha.” The goal is to understand “the wiring of their process.”
Technique · Tom Duffy, TIFF
Take apart individual deals
For each early portfolio company, TIFF works through the same checklist:
- How was the deal sourced?
- How competitive was the round?
- Why did the founder choose this manager?
- How strong are the company's product, market position, burn and capital efficiency?
- What is the GP actually doing to help it reach the next milestone?
Technique · Iren Reznikov, Vintage Investment Partners
Test the strategy for three funds, not one
When you see deals that are super successful: was it an accident or a strategy? You want to make sure that you can see that repeatability.
She also asks how the manager is “thinking through building out the fund for the next three cycles,” looking for strategic rather than tactical thinking as markets shift.
If you're the LP
- Choose the companies to discuss yourself, and include at least one that failed.
- Ask Ned Brines's plain question: did they get lucky, and does the record match what they say they do?
If you're raising
- Be ready to walk through any company in the portfolio, failures included.
- Show the thread from your thesis to each investment, and say where you deviated and why.
Test 4 of 8 · Attribution
Is the track record really theirs?
Short answerLPs judge first-time and established managers by the same standard, but first-timers need different evidence: references that confirm their actual role at prior firms, angel investments they can clearly claim, and a credible plan to build a firm.
First funds and spin-outs are where LPs spend the most diligence time, because a role on a deal is easy to overstate. Our guests were united on the approach.
We use the same manager selection framework for emerging and established managers. Every manager is competing for the same capital. The difference is what you can lean on without a standalone track record.
Technique · Tom Duffy, TIFF, and Iren Reznikov, Vintage Investment Partners
Verify the role through your own network
TIFF leans on its network “to verify an individual's actual role and impact at prior firms,” and many of the emerging managers it backs are spin-outs from firms it has followed for years.
Iren Reznikov says the same of Vintage: when someone leaves a multi-stage platform, the firm has usually tracked their investments already.
Technique · Hunter Somerville, StepStone Group
Check what they actually did on each deal
A lot of people can claim involvement in businesses, but maybe they did a first call or were on a deal team and really had no influence or relationship with the founders. And so that's something that needs to be heavily diligenced, heavily scrubbed.
StepStone is comfortable with angel track records, but wants evidence of real investing. A pure operator who has never invested “is a lot harder for us to digest.”
Technique · Matt Curtolo and Lara Nuchowicz
Assess the person first, then the process
Curtolo says early-stage diligence comes down to “people and process,” because LPs are committing to a blind pool: “I don't know the assets that I'm buying, so I need to trust you.” He wants managers to start with what shaped them, not their résumé: “What did you do the eighteen or twenty years before that?”
Nuchowicz, who runs private markets for her family's office, says she tracks “talent before anything else.” She looks for proof that a GP sources deals by design rather than by chance, and for signs of hustle, like spending weekends with founders. For very young GPs, she accepts a commitment funded by reinvesting management fees rather than writing a check.
Where LPs disagree: Fund Is
Some LPs simply don't back first funds. Curtolo thinks that reflects “an incomplete understanding of what risk is,” arguing you'll never find “a more motivated GP or an aligned opportunity than Fund One.” He cites a StepStone study of about 2,000 buyout funds in which first funds outperformed fourth funds at the median.
Slava Darkhaev takes a middle path: the first-time managers in his portfolio already had a record from their own investments or a top fund. “It's just technically Fund One.”
If you're the LP
- Match each deal the manager claims to their specific role.
- Find at least one reference yourself, outside the list they gave you.
- Ask how they'll build the firm: team, brand and processes.
If you're raising
- Build an attribution sheet: each deal, your role, and who can confirm it.
- Lead with why you're doing this, then the résumé.
- Have a plan for hiring, brand and back office. Duffy says LPs want to see that you can build an institution, not just pick deals.
Test 5 of 8 · Fund construction
Does the fund size fit the strategy?
Short answerLPs want a fund size that follows from the strategy, which for early-stage managers usually means a smaller fund. Seed managers are expected to earn meaningful ownership, around 7 to 10 percent, and to size the fund around how many founders the team can really support.
