What should LPs use to judge a venture manager before committing capital?

Harry Stebbings · Mar 17, 2023

What founders who have worked with an investor say is the measure that matters, not what the wider ecosystem says — and the gap between the two is itself informative

42:56 20VC: Why Growth Investors Ruined the Venture Market, Why Marketing in Venture Has No Substance, Why Follow-On Investing Can Damage Returns and The Mistakes VCs Made in the Last 18 Months with Ophelia Brown, Founder @ Blossom Capital

Miles Dieffenbach · Aug 4, 2025

Assessing whether a GP is a good picker requires more than track record — you need the reasoning behind each investment plus founder-side accounts of who believed in them before anyone else would take a call

Founders will tell you nobody else would pick up the phone, which reveals genuine early conviction versus following

26:07 20VC: Inside Carnegie Mellon's $4BN Endowment | Why 90% of LPs Shouldn't Invest in VC | The $140BN Problem with Multi-Stage Funds | The Hidden Math Behind DPI, TVPI, and Illiquidity with Miles Dieffenbach

Gokul Rajaram · Mar 16, 2026

LPs should diligence managers by talking directly to the founders of their last five investments and asking why they chose that firm and what other options they had

Most VC pitches look identical, so the only real signal is one level deeper — the founders' own account of why they picked the firm

Scope: especially seed and inception-stage founders

54:42 20VC: The 8 Moats of Enduring Software Companies: How to Analyse for Durability and Defensibility in a World of AI | Why Dropouts are "AI Maxing" the World & Remote Early-Stage Companies are Dying with Gokul Rajaram

Mitchell Green · Mar 28, 2025

LPs should diligence a manager by talking to the failed and 1x portfolio companies rather than the winners

The successful companies are the easy references; how a partner behaved in adversity is what reveals what they are actually like to work with

54:04 Probe managers holding of unlocked public stock at the 2021 peak

Harry Stebbings · Mar 28, 2025

An investor's reputation is made in the bad companies, not the good ones

54:32 Reputation is made in handling of bad companies not good ones

Harry Stebbings · Apr 10, 2025

Most of the British Business Bank's fund-of-funds portfolio is dire, those funds should not exist, and government money invested through them will be wasted

The test is whether a fund has a right to win — to find, pick, win and help companies — and the majority don't

17:19 Right to win across find pick win help is the correct manager test

Miles Dieffenbach · Aug 4, 2025

A manager who pitches how easy their strategy is and how assured their access and performance are is a red flag that ends the meeting.

Venture is one of the most competitive asset classes in the world and the return data shows how hard a 6x net fund is, so that hubris signals a lack of understanding.

21:33 Overconfident claims of easy guaranteed access are a disqualifying red flag

Miles Dieffenbach · Aug 4, 2025

GP-supplied references are the least useful references you will get; the valuable ones are off-list references sourced independently

GP-nominated referees are friends and godparents to their children who will just pat them on the back; venture's networked nature makes off-list references easy to find

26:45 Off list references not gp supplied ones reveal true quality

Miles Dieffenbach · Aug 4, 2025

Reference calls should hunt for interpersonal risk and partnership risk rather than views on strategy

Partnership dynamics are things a GP will never admit on a call — asked directly they'll say it's the best partnership ever — so you can only learn it from third parties

27:35 Reference calls should probe partnership risk not strategy views

Miles Dieffenbach · Aug 4, 2025

LPs should not re-up out of loyalty to a manager who has made them money in the past; Carnegie Mellon will not

They run an extreme performance-driven culture

50:21 Never re up out of loyalty judge on current performance

Harry Stebbings · Aug 4, 2025

Most LPs do not request trending revenue, gross profit and free cash flow on the underlying top NAV positions of the funds they underwrite

56:45 Most lps fail to request basic financial detail on nav positions

Miles Dieffenbach · Aug 4, 2025

The extreme right-tail outcome in a venture fund is impossible for an LP to underwrite, so diligence should focus on whether the underlying businesses are fundamentally sound and growing in value rather than on predicting valuations

Their own valuation of a company will look very different three to five years out; what they can assess is whether these will be real, durable businesses

57:18 Diligence should focus on business durability not forecasting valuations

Miles Dieffenbach · Aug 4, 2025

Deal attribution provided by GPs is systematically misleading and LPs should build their own partner attribution tables

When a partner retires or leaves, firms reassign that partner's home-run deals to someone still at the firm, giving new LPs the false impression that the people who led the winners are still there

79:02 Gp supplied deal attribution is misleading build your own

Miles Dieffenbach · Aug 4, 2025

Fund investing cannot be run off the data — it is a people-driven business and qualitative reference work should carry the most weight

He was initially drawn to the data from a first-principles perspective but learned you can over-index on it; talking to founders about why they chose a partner and how that relationship worked reveals what the data can't

80:22 Qualitative references outweigh quantitative data analysis

Anjney Midha · Apr 14, 2026

There is a huge misallocation of public capital into venture managers who fail to capture value in frontier AI, and the public will be angry when the companies they backed don't exist

Almost no venture firms were in Anthropic's Series C, and that pattern repeats again and again

53:38 Public capital is misallocated to managers who miss the frontier

Anjney Midha · Apr 14, 2026

LPs should stop outsourcing their own diligence work, educate themselves on what's actually happening technically, and back managers with defensible advantage on the bottlenecks

Understanding what's going on is the core job of a capital allocator, and the bottlenecks are where value accrues

54:27 Lps must do their own technical diligence on the bottlenecks

Tomasz Tunguz · Apr 21, 2023

LP diligence has shifted to scrutinising a fund's business model and portfolio construction assumptions, so managers now need an explicit business model in their deck

He received a consistently high volume of LP questions about seat counts, number of A rounds, fatality rates and multiples, which did not matter as much through the eleven-to-twelve-year bull market; the change is a result of the increased cost of capital

16:01 Lp diligence has shifted to scrutinizing fund business model and portfolio construction assumptions