Investing Billions - E297: Advisory Boards & LPACs: A Complete Masterclass for GPs

Episode Date: February 4, 2026

Why do so many advisory boards look impressive on paper but fail to deliver real value when it actually matters? In his second appearance on the podcast, I sit down again with Matt Curtolo, a senior advisor to both GPs and LPs who has worked with more than 600 general partners across venture, growth equity, and private equity. Matt breaks down the biggest misconceptions around advisory boards and LP advisory committees, why “performative” governance quietly destroys trust, and how the best managers design advisory structures with real purpose. We get tactical on compensation, LPAC construction, advisor selection, and how great firms turn advisors into a true strategic weapon—not window dressing.

So, Matt, you've sat on more advisory boards and LPAs than nearly anyone I've ever met. You've also been involved in entities that have invested in over 600 GPs, not even funds, but GPs. So you've seen everything across the gambit. What's the biggest gap between GPs in terms of what they think they want from their advisors and their boards and what they really need? First and foremost, it's this advisor means. a lot of different things to a lot of different people. So I think it's defining it. So you have your LP advisory committee. That's sort of governance for the fund, oversight of a particular entity or investment vehicle. Then you have a board of advisors, right? That can be independent folks. That can be

industry folks. They're oftentimes more firm level, strategy level, maybe helping out portfolio companies, helping in different areas of firm and fund management. And then you have sort of the general advisor, which may be someone who has functional expertise that gets piloted into different parts of a portfolio, helping out a company, could be doing a lot of different things, but it tends to be a bit more specific on that end. So as you think about advisory boards, we'll kind of cover all of those, but they are what you make of them. So GPs sometimes go in thinking that this is, I have to show credibility by the people that are involved around the table. So I use the word performative a lot of sometimes these boards end up looking and feeling

not necessarily that functional, but really are put together with the expectation that people will be impressed by it, to put it one. The other piece of that is you have to design it with, I say, purpose and clarity, right? So what do we want to achieve by putting this group of people together? That starts with the GP. And I think that's where a good advisor, you know, you ask about the gap, right? What do they actually want versus what do they need? Most of the time, they don't define it.

I think that's where you have to start. Is the GP defining what they want to get out of this? And then everything sort of follows from that. It can be fiduciary, strategic, could be a sounding board. But I think you need to define that up front. And then I think the rest of it will take shape. Like that they're plugging in the gap. So take it to the extreme.

If you have the perfect team or you have something for. everyone, you wouldn't have any advisors because you would have reputation, you would have all the functionality, you would have everything that you need internally without needing an advisor. I would never say never because I think advisors, in my current advisory practice, one of the things that folks really are looking for is just someone to tell them objective truth, right? No one who's an independent advisor, I think, is a title that really comes in because that's really what you want to try and get from folks. these even if you were at the top of your game in terms of the team, the reputation,

all of the functional areas within your firm, you're still going to want someone to keep you accountable and to look at things outside of the four walls. So I think that's someone maybe without a vested interest from an economic perspective or material economic perspective, but someone who is really there to tell you the objective truth. Somebody that's truly unconflicted, that's not an L.P. that's not a board member that may not even have any power. And they're really the best friend of the GP and the best friend of the team that's

really giving them the difficult and important feedback in a non-conflictive manner. Very much. I think that I say sort of indexed towards self-awareness and humility. As a GP, you can't believe that you know everything and you have the right way to do everything. And I think you do have to be humble. This business can humble you, whether that be from, fundraising to managing companies, I think about a lot of the early stage firms that I work with where more than half of the companies go to zero, right? You can't fix that. That's the nature of

the business, but you do have to be humble about a lot of this and take in that feedback, the best place to get that feedback, and probably the most willing folks to give that feedback are folks who are just there kind of rowing in the same direction, but not necessarily in the boat with you, to use that analogy. One of the hardest things of investing is seeing what's shifting before everyone else does. For decades,

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they think of advice. It's literally, in the name. But when I gave you some examples, as you said, heads of talent, former CEOs, it could be very functional. So are there any limits to what an advisor could be? In other words, what's the difference between a full-time team member and advisor? What's that distinction? Is it just the amount of time that somebody spends? And how do you go about deciding whether something needs to be an advisor or a team member? I think it sort of comes in three different versions, right? What is the cadence of their engagement and availability, right? Are they, is this someone who's sitting in a

full-time seat? In that case, it would look weird if they have two full-time jobs and are full-time team member, but you can absolutely get a few hours of their time, a quarter, potentially, or have them on call for specific needs. So I think that availability and cadence of the engagement is one. The expectations set, I think, are the other pieces? Like, what are they supposed to deliver? Right? If this is someone who you want to be able to, be engaged on a weekly basis versus a quarterly basis. And I think going back to cadence, how involved does this person need to be? So I think there is a fine line.

