Here’s what you need to know about a company general partner. You may even decide to become one yourself.
What is a General Partner?
A GP is responsible for managing a venture fund. They analyze potential deals and decide what to do with their money, just like other fund managers in different sectors like mutual funds, stocks, bonds, or real estate. A general partner may also hold a partnership at a large venture capital firm or invest independently on AngelList.
Like this general partner, they also invest capital into the company and have a stake.
There are two primary responsibilities for a general partner raising money from limited partners (aka LPs) and finding quality investments.
What Are the Responsibilities of a Company General Partner?
The work of an LP is mainly done when they invest money into a venture fund. You may occasionally advise the GP and give your opinion on deals, but you are generally a passive investor. It’s just a case of sitting back and waiting for returns one day.
GPs, however, face the opposite situation. During the fund’s lifetime (typically more than ten years), GPs are ultimately responsible for everything that happens.
A general partner’s primary responsibilities are as follows:
- Raising funds: The venture capital space is becoming increasingly competitive, making this task quite challenging. There are many cases in which LPs invest based on the track record and reputation of the general partner.
- Managing the fund’s capital effectively: The general partner has to carefully distribute funds and manage them effectively for the maximum return for LPs. This means monitoring performance and investing in the right companies at the right time to maximize growth and profitability.
- Increasing the value of portfolio companies: A general partner regularly monitors portfolio companies’ performance and often provides direct support to founders. A common way GPs support founders is by helping them make relevant industry connections-whether with potential customers or talent. In addition to offering advice, GPs can help secure follow-on funding.
- Following up with additional investments: In subsequent funding rounds, it is up to GPs to decide whether they want to continue or disperse. Pro-rate rights are often taken into account by the general partner when making this decision.
- Keeping LPs informed about the fund’s performance: GPs must report and communicate regularly with LPs. This lets them give you regular updates on the company’s performance, whether good news or bad depending on the outcome.
- Managing Fund Operations: Tax reporting, financial reporting, and other administrative tasks are the responsibility of the General Partner.
- Assemble the team: During the fund life, a general partner hires new investment professionals and managers to support the fund’s activities.
- Reporting profit: But first, congrats to the general partner if they’ve managed to generate profit from their venture fund investments! They are responsible for reporting their earnings to the limited partners to pay them out.
Generally, the job of a company general partner is not taken lightly. They operate under a lot of pressure and work on high-risk activities, which entails risks for them and LPs.
However, as successful venture funds can be highly lucrative in the longer term, the rewards will exceed those risks. Becoming a company general partner may be the perfect role if you’re entrepreneurial and passionate about startups.