· Venture Capital Tracker · investment-strategies · 2 min read
What Is a GP (General Partner) in Venture Capital? How VCs Actually Run a Fund
GPs manage VC funds, make investment decisions, and sit on boards. Here's how they get paid, how they're evaluated, and what LPs really expect from them.
A General Partner (GP) is the person or entity that manages a VC fund — sourcing deals, making investment decisions, supporting portfolio companies, and managing relationships with LPs.
What GPs actually do
- Sourcing: Building deal flow through network, inbound, intro reps, and thematic research.
- Diligence: Technical, commercial, legal, financial evaluation.
- Investment Committee: Internal decision-making on which deals to fund.
- Negotiation: Term sheet, co-investors, board composition, investor rights.
- Portfolio support: Recruiting, GTM advice, follow-on support, exit preparation.
- Fund operations: Capital calls, portfolio reporting, LP communications.
- LP relations: Annual meetings, LPAC, one-off queries, fundraising new funds.
GP economics
- Management fee: ~2% annually on committed capital (or net invested capital after investment period).
- Carry: ~20% of net profits after LP preferred return (often 8%).
- GP commit: Personal capital commitment of 1–3% of fund size.
- Catch-up provisions: Often 100% catch-up to GP after LPs earn the hurdle.
- Claw-back: LPs can recover carry if later losses offset earlier gains.
The GP career ladder
- Analyst / Associate: 1–5 years. Sourcing and diligence support.
- Principal / Senior Associate: Deeper diligence and sometimes sponsor deals.
- Partner: Full investment decision authority and carry.
- Managing Partner / Founding Partner: Fund governance, LP relationships, GP commit.
What separates top-quartile GPs
- Differentiated sourcing: Can they see deals others can’t?
- Founder feedback: Do founders actually want them in their next round?
- Follow-on discipline: Do they double down on winners or spray reserves?
- LP trust: Are LPs re-upping, and by how much?
- Exit outcomes: DPI, not TVPI.
Emerging manager vs established GP
- Emerging managers (Fund I–III): Harder to raise LP capital; compete on thesis differentiation, scrappy sourcing, and direct founder relationships.
- Established GPs (Fund IV+): Bigger fund sizes, platform teams, more LP optionality, potentially less founder intimacy.
Common GP pitfalls
- Fund size drift — raising too large a fund for the strategy.
- Team turnover — LPs re-diligence when partners leave.
- Style drift — chasing sectors outside of demonstrated competence.
- Overreserving or underreserving — follow-on strategy mistakes.
- Weak portfolio support — promising operational help that doesn’t materialize.
Practical takeaway
- Aspiring GPs: Build a verifiable track record (angel, scout, operator) before launching Fund I.
- Founders: Pick the partner, not just the firm — your primary GP relationship defines support quality.
- LPs: Evaluate the top 3 individual GPs’ tenure and alignment, not just the firm’s brand.
Further reading
- NVCA model legal documents: https://nvca.org/model-legal-documents/
Editorial note: AI tools assisted with research, structure, or drafting. Venture Capital Tracker retains human editorial responsibility for factual accuracy, relevance, and source quality before publication.