And I'd say advisors to, from a compensation perspective, are treated differently than full-time employees. That's probably, you know, to turn the dials between cash compensation and non-cash carry, equity, things like that. Most advisors take their compensation in the non-cash area. Maybe they have a small retainer. but for the most part, the full-time employee is going to have, or the full-time team member is going to have sort of the full package of compensation.

Let's talk about compensation. I want to talk about the different frameworks available for best practices for compensating advisory board member. Talk to me about how you go about thinking about that. And most specifically, what are some best practices around determining, the compensation for advisory board team members. So for an LPAC, for an LP advisory committee, there's generally no compensation other than the GP kind of or covering their travel expenses or things that they need to incur to attend

these meetings. Independent advisors, I think, you know, a lot of firms don't have a huge paid advisory practice, but I think for the most part, like I said, it's mostly carry. very kind of small amount of cash. Let's say for a classic low touch advisor, maybe two meetings a year. They have a brand that the firm can use. They can kind of tap them as needed. I think the market for that is 20 to 50 basis points in terms of the total carried interest pot. And again, this is very flexible based on firm. Some of that is contractual. Some of that is a lot of people will call it jump ball or you can be merit-based or performance-based type stuff.

But the way I try to think about, like for these carry-only and carry-heavy advisors, structure it like a, I use a phrase mini-partner, where it may be tied to a specific fund. It may be back-ended in terms of the vesting schedule. You don't get anything up front. So you're really testing out that advisor. Are they adding a lot of value? Have they been able to support what you're building? have they delivered on the expectations you set forth, and then, you know, have a kind of a

linear vesting schedule beyond that. So no no vesting, a cliff, and then kind of go into linear vesting after that. So similarly, like employees, you would have a cliff with advisors and what's a trade-off between that and just vesting them on a monthly basis? Yeah, I think that the biggest piece would be trying to make sure that you're getting what you hoped you would get before committing to a lot of this. That carry is, cash is the finite resource. We can do the math on how that comes in and flows out. Carry is a bit more flexible.

It does tie back to alignment, right? I think an advisor who's willing to take carry as a form of compensation, all things being equal is more likely to put more effort and energy into fulfilling the role that they've taken on versus someone who's getting paid a retainer to sit on a board, and they're getting that either way. So I think that's the, you want to make sure that they're achieving the goal that you've set forth at the beginning of the relationship when you've kind of signed them up as an advisor, the try before you buy, you can almost put around that.

But for the most part, I think that's the difference between what you would want with an advisor versus with a cliff with sort of a period of time for your testing. out the relationship versus starting that clock on day one. What's the typical hit rate for a successful advisory relationship that you see in the average venture growth equity PE fund? It's tough to say like the hit rate on achieving the goals that they've been set out to do. There's another piece of this where there's kind of a natural shelf life for some folks. So let's say you have an advisor, a board of advisors, or I always say the slide of faces of all the folks that are connected to you.

At some point, maybe their natural network is going to age out of the strategy. You're going to have a shift. They're going to be more involved in things. So there's some natural turnover within the advisor pool for funds. But I think for the most part, it's a pretty high success rate for, at least in my conversations with GPs, right? They are getting most of what they need from their advisors. And in the situations where they're not, it's less tenuous to kind of turn them over.

or let them age out of that situation. So I think it's a relatively high success rate. A lot of these folks are known to the investors and to the GP team. So even if there may be some misalignment, there's an opportunity to have a conversation around resetting expectations and maybe go there. As a manager goes from one fund to the next, there's a natural point where you could decide whether to re-engage so you don't have to, quote, quote, fire the advisor.

There's just a natural. transfer. It's a very flexible relationship. I think that's partly to your question before of what's what's the line between an advisor and a full-time person. Flexibility might be the number one piece of that. And these are folks who themselves will likely have. Let's take someone who's mid-career, who wants to be active. I see this a lot in venture, somebody who's, you know, chief marketing officer at a large company, at a large hyperscaler, perhaps, they really get a lot more than just compensation by being involved with early stage firms. They get to see and touch and feel some of the things that are out there. They also get the pay-it-forward aspect of helping earlier-stage companies,

