Does the sponsor's own money in the deal tell you anything, or is it theater?

Signals that are cheap to fake make me suspicious, and "the GP is co-investing alongside you" is starting to look like one. Two decks on my desk this month both lead with it. One sponsor is putting in 5% of the equity, the other says 10%, and neither says where the money came from.

The case that it matters: money in the deal means the sponsor loses real cash if the plan fails, and the promote isn't the only thing at stake. It's the simplest alignment there is and it costs them something to show.

The case that it's theater: the co-invest can be borrowed, it can come from fees earned at close on the same deal, and the sponsor can have twenty other deals running so this one's $250k is a rounding error to them. Meanwhile it's most of my liquid net worth. A number that's 2% of their world and 60% of mine isn't alignment, it's arithmetic that only looks symmetric.

There's a third view I've heard: what actually matters is who signs the loan guaranty, since that's unlimited exposure rather than a capped check, and the co-invest is a distraction from asking that question.

I don't have a settled answer. Curious where the room lands.