Fund size decides how big the winners have to be and how much of each company the fund needs to own. LPs read it as a test of discipline: a manager who raises more than the strategy needs is signaling that fees matter more than returns.
Benchmark · Hunter Somerville, StepStone Group
Check ownership, not logos
Somerville wants seed managers approximating 7 to 10 percent ownership, and about 10 percent once a seed fund grows to $100 million to $200 million. Larger firms arriving in later rounds will want 10 to 15 percent themselves, so a seed manager has to earn its stake by being useful early.
People just get tempted by doing companies that there's a lot of buzz around and they throw in two to three percent ownerships and it doesn't matter. They get no information. They have no relationship with founders. It's a logo collection exercise.
Rule of thumb · Iren Reznikov and Ned Brines
Treat size as the enemy of returns
“Size is the enemy of returns,” Reznikov says, and Vintage's fund of funds leans toward managers with funds of about $500 million or less. She's careful to add that it's case by case: “It's an important factor, but it's not always about size.”
Ned Brines, who invests for a California family office, typically caps venture funds at about $150 million and backs managers investing from pre-seed to Series A.
Technique · Jessie Jia Guo, Next Legacy Partners
Plan five steps ahead
The most common blind spot she sees in pitches is portfolio construction that only reacts to the current market. She asks managers to think “five steps ahead”:
- How will your target ownership shape your relationship with founders after investing?
- How many founder relationships can the team handle at once?
- How much attention will each company really get?
The fund size should follow from those answers, not the other way round.
If you're the LP
- Ask what would make this fund too big.
- Check entry ownership in the top five companies.
- Compare the number of companies with the number of partners.
If you're raising
- Show the math linking fund size, ownership, number of companies and reserves.
- Build the firm your strategy needs. As Somerville puts it, “there is no shortcut” to becoming a large multi-stage platform.
Test 6 of 8 · People
Would the LP want these partners beside them in a crisis?
Short answerWhen two managers look alike on paper, trust decides. LPs spend unstructured time with the partners, test how the team will handle growth and new hires, and judge alignment by what the firm does rather than what it says.
An LP commitment usually lasts a decade or more and can't easily be undone. That makes the partners' character a central risk, not a soft factor.
Technique · Ned Brines, Arnel & Affiliates
Spend unstructured time with the partners
Brines's team gets to know managers “almost on a personal level,” including what matters to them outside work. One GP told him it was the most unusual diligence process he'd seen.
Everybody is very easy when things are going well to do the right thing and treat your partners well. What happens when things go haywire?… When we're all in the bunker together… I want somebody who I can trust.
Technique · Hunter Somerville, StepStone Group
Stress-test the team for change
Small venture firms are fragile. Somerville says adding a second or third partner “can completely disrupt the chemistry,” and StepStone has seen it destroy a firm it backed. He prefers managers who hire promising juniors and train them over bringing in senior partners from other firms with fixed habits.
Technique · Aoifinn Devitt, Moneta Group
Judge alignment by actions, not statements
We are looking for the integrity of that individual. We want to know about their staying power in a market that is increasingly uncertain. And we want to know where their alignment lies… I think you have to watch the actions of a company.
She names three moments when alignment tends to slip:
- The firm grows too large.
- The founder steps back and a second generation takes over.
- The firm goes public, and shareholders' interests compete with clients'.
Curtolo adds a fourth: management fees that grow so large “it really doesn't matter if they perform or not.”
What culture can and can't tell you
Devitt's PhD research on psychological safety in investment firms found no direct link between it and investment performance. But she says healthier firms have less turnover and more time for clients. In other words, a good culture isn't a reason to expect higher returns, but a bad one is a risk worth taking seriously.
If you're the LP
- Ask the partners about a decision they disagreed on and how it was settled.
- Ask how economics are split today and how that will change.
- Meet the team outside the pitch at least once.
If you're raising
- Be open about economics, succession and your next hire before you're asked.