scale. So I think you have some of those folks where they may just get busy or they may have a great windfall where they're not going to be an advisor anymore. They start their own family office. They off and do their own thing. So I think you have a lot of just natural things that happen within the ecosystem that caused that turnover. So let's say you have a GP that's starting their franchise and building their fund won. How would you go about advising that GP to build their advisory board from scratch? Tell me the step by step. Why don't I talk about the LP advisory committee? Because in this case, I think that's for first time funds, by their very nature, there's a first time they're doing it. So I think what do you want this group to accomplish, right? Back to some of the

earlier points, the purpose, the expectations. Is this a group that's going to be approving valuations and governing conflicts? Is it going to help you raise capital? Is it going to help you hire folks? Is it, you know, I think defining that role, whatever it might be, the structure will follow beyond that. I also think keeping it manageable for a first time fund is important, right? I think there's, I've sat on LPACs with 25 people, there's where it becomes a bit performative, right? For the GP, you have to manage all of these relationships, folks who have that seat, want to have maybe some extra attention. That's a lot. But inevitably, there's a core few folks who really matter. That might be two, three, five. So the tighter, the better, I think, on the advisory committees.

and then I think finally you want to align the expertise to the strategy. I'd say like if you're an earlier stage operator-led fund, you might only need one advisor here. And this is kind of pivoting into the broader advisor rules. You might have a former CEO who's run a bunch of companies who can be a coach, who can do intros, who is more that Swiss Army knife type advisor. but maybe just to switch back to the LPAC, pick folks who are going to be genuinely helpful

as you build out your firm, right? It's not to say you even need a formal LP advisory committee. I'm involved with a few managers where it's informal, but we have regular conversations around, hey, I'm running into this problem with my administrator. Hey, I'm doing my first annual meeting. What should I do in my own advisory practice? Now, that is a big piece of just helping folks get that bandwidth and leverage and wherewith all of people who've been there and done that. So I think that's the way a first-time fund should think about their LP advisory committee. Get me sounding boards, folks who've been there, folks who can kind of serve as a river guide and help me navigate. And then with advisors, really align that strategy, align the expertise

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www. Northwest Registeredagent.com slash invest free. So it seems like the way to go about building your advisory board starts nothing to do with the advisory board. It starts to do with the team. What are the strengths, whether the weaknesses, what are you trying to achieve? And then you do first principles analysis on whether that gap could be achieved through a full-time hire, part-time hire, or an advisor. And obviously, the advisor could be some form of the part-time hire. So it actually has nothing to do with the advisory board. It has to do with the fund itself, figuring out what is needed internally, and then figuring out whether advisor is the right tool to solve that need. I think that's well said, David. I think that the reality is it can take so many

different shapes. I've seen good ones. I've seen bad ones. I've seen a lot that are that are there for fiduciary reasons, right? These LP advisory committees generally in the in the LPAs, GPs say we are going to have an LP advisory committee made up of X, Y, and Z that's going to meet once a year and do these, these things, right? So back to the idea of being performative. I wouldn't say it's performative in the sense that it's a big song in Dan. You've mentioned the word performative I get what you're saying, which is essentially window dressing. But isn't that really important for a fund one or fund two, somebody that's an emerging manager to have the right optics around a fund?

I know no one's supposed to talk about that, but the reputation, the optics, and really, I think it's true skin the game. If you have the former CEO of Pepsi, who obviously made a lot of money and has a lot of reputation on the line, if he's on your advisory board, it is a strong signal, even if he takes two phone calls a year. So shouldn't advisory boards have that performative aspect as well? Yeah, it's worth digging into what that actually means.

Because I think from an LPs perspective, when I see a page of all the faces, of all the people that are well-known, have had great careers, a bunch of logos of the companies they've worked at, my immediate next question is, what do they do? How are they compensated? How much time are you getting there? So on the surface, yes, I think it's important. If it is only there as window dressing, to use your words, then I'm going to sniff it out.

And that's going to have a black mark on the record. Whereas I'll give you an example, there's a great manager that I've invested with in the past in Seattle called Fuse. They're an early stage venture firm. They have all the logos of all the big firms in the Pacific Northwest. and these folks are tactically and strategically used. They're LPs, but they're also advisors. And it is doing the diligence when an LP kind of goes through that process. Hey, founder X, why did you choose this firm?

