What LPs Are Actually Signing Up For
And what most first-time investors don't realize until year three
Most people who invest in a VC fund for the first time make the same mistake. They evaluate it like a stock pick or an angel investment. They look at the portfolio companies, decide whether they'd personally bet on them, and write the check based on that.
That's the wrong framework. And it leads to a lot of confused, frustrated LPs somewhere around year two or three when the capital is still deployed, the portfolio is a mix of companies at various stages of unclear progress, and nobody can tell them what it's all worth yet.
Investing in a fund is not the same as investing in a company. The sooner you understand that, the better the decisions you'll make.
You're not picking deals. You're backing a manager.
When you commit capital to a VC fund, you're not selecting which startups to invest in. The GP does that. You're making a single decision: do I trust this person's judgment, sourcing ability, and operating discipline to deploy capital across 15 to 25 companies over several years and generate returns?
That's it. That's the bet.
The specific companies in the portfolio are an output of that judgment, not the thing you're evaluating directly. A first-time LP who spends all their diligence time on the portfolio companies and almost none on the GP has it backwards.
This sounds obvious when you say it out loud. It's surprisingly rare in practice.
How a fund actually works
Here's the basic mechanics, because most people have never had them explained simply.
You make a commitment. That's the number you sign for. You don't wire it all at once. The GP draws it down over time as they make investments, usually across a deployment period of three to five years.
During that time, you'll see capital calls. Money goes out. Some companies will fail. Some will raise follow-on rounds and increase in paper value. A few might exit. Most won't for a long time.
Returns come back through distributions. A company gets acquired, or there's a secondary sale, or eventually an IPO. That's when LPs start seeing cash come back. For most funds, the bulk of distributions happen in years six through ten, sometimes later.
This is called the J-curve. In the early years, the fund shows negative returns because capital is deployed and fees are being charged but exits haven't happened yet. It's not a sign something is wrong. It's the normal shape of the asset class.
If you need this money back in three years, VC is not the right place for it. That's not a soft warning. It's a hard constraint.
What you're actually betting on
Assuming you have capital that can be genuinely illiquid for a decade, the question becomes: who is the manager, and why do they have an edge in their specific context?
For a fund like Indelible Ventures, that means asking: why B2B tech in Malaysia, Thailand, and the Philippines? Why pre-seed and seed? What can this fund do for a portfolio company that a check from a generalist fund cannot?
The answer in our case is specific. We have manufacturing and supplier relationships across Penang and Thailand that can accelerate a B2B company's go-to-market in ways that are genuinely hard to replicate. We've operated businesses in the region. We know what it costs to cross a border from Malaysia into Thailand, not in theory, in practice.
That specificity matters. A fund with a vague thesis and a broad mandate is harder to evaluate because there's nothing concrete to agree or disagree with. A fund that says "we back B2B tech in SEA because of X, and our edge is Y" gives you something to stress-test.
Hold any fund manager you're considering to that same standard. If the thesis could apply to any geography or any sector, it's not really a thesis.
How to evaluate a fund before committing
For established funds, track record is the starting point. DPI (distributed to paid-in capital) matters more than TVPI (total value to paid-in capital). DPI is real cash returned. TVPI includes paper value that may never be realised.
For emerging managers or funds without a long track record, you're evaluating the person more than the numbers. That means looking at:
How do they source? Cold inbound, warm intros, active community presence, operator networks? The quality and repeatability of deal flow is the underlying engine of returns.
How do they talk about their losses? Every honest investor has them. A manager who can explain clearly what went wrong and what they learned from it is more trustworthy than one who deflects or blames the founder.
What is their actual value-add? Not the version in the pitch deck. Ask portfolio founders directly. What has this investor actually done for you since writing the check?
How do they make decisions? Are they thesis-driven or reactive? Can they explain a pass as clearly as they explain an investment?
Why micro-funds in emerging markets are a different conversation
A $500M fund cannot write a $150K check. The position size is too small to matter to the portfolio, the work per deal is the same regardless of check size, and the math doesn't justify the time. So the earliest rounds in markets like Malaysia, Thailand, and the Philippines are either self-funded by the founder, or backed by a small number of micro-funds who are deliberately in this lane.
That changes the risk and return profile compared to a large fund investing at Series B and beyond. You're earlier in the company's life, which means more risk per company. But you're also paying lower entry prices, and you're in before the institutional rounds that drive valuation.
Patient capital at the right entry point, in a market that is structurally underfunded at the early stage, is a different bet than parking money in a late-stage growth fund. It requires more conviction in the manager and more tolerance for uncertainty. It also has a different ceiling.
The question worth sitting with
Before committing to any fund, ask yourself one question: do I trust this person's judgment over ten years?
Not: do I think startups will succeed? Not: do I like this portfolio? Not even: do I believe in this market?
The question is the manager. Because everything else, the companies, the returns, the portfolio construction, flows from the quality of that judgment.
If you can answer yes with specifics, not just a gut feeling, you're in the right place to make the decision.
If you're still working through it, that's worth taking seriously before writing the check.
Indelible Ventures is a pre-seed and seed fund backing B2B tech founders in Malaysia, Thailand, and the Philippines. If you're exploring VC as an asset class and want to understand the entry point, reach out.