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Venture capital investment isn’t just about finding unicorn business ventures and reaping the rewards. Before seeing any returns, VCs must be on top of any relationships they have concerning their investment.
One of the most important relationships within a VC fund is between General Partners (GP) and Limited Partners (LP), a relationship that shapes how the fund operates and succeeds.
Limited Partners, also known as “silent partners,” purchase shares in exchange for partial ownership in a company. However, Limited Partners aren’t involved in day-to-day operations.
General Partners, on the other hand, are deeply involved. As the active managers of the fund, GPs are responsible for raising capital from LPs, sourcing and investing in high-potential startups, supporting portfolio companies, and ultimately delivering returns to their investors. Their day-to-day involvement and strategic guidance are what drive the fund’s performance.
| General Partner (GP) Responsibilities | Description |
|---|---|
| Fundraising | Raise capital from Limited Partners (LPs) to establish and grow the fund. |
| Investment Decisions | Source, evaluate, and invest in high-potential startups or companies |
| Portfolio Support | Provide strategic guidance, operational support, and access to networks for portfolio companies |
| Returns Management | Oversee exits and ensure profits are distributed back to LPs |
| Ongoing Fund Management | Handle reporting, compliance, and day-to-day operations of the fund |
In short, LPs provide the investment, while GPs put that capital to work. Understanding how these roles interact is key to grasping the dynamics of any VC fund.
A Limited Partner (LP) report is a critical document in venture capital (VC), designed to keep LPs updated on a fund’s performance and key activities. These reports are valued for their transparency, clarity, and thoroughness, qualities that help build trust and maintain strong investor relationships.
What’s Included in an LP Report?
| Section | Key Details |
|---|---|
| Fund Overview | Performance highlights, total commitments, goals for the period |
| Financial Overview | IRR, MOIC, Fair Value, Cash Realized, NAV, cash flow summary |
| Capital Activity | Capital called, distributions made, remaining commitments |
| Expenses & Fees | Management and performance fees, fund expenses |
| Portfolio Updates | New and follow-on investments, exits, valuation changes, and company milestones |
1. Fund Performance Metrics:
2. Cash Flow Summary: High-level overview of cash inflows and outflows during the period, along with the opening and closing cash balance.
1. Capital Called: Amounts called during the period, with a breakdown by purpose.
2. Distributions Made: Details on distributions returned to LPs, categorized by source (e.g., exits, dividends).
3. Remaining Commitments: Indication of uncalled commitments and potential future capital calls.
Transparency on management fees, performance fees, and other costs.
1. New Investments: Description of new companies added to the portfolio.
2. Follow-on Investments: Additional investments in existing portfolio companies.
3. Exits: Companies sold or gone public and the returns generated.
4. Valuation Changes: Significant changes in portfolio company valuations.
5. Portfolio Performance: News, milestones, and updates on the entire portfolio or individual company performance.
Limited Partners (LPs) have increasingly diverse and demanding reporting requirements. General Partners (GPs) are expected to deliver detailed reports in line with frameworks such as ILPA and Invest Europe. As LPs seek more frequent and granular insights, sometimes even beyond the traditional quarterly cadence, operational efficiency has become a key evaluation criterion for fund managers.
While GPs are committed to meeting these expectations, preparing accurate, comprehensive reports is no small task. Ensuring data quality, formatting consistency, and timely delivery can be both time-consuming and resource-intensive.
The LP report is an important way for your VCs to keep your investors informed and maintain strong investor relations. Some VC firms may also use automated tools, such as Rundit’s LP report feature, to help generate, organize, and share the necessary information with their LPs. Rundit’s interactive LP report allows VCs to structure aggregated data for easy sharing with their LPs.
Maintaining healthy relationships and engaging with Limited partners is crucial for General partners. Thus, creating an LP report that stands out is one way to achieve this goal. It helps your VC manage investment data, stay organized, and meet LP reporting requirements.
Are you looking for an efficient way to create and share LP reports with your Limited Partners? Book a call today and let us walk you through our LP reporting functionality.
Consolidate your portfolio and fund data in one single report.
