Questions a Potential Venture Fund Limited Partner Should Ask

This is going to be BIG.

Will the experience of partnering with this individual be a positive one? I have a draft deck put together for a next Brooklyn Bridge Ventures fund. I pretty much hate it. Don't get me wrong--the numbers look great. That's not it. It just doesn't really get at what's really important. I wasn't sure exactly how it missed, so I went back to first principles. What *is* really important for a venture fund?

The Experience of Being a Limited Partner in Venture Capital

This is going to be BIG.

Either way, VC funds aren't really built around creating much of an experience for their Limited Partners. Partnership investing is boring. You give someone your money and, once a quarter, they give you a report that says what they did with your money. That's because, for the most part, fund investors fall into two categories: institutions and individuals. If you're an institution, you basically care about returns and that's it.

Limited Partner Due Diligence on Venture Capital and Private Equity Funds

David Teten

Similarly, our limited partner investors have their own due diligence standards, and we manage HOF Capital to keep in line with their standards and expectations. Ask on what KPIs each Partner is evaluated. As a VC, I have a standard due diligence list for companies I’m reviewing.

Limited Partner Due Diligence on Venture Capital and Private Equity Funds

David Teten

Similarly, our limited partner investors have their own due diligence standards, and we manage HOF Capital to keep in line with their standards and expectations. Ask on what KPIs each Partner is evaluated. As a VC, I have a standard due diligence list for companies I’m reviewing.

VC Governance FAQ: (8) How can a limited partner exit from a VC fund?

Pascal's View

Answer: The options here are limited, and they are (1) the LP can try to sell their interest, including the obligation to fund future capital calls, to a fund that acquires secondary interests. It is far less disruptive to the GP and to the GP-LP relationship for the exiting partner to sell to a secondary buyer, but these buyers are totally financially driven and are going to get the best deal possible for themselves.

VC Governance FAQ: (10) Are limited partner defaults on capital commitments triggering a wave of lawsuits in the venture industry?

Pascal's View

This is the last in our series of 10 frequently asked questions from investors in venture capital partnerships. Susan Mangiero , CEO of Investment Governance’s Fiduciary X , asked me the following: Question: I’ve read that some GPs are suing LPs for not making capital calls.

VC Governance FAQ: (6) Are contract terms in partnership agreements shifting in favor of institutional Limited Partners?

Pascal's View

This is the sixth in our series of ten frequently asked questions from investors in venture capital partnerships. Susan Mangiero , CEO of Investment Governance’s Fiduciary X , asked me the following: Question: You had some thoughts about contract terms.

Austin-based Next Coast Ventures Raises $85 Million Fund

SiliconHills

The fund was oversubscribed by $25 million and its limited partners include leading institutional investors, funds of funds and family offices. Next Coast Ventures announced Thursday that it has closed on its debut fund at $85 million. Next Coast Ventures is looking at investing in deals in Austin and in the middle part of the […] The post Austin-based Next Coast Ventures Raises $85 Million Fund appeared first on SiliconHills. Austin

A Slow, Painless Death

Babbling VC

The same goes for the LP's (limited partners) that invest in venture funds. We're so misled by what we often read in blogs and press stories or see on TV shows. One way or another, we tend to react to drama and they who produce content feed on this.

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How do venture capital firms make money by investing in startups?

Gust

The general partners of a venture capital fund make money… …by raising the bulk of the capital that the fund’s investable capital from “Limited Partners”, usually institutions such as university endowments, insurance companies and pension funds. Invested Interests capital company general partners investing IPO startup venture capital fund

Content From LPs

Feld Thoughts

My partner Lindel Eakman wrote a post a few days ago about his transition from Austin to Boulder and a really helpful one about how to work with him titled A Human User Interface….with This prompted me to poke around for other content from the limited partner (LP) side of the LP/VC/entrepreneurship universe. A few blogs I found include Top Tier Capital Partners , Weathergate , and Sapphire Ventures (on Medium).

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What Founders Need to Know: You Were Funded for a Liquidity Event – Start Looking

Steve Blank

VC’s raise money from their investors (limited partners like pension funds) and then spread their risk by investing in a number of startups (called a portfolio). BTW, Angel investors do not have limited partners, and often invest for reasons other than just for financial gain (e.g.,

How long does it take for investors to approve the idea and to grant the necessary investment?

Gust

Instead, they have a limited amount of money entrusted to them by limited partners, and they invest in a very, very few companies each year. The question is based on a misunderstanding of how venture capital investment works. First of all, VC funds do not invest in ideas. What VCs invest in are operating companies that are ready (or almost ready) to scale. There are many wonderful ideas, all of which are not fundable. Only companies get funded.

