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?

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.

Friday Funism – Favorite Future

View from Seed

sometime back in 2010 or early 2011) one of the limited partners we met with asked us what our “favorite future” was for NextView. Another phrase we use internally at NextView pretty often is that of a “favorite future”. Early in NextView’s history, when we were raising our first fund (e.g. We were excited to talk about our vision and aspirations for the new VC firm we were building, but also intrigued by this as a general question.

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

Micro-VC fund management and capital account statements

David Cohen

She told me that most of her Limited Partners (investors in her fund) didn’t seem to care about the frequency of capital account statements. I’m a personal investor in about 20 micro-VC funds.

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

Friday Funism – “Favorite Future”

Agile VC

sometime back in 2010 or early 2011) one of the limited partners we met with asked us what our “favorite future” was for NextView. Reading Time: 2 minutes. This post also appears at NextView’s blog. Another phrase we use internally at NextView pretty often is that of a “favorite future”. Early in NextView’s history, when we were raising our first fund (e.g.

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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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.,

High Functioning vs. Low Functioning Startup Boards

Both Sides of the Table

Here are some observations I have from this exposure: If a company moves from strength-to-strength with predictable outcomes, easy financings, low staff turn-over, limited competitive threats then the composition of the board probably doesn’t matter as much.

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).

Get 10 years of experience in 3 years running the most active venture fund in Texas

Austin Startup

You will work closely with Joshua Baer, Gordon Daugherty, Bryan Chambers, the Ventures Team, limited partners, external venture capitalists, lawyers, accountants and startup CEO’s to review legal agreements, perform our diligence checklist, and make sure transactions close in a timely manner. You will coordinate and administer the most active venture capital fund in Texas and see an insane amount of dealflow. You’ll know the inside details about almost every deal that goes down.

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.

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.

A Deep Dive into What Has Really Changed in Venture Capital

Both Sides of the Table

Yes, VC / Startup Funding is up Massively If you look at how much VC firms have raised from Limited Partners (LPs) over the past 2 decades you’ll see that we’ve returned to a level that we haven’t seen since 1999.

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.

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.

This is the Dumbest Op Ed I’ve Read in a While

Both Sides of the Table

But I hate worse when I let down the people for whom I’ve totally committed my time to: the boards I set on, my limited partners, my colleagues at Upfront, companies that are pitching me and looking for feedback and my family.

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.

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.

Stock 337

VC Firm Creation Versus VC Firm Building

Haystack

This isn’t the only example, of course, but it’s the most recent one and illustrates what the bar is for building a team of GPs and limited partners. Earlier this year, I reflected on the difference between “fund investing” vs “fund management.” ” It’s a useful post for emerging managers, I’d recommend reading it.

Chad 93

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.

LP 329

How Does Venture Funding Work for Startups?

Board Effect

At this stage, if business owners are fortunate enough to partner with a venture capitalist, they need to be prepared to take the money and make it grow quickly. Limited partners are usually comprised of large institutions that work with venture capitalists to get big returns on their money.

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.).

Five Questions for Vetting an Investment in a New or Emerging VC Fund

This is going to be BIG.

A lot of VC fund pitches—and I know this because I used to vet VCs for a living as an institutional limited partner at a pension fund—sound the same. If you want to learn more about how VC funds get evaluated and you’re either an accredited investor, a non-partner at a VC fund, or work on behalf of a family office, check out this event tomorrow.

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.

Don’t Give Away Your Board Seats

Steve Blank

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

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).

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.

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.

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).

LP 99

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 99

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.

IPO 257

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 297

Startup Valuations Revisited Again

ithacaVC

Fred’s post hits some really interesting points on how valuations can actually impair limited partners (those investing in the VC fund) more than general partners (those running the fund). I have posted on startup valuations a couple of times. First on October 12, 2012 and then on November 28, 2012. On June 27th Fred Wilson wrote a post called Valuation vs. Ownership. Great post.