Before you wire money into a venture fund, know this: you can't take it back. There is no sell button, and there is no firing the manager. For about a decade, you are partners.
That changes what you should look for. Below is the opening of Chapter 13 of my new book, LP: The Insider's Guide to Investing in Venture Capital Funds, out November 4. It starts with one allocator's dinner-table test.
(A limited partner, or LP, is the investor in a fund. A general partner, or GP, is the person who runs it.)
Caprock Managing Director of Private Investments Chris Schelling has spent over two decades allocating capital to venture funds. When evaluating a manager, he shares a meal with them. Does the prospect yell at the waiter? Is he curious, generous, self-aware? If something feels off at dinner, it will feel a lot worse three years into a fund when a portfolio company is in trouble.
Two decades in. He means it.
When you commit to a VC fund, you're not buying a product or even making an investment in the normal sense. You're choosing a business partner for the next decade, with no escape hatch if things go sideways.
Ten years. Most marriages don't last that long. Your college roommate? You lived with them for maybe four years, and you've probably lost touch by now. But when you wire money into a venture fund, you're locked in. No refunds. No firing the manager if they turn out to be a nightmare. You're along for the ride until the fund liquidates, which often takes twelve years or more.
So the question isn't just about track records, it's about trust, character, and whether you can weather a decade of surprises together.
When the Marriage Starts
The relationship matters more than the pitch deck.
Benedikt Langer, who bridges LPs and emerging managers through his newsletter Embracing Emergence, makes the point clearly: the track record matters but it only tells you what happened. What LPs really need to know is whether the person can be trusted to be honest when things go sideways.
Numbers tell you what happened but not what will happen when the market crashes, when a portfolio company implodes, when the GP’s cofounder quits. And those things will happen. Every fund has a moment when the thesis meets reality and neither comes out clean.
You need to trust that the person managing your capital won’t go quiet when it gets scary.
The rest of the chapter follows two fund managers who approach the same investor in opposite ways. One stays in touch for two years and earns her trust before asking for a dollar. The other asks in the first meeting and pushes for an answer by the end of the month.
LP: The Insider's Guide to Investing in Venture Capital Funds by Brian Bell, with a foreword by David Meerman Scott, arrives November 4 in paperback, hardcover and ebook. Get your copy at thelpbook.com.