Understanding Overseas Accredited and Qualified Investor Requirements
The global venture capital industry is experiencing a dramatic shift as participation from non-traditional players (i.e., non-institutional fund investors), such as family offices and high-net-worth individuals, continues to grow. However, raising capital from overseas investors remains complex and costly due to differing regulatory frameworks across jurisdictions. In most countries, investors must satisfy accredited or qualified investor criteria, or similar regulatory standards, in order to invest in offshore funds. Failure to meet such regulatory requirements can expose fund managers to potentially severe risks and legal consequences, including regulatory fines, restrictions on future fundraising, and reputational damage.
Many countries allow funds to be marketed through private placements without a full offering prospectus or fund registration with regulatory agencies if the offer is restricted to certain types of sophisticated or high-net-worth investors, as they are considered capable of evaluating investment risks without full regulatory protections.…
Category: Limited Partners
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We’re excited to announce LP Institute Cohort 6, the accelerated program designed to help limited partners invest in venture capital funds.
Smarter than Ever.
We’re entering an unprecedented period where artificial intelligence is fundamentally transforming finance, driving deeper due diligence, and powering portfolio performance.
The second half of 2025 presents one of the greatest opportunities in venture capital history for sophisticated limited partners to spot standout managers and discover tomorrow’s top talent today.
Apply to Cohort 6
LP Institute Cohort 6 is the premier program for investing in venture capital funds.…
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LP to GP Matching
How technology transforms venture capital relationship building
LP to GP matching is the systematic process of connecting Limited Partners (investors who provide capital) with General Partners (fund managers who deploy that capital) in the venture capital ecosystem. This relationship determines which funds get raised, which startups receive funding, and which innovations reach the market. For decades, this process operated like an exclusive club dependent on warm introductions and industry conferences. The result was a concentration of capital among established players, with emerging managers locked out despite strong performance potential.
While traditional VCs trade business cards at Sand Hill Road coffee shops, a new venture capital universe is emerging. Over 600 new VC firms have launched through modern accelerator programs, 65% outside the US, with female GPs representing 29% compared to single digits in traditional VC.…
Venture capital is a top perfuming asset class for Limited Partners. There are many reasons to invest in venture, including financial, strategic, impact, and others.
There is a renewed interest in venture as we enter 2024, and the survey below seeks to identify the top five reasons that make venture capital an attractive option for LPs.
The insights from this survey will be instrumental in shaping discussions at the upcoming “Top 5 Reasons to Invest in VC in 2024” event on January 24th.
If you are an LP, please take a moment to complete the survey below.…
A number of investors say they are interested in your fund or startup. But how can you tell which investors are really serious about committing capital? And how can you nudge them into writing those checks?
Answer: The PACT
DOWNLOAD THE PACT
Why should you use the PACT?
Collecting signed PACTs provides a clear and time saving way to calculate the Hard Circled total, which reduces the uncertainty and guesswork of closing a multi-party investment round.
VC Lab successfully uses the PACT to help venture capital firms secure capital from Limited Partners. The Founder Institute also uses the PACT in the Funding Lab program for startups raising angel capital. To date, investors and funds have signed over 3,500 PACTs, and VC Lab systems are tracking as much as $60 MM per month in new PACTs being signed worldwide.…
A PACT (“Pledge Agreement for Capital Transaction”) is a non-binding letter of intent signed by a qualified investor to indicate their desire to invest a specific amount of money into a startup or into a venture capital fund.
The PACT is a Commitment Letter, which is commonly used in financial transactions.
The PACT Letter was developed in 2018 by the Founder Institute to solve the problem of internal fund offerings having excess investor interest. Before the creation of the PACT, it was difficult to identify which potential investors were serious about investing, commonly referred to as Hard Circled, and which other investors were casually exploring the investment, referred to as Soft Circled. Collecting signed PACT Letters provides a clear way to calculate the Hard Circled total, which reduces the uncertainty and guesswork of closing a multi-party investment round.…
As the Next Generation of VCs enter the market and look to build enduring venture capital firms, they should be aware of which types of limited partners to focus on when marketing their new venture firms.
Not all LPs and investors in venture capital firms are the same. Each type of LP has their own preferences, so when marketing your venture firm, you should take these into account. For example, large institutional LPs such as endowments rarely invest in new venture fund managers and their firms. Since such institutions are managing vast sums of money, it is un-optimal for them to write small checks and have small VC firms in their portfolio. Large institutions also have very lengthy procedures and are relatively slower than their counterparts.…
Many new fund managers ask us, “What is the optimal number of LPs in a VC fund?” Having powered the launch of over 100 VC firms worldwide, we’ve gathered valuable insights into the ideal number of investors for new funds, which we believe to range from 20-30 LPs. Intuitively, one might think that having a vast LP base is always advantageous. However, this may not always be the case, as this article will explore.
