Questions to Ask a Syndication Sponsor’s Current Investors

It’s safe to assume that if you’re reading this, you’ve probably been involved in hiring an employee, either as a hiring manager or as a business owner (and maybe both).

And although I think it’s less common than it used to be (for reasons I don’t understand), part of that hiring process usually involves speaking to references – a quick call with the person’s former manager or colleagues to confirm they are who they claim to be on their resume.

That call is considered basic diligence for a decision you can unwind in 90 days if it goes wrong. Yet the same person will wire a GP $100K (a “hire” they're locked into, often for 5+ years) without ever talking to a single investor who’s already in a deal with them.

The question not answered in the deal room

Every document in the deal room was written for someone who hasn’t invested yet.

It sounds obvious, I know. But it’s easy to forget that the deck was built to sell you, the pro forma to impress you, and the PPM to protect the sponsor.

Nothing in the deal pitch materials can really tell you what the next five (or more) years will feel like. The deck won’t tell you whether updates keep arriving in year three, and the PPM won’t tell you how the sponsor communicates when a deal hits a rough quarter.

What it’s like to be an LP with this GP lives in exactly one place: the experience of the people already in their deals. The pitch documents weren’t written to answer that question, so no amount of time and analysis in the deal room will surface it.

Which makes the highest-signal diligence step also the simplest one: get a current investor on the phone.

Getting a reference is one direct ask

Don’t be shy – ask the sponsor “Can you connect me with one of your current investors?”

A good sponsor won’t hesitate. Happy LPs are the best asset they have, and they know it.

And yes, they’ll probably hand you their happiest investor. That’s fine. You’re not running a satisfaction poll – even a hand-picked reference can still yield an incredible amount of signal, especially because the texture in their answers can’t be staged.

The actual issue is a sponsor who can’t produce even one willing reference. Plenty of LPs are glad to take these calls, and every sponsor knows who their happiest investors are. If they still can’t put a single one in front of you, you might have your answer about how their deals have treated the people in them.

The 20-minute script

Once you have someone, ask these questions:

• How often does communication actually arrive – on schedule, or only when there’s good news?
• What did the sponsor do the last time something went sideways?
• Where has reality diverged from what the marketing materials promised?
• How have distributions compared to projections?
• Knowing what you know now, would you invest with them again?

Pay as much attention to how they answer as to the answers themselves.

Vague answers are a signal too. Almost every multi-year hold hits a rough patch somewhere, and what separates a good LP experience from a bad one is often how the sponsor handled it.

An LP who’s been through that remembers the specifics – the distribution that paused, the email that explained why, what happened next. If the person on the phone can’t recall a single detail from any deal, be careful how much weight you put on their “yes, I’d invest again.”

Ask for a recent investor update

The reference call gets you an investor’s memory of how the sponsor communicates. But to see the communication itself, make one more request while you’re at it: a recent, real investor update.

An update is the one document in this process that wasn’t written to win you over – it went to people whose money the sponsor already has, which means there’s no selling in it.

To be clear, one update won’t show you a pattern. But it will show you the level of detail the sponsor thinks their investors deserve: actual numbers with context, or three sentences of happy talk.

You already make these calls

Nothing in this process is a new skill. It’s the same reference check you already run before hiring someone, but applied to a decision that’s a lot harder to walk back.

So before the wire goes out, ask the sponsor for a reference and a recent update. Twenty minutes on the phone won’t tell you how the deal will turn out – there are no guarantees in investing.

But it will give you a flavor of what this sponsor is like to be invested with – and ultimately you’re investing in them just as much as the deal itself.