Blue Collar VC

Mucker Lab

Just as entrepreneurs should aspire to raise capital from value-added, “smart money” investors, we, too, have focused on partnering with committed, long-term, institutional limited partners (LPs). We are consumed with generating great returns for our limited partners. Four years after founding and bootstrapping Mucker Capital , we are pleased to announce the close of a new $45 million fund, Mucker III.

How to Build a Startup & Understanding Venture Capital

Both Sides of the Table

Venture capitalists raise money with a goal of returning 4x the amount they raise to their Limited Partners (LPs).

Shut Up and Invest? Investors Weighing in on Politics

This is going to be BIG.

It’s an entirely fair question—and the risk is that limited partners, founders, or other VCs might not want to work with me because I’m vocal about my political views. As a solo General Partner, my firm is me—and there isn’t a difference between investor Charlie and personal Charlie. Limited partners judge my investment acumen. For the last two years, I’ve been pretty vocal about politics on social media , in my weekly tech community newsletter and on this blog.

VC’s Are Not Your Friends

Steve Blank

Their fiduciary responsibility was to manage a portfolio of investments for their limited partners. At the end of the day VC’s have to provide their limited partners with great returns or they aren’t going to be able to raise another fund.

What’s a typical day like for a full-time angel investor?

Gust

If you mean someone investing mostly other people’s money through a seed fund, they are venture capitalists, and their days are spent like other VCs, meeting with prospective investments, mentoring portfolio companies, raising money from limited partners, negotiating deals, and so forth. There is no such thing as a full-time angel investor (or if there is, I’ve never met one.).

Why the Blockchain is so disruptive for venture capital

Version One Ventures

Blockchain and ICOs are giving VCs new ways to run their own businesses – from changing agreements with limited partners to allow the fund to buy tokens and currencies directly to figuring out how to safely store token and currencies. These days not a single meeting with a fellow VC goes by without talking about Blockchain and how to invest in this space. We are all a bit puzzled by how quickly this market has evolved.

Fundraising Hacks for Venture Capital and Private Equity Funds

David Teten

Historically, the process of winning capital from limited partners has been opaque. LIMITED PARTNERS’ PERSPECTIVE. Origins is a podcast about Limited Partners, created by VC Notation Capital. Denis Tse: Fund Management Craftsmanship: An LP’s Food for Thought for Emerging VC General Partners. GENERAL PARTNERS’ PERSPECTIVE. However, in the last few years a few have started to use social media and become more transparent.

Book: The Startup Game

Feld Thoughts

started Draper Gaither & Anderson , one of the first VC firms on the west coast that coincidentally was the first firm to use a limited partner (LP structure). After writing Do More Faster with David Cohen, I have deep appreciation for the effort involved in writing a book. After reading a bunch of entrepreneurship books, I’ve decided there are three categories: (a) autobiographies, (b) consultant roadmaps, and (c) practitioner stories.

Details of Upfront Ventures New $400 Million Fund

Both Sides of the Table

A huge thank you to all of the Limited Partners who have entrusted us with your capital, time and reputations. Upfront’s Base As you probably know we are based in Santa Monica and as my partner Greg Bettinelli coined, we’re #LongLA.

Katie Rae and the Engine at MIT

David Cohen

We became a Limited Partner in Project 11 when it launched and Katie continues to mentor at Techstars regularly. Everyone who knows Katie Rae at Techstars is thrilled that she’s taken a lead role with The Engine at MIT, a new venture fund and incubator space there. Katie was the Managing Director at Techstars for our Boston program from 2010 to 2014.

Announcing K9 Ventures II – A $40M technology-focused micro-VC fund

K9 Ventures

This new $40M fund is backed by several high quality institutional limited partners including university endowments, foundations, family offices and fund of funds and key individuals. I am pleased to announce the formation of K9 Ventures II, L.P.

Announcing K9 Ventures II – A $40M technology-focused micro-VC fund

K9 Ventures

This new $40M fund is backed by several high quality institutional limited partners including university endowments, foundations, family offices and fund of funds and key individuals. I am pleased to announce the formation of K9 Ventures II, L.P.

How We Think About Values Versus Deeply Held Beliefs

Feld Thoughts

” Each of our funds is $225 million, we have four partners and no other investment staff, and we work out of the same office we’ve worked out of since we started in 2007. Until we created this fund, we limited the amount that we could invest in a company to $15 million. With Select, we are no longer limited to investing $15 million per company.

Similarities between raising a venture fund and raising for a startup

The Equity Kicker

I’m at the Super Investor conference in Amsterdam, which is the main event each year when private equity and venture capital fund managers and their investors (Limited Partners out LPs) get together.

