Backing independent sponsors on a deal-by-deal basis is more than an investment strategy; it is an extended due diligence process. This approach provides deep, real-time insights into a manager's problem-solving skills under pressure, offering transparency that is impossible to achieve before a Fund I commitment.

Effective due diligence isn't a checklist, but the collection of many small data points—revenue, team retention, customer love, CVC interest. A strong investment is a "beam" where all points align positively. Any misalignment creates doubt and likely signals a "no," adhering to the "if it's not a hell yes, it's a no" rule.

When entering the unfamiliar small-cap space, Julian Robertson tapped his own investor base for ideas. This unconventional approach turned Limited Partners into a valuable, proprietary deal flow network, demonstrating a creative way to leverage existing relationships for new opportunities.

When a credible, external VC leads a follow-on round at what seems like a high price, it provides a strong signal of validation. This should prompt existing investors to overcome their anchoring bias and increase their own investment.

While multi-stage funds offer deep pockets, securing a new lead investor for later rounds is often strategically better. It provides external validation of the company's valuation, brings fresh perspectives to the board, and adds another powerful, committed firm to the cap table, mitigating signaling risk from the inside investor.

When assessing a co-investment, LPs should request data on employee participation. Deals where the PE firm's own staff invest their personal capital tend to be the better-performing ones, serving as a powerful, internal signal of conviction that goes beyond the official pitch.

The executive you're talking to may not be the sole decision-maker in an acquisition. Requesting the capitalization table early in the process is a key diligence step. It uncovers the full ownership structure, helping you identify and influence all the key stakeholders needed to approve the deal.

When founders invest their own money, it signals an unparalleled level of commitment and belief. This act serves as a powerful 'magnetic pull,' de-risking the opportunity in the eyes of external investors and making them significantly more likely to commit their own capital.

When evaluating follow-on opportunities, the conventional wisdom is to look for a Tier 1 VC leading the round. However, a specialized fund with deep industry expertise leading a Series A can be an equally powerful, or even stronger, positive signal for a company's potential and market fit.