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The LP Institute is an 8 week online program built to teach Limited Partners (LPs) the process of investing in top venture capital managers. The program focuses on sourcing, conducting due diligence, and successfully closing on at least ...

The LP Institute is an 8 week online program built to teach Limited Partners (LPs) the process of investing in top venture capital managers. The program focuses on sourcing, conducting due diligence, and successfully closing on at least one investment. This hands-on approach ensures that participants not only learn the theoretical aspects of venture capital but also apply this knowledge to an investment. Find out more here: https://govclab.com/lp-institute/

We have developed an article for GPs to share with LPs: https://govclab.com/2023/04/26/how-to-invest-in-vc/. That being said, your proposed approach will not work. Sending LPs information about how the emerging managers over-perform othe...

We have developed an article for GPs to share with LPs: https://govclab.com/2023/04/26/how-to-invest-in-vc/. That being said, your proposed approach will not work. Sending LPs information about how the emerging managers over-perform other asset classes is a guaranteed fail. LPs that invest in new and/or emerging managers invest in the Managing Partner(s) because they believe that those INDIVIDUALS are uniquely qualified to executed on the thesis and they resonate with the thesis and want to be part of the mission. If an LP asks you questions like: how does this compare to investing in [insert asset class], you have lost. This is a no and you will struggle to recover from this. That means that your pitch was un-succesful. 

Feature requests for Decile Hub can be shared in the Decile Base Hub Feedback channel, which can be found here: https://www.decilehub.com/base/40-hub_feedback. Your insights and suggestions are always welcome as they help improve the pla...

Feature requests for Decile Hub can be shared in the Decile Base Hub Feedback channel, which can be found here: https://www.decilehub.com/base/40-hub_feedback. Your insights and suggestions are always welcome as they help improve the platform.

Yes. It's not uncommon for large LPs to want to request to be on the IC. That being said, you need to be very careful with who you nominate on the IC because it is making investment decisions for the fund. 

Yes. It's not uncommon for large LPs to want to request to be on the IC. That being said, you need to be very careful with who you nominate on the IC because it is making investment decisions for the fund. 

Some business expenses that are typically paid from management fees include: Laptops & Equipment, Salaries, LP Events, Software, Due Diligence and Travel. Please review this article on fund expenses: https://govclab.com/2022/11/07/mana...

Some business expenses that are typically paid from management fees include: Laptops & Equipment, Salaries, LP Events, Software, Due Diligence and Travel. Please review this article on fund expenses: https://govclab.com/2022/11/07/managing-fund-expenses-for-venture-capitalists/ Below is a summary. [Screen Shot 2024-01-03 at 6.20.08 PM.png]

VC Lab has developed a free Venture Share Agreement that is designed to be used by venture capital firms and Venture Partners alike to quickly start working together. The template agreement is designed to specify the duties and compensat...

VC Lab has developed a free Venture Share Agreement that is designed to be used by venture capital firms and Venture Partners alike to quickly start working together. The template agreement is designed to specify the duties and compensation of a Venture Partner by checking boxes. All the details can be found here: https://govclab.com/venture-share/ IMPORTANT: All conversations about VP compensation should be high level over a call. Do not put anything in writing until after you have formed and performed a 1st close. These agreements are between the VP and the fund, so none of this can take place until the fund is operational. Below is a summary: [Image]

The main metrics track record metrics are IRR, TVPI & DPI. However there are others that you can review in this question. In addition, you may also find this article helpful. 

The main metrics track record metrics are IRR, TVPI & DPI. However there are others that you can review in this question. In addition, you may also find this article helpful. 

It's really difficult to build an enduring VC firm on AngelList. Consider getting off AL. If you're going to setup a fund in BVI, all entities need to be in BVI. It's super expensive and inefficient for you to have entities in multiple d...

It's really difficult to build an enduring VC firm on AngelList. Consider getting off AL. If you're going to setup a fund in BVI, all entities need to be in BVI. It's super expensive and inefficient for you to have entities in multiple domiciles, especially for a small fund 1. By having entities in multiple domiciles, your operations costs will go to exponential because you need 2 sets of lawyers, 2 sets of fund admin, 2 sets of tax, 2 sets of treasury. Then, they have to talk to each other etc... The operational complexity is just not worth it.

