How to read a prior-firm track record, including SPV and angel deals

Evaluating managers
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Read a prior-firm record with three questions in mind: may the manager present it, can they prove their part in it, and is it labeled for what it is. Many emerging managers built their experience at another firm, as angels or through SPVs. That experience can be real evidence of judgment. It can also be a firm's results presented as one person's, or a selection of winners presented as a portfolio. The difference is usually visible in the documentation.

Firm results and partner contribution are different things

A fund's net return belongs to the fund, which belongs to the firm and its limited partners. A partner's contribution to that return is a separate question. A manager who worked on three of a prior fund's best investments did not produce that fund's IRR, and a presentation that implies otherwise deserves a closer look.

Portability: four things to check

The guidance Colibrí Strategies gives managers describes four gates a prior record has to pass before it can be used. They make a useful checklist from the LP's side.

  • Permission. Written consent from the former employer covering what may be used, in what form and with whom. Deal files and performance records typically belong to the former firm.
  • Documentation. Deal-level records showing date, entry stage, ownership, the manager's role, the decision made and the outcome, in a form your team can check.
  • Attribution. A defensible statement of the manager's part in each decision, ideally corroborated by someone who was in the room.
  • Disclosure. A presentation that states what the record is, what it excludes, what is realized and what is marked, and that the results were achieved at another firm.

For advisers subject to United States adviser marketing rules, predecessor performance may appear in an advertisement only when specific conditions are met. Among them: the people primarily responsible for the prior results must manage accounts at the new adviser, the prior accounts must be sufficiently similar, and all substantially similar accounts must be included unless the exclusion does not result in materially higher performance. That last condition is the one that rules out showing only the deals that worked. The rule text is linked below.

Reading SPV and angel deal summaries

Deal-level summaries are common for managers without a fund. Read them for their method, not just their headline.

  • Is the method consistent? If returns are weighted by check size, every deal should be weighted the same way. A summary that weights the helpful deals and averages the others is a red flag.
  • What is excluded? Every excluded position should be named. A deal without a recorded check size cannot be weighted honestly, and its exclusion should be stated.
  • What is realized? A realized-only summary leaves out positions that still carry a value. Ask what the unrealized positions look like.
  • Is it gross or net? Deal-level figures are almost always gross. They do not include the fees, expenses and carried interest a fund would charge, and there is no accepted formula to convert them. Our guide on gross versus net returns explains why.

Questions to ask

  • Do you have written permission from your former firm to present these deals?
  • What was your role in each one: sourcing, leading, sitting on the board, or participating?
  • Who else was involved in each decision, and may I speak with them?
  • Which deals from that period are not shown here?
  • How is this summary calculated, and is the same method used for every deal?

Employer restrictions are worth raising early

Confidentiality obligations to a former employer can limit what a manager can share and what former colleagues can confirm. That is normal and not a sign of a problem. It does mean you should ask early what can be verified and through whom, so a reference call is not the first time you discover a restriction.

Team continuity

A record predicts more when the people who made the decisions are the people who will make the next ones. If the record belongs to a partner who has since left, or to a team that has changed, it describes the past more than the fund in front of you. Ask who in the current team was responsible for which part of the record.

What a prior record does not prove

A documented, permitted, well-labeled prior record is good evidence of individual judgment in a prior setting. It does not establish how the manager will build and run a fund, and it is not fund performance. Read it alongside the plan for the new fund and the people who will carry it out.

Related questions

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Sources

This page describes market practice and published rules for context. It is not legal advice; questions about a specific record belong with qualified counsel.