We’ve seen a tendency from new fund managers to aim for an extensive base of investors. Unfortunately, this can sometimes work against the GPs and cause burdensome operational and administrative challenges. On the other end of the spectrum, having too few LPs can lead to those investors potentially having unhealthy influence and authority within the fund.…
Raising a venture capital fund can be challenging regardless of how many times you’ve done it. Though the process certainly can get relatively more manageable each time, fund managers may want to set out a well-thought-out plan in each of their fundraising campaigns.
When strategizing fundraising, a key factor to consider can be the minimum investment threshold. This can be an integral concept for first-time managers as a threshold may help manage and optimize time interacting with potential investors. It can also help managers build traction and run an efficient fundraising campaign.
Table of ContentsWhat is a ‘minimum investment size’?Why have a minimum ticket?Threshold guidelinesFundraising strategyKey Factors Influencing Minimum InvestmentsInvestment Threshold ImplicationsStrategic Considerations for InvestorsOther factorsExceptions
What is a ‘minimum investment size’?…
Launching a VC firm can be a demanding undertaking. New fund managers face many challenges, including fundraising and finding new LPs. Even with a vast network of investors, fundraising can prove to be a challenging task, so the process can become more arduous without deep-rooted connections in Venture Capital.
Difficulties can arise as many LPs prefer to stay anonymous and do not publicly share their investment status’, objectives, or activities. In our ‘How to Find LPs’ series, we guide new fund managers to leverage and expand their networks. This article will briefly outline ways to leverage your existing network and offer some ways to gradually grow your connections within Venture Capital. When doing so, it would be advisable that fund managers care to avoid general solicitation.…
The world of fundraising and pitching has changed considerably for entrepreneurs and fund managers since the pandemic. Raising capital from limited partners is in a state of flux and duality. Consequently, it is advised that fund managers master pitching both virtually and in person.
However, this is not necessarily a bad thing. Fund managers can now be in contact with and pitch more limited partners than before. Though some limited partners are exclusively investing in fund managers they meet in person, the majority of LPs are open to a hybrid approach.
Typically, the online to offline meetings is now around 70% to 30% respectively. LPs will usually meet with fund managers remotely and will then request an in-person meeting. LPs who have not taken virtual meetings have been shut down by the pandemic and are slowly starting to allocate capital.…
Introduction
Venture capital’s network dynamics play a pivotal role in fund success. The VC Lab Webinar, “Leveraging Second and Third-Degree Connections to Find LPs,” provides a strategic approach to network expansion in the VC industry, focusing on maximizing connections beyond immediate circles to access potential Limited Partners (LPs).
Understanding the VC Networking Landscape:
First-Degree Connections: Direct, immediate contacts often exhausted by venture capitalists.
Expanding to Second-Degree Connections: Friends of friends, offering a broader scope of potential LPs.
Tapping into Third-Degree Connections: Connections of connections’ contacts, a largely untapped resource with significant potential.
The key to successful venture capital networking lies not just in the breadth of your connections but in the depth and quality of these relationships.
Decile Start’s Role in Networking:
Decile Group’s innovative tool, Decile Start, plays a pivotal role in network expansion within the VC ecosystem.…
Venture capital firms navigate complex dynamics with several stakeholders to ensure their success. Central to this ecosystem are the team, whose expertise and vision drive the firm’s trajectory; the portfolio companies, startups or businesses that determine the return on investment; and the Limited Partners (LPs), who fuel the firm with capital. This article focuses on the nuances of fostering and maintaining relationships with these LPs, emphasizing their pivotal role in the firm’s longevity and prosperity.
LP Management Goals
The primary objective of LP management is to forge an enduring personal and financial relationship with your Limited Partners so that they continue to invest in and support the funds of the firm in a mutually beneficial manner.
Signs of Success
Responsive Communication: LPs who promptly reply to updates or inquiries show active interest and engagement.…
Securing Limited Partners is a formidable task that demands persistence, meticulous research, and strategic networking. For the average fund, this means courting nearly 250 LP prospects and pitching to a majority of them, only to culminate in a select few actual commitments. This article elucidates the exhaustive process, underscoring the challenges and providing a roadmap to effectively source and close LPs in the investment realm.
