How Important is it for an Investor to Have "Skin in the Game"

One of DWP's main value propositions is the significant amount of GP Capital (my money) I put in every deal. The idea is that if I am willing to put a large bet on a company, then it would stand to believe that I am aligned with investors who would put their capital aside mine.

I believe it is critically important for me to do this because a) it's attractive to my investors b) it creates an alignment of interest.

I also always thought in my head that this is something that emerging managers had to do to earn trust from limited partners. I believed that big GP commitments were not prevalent in more established funds because they could raise capital based on their performance and track record. I was wrong.

After listening to the Capital Allocators podcast with Christopher Zook of CAZ Investments, I found that this is precisely his strategy. Out of the 3B they deploy, 500 of it comes from their internal team. That is a 15% GP commitment. It is interesting to see that LP sentiment of "skin in the game" is quite prevalent in later and early stages.

More capital requires higher expectations and a higher need for alignment in interest.