Key Takeaways
- Ask questions that can be tested: A useful answer should lead to data, documents, investment examples, pass decisions, or credible references.
- Prioritize attribution and repeatability: Institutions need to know what the current team did and why it can do it again.
- Connect strategy to fund mathematics: Market focus, fund size, ownership, reserves, and expected exits should support one another.
- Carry uncertainty into the memo: Unsupported assumptions and unresolved risks should remain visible after the diligence meetings end.
A Public Example
ILPA's DDQ offers a useful model for the kinds of questions institutional LPs ask before backing a manager.
- The questions should be specific: LPs need evidence on attribution, decision-making, key persons, conflicts, valuation, reporting, and fund economics.
- The practical lesson: Emerging managers can prepare by turning narrative claims into documents, examples, and references that an LP can verify.
- Useful number: A typical private fund may run 8 to 12 years, so LP questions should test whether the manager can operate through a full cycle.
A small set of questions usually carries most of the diligence value. Illustrative diligence weighting totaling 100 points. LPs should adjust the weights to their mandate and evidence needs.
LP Question Map
A small set of questions usually carries most of the diligence value.
View chart data and assumptions
| Question area | Illustrative diligence weight |
|---|---|
| Attribution | 18% |
| Strategy | 16% |
| Sourcing | 15% |
| Construction | 14% |
| Terms | 12% |
| Operations | 10% |
| Conflicts | 8% |
| Reporting | 7% |
Strategy and Market Focus
Fund-size comparison: NVCA's 2024 data put the overall US median fund at $21.3 million, versus $10 million outside the three largest venture states. Ask why the proposed size fits the opportunity set.
- Market definition: What does the fund target, and is the focus specific enough to evaluate?
- Fund-size fit: How does the proposed capital match the available opportunity set?
- Failure conditions: What developments would cause the strategy to stop working?
Manager Edge and Sourcing
Market concentration: Removing 487 megadeals from 2025 leaves roughly 14,865 deals totaling about $105 billion, or $7.1 million on average. The manager should define where its edge actually operates.
- Differentiated access: Which opportunities did the team see before comparable managers?
- Win evidence: Which founders or sellers chose the manager, and why?
- Channel attribution: What share of investments came from each sourcing route?
- Conversion: How do reviewed opportunities progress into completed investments?
Attribution and Track Record
Quartile caution: Cambridge Associates found funds settled into their ultimate quartile at roughly 5.8 to 6.8 years. Younger marks need deal-level attribution and valuation review.
- Individual contribution: Who sourced, underwrote, won, and supported each material investment?
- Realization: Which results have produced cash and which remain unrealized?
- Ownership of the record: Does the current team genuinely own the performance being presented?
- Comparability: Were the results produced with a similar strategy, fund size, and decision process?
Portfolio Construction
Model check: A $40 million fund targeting 20 companies, $1 million initial checks, and 50% reserves is internally consistent. Raising the company count to 30 without changing the fund reduces the average initial check to about $667,000.
- Return drivers: How many companies can materially affect the fund?
- Exit ownership: What stake must the fund retain after dilution?
- Reserve allocation: How is follow-on capital divided among companies?
- Down-round response: What happens when a portfolio company raises capital below its prior valuation?
- Loss tolerance: How many failures can the model absorb before it depends on an extreme outlier?
Operations, Economics, and Conflicts
- GP commitment: Who contributes it, and how is the capital funded?
- Team economics: How are carry, fees, and management-company ownership allocated?
- Related vehicles: How are SPVs, co-investments, and warehoused assets governed?
- Cross-fund conflicts: What process protects LPs when several vehicles could pursue the same opportunity?
- Institutional controls: Are administration, valuation, cash management, compliance, and reporting dependable?
Using Answers in the Memo
The LP memo should interpret the answers rather than simply reproduce them.
- Evidence-backed conclusions: Identify what the data, documents, and references support.
- Remaining assumptions: State which parts of the case still rely on judgment or incomplete information.
- Decision risks: Explain what could cause the institution to decline, reduce, or condition the commitment.
- Monitoring priorities: Carry the most important uncertainties into post-commitment oversight.
Related reading: emerging manager scorecard and emerging manager due diligence.
Insight Venture Management: fund documents controlled the fee answer
In 2023, the SEC charged Insight Venture Management with excess management fees and an undisclosed fee-calculation conflict. The settlement focused on whether calculations matched the governing limited partnership agreements.
The adviser also paid disgorgement and prejudgment interest.
The SEC said the amount had already been returned to affected funds.
The issue involved the calculation basis after investment impairment.
What it shows: LP questions should force narrative answers back to documents and calculations. Ask who computes fees, who reviews impairments, how offsets work, when the basis steps down, and how errors are identified and corrected.
Primary sources: SEC, Insight Venture Management fee case (2023). Public transaction evidence only; this is not represented as a Frontierspace investment or result.
Frequently Asked Questions
What should an institutional LP ask an emerging manager first?
Short answer: Begin with the investment thesis and the evidence behind it: why the firm should exist, how opportunities are sourced, and why the team can win and select them repeatedly.
How can LPs compare answers across managers?
Short answer: Use a consistent evidence matrix covering attribution, sourcing, selection, construction, operations, conflicts, and references, while preserving judgment about strategy-specific differences.
Related Reading
Emerging manager due diligence, Emerging manager scorecard, and Venture fund due diligence checklist.