Navigating the world of venture capital requires understanding who sits on the other side of the table. You might meet associates, principals, or venture partners. However, the person who ultimately signs the check and joins your journey is the General Partner.
The core responsibilities
#A General Partner (GP) is a senior partner in a venture capital firm. They are responsible for the management and operation of the venture fund itself. While the firm may have many employees, the GPs carry the legal and fiduciary responsibility for the investments.
Their work generally falls into three main buckets.
- Fundraising: They must raise capital from outside investors to create the fund.
- investing: They source startups, conduct due diligence, and decide which companies receive money.
- Governance: They sit on the boards of portfolio companies to offer guidance and oversight.
The GP is an active manager. They are not simply holding money. They are deploying it with a specific thesis and strategy in mind.
Comparing GPs and LPs
#To understand the GP, you must understand their counterpart. This is the Limited Partner (LP).
The structure of a venture fund relies on these two distinct roles.
The Limited Partner provides the capital. They are usually institutional investors like pension funds, endowments, or wealthy individuals. They have limited liability. This means they can lose their investment but are not responsible for the debts or legal actions against the fund.
The General Partner manages that capital. In exchange for this work, the GP receives a management fee (usually to cover operations) and a percentage of the profits known as carried interest.
Think of it this way. The LP supplies the fuel. The GP drives the car.
The founder and GP relationship
#For a founder, the General Partner is the most critical relationship at a VC firm. When you accept an investment, you are effectively hiring this person to be a part of your company for the next five to ten years.
You are not just taking money from a brand name firm. You are entering a partnership with a specific human being.
This person will likely take a seat on your Board of Directors. They will have a vote on critical decisions. These decisions include future fundraising rounds, major acquisitions, and even hiring or firing the CEO.
Because they represent the fund, they have a fiduciary duty to their Limited Partners to maximize returns. This usually aligns with your goal of building a massive company. However, it is worth asking questions about their fund lifecycle. If a GP is near the end of their fund term, they may pressure you to exit earlier than you might want.
Evaluating the partnership
#Not all General Partners offer the same value. Some are former operators who have built businesses before. Others are career investors with deep financial networks.
When you are fundraising, you should conduct due diligence on the GP just as they do on you.
- Do they have a track record of supporting founders during hard times?
- Do they understand your specific industry deeply?
- Are they able to make decisions quickly, or do they require consensus from a larger partnership?
Understanding who holds the decision-making power allows you to navigate the fundraising process with clarity. You want a GP who is committed to the long haul.