TL'DR - leave your valuation policy in-tact and manage these LP communications at the newsletter/report summary level rather then at the financial level. Each quarterly/yearly report where you include financial statements should be accom...

TL'DR - leave your valuation policy in-tact and manage these LP communications at the newsletter/report summary level rather then at the financial level. Each quarterly/yearly report where you include financial statements should be accompanied by a newsletter that summarizes the information. In the newsletter, you can discuss this investment. ---- Tokens are considered non-qualified investments in VC funds. Each VC fund can allocate up to 20% of the capital to non-qualified investments. Because of this, as well as several other factors, it's unusual for VC funds to have a valuation policy that also manages tokens. Crypto/Blockchain/Web3 funds generally keep the tokens and the equity separate. The equity gets managed via a traditional valuation policy, financials approach and fund structure. The tokens are often managed by a different valuation policy, custodial policy and often a separate hedge-fund like structure.  So, you have 2 options here: 1. Setup the infrastructure to handle crypto which is expensive and complicated given that your Fund 1 is operational. 2. Manage the communications with current LPs via your newsletter/report summary and leave everything else in-tact.  I recommend approach 2. Unless you plan launching a blockchain/crypo/web3 focused fund 2, it's just not worth the hassle to research all this so you can come to the same conclusion.

Valuation increases are determined by the fund's valuation policy. In venture capital, the valuation of the company is typically set by priced equity round. Other inputs don't factor in unless the fund is writing down a company. 

Valuation increases are determined by the fund's valuation policy. In venture capital, the valuation of the company is typically set by priced equity round. Other inputs don't factor in unless the fund is writing down a company. 

Underrepresented represents the demographics of the founder (gender, ethnicity, economic background, underserved region for example.) Overlooked relates more to some investors' bias or the founder's lack of access or influence. This cou...

Underrepresented represents the demographics of the founder (gender, ethnicity, economic background, underserved region for example.) Overlooked relates more to some investors' bias or the founder's lack of access or influence. This could be a first-time founder or someone not from a central tech hub.  A great underrepresented founder can be overlooked. An overlooked founder doesn't necessarily mean they are underrepresented. 

Fund operations providers such as Decile Partners generate full financials for Limited Partners including: • Statement of Assets, Liabilities, and Investors' Capital • Income Statement  • Schedule of Investments • Statement of Changes in...

Fund operations providers such as Decile Partners generate full financials for Limited Partners including: • Statement of Assets, Liabilities, and Investors' Capital • Income Statement  • Schedule of Investments • Statement of Changes in Investor's Capital Limited Partners can access the above documents via their Decile Pro dashboard along with reports and the following additional metrics: • Portfolio Net IRR • Portfolio Fair Market Value • Capital Account Summary Reports summarizes the information outlined above and it's common for funds to highlight the following metrics:  • Committed Capital • Called Capital • Portfolio Investments • Cap Adjusted TVPI* • TVPI • DPI * The Decile Group valuation policy provides a Cap Adjusted TVPI projection which takes the cap defined in a SAFE note as the valuation of portfolio companies, which may be high depending on future financings.

If your fund is optimized to fund companies from your accelerator, then it could make sense to make it the focal point of your thesis. If you do mention the accelerator, provide metrics for how succesful alumni have become. This way LPs ...

If your fund is optimized to fund companies from your accelerator, then it could make sense to make it the focal point of your thesis. If you do mention the accelerator, provide metrics for how succesful alumni have become. This way LPs make a clear connection for why the fund will over-perform by specializing on investing in accelerator participants.  On the other-hand, if the accelerator is just one source of deal-flow amongst many, experiment with a different secret sauce.

The target fund size should be thought of as the minimal viable fund size to operate. Most new and emerging mangers set fund size targets that are too large, resulting in them under-subscribing and ensuring an extremely difficult time ra...

