How to become an LP
A first-timer's course on investing in a venture fund, from whether you qualify to what arrives in the mail at tax time.
Start lesson one8 lessons, about one hour
Limited partners are the people and institutions whose money a venture fund invests. Most explanations of how that works are written for institutions, by lawyers. This course is written for an individual who has never done it before.
Eight short lessons. Read them in order, or jump to the one you are stuck on. Every lesson ends with the questions you should be able to answer before moving on.
Nothing here is a pitch for our fund. It is the background you need to evaluate any fund, including ours.
- Why venture, why nowWhat a venture fund is for, why returns follow a power law, and why this moment looks like 1995.
- Are you eligible?The accredited investor and qualified purchaser tests, in plain language, and why they exist.
- How a fund actually worksGeneral partners, limited partners, the three documents you will sign, and the ten-year life of a fund.
- The money mechanicsCommitments versus capital calls, management fees, carried interest, and how proceeds flow back to you.
- The J-curve and patienceWhy your first few fund statements look bad, when distributions usually start, and the three numbers on every report.
- Questions to ask any GPThe diligence a first-time LP can actually do, and the answers that should worry you.
- Building your venture allocationHow much to commit, how to spread it across funds and years, and the four routes into early-stage investing.
- Taxes, paperwork and the boring partsSchedule K-1s, why they arrive late, the QSBS exclusion, and what your accountant needs from you.