General Partners (GPs) prioritize speed and certainty when allocating co-investment opportunities. LPs who build a reputation for fast, reliable decision-making can punch far above their weight, gaining access to deals disproportionate to their fund commitment size.

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.

For LPs, the primary benefit of pre-fund co-investments with emerging managers isn't just financial returns. It's a critical diligence tool to observe intangible qualities, such as a sponsor's discipline to abandon a flawed deal, which strongly correlates with long-term success.

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.

To ensure robust decision-making, Eclipse requires that if a partner feels strongly against a potential investment, they must join the deal team alongside the champions. This forces a direct confrontation of the risks and ensures that by the time an investment is made, all major concerns have been addressed.

Vested's investment model gains an edge from proprietary data on employee sentiment and behavior. Signals like unsolicited negative comments, willingness to counter on price, or selling more shares than necessary provide unique insights into a company's health that traditional financial analysis lacks, forming a data moat.

The best private equity talent often leaves large firms encumbered by non-competes, forcing them to operate as independent, deal-by-deal sponsors. LPs who engage at this stage gain access to proven investors years before they have a marketable track record.

Sequoia's internal data shows consensus is irrelevant to investment success. A deal with strong advocates (voting '9') and strong detractors (voting '1') is preferable to one where everyone is mildly positive (a '6'). The presence of passionate conviction, even amid dissent, is the critical signal for pursuing outlier returns.

Founders Fund's perk allowing employees to co-invest personally is a clever mechanism to test true conviction. If an investor sponsoring a deal is unwilling to put their own money in, it raises a serious question about their belief in the investment's potential, forcing them to justify why it's a better allocation for LPs than their own capital.