5 ms·

For people like me who are startup-dumb and bad at skimming: LP = Limited Partner (I think)

danieltillett 11y ago
Yes this is right. The limited partners are the investors in VC funds who provide the money. The general partners are the VC’s who are supposed to have the experience be able to decide which companies are the good investments. It is a bit of a worry if LPs think that they can do this on their own. Maybe they can, but historically whenever “dumb money” enters a market a crash is not far away.
jessedhillon 11y ago
LPs are the investors from whom VCs raise their funds. The limitation they normally abide by, when investing through a partnership (like a VC), is that they aren't allowed to direct funds towards any particular investment. So they can invest in a general thesis, but can't direct funds towards a specific company. The general partner (GP), typically an employee of the VC firm, manages the specific allocation of money into deals. The restriction to acting through a layer of management is a legal requirement in order to give the LPs the protections afforded by the LLP structure.
deleted 11y ago
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brudgers 11y ago
LP typically stands for "Limited Partnership", a form of organization where one or more general partners have agency and unlimited liability similar to that of a general partnership and one or more limited partners whose liability tends to be significantly less but whose role in the enterprise is generally passive. There's a wikipedia article. Generally, a limited partnership have been useful when there is a plan not to bring on additional investors later, since later investors are able to renegotiate terms. In other words, LP's are common when all the money ever needed is going to be raised at once and any future expansion of the project will be funded by traditional loans [a construction loan for a shopping center] and from projected revenues [e.g. ongoing maintenance of the shopping center once it is operational]. This also means that projects structured as LP's are not really tailored to take advantage of hockey stick growth. Though an LP may use equity growth as a means to an end, the focus is usually on income, and matching the cashflow objectives of LP like investors is why individual Venture Funds have limited lifetimes.
- rahimnathwani 11y ago
  A few clarifying points: 1) Private Equity funds (including VC funds) are often structured as Limited Partnerships. The PE/VC firm and/or its principals are General Partner(s) in the Limited Partnership. Investors are Limited Partners. 2) LLP = Limited Liability Partnership 3) LPs usually refers to Limited Partners (referring either to the Limited Partners in a particular fund, or to PE/VC investors in general) 4) Not all the money needs to be invested up-front. Partnerships can be set up such that an amount of capital is committed up front, but drawn down from investors on an as-needed basis.
  - brudgers 11y ago
    I don't disagree. To clarify though, it's often LP's all the way down to the turtles...that is it is not uncommon that the limited partners in a limited partnership are limited partnerships because limited partnerships are a way of organizing capital that scales from a few hundred grand for 20 residential lots to a billion or so for a VC fund. From the individual partners point of view, their investment fuss are committed upfront with the expectation that that commitment is adequate for the entire project. Should the funds prove inadequate the investor may not loose their shirt but will consider themselves lucky to escape with shortened sleeves.

Yes this is right. The limited partners are the investors in VC funds who provide the money. The general partners are the VC’s who are supposed to have the experience be able to decide which companies are the good investments. It is a bit of a worry if LPs think that they can do this on their own. Maybe they can, but historically whenever “dumb money” enters a market a crash is not far away.

jessedhillon 11y ago

LPs are the investors from whom VCs raise their funds. The limitation they normally abide by, when investing through a partnership (like a VC), is that they aren't allowed to direct funds towards any particular investment. So they can invest in a general thesis, but can't direct funds towards a specific company. The general partner (GP), typically an employee of the VC firm, manages the specific allocation of money into deals. The restriction to acting through a layer of management is a legal requirement in order to give the LPs the protections afforded by the LLP structure.

deleted 11y ago

[deleted]

brudgers 11y ago

LP typically stands for "Limited Partnership", a form of organization where one or more general partners have agency and unlimited liability similar to that of a general partnership and one or more limited partners whose liability tends to be significantly less but whose role in the enterprise is generally passive. There's a wikipedia article. Generally, a limited partnership have been useful when there is a plan not to bring on additional investors later, since later investors are able to renegotiate terms. In other words, LP's are common when all the money ever needed is going to be raised at once and any future expansion of the project will be funded by traditional loans [a construction loan for a shopping center] and from projected revenues [e.g. ongoing maintenance of the shopping center once it is operational]. This also means that projects structured as LP's are not really tailored to take advantage of hockey stick growth. Though an LP may use equity growth as a means to an end, the focus is usually on income, and matching the cashflow objectives of LP like investors is why individual Venture Funds have limited lifetimes.

rahimnathwani 11y ago
A few clarifying points: 1) Private Equity funds (including VC funds) are often structured as Limited Partnerships. The PE/VC firm and/or its principals are General Partner(s) in the Limited Partnership. Investors are Limited Partners. 2) LLP = Limited Liability Partnership 3) LPs usually refers to Limited Partners (referring either to the Limited Partners in a particular fund, or to PE/VC investors in general) 4) Not all the money needs to be invested up-front. Partnerships can be set up such that an amount of capital is committed up front, but drawn down from investors on an as-needed basis.
- brudgers 11y ago
  I don't disagree. To clarify though, it's often LP's all the way down to the turtles...that is it is not uncommon that the limited partners in a limited partnership are limited partnerships because limited partnerships are a way of organizing capital that scales from a few hundred grand for 20 residential lots to a billion or so for a VC fund. From the individual partners point of view, their investment fuss are committed upfront with the expectation that that commitment is adequate for the entire project. Should the funds prove inadequate the investor may not loose their shirt but will consider themselves lucky to escape with shortened sleeves.