- Keep your fee budget in line with what the firm actually needs.
Test 7 of 8 · The numbers
What's behind the IRR?
Short answerLPs read performance numbers skeptically and in context. They rank managers against each other, not just benchmarks; recalculate IRR without the effect of credit lines; compare valuations with actual sale prices; and judge distributions against the exit market.
IRR is the number every deck leads with, and it's the easiest to flatter because it depends on timing. Distributions (DPI) are scarce in a slow exit market. So the experienced allocators we spoke with adjust the headline numbers before relying on them.
Technique · Ned Brines, Arnel & Affiliates
Recalculate the IRR without the credit line
Many funds borrow on a subscription credit line to make investments and call capital from LPs months later. The LP's money is at work for a shorter time, so IRR rises, but the actual multiple doesn't change.
My IRR got better because I didn't have to deploy capital until six months later. But in reality, my multiple of money, which is what I care about because that's what I can spend, and my DPI, that doesn't change.
His team's method:
- Separate out every cash flow to and from LPs.
- List each acquisition and the date it was made.
- Match each capital call to the acquisition it paid for.
- Move the call back to the acquisition date and recalculate.
His summary: “I can't eat IRR.”
Technique · Ned Brines, Arnel & Affiliates
Compare the last valuation with the sale price
To see how conservatively a manager values its portfolio, Brines compares the last reported value of each sold asset with the price it actually sold for. Sales at or below the last mark suggest aggressive valuations. Sales regularly well above it suggest a conservative manager, even though that makes interim IRR look lower.
Technique · Jessie Jia Guo, Next Legacy Partners
Rank managers against each other, not just the benchmark
Sometimes we can feel happy to say, hey, all of our managers are in the first quartile or beat the industry benchmark. But we really have to also incorporate another layer of rigor to say, hey, what if we force rank them?
Next Legacy ranks its managers on every factor it cares about. Whoever is at the bottom raises two questions: could a better manager fill that place, and what should the team discuss with that GP?
Technique · Slava Darkhaev, single-family office
Look at the companies, not the valuations
For young funds, reported valuations say little. Darkhaev looks at each portfolio company's growth, burn and founder quality, progress “not yet reflected in the books, not yet reflected in markups,” and talks to founders directly.
Two views · Tom Duffy, TIFF, and Hunter Somerville, StepStone Group
Judge DPI in context, but expect some
It's very hard to judge a venture vintage on DPI in year six or year seven of a closed exit market. Judge the underlying business quality and then expect the liquidity to show up on a longer, more normal timeline once the windows reopen.
Duffy tracks leading indicators instead: follow-on rounds at higher valuations, revenue and unit-economics growth, and interest from acquirers.
Hunter Somerville sets the limit on patience: “you can't be asking people to support four or five of your funds and have returned no money back to them.” He expects managers to sell part of their positions along the way and to use secondaries.
If you're the LP
- Request dated cash flows and details of any credit line, and calculate IRR both ways.
- Collect the last valuation and sale price for every exit.
- Ask Dave White's structural question: does the liquidity of the portfolio match the liquidity promised to LPs?
If you're raising
- Show IRR with and without your credit line before you're asked.
- Share your record of valuations against sale prices.
- Explain your approach to liquidity: partial sales, secondaries, and when you'd use them.
Run the numbers yourself: the Fund Performance Calculator computes IRR, TVPI, DPI and PME from a fund's cash flows.
Test 8 of 8 · Conviction
Is it real expertise or a hot theme?
Short answerLPs look for evidence that predates the trend: expertise built over years, a real community of founders and experts around the GP, and visible help to founders. A thesis that exists only on slides doesn't count.
Hot themes attract managers who discover them at the same time as everyone else. With AI, the question isn't whether a manager invests in it, but whether they understood it before it was obvious.
Technique · Jessie Jia Guo, Next Legacy Partners
Look for three kinds of evidence
- Expertise built before the wave. Research, writing and relationships that go back years.
- A community around the GP. Founders and experts in the field who already see the GP as a central figure.