Well, we talked to the former CEO of Starbucks or Costco or whatever it might be, and they were able to make an introduction. So I think it goes a layer deeper, right? It's the slide on the page, but is there substance behind it? That's where I think an advisor group, becomes a weapon for the firm, right, and really becomes a selling factor versus here are a bunch of really famous people that I know. I know in terms of recruiting talent, the talent wars are conducted pretty much on email and

LinkedIn. So I've heard a lot of times advisors that put their affiliation on their LinkedIn is a very strong signal. How realistic of that is an ask for GPs to ask their advisors to do that. Talk to me about that. Yeah, I actually think it's low-hanging fruit in my mind. I think, like, that's something that a GP, or I'm sorry, a GP can ask, right, if someone's willing to be an advisor and not put it on something like their LinkedIn,

that's a red flag for me. You know, and that's not necessarily like I'm going to take that as a negative and not dig into it. But there may be reasons behind it. But I do think that is a signal of this advisor is sort of putting it out they're in the public sphere that they are connected to this company or firm. So I think that is, it is positive from, I wouldn't say it's like table stakes because there are a lot of people that just don't do it. So there's probably a big neutral category here. But if it's on there, it's positive. It does send a positive signal. If it's in the deck and not in those public spheres, it may have

a less positive or potentially negative signal. And as I mentioned, you've been investor through different organizations that you've been in over 600 GPs, which is a crazy amount. What is the most strategic way and the smartest way that you've seen GPs use advisors? Give me some case studies. Let's take the LP Advisory Committee. That's the one where I've probably served in the most capacities. The best way a GP can use an LP advisory committee is first through its construction and its diversity.

get representation from different parts of the globe, get from different entity types, right? And maybe just to take a step back, an LP advisory committee is set up by the GP at their discretion. They meet at their discretion. And in some cases, they do pass on some fiduciary responsibility of oversight of governance, conflicts. They may have a voting power outside of what the broader LP base is. So it can be a very important body. So I think as the GP, you want to put something together that has diversity, is not expansive. So you can really get positive impact and influence from these folks.

You can have conversations, honestly, before things go sideways, I think that's the other piece of it. What you really don't want is an LP committee where they're just kind of going through the motions. You want the best functioning committees that I've been on have been GPs who bring the quote-unquote dirty laundry into that room and talk to their LPs about it. Seek counsel, seek advice on what should we do? You are experienced folks. We have you in this room for a reason. Help us. I mean, so I think it comes from a genuine relationship.

And that's, I think, an LP advisory committee, it's the number one goal is to, to make sure that you have an open line of communication, real transparency. And, you know, I think what you actually get is a room full of advocates. They see how the sausage is made. They really get close to that GP. So it can, again, back to the idea of it being a weapon for the GP. Those are the best committees I've been on. What's a tactful way for GPs to leverage their advisory board in order to fundraise

and some key LP introductions or to have their advisors help them get LPs over the line. They are, right, it goes back to when I'm doing the diligence on a fund and I see these names in there, they're going to be on my list of people I want to talk to. So have them, I think for the GP, they have to think about advisors as extensions of the partnership. right? They have to be able to tell that story. You know, it's not about just name dropping and, you know, kind of putting that out into the ether. It's like, I know this person, can you make some introductions? I think that's, maybe that's something that they can do. And you do as the GP want to leverage the networks that your advisors have. But I think give the GP or give the advisor

enough transparency and access so that they can reinforce your message for you. You want to amplify this as many ways as you can in a fundraising market that's incredibly challenging. I don't know if an advisor is going to really activate capital all the way from beginning to end, but they can very much be a driver as an LP moves through their diligence process. And then the GP can arm them with specific cases. studies and you want it to be honest about what are they what are they doing where have they come from how does it align with the fund strategy i always probe less about their prior experiences

but what are they doing now in relation to the firm how have they been involved do they attend the weekly meetings do they talk about pipeline and deal flow do or they just attend once a month and talk about the things that they're working on so it can take a variety of ranges but i think The idea of their extension of the partnership, they can reinforce your message. They can really drive home some points when LPs are in mid-funnel. And of course, they can always open up their network at the top of the funnel. Let's talk about L-PAC constructions. What are the most common mistakes GPs make when it comes to constructing their L-PACs?

Too many is certainly the first piece of it. Too many LPs on the board back to the purpose. So I think the place where folks can go, wrong too is we have too many folks on there, but there is a sort of a suitability test for who should be on that, that LPAC. It's not just LPs that write the biggest check. In a lot of cases, that is something that when you are a large investor, you ask for in every fund. And GPs feel like that's kind of a carrot, right? You write a big check, you can be on the LPAC. I would just say decouple size and suitability. So not every large LP.

is suited to be on the LPAC and kind of serve in that function. So that's one place where I would say make sure that you don't let it get too big just by people who write big checks. It can lose effectiveness. I would say once you get over into double digits, I see you really start to erode some of that ability to have one-to-one conversations. I mentioned it before, but I would say don't over-index on one LP type. So diversity of LPP.

