Over a year ago, I posted an innocuous reply to another GP’s post on Twitter about LP due diligence. Nothing earth-shattering – just a comment about how approach matters as much as the questions themselves.
Fast forward to a few weeks ago, and someone replied to my year-old comment (🤨) with a response that completely missed the point. They interpreted my advice about being collaborative as “don’t ask tough questions” or “just trust the GP blindly.”
That's not at all what I said. But their misunderstanding brought something else to mind.
Recently, I’ve seen more passive investors approach due diligence like they’re buying a used car from someone trying to rip them off.
I get the skepticism. Many LPs got burned by bad deals with questionable GPs in 2021-2023, and those losses are hitting home now.
But treating every GP as a potential scammer isn’t just bad form – it’s counterproductive.
The Relationship Reality Check
Syndications aren't anonymous stock trades. When you invest, you're entering a 5+ year partnership with real people who’ll make decisions involving your money every day.
Yet I see LPs firing off 50-question checklists with 48-hour deadlines, asking generic copy-paste questions they found on the internet, or setting “gotcha” traps for GPs.
Not only is this bad form and unnecessarily adversarial, but they’re missing an important point: good GPs don’t need your money.
The Power Dynamic You're Ignoring
I know this might sting, but as an LP, you don't hold all the power just because you have the checkbook.
Experienced GPs have plenty of investors to choose from. And they don’t just spend all day evaluating deals. They evaluate investors too – you.
They want to know:
Do you actually understand the business?
Will you cause headaches during tough times?
Are you going to be a good long-term partner?
Are you someone they’d want to work with again?
Every interaction, especially early ones, becomes a data point in their evaluation. And if they conclude you’re going to be more trouble than your check is worth, they'll politely pass.
I've seen it happen. Great GPs turning down six-figure investments because the LP’s approach raised too many red flags.
How You Ask Matters
The difference often comes down to how you phrase things.
Instead of: “What’s your backup plan when you can’t raise rents?” Try: “Given current market conditions, how are you thinking about exit flexibility?”
Both get at the same concern, but one sounds like you’re expecting failure while the other shows market sophistication.
The Right Questions at the Right Time
And not all questions are appropriate at every stage of the process.
Early conversations: Focus on alignment and philosophy. Do your values match? Do you want to be in business together for 5+ years?
Middle stage: Dive into deal specifics, execution strategy, and track record details
Final stages: Cover partnership terms, distributions, and operational logistics
Leading with “How often do you send distributions?” signals you're focused on the wrong things. It's like asking about vacation days in a job interview before you've even discussed the role.
Quality Over Quantity
Sophisticated LPs understand that it’s better to ask five thoughtful questions that demonstrate real analysis than to blast through a generic 50-point checklist.
Good questions show you’ve studied this specific deal and this specific GP. They demonstrate you understand the business and are thinking about partnership success, not just trying to check boxes.
The Bottom Line
Your approach to due diligence is often a major part of your first impression on the GP. Remember, you’re not just evaluating them – they’re evaluating you too.
The best LPs understand this dynamic. They ask tough questions collaboratively. They’re thorough but respectful.
So next time you’re preparing questions for a GP, ask yourself: Am I approaching this like a potential business partner, or like someone trying to catch a used car salesman in a lie?
The quality of your future partnerships (and access to great deals) depends on getting that balance right.