E70: How VC Fund of Funds Work with Alex Edelson

Key Points

• Investing in a single fund offers the potential for higher returns but also carries more risk, whereas a fund of funds provides exposure to top quartile and decile venture firms with the benefit of diversification and a potentially higher floor for returns.
• Slipstream's investment strategy focuses on emerging managers in their first few funds, with a portfolio construction of 90% core investments and the flexibility to co-invest in breakout companies, maintaining a balance between US-based and international funds.
• The due diligence process for fund managers includes evaluating their motivation, portfolio construction, competitive advantage, and receiving feedback from founders and downstream VCs, with a preference for off-list references to respect the GPs and their relationships.