The target fund size should be thought of as the minimal viable fund size to operate. Most new and emerging mangers set fund size targets that are too large, resulting in them under-subscribing and ensuring an extremely difficult time raising future funds. For most new managers, the fund size should be $5 MM to $10 MM in the developed world and $2.5 to $5 MM in the developing world. If a new manager has extensive angel experience with strong returns or venture experience dealing with limited partners, then the fund size can be up to twice that size. For emerging managers on Fund III or Fund III, the next fund size can be 1x, 2x or 3x the previous fund size. If the returns from previous fund or funds are exceptional, an emerging manager can consider a fund size as large as 5x the previous fund size. The goal of any manager is to have a target fund size that they can easily hit or exceed. It is very difficult to recover from raising less than your target fund size. Conversely, oversubscribing is looked at favorably by all parties. If a manager cannot quickly raise 15% to 20% of the fund size from friends and confidants, then the fund size is too large.

You can find more resources at this on the Foresight website here: https://foresight.is/fund-resources

You can find more resources at this on the Foresight website here: https://foresight.is/fund-resources

A fund has costs that are both one-time and recurring. A fund incurs one-time organizational expenses in the first year, usually in the form of legal, accounting, and state compliance expenses. Here are the vendors that typically make up...

A fund has costs that are both one-time and recurring. A fund incurs one-time organizational expenses in the first year, usually in the form of legal, accounting, and state compliance expenses. Here are the vendors that typically make up those expenses. • State domicile filing fees (eg: Delaware) • Blue Sky Fees (Filed with NASAA, fees based on state where LPs reside) • Form ADV Filing (IARD) • Legal formation fees (law firm or fund administrator) Typical estimates for organizational expenses for a small fund range from 50-100k. A fund also incurs recurring expenses to maintain and manage the funds starting in the first year. Broadly, they are called fund administration expenses and, for smaller funds, include at a minimum the following: • Annual Tax Preparation • CPA/Accountant for bookkeeping, financial statement prep • Legal Operations • KYC/AML and other compliance expenses • Treasury (banking) Typical estimates for the annual costs of a small fund range from 20-60k depending on the service provided.

Securing Limited Partners is a formidable task that demands persistence, meticulous research, and strategic networking. For the average fund, this means courting nearly 250 LP prospects and pitching to a majority of them, only to culmina...