The LP Opportunity to Change Tech Culture

thebarefootvc

Limited partners (LPs), who manage the capital that gets deployed into venture capital funds, can play an important role in diversifying the funding landscape. Limited partners are pension funds, university endowments, funds of funds (who get their money from pension funds), family offices and foundations. Over the past month, Silicon Valley has been at the forefront of many conversations outside of the technology world.

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How to Break into a Senior Business Position at a Growing Startup

This is going to be BIG.

Smaller funds are always looking for limited partners and co-investors in their deals—so starting an angel group or just being willing to make such introductions in your network goes a long way. You’ve got a great resume. You went to top schools, trained at a prestigious bank/consulting firm/etc, and you’ve succeeded in the corporate world doing some important and impactful stuff. Now you want to take that skillset over to the startup world and you’ve got a lot to offer.

Don’t Give Away Your Board Seats

Steve Blank

And they have a fiduciary responsibility to their own limited partners.)

UK micro-VC

The Equity Kicker

Invest on behalf of 3rd party Limited Partners. Forward Partners is a tick on all four criteria. I’ve been reading a lot about the development of micro-VC this afternoon.

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The Morning After

Both Sides of the Table

Long before the markets corrected my smartest professional trader friends and limited partners were telling me that many people in the market were telling me that all eyes were glued on Sept 16-17 when the FOMC meets to discuss interest rates.

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What do you give up when taking outside investors?

Berkonomics

From the moment such an investor looks seriously at your company, the investor or VC partner is thinking of the end game, the ultimate sale of the company or even of an eventual initial public offering.

Welcome to the Lost Decade (for Entrepreneurs, IPO’s and VC’s)

Steve Blank

VC’s invested their limited partners’ “risk capital” in a portfolio of startups in exchange for illiquid stock. Suddenly there was a public market for companies with limited revenue and no profit.

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This Friday at NYU-Annual Stern Private Equity Conference

David Teten

In addition, there will be 8 thematic panels: Leveraged Buyout, Real Estate, Energy, Distressed, Venture Capital & Growth, Media & Entertainment, Emerging Markets, and Limited Partners & Secondaries.

Upfront Ventures Raised New $280 Million Fund

Both Sides of the Table

Whereas we had four partners investing Fund IV we now have six partners actively looking at deals for Fund V. In recent years we’ve had big wins across all of our long term partners (Yves: Envestnet), (Steven: TrueCar), (Me: Maker Studios).

Mentor Whiplash About Early Board Members

Feld Thoughts

And they have a fiduciary responsibility to their own limited partners. At TechStars , we talk often about “mentor whiplash” – the thing that happens when you get seemingly conflicting advice from multiple mentors. Talk to five mentors; get seven different opinions!

When Does a Seed Stage Company Need a Board with More Than Just the Founder?

ithacaVC

One final thought – what about the VC’s fiduciary duties to its own investors (called limited partners). It is reasonable to think that the limited partners would expect their money managers (i.e., I think many limited partners would answer “yes” Love to hear your thoughts on this. I recently engaged in a conversation (over a few days) about the need for a seed stage company to have a board member other than the founder.

Why the LP Outlook is Good for Venture and Startups in 2017–2020

Both Sides of the Table

Every year Upfront Ventures surveys Limited Partners (LPs) who are the main source of capital that invests in VC funds and thus the main source of capital that goes to startups to get an early-warning sense of the year ahead, leaving aside any Black Swans.

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BVCA Report: The Global State of the IPO Market

VC Cafe

The answer, gathered from 347 respondents from nine countries is, that venture capitalists believe higher returns generated by IPOs are critical in providing superior returns to limited partners and growth capital to developing portfolio companies.

IPO 101

What to Make of Andreessen Horowitz’s Returns?

Both Sides of the Table

Scott Kupor of A16Z responded with a comprehensive overview of valuation methodology in a post that while accurate feels more targeted at sophisticated Limited Partners (LPs) who invest in funds. Upfront Ventures has partnered with Andreessen Horowitz on several deals.

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Where Does VC Money Actually Come From? [Flowchart]

View from Seed

This post was originally published on the personal blog of NextView founding partner Lee Hower. Most of the dollars a VC firm invests come from outside limited partner investors (LPs). Lee’s posts also appear regularly on View From Seed. Subscribe here for more.

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Words of Wisdom From Chris Sacca

Scott Edward Walker

Remember: VC’s have fiduciary obligations to their limited partners (i.e., To Our Clients & Friends: Welcome to our weekly series “ Helping Entrepreneurs Succeed.”