Limited Partner / General Partner
The two principal roles in a venture capital fund: LPs provide capital, GPs manage the fund and make investment decisions.
Definition
Venture capital funds are typically organized as Delaware limited partnerships in which Limited Partners (LPs), pension funds, endowments, family offices, sovereign wealth funds, fund-of-funds, high-net-worth individuals, provide the capital, and General Partners (GPs), the venture firm's investment professionals, manage the fund. LPs have limited liability and limited management role; GPs have unlimited liability for fund obligations and earn management fees (typically 2% of committed capital annually) plus carried interest (typically 20% of profits above a hurdle).What this means in practice
MedTech founders should understand LP composition because it shapes a fund's risk tolerance, hold period (typical 10-year fund life), and willingness to support follow-on rounds. Funds late in their investment period have less capacity for new investments and reserves.- •Pitching a fund without checking where it sits in its investment period.
- •Underestimating how LP composition (pension vs. family office) affects a GP's behavior in tough rounds.
Related terms
Grouped by themeEditor's picks
· Hand-selected related conceptsInvestigation of a company before an investment, financing, or acquisition.
Corporate investor with operational, not just financial, motives.
Non-binding outline of the key economic and control terms of an investment.
More in Investment & Finance
· Same categoryAn independent fair-market-value appraisal of common stock used to set tax-compliant strike prices for employee stock options.
Adjustment that protects investors if the company raises a future round at a lower price.
Interim financing between priced rounds, usually convertible.
Rate at which a company spends cash, typically expressed monthly.
Where this term appears across MedTech Terms.
Primary references
3 sources- 1
NVCA, Venture Capital 101VerifiedNVCAnvca.org
- 2
ILPA Principles 3.0VerifiedILPAilpa.org
- 3
NVCA Model DocumentsVerifiedNVCAnvca.org
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