- Visible help to founders. Real examples of the GP being useful.
If I'm hearing from a manager just talking through the slides about… physical AI, ‘I want to invest in physical AI because that's the next wave of innovation I believe in,’ but I don't see the evidence in any of the three we discussed, it's hard to build that conviction.
Rule · Tom Duffy, TIFF
Back specialists, not newcomers to the theme
TIFF holds only a couple of managers fully dedicated to AI, and expects sector expertise to be long-standing. In Duffy's words, it “cannot, simply put, be an afterthought or just something you pick up and start. This needs to be your true bread and butter.”
Technique · Dave White, Wayfinder Advisors
Ask what's special about the companies
White says LPs should ask the same question of companies in an AI-heavy portfolio: “this is an AI company, but is it actually anything special?” Is there a moat in its data or process, or could anyone with a good model copy it?
If you're the LP
- Ask when the manager first invested in or wrote about the theme.
- Ask for founders in the space who will vouch for them.
If you're raising
- Show a timeline of your involvement in the theme before it peaked.
- Explain each AI company's moat in one sentence.
After the first fund
How do LPs decide whether to re-up?
Short answerThey ask the same forward-looking questions they'd ask a new manager, often with new people reviewing. Is the strategy still consistent, does the new fund size still fit, is the team intact, and is the portfolio adapting?
A strong existing relationship helps, but our guests were clear it doesn't replace diligence.
Technique · Iren Reznikov, Vintage Investment Partners
Bring fresh eyes to every re-up
Vintage puts new team members on each re-up review so the discussion stays objective. Reznikov is candid that the answers are rarely all yes. A fund may be larger than hoped or have some team friction, and conviction comes from weighing the whole picture across two or three earlier funds.
We want to know that we're going to back you for three cycles, at least, not for one. So even if it's a really long-term relationship, we still want to understand how the strategy is looking. Does it still make sense? Does the size still make sense?
Darkhaev looks at the companies' growth, burn and founder quality, and doesn't mind a manager changing course when they spot a new opportunity.
Vishal Verma of Edgewood Ventures explains why many LPs keep committing through good and bad years: “you continuously have to put money from one vintage to another vintage to be invited back to the next party.”
Planning commitments across vintages? The Commitment Pacing Model projects calls, distributions and NAV year by year.
The LP due diligence question bank
Forty questions drawn from these conversations, grouped by the eight tests. Use it to run diligence, or to prepare before LPs run it on you.
Test 1: Focus
- In one sentence, what is your focus, and why are you the right team for it?
- Why should the best founders in your area choose you over the five to ten funds they'll also speak with?
- What evidence shows your advantage works: competitive rounds won, founders who referred others?
- Which part of the market are you deliberately not pursuing, and why?
Test 2: Picking
- Tell me about a company you passed on. Why, and what happened?
- Tell me about a company where you chose not to invest more. What did you see?
- In your best deals, why did the founder choose you over other investors?
- In competitive rounds you lost, why did the founder pick someone else?
- What did you do for a company in its first year that another investor couldn't have?
Test 3: Skill or luck
- Walk me through one investment: how it was sourced, how competitive the round was, and what the thesis was.
- Walk me through a company that failed. What did you learn, and what changed?
- Which of your best outcomes came from the strategy, and which were luck?
- Where have you deviated from your thesis, and why?
- How will this strategy hold over your next three funds, not just this one?
Test 4: Attribution
- For each deal in your record, what was your specific role: sourcing, leading, board work?
- Who at your prior firm can confirm that role?
- Which founders can we speak to without you arranging the call?
- How do your angel or prior-firm investments relate to this fund's strategy?
- How will you build the team, brand and processes (compliance, administration, audit) of a standalone firm?
Test 5: Fund construction
- How did you arrive at this fund size, and what would make it too big?
- What ownership do you target at entry, and how do you earn it?
- How many companies will you back, and how many can each partner really support?
- What is your reserve strategy, and who decides where follow-on capital goes?
- How will the portfolio look five steps ahead: at fund three, or at exit?
