How to explain a newer manager to an investment committee

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Lead with the decision and the reasoning, then the risks and how you tested them. Committees are rarely worried that a newer manager is new. They are worried about being unable to explain the decision later if it goes badly. A recommendation that shows what you checked, what you could not check and why you are comfortable with the remaining uncertainty is far easier to defend than one that leans on a single impressive number.

A structure that works

  1. The recommendation. The commitment amount, the fund and the role it plays in the program.
  2. Why this manager. The specific edge, supported by evidence: sourcing examples, references, prior decisions.
  3. Why the plan holds together. Fund size, company count, ownership, reserves and team capacity, tested against each other rather than taken from the deck.
  4. What the record does and does not show. Prior-firm or angel results, presented as gross deal-level figures where that is what they are, with attribution reviewed.
  5. Terms and governance. Fees, GP commitment, key-person terms, LPAC and reporting.
  6. Risks and mitigants. Named plainly, with what you did to test each one.
  7. How you will monitor it. What you will look at each quarter and what would cause concern.

Framing the evidence on emerging managers

If the committee asks whether emerging managers are riskier, it helps to separate the category from the manager. Colibrí Institute's research across 2,471 U.S. venture funds found a higher mean IRR for emerging managers under its main definition. That supports evaluating them rather than excluding them. It does not justify any particular commitment. See Should LPs allocate to emerging venture managers? for the findings and their limits.

Mistakes that weaken a recommendation

  • Presenting an early interim mark as evidence of skill.
  • Comparing gross deal results with net fund benchmarks.
  • Leaving out a known weakness that the committee later discovers.
  • Recommending a commitment size that does not match the program's plan.

Related questions

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