Researching LPs
Sourcing potential Limited Partners necessitates the usage of multiple research platforms. These platforms, whether digital tools or networks, provide data and insights about potential LPs, their investment behaviors, and affiliations.
LinkedIn: A hub for professionals, it can identify LPs by job titles, backgrounds, and company affiliations.
CrunchBase: This platform offers insights into businesses and their associated stakeholders, ideal for locating previous investors.…
As an emerging venture capital fund manager, identifying and engaging with the right Limited Partner (LP) archetypes is crucial for your fund’s success. This article aims to guide you through the process of identifying relevant LP archetypes, developing personas, creating target lists, and testing receptiveness to your fund’s offering and thesis.
Step 1: Identify Relevant LP Archetypes
Step 2: Develop Personas for Targeted LP Archetypes
Step 3: Create Target Lists of Actual LPs
Step 4: Test Receptiveness
Step 5: Refine Your Approach
Step 1: Identify Relevant LP Archetypes
Begin by familiarizing yourself with various LP archetypes, such as exited founders, high net worth individuals, family offices, bankers, tech executives, and small business owners, among others (see below). Evaluate each archetype based on their alignment with your fund’s investment thesis, industry focus, and stage preference.…
Limited partners, commonly referred to as LPs, are passive investors in venture capital funds. They are the main customers and ultimate backers of the venture capital model. Without LPs, venture capital would not exist. The relationship between the fund managers and the Limited Partners is complex. This article covers the history and reality of managing Limited Partners.
The History of Limited Partners
The concept of Limited Partners traces its roots back to ancient maritime trade, but its formal legal structure originated in France with the “commandite” system in the early 18th century. In this arrangement, silent partners, or “commanditaires,” would invest money in a trading or business venture without being involved in its operations. These investors had limited liability, which meant their financial loss was restricted to their investment.…
In the world of venture capital, ‘Connectors’ are individuals with an extensive network of potential investors or limited partners (LPs). They serve as a bridge between general partners (GPs) at venture capital firms and potential LPs, facilitating introductions that could lead to fruitful partnerships. However, for GPs looking to raise capital, especially those at new and emerging venture capital firms, it is crucial to understand and navigate the delicate terrain of securities laws to avoid triggering general solicitation.
The Role of Connectors
Connectors, individuals who maintain expansive networks encompassing wealthy individuals and potential limited partners, serve as conduits between general partners of venture capital firms and potential investors. With their broad connections, Connectors can provide access to an array of potential limited partners that might otherwise be challenging to reach.…
In venture capital fundraising, understanding the distinction between soft circled and hard circled limited partners is crucial. Soft circled partners express interest in investing, while hard circled partners commit to a specific investment amount. This article will outline how to identify soft and hard circled limited partners, guide you through the identification process, discuss the importance of regular communication, and explore the role of geography in closing probabilities to help you maximize your fundraising success.
What is Soft and Hard Circled
Soft Circled Limited Partners:
Soft circled limited partners express interest in investing a specific amount or range, but they typically have additional questions or require further steps to finalize the investment. The probability of closing a deal with a soft circled commitment ranges from 10% to 25%.…
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Meet Decile Capital
VC Lab is proud to announce the launch of Decile Capital, a family of funds set up to invest in promising alumni of the VC Lab program. The inaugural fund, Premier I, invests in the top 5% of new managers launched by VC Lab, which has accelerated 285 VC firms to date from 9,500+ candidates.
Premier I closed in April of 2023 and was oversubscribed. The flagship fund has already backed 6 of 20 target portfolio funds, and Premier I has plans to invest in 14 new funds over the next 12 months. Decile Capital backs funds from the VC Lab accelerator that have been accepted into our Decile Partners firm success program.
The portfolio includes an impact fund in LATAM that has backed a unicorn as well as a fund led by a leading social media influencer focused on social good, 444 Capital.…
Venture capital (VC) is a critical catalyst for innovation and progress in various sectors, including healthcare, energy, financial services, artificial intelligence, and climate change. As an asset class, venture capital has consistently outperformed others over the past five years, making it an attractive investment option for those looking to diversify their portfolio and contribute to the advancement of groundbreaking technologies and solutions. This article will explore the reasons why investors should consider investing as a limited partner in venture capital funds and guide you through the process. It also includes a glossary of key venture capital terms for limited partners.
Venture capital is the top performing asset class, and projections show that it will remain at the top for the next decade.…