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LPs aren't just shareholders. I wish. LP agreements are hundreds of pages long! A complication with institutional funds is that they raise a new fund every cou

by tlb 7y ago

LPs aren't just shareholders. I wish. LP agreements are hundreds of pages long! A complication with institutional funds is that they raise a new fund every couple years, with a changing set of LPs. So they can't make a deal like "we can write off the investment in your previous company, if you let us invest in your new company" because it's favoring one set of LPs over another. LPs get prickly about that. So a company like Amazon can take lower profits now in return for bigger profits later, but institutional funds can't if they're into the next fund.

nostrademons 7y ago
LPs themselves also have basically zero information to go on when evaluating a potential venture fund, other than exits they invested in with their previous fund. And the competition is pretty brutal among venture funds today. So a VC is going to have a very hard time raising money for their next fund if they can't show exits or at least follow-on rounds of funding at substantially higher valuations for some of their previous portfolio companies.