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.

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?

Trending Sources

Venture Math 101

StartupCFO

The basic structure of a fund is as follows: - Limited Partners (LPs) commit to invest $100M over a number of years. - The VCs (General Partners or GPs) call that capital over time as they need it in order to pay expenses and make investments. -

Investing in Venture Capital - Limited Partner or Fund of Funds? - Part 2

Recent Buzzes - VC Experts, Inc.

Generally, a FoFs has greater leverage in scrutinizing a venture firm's financial reporting, its partner expertise relative to market sector focus resulting in a better risk-return ratio than direct investments. By Igor Sill, Managing Director of Geneva Venture Management LLC.

Investing in Venture Capital - Limited Partner or Fund of Funds? - Part 1

Recent Buzzes - VC Experts, Inc.

Billion represents a significant liquidity window for Venture Capitalists and their Limited Partner investors. Via a Limited Partnership (LP) arrangement, an investor is typically committing funds in the $500,000 upwards to $10 million range for 10 plus years.

Top Ten Limited Partner (LP) Lies

Florida Venture Blog

Paul Kedrosky has published another great Top Ten list, following on his previous Top Ten VC Lies. This time it's the Top Ten LP Lies. I'll give you the first five, but you'll have to visit Paul to see the rest.

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

Generational Transition In VC Firms

A VC : Venture Capital and Technology

Today, sometime around 5:30/6pm PT at the Upfront Summit , my partner Andy and I are going to talk about generational change in VC firms, in a talk moderated by Lindel Eakman , who has been our lead limited partner investor at USV since we started the firm in 2003. When my partner Brad Burnham and I started USV in 2003, we told prospective investors, including Lindel, that we had no intention of building an institution.

Fund Level Vs Deal By Deal Carry

A VC : Venture Capital and Technology

In a venture fund, the general partners will make something like twenty or twenty five investments. The limited partners will get back $84mm on their $50mm investment, a gain of $34mm which produces a 1.68x multiple on their investment. In the example above, those investors would make $12mm in carry on the same portfolio and the limited partners would get back ~$80mm or 1.6x.

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.

LP 0

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.

LP 1

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.

Investing in Venture Capital - Limited Partner or Fund of Funds? - Part 1

Recent Buzzes - VC Experts, Inc.

Billion represents a significant liquidity window for Venture Capitalists and their Limited Partner investors. Investor confidence in Venture Capital is at an all time high. The unusually strong Initial Public Offering (IPO) market and its pent up pipeline is due in part over the tremendous success of Venture Capital funded Linkedin's recent public market debut. LinkedIn shares skyrocketed to a high of $92.99 per share from its opening of $45., establishing a market value of $8.9

IPO 0

VC Governance FAQ: (1) How much information are limited partners (pensions, endowments, foundations, etc.) entitled to receive from a VC fund?

Pascal's View

It’s that time of the year again– time to send out audited financial statements and K-1’s to your limited partners– which means it’s also a great time to address some of the common questions that investors raise about VC partnership governance and disclosure issues.

LP 1

Tough Market for Entrepreneurs? VC Firms Are Having a Rough Go Of.

Seed Stage Capital

Venture capital investing is supposed to be a long-term investment play.venture funds generally have 7-10 year durations, over which time they invest the money raised from limited partners (e.g., skip to main | skip to sidebar 21 April 2009 Tough Market for Entrepreneurs?

Investing in Venture Capital - Limited Partner or Fund of Funds? - Part 2

Recent Buzzes - VC Experts, Inc.

Huge problems still remain to be solved and massive opportunities loom as major corporations, mid to small businesses all seek competitive advantages via new technologies. The emergence of Software-as-a-Service and Cloud computing are major tectonic shifts occurring in the global software ecosystem. Technology's self-renewing cycle of new wave innovation continues, driven mostly by cost improvements, easier use and vastly greater efficiencies.

