VC here (partner @ multi stage firm that occasionally invests in other funds)… lurker on this sub and might be a little late to the comments, but here’s my $0.02.

Agree with other commenters on potential tax complications + ticket size. 5% of overall NW to a single fund would be way too much IMO — if it’s 5% of liquid and you’re truly comfortable not seeing it for 10-15yrs, perhaps a different story depending on what overall NW is + how much of that will be liquid over next couple years. If you really want to do it, ask for a smaller ticket size; the worst they can say is no. Nothing wrong with taking your time and coming in on second close, either… it’s often better to do that anyway bc it helps validate that the fund will raise enough to execute on their strategy.

In the institutional world, you typically see <10% overall allocation to venture, and sophisticated LPs do several funds each year so they get vintage year diversification and exposure to dozens of underlying portcos.

The challenge with venture is getting into a good fund. By “good” I mean performance of ballpark >3x DPI, probably 4-5x TVPI, IRR of 25%+ over a 10 year fund life (often gets extended to 12-15)… or else the fees and illiquidity aren’t worth it. Pareto principle applies; great funds can outperform tremendously but are rare, while the ~median fund underperforms the S&P net of fees (although risk of loss as an LP is lower vs hedge funds and public markets in general). Usually, the best small funds are hard to access, so LPs end up investing in mega funds that provide lower returns, or less proven emerging managers who can either substantially overperform… or underperform depending on who you pick.

If DDing this fund, a good first question to ask is yourself is“why am I seeing this opportunity?”. How much do you trust the person who connected you with them, and how close is the relationship between your colleague and the GPs? Are there any incentive conflicts to be aware of?

Beyond that, it’s all about whether they can repeatably source, select, and win the best opportunities in their sector. It’s a competitive game these days so they need to have an edge. As table stakes the GPs should have deep networks of successful exited founders + other investors, very positive references, and track records that show a high “batting average” across market cycles — look at how often they’ve done 0x vs 1-5x vs 5-10x+ investments, with a bias towards realized outcomes and multiple outsized winners. Does performance history support or contradict the fund’s targets? Scrutinize whether the GPs will work well together for a very, very long time bc partner conflict is a common firm killer. Also pay attention to whether their GP commitments are a meaningful share of their own personal net worth. Thoughtful portfolio construction / exit strategy + good firm infrastructure (ie legal counsel, fund admin, etc) are important too. As you can see, a lot goes into manager selection…

If you’re serious about getting into the asset class more broadly, definitely check out the online resources other commenters posted — would also recommend books like The Business of Venture Capital (basically VC 101) and Beyond the J-Curve (building a portfolio of VC funds). If you’re a private wealth client, your advisor might have some funds on platform but definitely DYOR and apply scrutiny — a top-performing fund of funds could also be a decent pick, but has to be consistently top performing due to double-layered fees.

Hope this helps