Securing Limited Partners is a formidable task that demands persistence, meticulous research, and strategic networking. For the average fund, this means courting nearly 250 LP prospects and pitching to a majority of them, only to culminate in a select few actual commitments. This article elucidates the exhaustive process, underscoring the challenges and providing a roadmap to effectively source and close LPs in the investment realm. Researching LPsSourcing potential Limited Partners necessitates the usage of multiple research platforms. These platforms, whether digital tools or networks, provide data and insights about potential LPs, their investment behaviors, and affiliations. • LinkedIn: A hub for professionals, it can identify LPs by job titles, backgrounds, and company affiliations. • CrunchBase: This platform offers insights into businesses and their associated stakeholders, ideal for locating previous investors. • AngelList: Geared towards startups, it provides data on venture capitalists and angel investors. • Professional Networks: Industry-specific groups or associations can have directories to identify potential LPs. • Alumni Networks: Educational affiliations can reveal potential LPs, as many alumni invest in ventures related to their alma mater. • Coworkers: Past and current colleagues can offer introductions or insights on potential LPs. • Web Searching: General internet searches using specific keywords can lead to potential LPs or their affiliations. Incorporating a variety of these platforms into a research strategy can enhance the depth and breadth of potential LP discovery, creating a solid foundation for the engagement process. Keywords for LPsResearching LPs is difficult. Most do not self identify, and there are fake LPs, seeking attention and opportunities, as well as inactive LPs.  Identifying real LPs requires searching with a combination of less obvious keywords, such as “Multi-Family Office Chief Investment Officer”, on LInkedIn, and then carefully filtering the results by individually researching each person. Many don’t invest in VC. Looking at what Boards they serve on, their interests, or their investments are obvious signals, but some of the largest LPs are mostly silent online. 1 in 20 in a well formatted search might actually be a LP due to the high level of noise. Here are some keywords to use in different categories to start searching for LPs: Job Title• Chief Investment Officer • Investment Director • Institutional Investor • Angel • Venture Partner • Exited Entrepreneur Background• Private Equity • Angel Investing • Private Investing Company Description• Investment Firm • Family Office • Fund of Funds • Endowment Fund • Hedge Fund • UHNW (Ultra High Net Worth) • Acquired LP Archetypes• Personal Friends: These individuals, often within the social circle of a venture capital fund’s general partners, invest in the fund based on trust and rapport. They believe in the expertise and judgment of the general partners and may provide additional resources or connections to support the fund. • Angel Investors: Wealthy individuals who invest in startups at an early stage and may also invest in venture capital funds to gain access to a broader range of investment opportunities. Their experience, mentorship, and connections can be valuable for the fund and its portfolio companies. • Alumni Networks/Affinity Networks: Individuals connected through shared educational or professional experiences, such as alumni of prestigious universities or members of industry associations, may invest in venture capital funds as part of their broader investment strategies. These networks can provide access to a diverse pool of potential LPs who share common values, experiences, or interests, and can contribute valuable connections, resources, and insights to the fund and its portfolio companies. • Tech Executives: High-ranking professionals within the technology sector invest in venture capital funds to leverage their industry insights, connections, and expertise. They can identify and support the next generation of technology-driven startups, making them valuable partners for the fund. • Small Business Owners: Entrepreneurs who have built successful small businesses often invest in venture capital funds to diversify their investment portfolios and contribute to the growth of innovative companies. Their unique perspectives on business operations and customer needs can be valuable for the fund and its portfolio companies. • Exited Founders: These successful entrepreneurs have built and sold their own companies, and now seek to invest in new ventures. They bring valuable experience, industry knowledge, and connections to the table, making them attractive partners for venture capital funds. • High Net Worth Individuals (HNWIs): Wealthy individuals interested in diversifying their investment portfolios often turn to venture capital funds. They may have personal interests or expertise in specific industries, which can add value to the fund and its portfolio companies. • Family Offices: Representing wealthy families, these private wealth management firms invest in venture capital funds as part of their diversified investment strategy. They aim to grow and preserve the family’s wealth while contributing to the success of innovative companies. • Bankers: Financial professionals with deep knowledge of finance and investment strategies may invest in venture capital funds to capitalize on their industry connections and expertise. Their background in finance can be an asset for the fund and its portfolio companies. • Corporations: Large companies interested in investing in venture capital funds to gain exposure to emerging technologies and trends, as well as to identify potential strategic acquisitions or partnerships. Corporate LPs can provide valuable industry insights, connections, and resources to the fund and its portfolio companies. • Corporate Venture Capital (CVC): Large corporations that invest in venture capital funds to gain access to emerging technologies, trends, and potential strategic acquisitions. Their industry expertise, resources, and connections can help accelerate the growth of portfolio