∞Direct answer
Direct answer
Test each deal against your written mandate before deep work. Check the stage, place, sector, cheque size, ownership, and close overlap. Write down each exception. Name the person who can approve it. ILPA says fund strategy should be clear. It says deals should match it. [2]
Name the drift early
Drift often starts with one good-looking deal. The team then bends one rule.
That may make sense. But write down the change.
An investment thesis says what types of firms you seek. A mandate sets the limits. Check both before you call a deal a fit.
The SEC gives examples of set limits. They include concentration, credit quality, and maturity. [1]
- Stage: the round, company age, and proof required.
- Place: the countries or regions you can support.
- Sector: the problems, customers, or industries in scope.
- Cheque and ownership: the normal capital range and stake sought.
- Portfolio: known overlap, conflict, and concentration limits.
- Process: the person who can approve an exception.
Use one card for each deal
Use one short fit card before deep checks. Put facts on it. Do not put gut feel on it.
Mark each field fit, not fit, unknown, or exception. Give each unknown an owner and date.
Write down goals, limits, and who owns each step. CFA Institute says this can make roles clear. [4]
A good firm can still be out of scope.
- Source: the deck, data room, public record, or founder statement.
- Check date: when the team reviewed the fact.
- Fit result: fit, not fit, unknown, or exception.
- Reason: one short note tied to the mandate.
- Next step: pass, ask, hold, or send for approval.
Check the full portfolio
Company fit is only one test. Also ask if this is the right next deal for the full portfolio.
Look at money, time, and team focus. A small cheque can still add a close conflict.
ILPA asks managers to think about limits on deal and industry concentration. [2] This does not set your own limit.
Do not hide overlap behind a wide sector name.
- Customer overlap: the same buyer or budget line.
- Product overlap: a close substitute or shared core asset.
- Stage and time: too many firms needing support at once.
- Geography and rules: a new local risk or operating burden.
- Capital: the effect on follow-on capacity and reserves.
Make each exception real
An exception may be right. A hidden exception is not.
State the field outside the mandate. State why it matters. Name the person or group that decides.
ILPA asks teams about plan changes. It asks how they spread risk and share deals across funds. [3]
Read your own fund papers. Get proper advice where needed. This page does not read those papers for you.
- Exception: the exact mandate field that does not fit.
- Case: the facts that support the request.
- Risk: the conflict, concentration, or process issue.
- Approval: the named person or group and its decision.
- Notice: any update required by your own documents.
Review the pattern
Save the fit result and reason after each meeting. A pass can teach the team too.
Review exceptions on a set date. A repeat pattern may mean the mandate needs a formal review.
CFA Institute says a plan should name who sets it, uses it, checks it, and reports risk. [4]
This is a deal record. It is not a return forecast. It cannot remove startup risk.
- Count: fit, not-fit, unknown, and exception decisions.
- Group: repeat exceptions by cause.
- Review: set the owner, date, and source records.
- Change: update the mandate only through the agreed process.
- Share: tell the team what changed before new screening starts.
FAQ
Frequently asked questions
What is investment thesis drift?
Thesis drift means moving away from the deals your mandate allows. It can happen one deal at a time. It is a change that you should make clear.
Is a strong company always a portfolio fit?
Not always. A good firm can create a close conflict. It can add too much risk in one area. Check firm fit and portfolio fit apart.
Who should approve a mandate exception?
Use the person or group named in your rules. Write the changed field. Write the reason, risk, and result. ILPA calls for disclosure and approval of strategy changes. [2]
How does a clear mandate help founders?
It can give a fast, clear answer. A founder can learn if your stage, focus, and cheque range fit. It does not promise an introduction or funding.
REF
Sources
- 1
U.S. Securities and Exchange Commission
Commission Interpretation Regarding Standard of Conduct for Investment Advisers ↗ - 2
Institutional Limited Partners Association
ILPA Principles 3.0 ↗ - 3
Institutional Limited Partners Association
ILPA Due Diligence Questionnaire 2.0 ↗ - 4