How Questions Lead to Evidence
Diligence questions become useful when they lead to evidence an LP can inspect. ILPA's DDQ provides a base. Deal attribution, sourcing data, references and written policies show what sits behind claims about track record, access and process.
A manager's account is easier to assess when a document, calculation, reference or concrete example supports each major claim. This gives the LP less work translating general answers into an investment decision.
A typical private fund may run 8 to 12 years. The manager's skill and the firm's ability to operate through that period are both part of the investment case.
A manager may describe a previous firm's success when asked about its track record. Without a link between individual people and decisions, that history says little about what the new fund can repeat.
Investment Skill and the Firm Behind It
A team can have investment skill yet lack the systems to manage capital for large LPs. A polished operating setup can also conceal a weak strategy. The two parts of the case rely on different evidence.
Questions That Produce Evidence
| Question | Evidence |
|---|---|
| Which prior deals did each partner lead? | Round-by-round attribution and founder references |
| Why is this fund the right size? | Company count, cheque size, ownership, reserves, and deal pace |
| Why do founders choose you? | Win-loss data and references from deals won and lost |
| How will decisions work? | Investment committee rules, partner economics, and conflict process |
| How will LP reporting work? | Administrator, sample report, valuation policy, and calendar |
What Losses Reveal
Winning deals are easy to present. A failed company reveals how the manager responds when the original case breaks. Decisions from the first warning through the final reserve choice show how that response developed.
A regretted pass can reveal an error in selection. The information available at the time helps distinguish a flawed decision from an outcome the team could not reasonably foresee.
The Firm Behind the Fund
A talented investor can still build a fragile firm. Management-company ownership and carry show who has an economic stake. Responsibility for reporting and portfolio work reveals what would happen if a key partner left.
A small firm can operate differently from a large one. Clear ownership of key tasks and a budget that lasts through the investment period make that model more dependable.
What the Successor Fund Might Change
A successor fund may grow in size and staff while preserving its strategy and decision leadership. Agreed milestones give the LP a basis for judging whether that growth supports a larger re-up.
A key departure or an increase in fund size without supporting evidence can weaken the case. Capacity and co-investment policies also shape the relationship as it grows.
Good questions expose both the manager's advantage and its gaps. They also give the LP a monitoring plan before the commitment is signed.
A small set of questions often carries most of the diligence value. Their weight depends on the LP's investment plan and the evidence available.
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
NVCA reported that the 10 largest US venture funds captured 32.9% of traditional VC fundraising in 2025. In that concentrated market, a repeatable route to strong deals is a central part of an emerging manager's case.
A strategy's boundaries explain which opportunities belong and which do not. They also help show whether the proposed fund size fits, and what market change could make the approach stop working.
Manager Advantage and Sourcing
Removing 487 megadeals from 2025 leaves roughly 14,865 deals totaling about $105 billion, or $7.1 million on average. An emerging manager's advantage may operate in only a narrow segment of that broad market.
A deal seen before comparable managers, and the founder's reason for choosing the fund, can reveal a sourcing advantage. The share of investments from each route shows its wider role. A raw inbox count says little about which introductions became investments.
Attribution and Track Record
Cambridge Associates found that funds settled into their ultimate quartile at roughly 5.8 to 6.8 years. Before then, deal-level attribution and valuation review carry particular weight.
A deal's attribution record connects the people involved with the investment's progress:
- The people who sourced and assessed the opportunity explain how it entered the fund.
- The person who won the allocation may differ from the person who first found the company.
- Work after closing shows who supported the company through later challenges.
- Cash proceeds and unrealized value carry different degrees of certainty.
- Results from the current team using a comparable strategy are more relevant to the proposed fund.
Fund size and the decision process at the time also affect that comparison.
Portfolio Plan
A $100 million fund can plan for 5 companies, $10 million first cheques and 50% reserves. Those amounts fit together. More companies in the same fund would require smaller cheques or fewer reserves. The cheques may then fall below the intended institutional minimum.
Retained ownership determines how many companies can materially affect the fund. Follow-on choices and down-round terms can change those stakes. The model's tolerance for failures reveals how far the target depends on an extreme outlier.
Operations, Economics and Conflicts
The partners funding the GP commitment bear its risk. Funding sources, carry and ownership of the management company show how that exposure compares with the rewards available to each decision-maker.
Conflicts become clearer through a specific example. If one company could enter the main fund, an SPV or a warehoused vehicle, who decides where it goes? The allocation policy defines how those competing interests are handled.
The reporting and cash workflow shows who does the work. An administrator's or auditor's name tells less than a clear account of each provider's responsibilities.
Using Answers in the Memo
The LP memo gives meaning to the answers by connecting the most relevant evidence with the decision.
- Data, documents and references support some parts of the investment case directly.
- Other parts rely on judgment or information that is still incomplete.
- Decision risks: Specific weaknesses can support declining, reducing or placing conditions on a commitment.
- Monitoring priorities: Unanswered questions remain part of the review after commitment.
An emerging manager scorecard keeps that evidence consistent across candidates. The broader due-diligence process then carries the findings into the commitment decision.
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 paid more than a civil penalty. It also returned money through disgorgement and paid interest for the period before judgment.
The SEC noted that the relevant amount had already been returned to the affected funds.
The dispute turned on the calculation basis used after an investment impairment; the headline fee rate did not resolve it.
The case shows how documents and calculations can qualify a narrative answer. Responsibility for fee calculations and impairment reviews affects the result. Offsets, changes in the fee basis and the process for correcting errors explain how the terms work in practice.
Primary source: SEC, Insight Venture Management fee case (2023). The Insight Venture Management case relies on public court records and makes no claim about Frontierspace performance.
Frequently Asked Questions
What should an institutional LP ask an emerging manager first?
The firm's reason for existing, its sourcing routes and the team's ability to win and select deals form the core investment case.
How can LPs compare answers across managers?
A consistent checklist makes managers easier to compare. Deal attribution and sourcing explain the past record; fund plans, operations, conflicts and references give context to the new proposal. Differences between strategies still affect the interpretation.