companies. • Venture Capital Firms: Established VC firms may invest in other venture capital funds, particularly those with a specialized focus or unique investment thesis. This can provide them with access to a broader range of investment opportunities and the ability to co-invest in deals that align with their own strategy. Investing in other funds can also be a way for VC firms to diversify their portfolios and share risk. • Next Generation Wealth: Offspring of wealthy families, these individuals seek to establish their own investment track record and contribute to the growth of innovative companies. Their family connections and resources can be valuable for the venture capital fund. • Fund of Funds: These investment firms focus on investing in other funds, including venture capital funds. They seek exposure to a diverse range of startups and industries through their investments, while offering additional resources and expertise to the funds they invest in. • Sovereign Wealth Funds (unlikely for Fund I): State-owned investment funds that invest in various asset classes, including venture capital. They aim to generate long-term returns and support their nation’s economic development, offering significant capital and a long-term investment horizon. • Endowments (unlikely for Fund I): Institutional investors like universities and foundations invest in venture capital funds to support their missions and generate returns that sustain their operations. They often have long-term investment horizons and can provide stability to the fund. • Insurance Companies (unlikely for Fund I): These organizations invest in venture capital funds to diversify their investment portfolios and seek higher returns compared to traditional fixed-income investments. Their experience in risk management can be an asset for the fund. • Pension Funds (unlikely for Fund I): Institutional investors managing retirement savings for employees, these funds invest in venture capital funds to diversify their portfolios and generate long-term returns for their beneficiaries. Their large asset base and long-term investment horizon can be beneficial for the venture capital fund. Develop Personas for Targeted LP ArchetypesOnce you’ve identified three LP archetypes that align with your fund’s goals, create detailed personas for each. This will help you better understand their motivations, pain points, and interests, allowing you to tailor your outreach and communication. When developing personas, consider the following factors: • Background and professional experience • Investment history and preferences • Personal interests and values • Network and connections Sample Persona for an LP Archetype (Exited Founder): Simon Thompson, an exited founder, made his fortune after successfully selling his e-commerce startup to a tech giant. A software engineer by trade, he ventured into entrepreneurship in his mid-30s, building a revolutionary platform that streamlined online retail experiences for both consumers and businesses. As a limited partner in a venture capital fund, Simon is particularly interested in backing startups that leverage cutting-edge technology to transform traditional industries. With a keen eye for innovation and an impressive network of industry connections, he adds immense value to the fund beyond his financial contributions. In his personal life, Simon is a passionate advocate for education and workforce development, actively supporting initiatives that empower underrepresented communities in the tech industry. Balancing his roles as a mentor, philanthropist, and investor, Simon is driven by a desire to create meaningful impact and help shape the future of technology. Sample Persona for an LP Archetype (Corporation): Natalie Johnson is Head of Strategic Partnerships at GreenTech Solutions, a leading clean energy corporation. She is responsible for identifying and fostering relationships that can drive the company’s growth and innovation. With over 15 years of experience in the energy sector, Natalie has built a reputation for her ability to spot emerging trends that shape the industry’s future. As an LP in a venture capital fund, she is particularly interested in discovering promising startups that could lead to strategic partnerships, joint ventures, or acquisitions for GreenTech Solutions. In her personal life, Natalie is a devoted advocate for environmental sustainability and social responsibility. She frequently speaks at industry conferences and mentors young professionals entering the clean energy sector. “Helpful Tip: Utilize Chat GPT to develop comprehensive LP personas by providing a detailed prompt, such as: “Create a persona for a high net worth individual interested in investing in a venture capital fund focused on clean energy. Include background, investment history, personal values, and network connections.” This will help you obtain a well-rounded persona that can guide your outreach strategy.” Create Target Lists of Actual LPsWith personas in hand, start building a target list of potential LPs for each archetype. Leverage your network, industry events, and platforms like LinkedIn to identify individuals and organizations fitting your criteria. Keep track of your prospects in a spreadsheet or CRM, including their contact information, relevant background, and any mutual connections. “Helpful Tip: Prioritize LPs with a history of investing in funds with similar Thesis or focus areas as yours. This demonstrates an existing interest and may increase the likelihood of a successful partnership.” Test ReceptivenessBefore launching a full-scale outreach campaign, test the receptiveness of each LP archetype by engaging a small sample from your target list. Prepare a compelling pitch that highlights your fund’s unique value proposition, investment thesis, and team credentials. Tailor your pitch to address each archetype’s specific interests and motivations, based on the personas you developed. “Helpful Tip: Test different communication channels (e.g., email, phone, LinkedIn) and messaging styles to determine which resonates best with each archetype. Track engagement metrics such as open rates, response rates, and