Signaling Games in Private Markets

Why GPs Behave the Way They Do (and How LPs Should Respond)

Most GP fundraising behavior is signaling.
The mistake is taking signals as fundamentals.

Private markets are built on an uncomfortable truth: the GP almost always knows more than the LP—about portfolio health, valuation realism, pipeline quality, team dynamics, and how “repeatable” the track record actually is. LPs are writing large, illiquid checks with imperfect information. That gap is not a bug. It’s the structure of the game.

And in any game with information asymmetry, players don’t just communicate with facts—they communicate with signals.

Signals shape perception. Perception shapes momentum. Momentum shapes outcomes.

This is why fundraising often feels like theater. It isn’t random theater. It’s incentive-driven theater.