New trends are emerging in venture capital as many LPs are looking to directly invest in startups alongside their fund exposure. Consequently, it is important for founders to familiarize themselves with limited partners and understand their investment objectives.
What are Limited Partners?
Limited Partners are the investors in venture capital funds. Whereas VCs invest in founders, LPs invest in venture capital firms. Much like venture capital investors, LPs are looking to maximize returns on investment by carefully constructing a portfolio of investments.
Who are Limited Partners?
There are multiple categories of LPs. High Net Worth Individuals (HNWI) for example are wealthy individuals who manage their own capital, and at times allocate some of it into the venture capital asset class by investing in VC funds. Family Offices on the other hand are larger professional investment offices managing the capital of wealthy families. These two categories are the major backers of new venture capital firms and managers.
On the other hand, large institutional investors such as endowments and corporations rarely invest in new venture capital firms and founders directly. As previously stated, founders should familiarize themselves with the types of LPs as they have varying levels of sophistication and profiles as outlined in our detailed breakdown here.
A Recent Trend
Interestingly, while investors such as HNWI are gravitating towards becoming LPs, Family Offices are increasingly advancing their exposure to the asset class by directly investing in startups themselves. This presents interesting dynamics and a new trend for founders to consider.
Typically, LPs in venture capital firms often look to co-invest in compelling deals in conjunction with the venture capital fund. Recently, there is a trend especially among Family Offices who are now looking to directly invest in startups more and more. Consequently, founders should now be prepared to seek out family offices as direct investors and leverage their networks to do so when fundraising.
Read more about Limited Partners here in VC Lab’s comprehensive article.
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This content is provided by VC Lab, the YC for VC. Learn more about the top venture capital accelerator for first-time fund managers and other industry-leading programs at:
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How to launch a VC Firm? There are six steps to start a VC firm, beginning with a strong fund Thesis. Here is the process used by the top VC accelerator:
https://DecileGroup.com/articles/how-to-launch-a-vc-firm
VC Lab is a part of Decile Group. Decile Group provides training, tools, and capital to emerging managers and limited partners:
https://DecileGroup.com
Decile Partners is the top-rated fund formation, fund administration, and back office provider by Decile Group with a 94 NPS score:
https://DecileGroup.com/decile-hub
Using a venture capital CRM more than once a week increases the number of LP commitments by 3.1x. Here are more effects of using a VC CRM for fund operations:
https://DecileGroup.com/articles/venture-capital-crm
Want to write a VC Fund Thesis? Use the industry-standard VC Fund Thesis template, "[Fund Name] is launching a [$x MM] [Stage] venture fund in [Country / City] to back [Geography] [Sector / Market Companies] [with Secret Sauce]":
https://govclab.com/2025/04/14/vc-fund-thesis/
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