Why is that? What's the risk? Yeah. Absolutely. So like the, a pension fund, for example, is going to look at the world differently than an insurance company than an OCIO. And these are all capacities that I've sat on LPAX on versus, you know, a small fund versus a big fund. What is the time commitment that you expect from people? They're all, I always said that the LP on the advisory committee is certainly looking out for their own institution's best interest, but they should also have a lens into the way that other folks operate. So if you can put folks that represent each of those different areas, taxable investors, non-taxable as private wealth becomes bigger, you have all sorts of different perspectives that as a GP, I should want those diverse

viewpoints to come through in the conversations I'm having around the portfolio or maybe even some of the stickier situations. So don't over-index on one or the other. You want to hear from all the different constituencies that make up your portfolio. And I'll come back to it too, David. I think the what is the goal of the group? What guidance do you want to get from them? Without that, you can't pick the right LPs or have the right cadence. So I think that's, if you don't start there,

all the rest of this becomes a little bit noisy and hard to assess. What's the optimal size of the LPAC? You mentioned double digits as too much. What's the optimal size? Yeah. I'm a big, I think five or six is probably a good number, but probably more of a range. You could absolutely get by with three. Could you have nine or ten?

Sure. I think the devil's in the details there. I will certainly say once you get to 15 or 20, it becomes really hard to manage from materials, meetings, you know, you want to be able to use this. Inevitably, that ends up shrinking down to a core group. You're going to call five of these folks when you have something. And I always say, like, I ask a GP, which LPAC member do you call first when something happens? Not that they're stack ranking their favorite children in this situation, but there is a core group that you lean on for more advice than other.

What's your sense for the venture market today coming into 2026? Tell me about the venture market today. I have said innovation has no clock. It doesn't really matter what's happening in the broader market. We are seeing step functions in terms of new and interesting technologies that are coming to bear. So I'm long-term bullish on the innovation economy. I would say the market, let's take it in two steps. Fundraising has been very challenging.

It's getting more and more concentrated. The big firms are getting bigger. So you are seeing some round-size inflation at the smaller end where bigger firms are coming down market, and this is not a new phenomenon, but it's a continuation. And that's really where folks are kind of pulling that up. So round sizes are getting bigger, so larger GPs can write, let's call them option checks to put more dollars in the future. Emerging managers are getting crowded out. So you have maybe less sources for a founder to get capital. And LPs are also increasingly, based on that dynamic, are increasingly putting more dollars with the larger firms.

the health of the companies, I think we've seen pretty much a reset in terms of where things were held relative to the peak three, four, five years ago. So I think you have companies still that are on the books, whether they survive or not. I think the reality has set in with a lot of these companies that were once valued in the billion plus range. Unicorns No More, I think was the headline I was reading the other day. And that's just, I think we're getting to a normalization in the market. AI is the pocket of this that really defies all history and all logic. When you look at any of these large companies, how quickly they're growing, and you try to apply financial metrics to it, it's very hard to do.

So I think you have that AI pocket and a lot of folks trying to rebrand and get lumped in. into that world. And then I think the other piece of it is everything else is becoming AI enabled. So you have a consumer platform. You have all the things going on in aerospace and defense and hard tech. You have a lot of different pockets within the venture space that are becoming supercharged with AI, but not necessarily viewed from evaluation perspective as the pure AI hardware software at the spin absolute masterclass on advisory boards what would you like our audience to know about you and everything that you're working on absolutely well having been you mentioned 600 lp or 600 GPs that i've worked with over the years my background has really covered the gamut and what i've been

doing for the last 18 months is working both with GPs and LPs in an advisory capacity and that's something that i have a deep passion for recognizing and understanding of how how LPs view GPs and how GPs should effectively talk to LPs and be that translation in between. So I get a lot of energy from doing that work now, especially working with emerging fund managers globally and LPs that are just getting into the asset class. It's not easy for everybody to navigate. There's not a lot of, I guess there's a lot more textbooks now than there used to be,

but even just understanding the language, it operates like a different asset class. So love being able to educate folks, being able to help them get up the curve on both sides of the table. It's one of those assets that say you have to be on the ground because it's evolving every day. Totally. It's so rapid. And I think that's both the exciting and the challenging part of it. How should people follow you or get in contact with you? Yeah. LinkedIn is the place where I have centered most of my content. And I'm very active on there. So that's the best port of call and would love to hear from folks. Awesome. Well, thanks so much, Matt. I appreciate you taking the time.

Thanks, Dave. That's it for today's episode of How I Invest. If this conversation gave you new insights or ideas, do me a quick favor. Share with one person your network who'd find a valuable or leave a short review wherever you listen. This helps more investors discover the show and keeps us bringing you these conversations week after week. Thank you for your continued support.