LP Series: Our Views on Team


Fund of Funds Investing – Our View


Venture capitalists are, by their nature, builders. They are also (usually) a mix of former entrepreneurs and transactional professionals who are optimistic about the future and ravenous for learning. They’re so certain of an opportunity that they are willing to commit capital (of others and their own) and at least a decade of their life in pursuit of that vision. This mix of enthusiasm and energy makes them interesting company.

But that, of course, is not enough to move forward when committing capital. We take a detailed and clear-eyed look at many aspects of GP (General Partnership as we deliberate next steps.

Team Constitution

Four primary considerations underpin our due diligence evaluation of the GP (General Partner) team members and architecture:

  • Longevity of the Relationship

A team can be composed of greatly accomplished individuals, but if they haven’t worked together for a significant time, we are out. New team implosions are not uncommon and when they happen, they can be catastrophic. So no, we are just not going to take that risk. On a related note, we do not invest in first funds. The team, good as it may be, does not yet have the operating history that would enable itto build out the reliable infrastructure (including team, value-add, investment and post-investment processes, back-office systems, reporting, syndications, and market presence) that will make it successful. 

  • Economic Equality

On occasion, one GP’s share of the carried interest is larger than that of other GPs. At the outset, the other GP team members might shrug and believe that if they signed up for this position of lesser gain then the LPs should not be concerned. Their intent is to rectify the imbalance in the next fund after the Partner is “proven”… maybe. However, this inequity will inevitably become a problem. Carried interest imbalances are too often rooted in a founding member’s belief that they bring something unique to the partnership table that warrants their enhanced position. But we know from experience that, for a fund to be successful, all members must bring a unique skill set to the endeavor and commit and win as a unified equitable team. Several skills are required to sustain a great GP, and no one skill is more important than another. Partnerships are hard enough; starting with these kinds of imbalance issues will almost certainly lead to problems downstream.

  • Skills Array

We often see funds started by a small team (2 or 3) of ex-entrepreneurs who have done well in previous pursuits. This team has surrounded itself with itself and has doubled or tripled up on the same business building skill set. This can be overcome as the team is augmented; if done correctly, a diversity of skills and backgrounds should naturally also result in a team that is diverse in all aspects.

The issue of skills diversity is that, while the team members may all be professional businesspeople, they are learning other key skill sets on the fly. It will take substantial time to establish a system for investing, build an always elevating post-investment value-add, build a quality syndication network and develop exit skills. Many well-known, successful business builders and executives have managed funds but delivered lackluster results. Being a great entrepreneur is useful as part of the overall skills array — but being a great investor is entirely different.

We appreciate teams with clear roles. While overlap is necessary, the team must be able to determine who will cover deal flow construction, analysis, back-office support, transactions, post-investment support and value-add, M&A, fundraising and LP relations. A skills matrix held up against the team will quickly identify gaps should any exist.

  • Decisions

We are also very curious how decisions are made within the team. Do investment decisions require unanimous support? Majority only? What about follow-on investments, the decision to engage a roll-up strategy or dropping support altogether? How is all this accomplished? When we see a written, defined process we understand that this team has either had sufficient forethought or has implemented a process as a result of previous battles. If no process exists, we are concerned.

Team Fit 

Assuming the above criteria are met, our effort turns to understanding how this team is uniquely qualified for portfolio construction and management within the market identified by the investment thesis. We examine depth and breadth of domain expertise, robustness of their networks and vision for the industry trends that are creating investment opportunity. Are lines of responsibility and related authority clear? Is the career path clear for Analysts and Principals seeking to one day make Partner or General Partner? How are the GPs supporting that development? How is carry allocated?

Team Succession

Once a fund has made it to the 10-year mark, some elevation and succession of identified talent should be evident. We look to see if analysts/associates have grown and developed into a much-elevated role or have become a General Partner. Such forward planning reassures LPs that the business will successfully transcend the original Partners. This is particularly important if original GPs are advanced in years. We do not want to see retiring GPs suddenly staging their replacement without appropriate transitions.

Our search for solid teams extends to meeting Senior Associates and Analysts – their attitude and disposition speak significantly about team dynamics. It is useful to meet them both individually and in the same room as the Partners and to have a discussion regarding the future leadership plan. There is currently no example of a multi-generational fund in Canada. This takes years of planning and requires GPs who can – without ego or greed – gradually pass authority to rising talent.

Team Sustainability

Just as a GP must evaluate how long their investee will be able to hold a market advantage over competitors, a prospective LP considers how long the GP will be able to sustain their unique position in the market. We have GP teams who have won deals over much larger-name VC firms at lesser valuations simply because their value-add was unmatched, proven, established and worth more than other “better” offers. In this regard, GP teams are improving. Value-add used to be a matter of lip service, but now it is the spear tip of survival. And yet we still have meetings with teams who, with a straight face, state that they “will do the same thing in the next fund as they did in the last.” This is typical behavior of a team that will not deliver upper-quartile performance.

Improving in every capacity — team, portfolio selection, post-investment processes and back-office systems — is crucial. Every fund must be better than the last just to stay even. Robust markets reward an outsized portion of the VC community in a high-tide-raises-all-boats phase of market euphoria. When the tide turns, those teams who have done the work of fund-over-fund team improvements in all areas will prosper through a down market.

Team Culture

We once walked into the Toronto office of a fund manager, and you could literally feel the negative doldrum vibe. We asked to see their performance metrics, and there was no second meeting. Most high performing GP teams have a great culture. The venture capital community is well-stocked with egos and big personalities. As a result, some teams have difficulty promoting from within as they cannot fathom the prospect that anyone else could adequately replace their ability. Delegation and share of control are anathema. Then there are teams that not only foster a clear path for the outperforming talent but open the carried interest beyond the GP. This “thrive and win” together environment tends to become reflected in Net IRR.


We are always looking for teams that have a vision of what they are building and that can clearly identify how every aspect of their fund business is improving on a fund-over-fund basis. The GP must demonstrably have learned from any mistakes and show what has been done to improve their internal processes in order to create a better outcome in the future. We want to establish a relationship over time and learn how the team is advancing in every area of their fund business. The team that breaks down their business into each functional area, and outlines and measures the performance, can only improve as they build an outperforming venture fund family.

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Warren Bergen began his work at AVAC Ltd. in 2011 and was promoted to President of the organization in 2015. He established AVAC’s BridgeCo Capital Fund I with Mark Carlson in 2017. Warren is a member or observer member of the Limited Partner Advisory Committee for several venture capital funds. Warren is a Partner of Accelerate Fund I, L.P., an early-stage technology fund and serves on several boards including Alberta Machine Intelligence Institute(AMII). Mark Carlson began his work at AVAC Ltd. in 2009 and was promoted to Managing Director of the organization in 2015. He previously worked with several funds and co-founded BridgeCo Capital with Warren Bergen in 2017. Mark is a Partner in Accelerate Fund I, L.P. and is a member or observer member of the Limited Partner Advisory Committee for several venture capital funds. More broadly, Mark has managed the full cycle of venture transactions including serving as a Director on numerous boards and has completed 50 marathons. About AVAC Our team brings venture capital and entrepreneurial experience valued by our investment partners and portfolio companies. Collectively, we are entrepreneurs, investors, science and technology experts, company builders, and business drivers. Our management team is fully immersed in the entrepreneurial and venture profession across all technology domains. AVAC is invested venture capital funds managed by Inovia Capital, Finistere Ventures, Georgian Partners, Yaletown Partners Inc.