When it comes to venture capital, the GP-LP relationship shapes everything.
Think of General Partners as the drivers. They raise capital, choose startups, manage portfolios, and aim for profitable exits. They’re hands-on and deep in the trenches with founders.
Limited Partners provide most of the capital. These are institutions or individuals who back a fund, but don’t get involved in daily decisions. Their role is high-trust and high-stakes.
What it looks like in the real world:
🔷 Andreessen Horowitz (a16z) Andreessen Horowitz is the GP. They created multiple funds and are responsible for finding and supporting promising tech startups across various sectors.
California Public Employees’ Retirement System (CalPERS) is an LP. They invested money into a16z’s funds, expecting returns over time.
A16z uses its own teams to support startups directly beyond just writing checks, offering operational expertise and network access.
🔷 Sequoia Capital’s Growth Fund Sequoia Capital acts as the GP, managing billions in growth-stage investments focused on scaling technology companies.
Harvard Management Company is an LP, contributing capital from Harvard’s endowment but staying hands-off in investment decisions.
The purpose: Generate substantial returns for institutional investors while supporting the next generation of tech giants.
Why does this matter to you?
If you want to be in venture capital, understanding the GP-LP dynamic is foundational. It’s where power, responsibility, incentives, and long-term outcomes all converge.
How do LPs assess new venture capital fund managers?
LPs typically focus on five critical areas:
- Track Record: Previous investment experience, even if not as a fund manager
- Investment Thesis: Clear, differentiated strategy with addressable market size
- Team Composition: Complementary skills and domain expertise
- Network Access: Ability to source quality deals and provide value-add
- Fund Economics: Reasonable fee structure and alignment of interests
First-time managers must demonstrate exceptional conviction and execution capability to overcome the lack of fund management history.