Venture fund due diligence: questions for LPs

Venture fund due diligence connects a manager’s story to evidence about how the fund will operate. For a prospective limited partner, a useful review covers the strategy, people, decision process, economics, and reporting. Start with questions that produce specific documents or examples, then investigate the gaps between the answers.

What will the fund actually do?

Ask the manager to describe the intended company stage, geography, sectors, check sizes, ownership targets, and approach to follow-on investment. Then ask how those choices fit together. A strategy that sounds broad in a pitch should become concrete in a portfolio construction model and a description of the opportunity set.

Useful evidence includes a sample investment memo, the assumptions behind the model, and examples of companies the manager would decline. Ask what would cause the strategy to change and how LPs would learn about it.

Who makes decisions, and on what evidence?

Identify who sources deals, conducts diligence, approves investments, and handles conflicts. Ask how the manager distinguishes a team member’s prior experience from the fund’s own track record. References and attributable examples can help you understand each person’s actual role.

If a manager uses AI research or a community network, ask to see the workflow. Which sources support the analysis? How are errors challenged? What remains a human judgment? Who has final authority? A tool name or a large network is less informative than an example showing how an investment decision was reached.

How do the economics and cash flows work?

• Commitments and calls: When can capital be called, and what obligations does an LP accept?
• Fees and expenses: What does the management fee cover, which expenses are charged separately, and how do those terms change over time?
• Distributions: How are capital and profits distributed? Ask for an example using the proposed fund documents.
• Alignment: What capital does the manager commit, and how are incentives shared with the people sourcing and managing investments?
• Liquidity: What restrictions apply to transfers or withdrawals, and what fund extensions are possible?

Compare the presentation with the governing documents. If an answer relies on a defined term, request the definition and an example. Have the relevant advisers review the terms for your circumstances before making a commitment.

What will you be able to see after investing?

Request a sample LP report. Ask how the manager values private holdings, identifies realized versus unrealized results, reports fees and expenses, and explains material changes. Clarify the reporting schedule and the process for responding to LP questions.

Also understand the operational responsibilities: fund administration, accounting, custody where applicable, access controls, and business continuity. The objective is to identify who does each job and what evidence supports the process, rather than collect reassuring labels.

Use a framework, then adapt it

The ILPA due diligence questionnaire provides a broad private markets framework. Select and adapt questions to the manager’s venture strategy and size. SVB’s guide to a fund data room and DDQ is another reference for organizing the review.

Keep a short log of each important question, the supporting document, and what remains unresolved. A completed questionnaire is an input to judgment; it does not eliminate venture investment risk.

Questions to bring to ADIN

ADIN’s LP page describes the fund and the role of AI research and network participation. Ask how research reaches an investment decision, how non-binding community input is considered, and how the GPs exercise final authority. Review the applicable fund materials for the actual offering terms, eligibility, and risks.