100 Days, 100+ Deals: Lessons from Launching GP-LP Match

A letter to LPs and GPs

Welcome back and happy Friday!

It’s been 100 days since I launched GP-LP Match - a platform where GPs can share deals and LPs can filter for what they want to see in their inbox. In that time, over 100 deals have come through, and I’ve spoken to hundreds of GPs and LPs.

This made my day today, so I figured I’d share it with you!

If you’re curious about what trends are emerging and what most LPs are actually looking for, this article is for you.

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Announcements (article continued below):

1. Latest article: 5 common LP investment biases - on the most common psychological traps that I consistently see

2. Ads: I am considering running ads on here, if you’re interested please reach out

3. LPs on GP-LP Match have now gotten 100+ deals for free and the platform is at 1,600+ verified LPs. If you’re an LP or GP join here in under a minute.

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Here are my top 6 takeaways so far:

1. Development is hardest to raise for - but that also might be the opportunity

   • Most LPs are avoiding ground-up development right now

     • Timelines are long, risks are high, and near-term cash flow is hard to justify against 4% treasuries (more on this topic here)

   • GPs often have to offer stronger economics to attract LPs right now, which directionally means that GP economics shrink (sometimes to an extreme that ultimately makes the deal not worth pursuing)

     • In terms of stronger terms to attract LPs, think higher prefs, more favorable & simpler waterfalls, or reduced fees - essentially an improved alignment of interests pillar

   • Ironically, the lack of capital is what makes this space interesting as well … when nobody is looking at something, it’s a good time to get familiar and start educating yourself

2. “Market terms” matter the moment you leave your inner circle

   • I really can’t stress this one enough - friends and family don’t ask about promotes or coinvest and your deal with them is most likely not indicative of market

   • As soon as you begin to expand your circle to LPs that you don’t know, everything changes

     • Your pref, your fees, your GP commitment (aka the alignment of interests pillar again) all get scrutinized

   • For GPs:

     • Be at or better than market if you want fundraising to be easier

     • Fundraising takes time and resources, so I think a real question to think about is whether the marginal probabilistic promote (with less favorable terms) is worth the additional time and resources it takes you to raise the cash (and the risk of losing your deposit if you don’t)

     • Needless to say, you’re welcome (as GP) to charge whatever you’d like - it’s a free market. My point is simply that if a priority of yours is to spend less time fundraising the best thing you can probably do is have more reasonable terms

   • For LPs:

     • Economics are your probably among your first filters - learn how to spot what's fair and what’s not - you can certainly take my word for it, but I would highly recommend learning on your own and developing an eye for what looks right and what doesn’t

3. Most decks are weak - and it’s costing GPs real money

   • I’ve reviewed several hundreds decks in the past few months and more before, and the uncomfortable truth is that most decks are between terrible and subpar. Not because of typos - but because of lack of clarity

   • If you're industry veteran GP, people won't care. If you're not, you're making a massive mistake and likely losing significant capital by not making your thesis clear (most LPs will not tell you why they’re passing).

   • For LPs:

     • As an LP, the only way to understand what's good and what's bad is see a lot of it and be patient.

     • I’d also recommend reading Minimum Viable Deck - there’s a level of simple knowledge that you need in order to logically investment in something, and if you don’t have it you’re essentially gambling while thinking you’re making an investment

4. Track records are often blurry - sometimes misleading

   • Many GPs say they “worked on” or were “involved in” a deal, but their actual roles are unclear. AUMs are misstated all the time, and the list goes on and on.

   • For GPs:

     • Transparency builds trust, just be honest and include footnotes.. the last thing you want is negative surprises

     • LPs (as any human) don’t like surprises … the best way to manage expectations is to be up front in the beginning

   • For LPs:

     • Dig into who actually made the decisions and what role they played

     • You can also read up on the topic here

5. LPs strongly prefer single-asset deals over funds

   • This has been impeccably clear on the platform, and while it’s not a surprise I have been amazed at how true this is even for large GPs raising for a fund with a longer track record

   • A part of me wonders whether this is part of a larger trend within retail LPs - people want to see what they’re investing in when it comes to alternatives and many have recently (and I expect the trend to continue) are getting educated on the space and are directionally less likely to give their capital to blind or semi-blind funds

   • A lot more on this topic in Are funds safer than single asset deals?

As always, I hope this is helpful and I look forward to your feedback!

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When you’re ready, I could help you in 3 ways - simply reply to this email if one is of interest:

• Limited Partners:

  • GP-LP Match - a simple way for you to get more deal-flow that matches you precise LP parameters. You can join here in under a minute. I’m behind on verification for LPs so please ping me privately to expedite once you sign up.

  • Potential positions - you’re considering investing and need an independent opinion

  • Existing positions - there’s a lack of communication, you’re concerned about fraud, or perhaps you got a capital call request and you’re not sure how to proceed. I have also helped LPs with a “post-mortem” analysis on deals that didn’t work out - it’s important to learn these lessons as opposed to just blaming the GP.

  • LP Course - review 4 separate memos in 4 weeks together with me and other LPs to learn how to find good LP investments.

  • LP Topics Seminar - an ongoing biweekly 1 hour meeting with other LPs where we'll go over investment decks, capital calls, distressed situations, and modeling. This is meant to provide a deeper look into existing LP investments. Please reply to this email if you’re interested.

  • LP Community - free 2,800+ member LP Investor community on Twitter

  • Find GPs in unique asset classes/geographies on my monthly intro post (see LinkedIn’s post as well for more)

• General Partners:

  • Deck review - I’ll look over your marketing materials from the perspective of an LP and provide slide by slide commentary to improve your pitch

  • Investment review - I’ll provide independent feedback on an opportunity you’re pursuing

  • Capital call advisory - you suspect that you’ll need to make a capital call, but aren’t sure how to proceed or communicate the message.

  • Other - anything from waterfall/fee advisory to disagreements between co-GPs on the proper path given a set of circumstances

• General Consulting: modeling, strategic advisory, underwriting training, etc.

If you’d like to speak on the phone, you can reach me at aleksey@centriocapital.com.