Nov 4, 2019 · 32m · 20vc
20VC: Inside The Mind of A Leading LP: How LPs Evaluate New Fund Managers on Everything from First Meeting to Portfolio Construction To Fees and Carry with Lisa Edgar, Managing Director @ Top Tier Capital Partners
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this live episode of The 20 Minute VC, host Harry Stebbings interviews Lisa Edgar, Managing Director at Top Tier Capital Partners, discussing how limited partners evaluate emerging general partners, structure fund economics, and navigate macroeconomic cycles. Lisa shares key insights on LP pitch etiquette, secondary market liquidity, waterfall structures, and building enduring venture firms based on core organizational values.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 31.6% of the talking time here. How this is scored →
Harry as informed peer 4.2 Guest teaching 4.5 Guest disagreement 1.3 Harry pushing back 1.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 17:55 LPs Don't Give Term Sheets
Lisa gently dismisses a former founder turned GP's naive assumption that LPs hand out term sheets, correcting his fundamental misunderstanding of LP deal execution.
Hardest push from Harry ▶ 10:33 Is Track Record Everything?Harry explicitly pushes back on the soft LP line that track record is secondary, stating that in real fundraising experiences track record is practically everything.
Biggest teaching moment ▶ 21:00 European Waterfalls and ClawbacksLisa provides a masterclass on European vs American distribution waterfalls, explaining the harsh economic realities of clawbacks if GPs take premature carry.
Harry holds his own ▶ 15:22 Moolah in the Cooler vs Paper ReturnsHarry asserts his market fluency by invoking Chris Douvos's famous phrasing to challenge non-liquid paper valuations versus actual realized cash distributions.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Lessons Learned from Economic Booms and Busts | 3 | 5 | 1 | 1 | Harry asks a strong follow-up regarding capital call cadence after Lisa mentions time diversification from past market busts. Lisa educates him on how institutional funds manage liquidity through subscription finance lines and distinct back-office teams. | |
| Evaluating General Partners: Warm Intros and Pitch Styles | 3 | 4 | 1 | 1 | Harry asks structured questions about pitch mechanics and deck preference. Lisa candidly explains why rigid slide-by-slide presentations fail with LPs and how she reframes initial meetings into contextual discussions. | |
| Track Records, Qualitative Factors, and Re-Up Decisions | 3 | 5 | 2 | 3 | Harry challenges the standard LP claim that track record isn't everything, pushing on its centrality during actual fundraising. Lisa clarifies that track record is merely the entry filter while blind pool risk makes qualitative team dynamics decisive. | |
| Fund I Institutional Strategy, Liquidity, and Secondaries | 6 | 3 | 0 | 2 | Harry demonstrates high industry expertise by referencing prominent figures like Chris Douvos and Semil Shah regarding liquidity and secondaries. Lisa fully agrees with his references and expands on secondary structures. | |
| Follow-Up Etiquette, Management Fees, and Carry Structures | 5 | 6 | 3 | 3 | Harry digs deep into management fee creep and carry hurdles while sharing an anecdote about emailing an LP 32 times. Lisa playfully teases his persistent follow-up and provides detailed instruction on European waterfalls versus clawbacks. | |
| GP Commitments and Building Lasting Venture Franchises | 5 | 4 | 1 | 1 | Harry frames the distinction between GP commitments that require remortgaging a home versus trivial sums for wealthy managers. Lisa outlines LP expectations for GP commit scaling and long-term firm building. |
Statements from this episode (20)
Top Tier Capital Partners' portfolio includes Andreessen Horowitz and Index Ventures
“Included in their stellar fund portfolio is the likes of Index, Initialize, True Ventures, Andreessen, and some of my favorites in Ed and Elliot at Boldstart, just to name a”
Edgar: Only four fund of funds existed when she joined VC
“That was a, at a time where I think there was four fund of funds in the entire industry.”
Lisa Edgar plans to retire after one more economic downturn
“I've been through two busts, and I say I have one more in me, so that's it. I can do one more, and then I'm out.”
Top Tier Capital Partners added secondaries and co-investments to shorten J-curves
“So we really added secondaries and co-investments to our portfolio construction so that we could really reduce and shorten the J-curve for institutional investors.”
Edgar: Globalization is the biggest shift in venture capital over 20 years
“It's changed, obviously, dramatically from a very small cottage industry that was really Silicon Valley in Boston, so it was really US-based, and I would say the biggest change that we see today is really the globalization, and sitting in this room, you know, …”
Lisa Edgar always responds to pitch inquiries sent via warm introductions
“If it comes from somebody I know, i.e. A warm introduction, I always answer. I either take a call or meeting, or I turn it over to someone on my team”
Lisa Edgar prefers conversational pitch meetings over deck presentations
“I cannot go through a pitch deck. I just don't have, I don't have the capacity. I think I'm ADD. I don't know what it is. So I like to have a conversation.”
Initial LP meetings assess context while second meetings examine portfolio details
“First meeting, it's more context. Who are you? What are you doing? Why is it different? Second meeting is generally drilling a little bit further into companies because you probably have some, a track record of some sort.”
Top Tier never backs first-time fund managers without an investing track record
“While we might invest in first-time funds, we won't invest in first-time investors, so there must be a track”
Top Tier has refused to re-up with top-performing venture funds
“And we've done this, it could be that we're evaluating and doing our compare and contrast, as we call it, and there might be a One of the best performers in our portfolio, and we don't re-up, and the numbers would tell you all day long, you know, with your eye…”
Raising a first-time venture capital fund takes 18 to 24 months
“First-time funds, I mean, often, it's 18 to 24 months, and you just have to expect that.”
Top Tier's average U.S. venture fund commitment is $20 million
“Our average commitment is twenty million, that's because that's kind of what ours is in our main kind of U.S.”
Lisa Edgar: Top Tier managed two VC fund-of-funds with no J-curve
“We had two fund-to-funds that didn't even have a J-curve. I mean, think about it. Venture capital only, fund-to-funds, no J-curve.”
Top Tier Capital commits to GPs who maintain persistent post-meeting follow-up
“Some of these people have been very good at continuing to keep in front of us, and they are the ones that we've ended up Committing to, because they're doing things, you know, they said they're going to do something, they're giving us more information, and so …”
Top venture capital firms command premium carry above the standard 20%
“So VC is not a two and 20 world. PE is, but a lot of VC isn't, and certainly when I say that, I really mean the top players. I mean, they have premium carry, and we are fortunate enough to have a portfolio of a lot of that.”
A 2.5% management fee is reasonable for small venture capital funds
“If you're raising a very small venture capital fund, having fees at two and a half percent is reasonable. I mean, you're building a team, you're building a platform. I mean, that would not be egregious, right?”
Premium venture capital carry should require a 3X return hurdle
“For carry, I think you have to start at 20%. That is the base when you're getting started, and to have some type of premium carry after a return hurdle is okay, but really that return hurdle should be three X, you know, not two X, because you kind of have to d…”
Lisa Edgar: Industry standard for GP commitments is 1%
“I think the industry standard is one percent, so you want somebody at least be doing one percent”