meeting conversions to measure effectiveness.” Refine Your ApproachAs you engage with potential LPs, it’s essential to continuously refine your approach to ensure optimal results. Regularly assess your interactions with each LP archetype to identify areas for improvement or optimization. Make necessary adjustments to your pitch, communication style, or outreach channels based on the feedback and responses you receive. It’s also crucial to be aware of the limitations and potential pitfalls of pursuing certain LP archetypes. Some may consistently produce small checks or lose interest in your fund over time. In such cases, it’s important to recognize when to stop pursuing an archetype that’s not yielding the desired results. Instead, shift your focus to new LP archetypes that may align better with your fund’s goals and investment thesis. During this iterative process, maintain a balance between persistence and adaptability. Understand that building strong LP relationships takes time, and you may need to explore various archetypes before finding the right partners. Continuously analyze the performance of each archetype and replace underperforming ones with newer, more promising alternatives. This approach will help you maximize your chances of success while ensuring that your fund is supported by a diverse, committed group of LPs. “Helpful Tip: Use analytics tools to track and measure key performance indicators (KPIs) such as response rates, meeting conversions, and average investment size, enabling data-driven decision-making when refining your approach.Helpful Tip: Stay informed about industry trends, news, and events that may impact LP interests or preferences, and adjust your pitch and outreach strategy accordingly to maintain relevance and resonance with your target audience.” Connectors to LPsConnectors are individuals or entities that are 1st degree connections of the manager who have strong 1st degree connections to Limited Partners. They bridge the gap between managers and potential LPs, making trusted introductions to potential LPs. To identify Connectors,  managers review friends, alumni, past colleagues, industry acquaintances, or professionals met at conferences. Use LinkedIn to see if they have 1st degree connections to any Limited Partners on the LP target list. For Connectors with strong relationships with target LPs, managers set up a meeting. The goal of the meeting is to catch up and share what each party is working on, including the fund. If the meeting is going well, the manager asks if the Connector is open to helping to make any introductions, and the manager also offers to help the Connector with anything. Connector Best PracticesConnectors play a vital role in fundraising for venture capital funds. Here are some best practices: • Offer to Help: Help a Connector with something that they need first to demonstrate that it is a mutually helpful relationship • Keep Up-to-Date: Inform the Connector of the status of any introductions so that they can help close • Measure Success: Track which Connectors are generating the most referrals and closes for deeper engagement • Send a Newsletter: Keep Connectors on the monthly newsletter so that they know more about the fund • Check in Quarterly: Organize a short check-in call quarterly with the best Connectors to find new leads • Invite to Events: Invite the strongest Connectors to LP events and other industry functions General Solicitation ConsiderationsIn many countries around the world, managers are prevented from soliciting investment from people that they do not know and from people that are not wealthy. It is important that the manager understands the general solicitation rules and helps the Connector follow the rules, as well. To this end, the Connector can introduce the manager individually without mentioning the fund. Compensating ConnectorsCompensation should avoid triggering broker-dealer regulations. GPs shouldn’t offer, nor should Connectors seek, a percentage of capital raised. Alternative compensations can include dinners, business assistance, prioritizing introductions, or considering them for a venture partner role, provided it’s not tied to capital raised. LP ConstructionVenture funds usually employ a phased approach when securing commitments from Limited Partners. The First Close often captures between 10% to 25% of the target fund size.  Funds attract smaller investors at first that are normally close to the managers, followed by larger investors later on after the fund has operationalized. This is, in part, a de-risking strategy by larger LPs, and it also often takes larger LPs more time to close.  Managers are advised to set up a fund closing model with targets that include monetary goals and LP Archetypes. Using the example of a $10 million fund, the fund closing model might look like this: $1 MM LPs: 2 for $2 MM• Family Offices: These firms represent wealthy families and invest to both preserve and grow the family’s wealth, often having access to significant resources. • Fund of Funds: Investment firms that focus on backing other funds, offering access to a broad range of startups and industries, and providing resources and expertise to the funds they invest in. • Corporate Venture Capital (CVC): Corporate entities looking to invest in emerging trends and technologies, bringing industry expertise and significant resources. $500K LPs: 6 for $3 MM• Exited Founders: Entrepreneurs who have previously built and successfully exited businesses, bringing with them vast experience and potentially beneficial connections. • Tech Executives: Individuals at the forefront of technological advancements, bringing industry insights and a deep-rooted network. • Next Generation Wealth: Younger individuals from wealthy lineages aiming to carve their own investment legacy, potentially leveraging their family’s resources and connections $250K LPs: 12 for $3 MM• High Net Worth Individuals (HNWIs): Wealthy individuals seeking diversification and possibly harboring a personal interest in sectors the fund might target. • Bankers: Those from the financial sector, potentially offering a robust understanding of finance and a vast network. • Venture