Happy Thursday and welcome. As always, let’s dive in.
After my story about passing on Alpine’s 2019 vintage, a few people wrote asking:
“Okay, which other great funds have you missed?”
The answer? A lot!
Today I want to talk about Veritas Capital Fund VI (2017) - a fund that has turned out to be one of the absolute standouts in its cohort. It’s tracking north of 30% net IRR and close to 3x net TVPI.
And yes, we passed.
And yes, we would pass again.
Let me explain why.
What We Saw
When Veritas came to market, it had all the elements that make LPs love them: clear focus and strategy, a hungry team, and a stellar track record.
But there were also some real issues:
It was a new relationship for us
Coming only two years after their 2015 vintage
A target size double their latest fund and 3-4x larger than their fund before that
We also had a clear mid-market mandate, and this fund was right at the edge of it (today I'd call $3.5bn mid-market - but not back then).
Then came the bigger challenge: the last fund with meaningful realizations was basically their 2010 vintage, built on much smaller deals. Now they were stepping up significantly in both fund size and check size.
So the question became: “Are we underwriting their track record - or our belief that they could scale it?”
And that’s where our process ran out of road.
The Decision
We didn't dig too deep. Not because we didn't respect the team - we did. There was a lot to like. But because it was clear this fund didn't fit our diligence framework.
And that's the point worth dwelling on.
The Framework Question
First off, I've never found a perfect fund investment. You always compromise somewhere.
But Veritas required more compromises than we were willing to make. Large fund size increases, short timeline, limited track record at the new scale, fund size at our upper boundary. It wasn’t one thing - it was the stack.
So at the time, it was actually a straightforward decision.
/ Self-promotion
Still relying on Excel, OneNote and Outlook? FundFrame is built by LPs, for LPs, to help you move from spreadsheets to rigorous, repeatable frameworks.
Practice What You Preach
One of my biggest turn-offs in GPs is when they clearly have an investment model, and then in every fund there are 2-3 investments that don't follow it.
I haven't done formal research on this, but anecdotally? Those exceptions seem to be the worst performers in a fund.
You know the ones I'm talking about.
The consumer fund that suddenly does a business services deal.
The growth equity firm that backs an early venture investment.
The value firm, that paid a higher-than-normal multiple for a deal because of some special argument.
Or in other words: Investments where you’re playing away from home.
If I don't want my GPs making major exceptions to their frameworks, why should I make major exceptions to mine?