Venture Capital Returns

A VC : Venture Capital and Technology

When I got into the business in the mid 80s, I was schooled that you needed to produce at least 20% annual returns net to the limited partners to stay in business. This post is for everyone who thinks venture capital is an easy business. I'd like to dispel that notion.

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).

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.,

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.).

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.

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.

LP 22

“He has no clue whether it will be another Google, yet he has to make promises that only hucksters can make.”

Venture Hacks

Tags: Limited Partners Pitching Plans VC Industry

More diligence and less capital coming for startups (and their investors)

Venture Hacks

Thanks to George Zachary , a partner at Charles River Ventures , for sponsoring Venture Hacks this week. Venture firms will be under significant pressure to outperform their peers and outperform their limited partners’ common benchmark indices like NASDAQ.

The Hard Raise

A VC : Venture Capital and Technology

At that time (early 2000s), the big VCs in the bay area were kicking out FOIA obligated limited partners out of their funds. In the summer of 2003, Brad Burnham and I set out to raise a $100mm early stage venture capital fund. We had both been successful VCs in other firms and we had a thesis that the second wave of the Internet was upon us and that large networks were going to get built in this phase. The term “web 2.0”

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.

Investing In Competing Companies

A VC : Venture Capital and Technology

Our shareholders are the limited partners who allow us to invest their capital. Bijan has a really good blog post up today about Spark 's approach to investing in competing companies (they don't). He says: I’m quite sure that we will miss a few important investments and i’m sure we could be more aggressive with and flirt with the gray line that we are trying figure out every day. Our firm takes an almost identical approach to Spark on this topic.

You Can’t Report to Yourself

Non-Linear Growth

I once interacted with an entrepreneur who chose another investor over us because, “we understood the business too well” Apparently this entrepreneur thought my understanding of his business would be a “burden” VCs have someone to report to; Limited Partners and Advisory Boards. Yesterday, my Partners and I reported on our progress here at Meritage Funds to our “bosses”, our Limited Partners and Advisory Board, at our Annual Meeting.

CasaSiegel: Timeless learnings

CasaSiegel

With the support of some key Limited Partners (LPs), our second fund is already larger than our first, and we will thus have the ability to execute on the strategy of investing in breakthrough technologies that come from major research institutions and to deliver venture-level returns. 5) Keep Your Eye on the Prize – The partners at X/Seed will not generate wealth for our selves via our management fees. CasaSiegel.

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.

Entrepreneurs Teach VCs to be VCs

A VC : Venture Capital and Technology

They taught me a lot about finding and researching opportunities, structuring deals, managing a fund, and working with limited partners.  So it is the entrepreneurs I worked with in the first five years I was a partner, people like Isaak, Ron Schreiber and Jordan Levy, Mark Pincus and Sunil Paul, and Seth Godin that I have to thank for teaching me how to do what I do. Isaak Karaev stopped by and left a comment in yesterday's thread.

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

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.

Jordan 135

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 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.

Top 100 venture VC investments each year average $100-150m gain

The Equity Kicker

Cambridge Associates is a service provider to the Limited Partners that invest in venture capital funds that’s known for the quality of its research. That’s the Forward Partners way.

Tearing Down The Teardown

A VC : Venture Capital and Technology

And I do not believe our limited partners are sharing our reports with them. CB Insights published a “teardown” of USV’s investment strategy last week. It’s a pretty solid piece of work considering they did not have access to any of our internal data. The got some stuff wrong, however. 1) We did not participate in Zynga’s “megaround” in Feb 2011. 2) We only have six main investment vehicles; USV 2004 – $125mm. USV 2008 – $160mm.

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.

Let Your Winners Run

A VC : Venture Capital and Technology

But I am fairly sure that my partners and I and our limited partners will be happy to let this fund play itself out over a longer period of time. I met with a group of very experienced and sophisticated investors yesterday who make up the investment committee of a large charitable foundation that is an investor in USV.