Capital Firms: Larger VC firms may participate, especially if the new fund offers a unique access to trusted dealflow. $100K LPs: 20 for $2 MM• Personal Friends: Investing based on deep trust and belief in the general partner’s acumen and potential. • Alumni Networks/Affinity Networks: Professionals united by common educational or professional backgrounds, offering shared values and a myriad of connections. • Angel Investors: Well-to-do individuals seasoned in backing startups, and who might be looking to diversify through a venture fund. LP Closing ProcessClosing a Limited Partner involves a number of steps and can often take multiple months, sometimes even years. A rough outline of the closing process is below: 1. Source the LP: Conduct basic research around likely LP Archetypes to find a list of 150 to 500 Limited Partners to target for a full fund closing. This sourcing is an ongoing process over months during the full fund closing. 2. Meet with the Connector: Arrange a meeting with your identified Connector. In this meeting, discuss what you are working on and ask if the Connector can help identify any LPs, sharing the names from your research. 3. Secure an Introduction: If the Connector believes a suitable LP is in their network, ask them to facilitate an introduction. Ensure this introduction focuses on you or your team rather than directly mentioning the fund or Thesis. 4. Hold an Initial Meeting: After a successful introduction, set up a meeting with the potential LP. This meeting aims to build rapport and establish a relationship before pitching to comply with general solicitation rules.. 5. Hold Pitch Meetings: Once a relationship is established and the LP is qualified, organize pitch meetings to present the fund. In this meeting or meetings, describe the Thesis with your value add and address any questions. 6. Provide Materials: It’s likely that the LP will request further information or documentation either before or after the meetings. It is recommended that the manager secure a non binding commitment letter, a PACT, before sending materials. 7. Secure a PACT Commitment: When an LP expresses interest, requests materials, asks for Data Room access, or seeks multiple meetings, the manager asks the LP to sign a PACT to indicate their investment interest. This “hard circles” the LP as a serious investor. 8. Respond to Due Diligence: Larger and more serious LPs will complete due diligence and review the fund Data Room, which includes fund materials, legal agreements, portfolio company information, team biographies, and references. 9. Complete a Legal Review: Lawyers from the LP will review the LPA and may ask for a Side Letter to secure special terms. The manager normally coordinates the answers to legal questions and negotiates against any special terms. 10. Sign the Agreements: Once the questions are resolved and any special terms are negotiated away, the manager sends the LPA to the LP for signature. Depending on the LPA, the Subscription Agreement and LPA may be hundreds of pages and complex to sign, taking days. 11. Complete a Capital Call: After signing, the LP is sent a Capital Call to send in a percentage of their commitment that catches them up to the level of all other LPs in the fund. It is normal for managers to call 20% or 25% on first closing. Setbacks  A common LP scenario in venture capital is called “LP Love.” This term captures the tendency of some Limited Partners to engage fund managers extensively, consuming substantial amounts of their time without ever saying “yes” or “no.” While LP Love can be a genuine drain on resources, it is one of several setbacks in the LP closing process. • Seasonality: Investment cycles and fiscal year-ends can influence LP decisions. For instance, an LP might delay decisions due to vacations or a forthcoming budget. • Changing Market Conditions: Sudden market volatilities or economic downturns can prompt LPs to reconsider their investment strategies, pushing commitments to the future. • Shifting Industry Trends: Evolving trends in the industry can divert an LP’s focus. A surge in a new technology or a decline in a particular sector’s prospects influence LP decisions. • Internal Problems: Challenges within the LP’s organization, such as leadership changes or strategic overhauls, can stall or terminate potential investments. • Liquidity Setbacks: Even if an LP is interested, they might face capital constraints or other liquidity issues that prevent them from committing. Recognizing these potential setbacks early can equip fund managers with strategies to navigate them, ensuring smoother LP engagements and mitigating prolonged periods of uncertainty. LP Rejections  LPs rarely say, “no,” but they do say things that tell you their answer is a “no.” In venture, anything that is not a “yes” is a “no,” and here are some examples of things that LPs say which effectively mean, “no”: • Delayed Response: After multiple follow-ups, the LP might remark, “I’ve been swamped lately and haven’t had a chance to review.” • Resource Constraints: They might mention, “We are currently overallocated in venture, and I will let you know when this changes.” • Alternative Investments: The LP could note, “We’re currently exploring some other opportunities that align closely with our focus.” • Strategic Shifts: A common indication is, “Our investment focus is undergoing some changes right now.” • Seeking More Data: By saying, “Can you provide more detailed projections?”, the LP might be stalling the decision. • Concern Over Team: A subtle hint could be, “How experienced is your management team with ventures of this scale?” • Market Concerns: An LP might remark, “The market seems quite saturated; how do you plan to differentiate?” • Return Potential: Expressing concerns like, “The projected returns seem optimistic given the risks,” indicates hesitancy. • Fit with Portfolio: An LP might say, “We typically invest in different sectors or stages.” • External Advisors: They could note, “Our advisors have raised some concerns that we need to address.” Recognizing these indirect refusals early can help in redirecting efforts and refining the approach for future interactions.