A Limited Partner (LP) is an investor in a venture capital (VC) or private equity fund who provides capital but has limited liability and no active role in fund management. LPs typically include institutional investors, pension funds, family offices, and high-net-worth individuals. They entrust fund management to General Partners (GPs), who make investment decisions and oversee the fund’s operations.
What is the difference between an LP and a GP?
A Limited Partner (LP) provides capital but has no management control, while a General Partner (GP) actively manages the fund and makes investment decisions.
What are the benefits of being an LP?
LPs gain access to high-growth private investments while maintaining limited liability, meaning they can only lose the amount they invest, without personal risk.
How do LPs make money?
LPs earn returns through fund distributions when a venture capital fund exits investments (e.g., IPOs, acquisitions). The profits are shared based on the fund’s structure, typically after the GPs take their management fees and carried interest.
How do LPs choose which VC funds to invest in?
LPs evaluate track records, investment thesis, fund size, GP experience, and risk-return profiles before committing capital.
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