![]() Therefore, make sure that your LPs are people you vibe and communicate with effectively. Though you are not going to be talking to them every day, your LPs will be with you for a long period of time, and you will need to make several capital calls and raises. In addition to qualifying them as likely investors, you need to make sure they are aligned with your perspective and that you have good rapport. Doing so invariably means not broadcasting your fund’s intentions, thesis or anything that can be construed as seeking investment.Īll that having been said, your fund’s thesis and concomitant risk profile necessitate focusing on LPs that can and want to take advantage of your unique vision. Furthermore, because of restrictions on general solicitation (asking for capital), it is imperative that your process comply with local laws and regulations. Doing so will simply dilute your effort and is unlikely to produce results. However, you should not cast a wide, unstructured net for capital. It’s generally good practice to keep your options open until you’ve soft circled the funds for your first close. The ideal limited partner is an individual or entity that aligns with your vision, can commit to the required capital size, and is willing to write a check. Find out more here, and apply to join one of our coho ![]() VC Lab is a free accelerator that provides structure and guidance to build your venture fund. Operating at various degrees of transparency and autonomy, SWFs frequently source deals from around the world, with a close eye on the political implications of their investments.īecause any qualified individual or entity can be an LP in your fund, it’s incredibly important to have a clear plan of attack for getting your first close. Sovereign Wealth Funds (SWFs) are those state-owned entities that invest capital on behalf of the leadership and/or their citizenry. Endowment funds are similar in most respects to Pension Funds, but may be limited to serving one particular entity. They often make higher-risk investments to ensure optimal returns, but are generally very regulated and strictly regimented. Because pension funds have to pay out when eligible employees retire, they are focused on ensuring returns sufficient to accomplish that goal over the medium term. Pension funds generally cluster around specific large companies (or governments), and are more common in industries that have been around for a longer time. Pension Funds are entities that capture, invest and then pay out capital to employees, employers or both. Family Offices also tend to hold a lot of illiquid investments and may be attracted to venture capital as a way of balancing their portfolios. Family offices often handle the entire trust portfolio for a group, and mostly consider longer-term ROIs when allocating investable assets. Typically, an FO will have a structure similar to a venture fund, but with varying degrees of active management and full time resourcing. Family Officesįamily Offices are entities formed by families (or very HNWIs) to act as investors on their behalf. If they’ve not done a lot of investing, they may be motivated by access to deal flow that is otherwise closed off to them. HNWIs who invest directly are generally looking to increase their wealth in the medium to long term, and can make their own decisions (perhaps in concert with a spouse). Clusters of HNWIs can be found among professionals, executives, entrepreneurs and – of course – investors. HNWIs can come from any background, have any educational or professional experience, and be located anywhere. High Net Worth Individuals are generally those with over $1M in liquid assets, though there is no universally accepted minimum, and it varies by country/region. Here are some of the most common types of LPs and their motivations. As a general rule LPs don’t advertise their investment activities on LinkedIn or other channels, so you have to use some smart sleuthing and sourcing skills to ferret them out. Though Limited Partners can technically come from any background and have several different legal structures, there are some common LP archetypes that you should be aware of. There are four major type of Limited Partners (LP): High Net Worth Individuals (HNWIs), Family Offices, Pension Funds and Sovereign Wealth Funds.
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