Podcast Summary: How I Invest with David Weisburd

Episode 251: Why 95% of Funds Don’t Pass LP Diligence w/ Alex Edelson

Date: November 28, 2025
Host: David Weisburd
Guest: Alex Edelson, Founder of Slipstream, ex-COO at QED Investors

Episode Overview

This episode dives into why only a minority of venture funds pass Limited Partner (LP) diligence—an often misunderstood, nuanced process. Alex Edelson, a repeat guest and expert LP, explains his approach to sourcing, evaluating, and building relationships with emerging venture fund managers ("GPs"), and the intricate reference work that separates top funds from the rest. Edelson also provides context for the current LP market, the use of AI in venture, best practices for LP/GP relationships, and how anti-selling and authentic communication lead to lasting partnerships.

Key Discussion Points & Insights

1. AI Adoption in Seed Funds and its Real Impact

• AI is now broadly used by seed funds across sourcing, diligence, operations, and communication.
• Examples include:
  • Scanning networks for future founders
  • Scoring founder quality algorithms
  • Automating market research, note-taking, and investment documentation
  • AI-driven sourcing and portfolio construction is beginning to emerge

“I still think VC is an artisanal game. It's about relationships... But I think everybody's using [AI] or should be using it.”—Alex Edelson [00:49]

• Edelson questions whether AI provides a real competitive advantage, suggesting the differentiator remains in relationships and brand, not just tools.

2. LP Differentiation & “Right to Win”

• Edelson’s “right to win” as an LP is rooted in learning venture from top-tier firms (like QED), informing a distinct ability to help GPs build the best versions of their firms.
• LPs must be additive, constructive, transparent, and offer early, actionable strategic input.

“I can be the LP I wanted to do work with at QED... There's a deference and a trust and a responsiveness and a transparency that I think helps build a brand.”—Alex Edelson [02:28]

• The process includes pushing GPs to imagine the best iteration of their fund, often going deeper and faster than most other LPs.

3. Portfolio Construction: Lessons Learned

• Edelson now has a greater preference for funds that balance high ownership with a sufficient number of companies, especially in deep tech.

“The bar is very high for us to [invest in concentrated funds] right now... Deep tech is one area that might benefit from more shots on goal.”—Alex Edelson [06:54]

4. What Makes a Good GP?

• While frameworks may sound similar, practical application and “real talk” references create true differentiation.

“It does feel like part of it is just like getting real talk from people who actually know about things that matter... you want to see sustainable competitive advantages.”—Alex Edelson [08:55][13:08]

• Success is rarely about pitching polish; sometimes the best funds have idiosyncrasies or apparent “messiness” behind the scenes, which doesn’t preclude great returns.

5. Reference-Driven Diligence (The “Alpha” Source)

• Edelson emphasizes personal, trust-driven references as the core of diligence.
• Three critical factors to get authentic feedback:
  1. Longstanding personal relationships with references
  2. Warm, open, and disarming conversation style
  3. Skills honed from legal background (“deposing” references)

"These references are at the center of this work... the work you do before deciding to do references screens out like 95% of funds."—Alex Edelson [16:58][18:03]

• Ultimately, references rarely surprise him—by the time he conducts them, he has an accurate hypothesis.

6. Screening Out 95% of Funds

• Pre-ref check screens eliminate most with:
  • Incompatible portfolio construction
  • Lack of evidence the GP is likely to build a breakout portfolio

7. The Bar for Emerging Managers

• It's always a challenge for emerging GPs to raise—especially for those lacking a strong track record. Investors look for a plausible path to asymmetrical returns (5–10x), not merely base hits.

"Every shot on goal... has to have some chance of that asymmetry, or else you should be investing into private equity."—David Weisburd [23:01]

• Benchmarking is tough for GPs, as they see far fewer peer pitches than LPs. Edelson suggests it takes seeing hundreds of pitches to calibrate what “great” looks like.

8. Building LP Relationships—Best Practices

• Relationship-building is long-term, sometimes bordering on friendship; credibility is built through authenticity, not salesmanship.
• Edelson often acts as a “thought partner,” helping LPs think through portfolio strategy even before discussing Slipstream as a product.
• Anti-selling—honestly stating pros and cons and decline fit when appropriate—is a core tenet.

“It's not a win for me if someone comes in and realizes this isn’t a good fit... that’s not a win. I’d rather have someone who views this as a long-term fit.”—Alex Edelson [32:20]

9. Anti-Selling and Filtering for Fit

• Anti-selling is not just a tactic, but a way to efficiently match with the right LPs/GPs, save time, and build authentic partnerships.

10. What Excites Edelson as an LP?

• Being early in a GP’s process and helping shape their strategy and LP base.
• Innovation in identifying great talent before it’s consensus.
• More AI-driven processes and the evolving challenge for LPs to assess which VCs can maintain sustainable “edge.”

Notable Quotes & Moments (with Timestamps)

• AI’s Role in VC:

  • “I'm sure there will be more of that over time. Maybe AI will just be doing venture power.” —Alex Edelson [01:18]

• Additive LPs:

  • “It's constructive. It's not just like, oh, I need the standard information that all LPs need. It's like, no, let me push on the edges here.” —Alex Edelson [04:41]

• Screening Funds:

  • “The work you do before deciding to do references screens out like 95% of funds.” —Alex Edelson [18:03]

• Reference Diligence as Alpha:

  • “In many ways this is the source of alpha because it uncovers someone's past behavior, which is essentially their future behavior.” —David Weisburd [16:41]

• Asymmetry in Venture:

  • “Every shot on goal... has to have some chance of that asymmetry, or else you should be investing into private equity.” —David Weisburd [23:01]

• Anti-Selling:

  • “It's not a win for me if someone comes into our fund... and then they realize after they're in, well, this isn't a good fit for them and then they don't re-up... I'd rather have someone who views this as a long term fit.” —Alex Edelson [32:20]

• What Actually Matters in a GP:

  • “Are these people getting in front of great founders at or before inception? ...What evidence do we have that they're picking great founders?” —Alex Edelson [12:36]

Timestamps for Important Segments

• AI in Seed Funds: [00:06]–[01:24]
• LP Differentiation & Value-add: [02:10]–[06:11]
• Portfolio Construction Trends: [06:44]–[07:58]
• What Makes a Good GP (and Market Differentiation): [07:58]–[11:53]
• The Diligence Process & Power of References: [14:38]–[19:05]
• Screening Out 95% of Funds: [20:08]–[21:14]
• The Bar for Emerging Managers: [21:14]–[24:23]
• LP Relationship Building & Anti-Selling: [26:54]–[34:45]
• Excitement for the Future/Frontier: [34:45]–[36:20]

Tone & Final Takeaways

The conversation is honest, practical, and deeply rooted in industry experience. Edelson and Weisburd discuss the messy realities and high standards of venture LP diligence, demystify the reference process, and champion authentic, relationship-based investing. The episode is rich in actionable insights for LPs, GPs, and anyone interested in the mechanics of institutional venture investing.