But for all the attention paid to venture capitalists, and for all the energy expended on getting inside their heads, little attention has been paid to limited partners LP — the money behind the money that makes the venture world go round.
LPs come in all shapes and sizes: one person writing a check for tens of thousands of dollars, sovereign wealth funds writing checks for $100 million or more, family offices and institutional LPs — endowments, foundations, pensions and managed assets such as banks, fund of funds, insurance companies and corporations.
It s also important that founders understand how venture finance works, at all levels, if they are going to depend so heavily on it.
This includes getting to know their LPs, who may actually be beneficial to startups.
The modern venture capital system emerged during the 20th century thanks to the efforts of business titans like Arthur Rock and Laurance Rockefeller, who invested capital in high-risk, young enterprises grounded in science and technology.
This trend poses the question: Will LPs follow suit?