Private market investing has become more accessible, but that accessibility has created a different challenge: determining which opportunities are built on institutional grade discipline and which are not. For individual investors, the real edge is rarely about sourcing alone. It is about alignment. Greg Talcott, whose career spans venture capital, private equity, asset management, and real estate, believes one of the most reliable ways to achieve that alignment is by investing alongside institutional partners.
At its core, co-investing with institutions reshapes how risk is distributed, how decisions are made, and how capital is protected. “The benefit of an individual investor investing alongside an institution is the fact that they’re getting the benefit of institutional capital being deployed in a far greater amount than theirs,” Talcott says. “Arguably, the institution is shouldering more risk within a given project.” That shift in structure has implications long before returns are ever discussed.
When Institutional Capital Sets the Foundation
As private markets fill with early stage companies and new sponsors, many deals look attractive on paper but hide weak underwriting and misaligned fees. Individual investors who go it alone can take risks that institutions would never accept, and the consequence is often permanent capital loss rather than short-term underperformance. Institutional participation alters the foundation of a deal. Large allocators commit capital only after extensive underwriting, scenario analysis, and downside testing, processes that most individual investors simply cannot replicate on their own. That work does not disappear once a deal is funded; it becomes embedded in the way the investment is managed.
“They are doing substantially more due diligence than an individual investor is capable of doing,” Talcott says. “So you get a little bit more peace of mind from that enhanced due diligence, having an institutional partner alongside.” Equally important is the breadth of opportunity institutions evaluate. By reviewing hundreds of potential investments within a given strategy, institutions arrive at decisions through comparison rather than conviction alone. When they allocate capital, it is typically after narrowing the field to what they view as the strongest options available, a filtering effect that benefits co-investors.
Discipline, Fees, and Alignment in Institutional Deals
Fee structures are one of the clearest indicators of whether an opportunity reflects institutional discipline. High acquisition fees, development fees, management fees, and commissions often signal misalignment, especially when sponsors are paid handsomely before investors see returns. “The higher the fee stack is, the less institutional the deal,” he says. “Institutions aren’t going to pay for that.” Their presence typically demands a closer alignment of incentives, ensuring sponsors succeed only when investors do.
This emphasis on alignment often shapes project selection as well. Institutions generally deploy large amounts of capital, which pushes them toward larger, professionally managed projects rather than small, localized developments. Scale, in this context, is less about ambition and more about operational consistency and risk management.
Understanding the Risk Gap Between Institutions and Individuals
One of the most common mistakes individual investors make is assuming institutional risk tolerance mirrors their own. This could not be further from the truth; institutions can withstand losses that would fundamentally alter an individual’s financial position. “A multi-billion-dollar institution loses a million dollars on an investment, it’s still a multi-billion-dollar institution,” he says. “Somebody with two million dollars in liquid net worth loses a million dollars, their net worth has been cut in half.” For individuals, sustainability matters more than outperformance. Reasonable returns, sensible holding periods, and a low probability of total loss often lead to better long-term outcomes than pursuing outsized gains with disproportionate risk.
Using Institutional Signals as an Investment Filter
Institutional involvement can serve as a powerful screening tool. Underwriting quality, transparent fee structures, project scale, and debt terms all provide clues. Institutions tend to secure more competitive financing, such as agency debt, rather than relying on expensive private lending, improving both returns and downside protection. “You’d much rather have the institution representing 80 or 90% of the equity of a given deal, and individual investors at 10 to 20%,” Talcott says. This is because deals funded entirely by individuals often concentrate risk where it can least be absorbed. Institutional participation won’t eliminate risk, but it reframes it through discipline, alignment, and scale. For individual investors, that reframing can mean the difference between pure speculation and a winning strategy.
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