Test 6: People
- How do partners split economics and decisions, and how will that change as you grow?
- Who might you hire next, at what level, and how will they fit the culture?
- How much are the partners committing, and is it cash or a fee waiver?
- How large is the management fee budget relative to what the firm needs?
- Describe a decision the partners disagreed on. How was it resolved?
Test 7: The numbers
- Do you use a subscription credit line? Show IRR with and without it.
- What are TVPI, DPI and multiple of invested capital by fund, not just IRR?
- For each exit, how did the sale price compare with your last valuation?
- Which unrealized companies drive the value, and what are their growth and burn today?
- When do you expect to return capital, and what leading indicators support that?
- Have you sold partial positions, used secondaries or run a GP-led process? What's your policy?
- Does the liquidity of your portfolio match the liquidity of your LP terms?
Test 8: Conviction
- When did you first invest in, research or write about your theme?
- Which founders and experts in the space would vouch for you?
- For each company in a hot theme, what is its moat, in one sentence?
- If your theme cooled, what would remain of your edge?
Frequently asked questions
- What do LPs look for in a venture capital fund manager?
- The allocators in this playbook consistently name five things: a clear focus and a reason the manager should win the best deals; picking judgment that's repeatable rather than lucky; a strategy that stays consistent across fund cycles; a fund size and ownership target that fit the strategy; and partners they trust, with interests aligned with LPs.
- How do LPs evaluate a first-time fund manager with no track record?
- Most use the same framework as for established managers but lean on other evidence: references that verify the person's actual role at prior firms, angel or prior-firm investments they can attribute, deep dives into any early portfolio companies, and the manager's plan for building a team, brand and institutional processes.
- What ownership should a seed fund target?
- Hunter Somerville of StepStone Group told VC10X he wants seed managers approximating 7 to 10 percent ownership, and around 10 percent once a seed fund reaches $100 million to $200 million. Small 2 to 3 percent stakes in buzzy companies, he said, are “a logo collection exercise.”
- Why don't LPs rely on IRR alone?
- IRR depends on timing, so it can be inflated, most easily with subscription credit lines that delay capital calls. Allocators such as Ned Brines rebuild cash flows to normalize IRR and put more weight on multiple of invested capital and DPI, which are what LPs can actually spend.
- How do LPs judge DPI in a slow exit market?
- Tom Duffy of TIFF told VC10X it's very hard to judge a venture vintage on DPI in year six or seven of a closed exit market. LPs look at underlying company quality and leading indicators such as up-rounds and acquirer interest, while still expecting managers to create some liquidity through partial sales and secondaries.
- Are due diligence questionnaires still useful?
- Less than they were. Aoifinn Devitt of Moneta Group told VC10X that DDQs have become less useful because both the questions and the answers are increasingly AI-generated. Allocators put more weight on unscripted conversations, portfolio case studies, references and the manager's actions over time.
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Sources
Every insight in this playbook comes from an on-record VC10X conversation. Quotes are lightly edited to remove spoken filler; the full episodes are linked below.
- Tom DuffyDirector, Private Markets, TIFF
- Iren ReznikovPartner, Vintage Investment Partners
- Hunter SomervillePartner, StepStone Group
- Jessie Jia GuoInvestment Partner, Next Legacy Partners
- Ned BrinesChief of Investment Strategy, Arnel & Affiliates
- Matt CurtoloFormer Institutional Allocator; LP/GP Advisor
- Aoifinn DevittManaging Director, Global Wealth, Moneta Group
- Slava DarkhaevHead of VC Allocations, Single-Family Office
- Jeffrey BlazekCo-CIO, Multi-Asset, Neuberger
- Dave WhiteFounder, Wayfinder Advisors; former MD, Cambridge Associates
- Lara NuchowiczPrincipal, AR Capital (Single-Family Office)
- Vishal VermaPrincipal, Edgewood Ventures (Single-Family Office)
This playbook summarizes views guests shared on the VC10X podcast. Figures and claims are theirs, as stated on the record. It is not investment, legal or tax advice.