Operational due diligence for emerging venture managers, what to check

Evaluating managers
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Operational due diligence asks how the fund works as a business, separately from whether the investment thesis is good. For an emerging manager, the useful question is not whether every institutional process is already in place. It is whether the people, providers and controls the fund needs exist today, and whether the manager is honest about what is still being built.

Why operations deserve their own review

A plausible strategy and a capable operating setup are related but distinct. A strong investment case still needs an organization that can handle money and information, report accurately and respond when something goes wrong. With an emerging manager, the operating side is often thinner and newer, which makes it worth examining directly rather than assuming.

The foundations to check

Ask for evidence of what is operating today. Label anything planned as planned.

  • Service providers. A current list naming the fund administrator, the auditor, legal counsel and, where applicable, a custodian. These should be engaged providers, not names the manager intends to approach.
  • Technology and systems. The portfolio management platform, cap table system and LP reporting portal actually in use.
  • Insurance. A summary of coverage types and amounts in place, such as errors and omissions, cyber liability and directors and officers coverage.
  • Compliance responsibilities. Who is responsible for compliance, which policies exist and how they are monitored.
  • Cybersecurity and data protection. How investor and portfolio information is stored, who has access and how access is controlled.
  • Business continuity. What happens if a key system fails or a key person is unavailable.
  • Reporting. The planned reporting cadence and content, and who prepares it. Confirm what the fund documents and any side letters require.

A policy, a person and evidence are three different things

A compliance manual is a document. Whether anyone follows it is a separate question. For each area that matters to you, check three things: the written policy, the person responsible for it, and evidence that the practice actually operates. A useful exercise is to pick one process, such as approving a capital call or handling a valuation, and follow it from the policy to the person who carries it out.

Questions to ask

  • Which of your service providers are engaged and onboarded today?
  • Who prepares your quarterly reports, and who reviews them before they go out?
  • Walk me through how a capital call is approved and processed.
  • What is still being built, and when do you expect it to be in place?
  • Who would handle urgent responsibilities if you were unavailable for a month?

Reading gaps fairly

An emerging manager will often have some arrangements still in progress. A missing item may be a condition of proceeding for your institution, or it may be acceptable with a clear plan and timeline. The signal to watch is how the manager describes the gap. A manager who names what is unfinished, explains the plan and gives a realistic date is showing you how they will report to you later. A manager whose answers do not match the documents deserves a closer look.

There is also no universal threshold for when an audit or a particular control becomes required. Check the requirement against the fund documents, applicable rules and your own policies rather than assuming a standard rule applies.

How operations connect to the investment case

Operational weaknesses rarely show up in the pitch, but they shape the experience of being an investor in the fund for a decade: the accuracy of reports, the handling of conflicts, the response to a write-down. If you can see how the fund runs today, you have a better basis for judging how it will run when something goes wrong.

Related questions

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Sources

This page reframes for allocators the operational guidance Colibrí Strategies publishes for managers in Blueprint Intelligence. Requirements differ by institution; confirm the ones that apply to your program.