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For a new venture fund to get off the ground, the partners may pitch dozens if not hundreds of prospective limited partners. Finding information about prospective limited partners is difficult, and getting them to invest is even harder.
In this episode of The First Close podcast, we interview Nate Leung, Principal with Sapphire Partners, to shed light on the limited partners’ perspective on new venture funds. Transparency is a core value of Sapphire Partners. The firm, which has a number of both direct and fund investment strategies in venture, also founded OpenLP in 2015. Search #OpenLP and you’ll find a collaborative and public effort to promote diverse perspectives from LPs, GPs and Founders.
In our conversation with Nate, we discuss:
- the limited partner perspective on fund specialization and fund size,
- how LPs evaluate manager track records and on-list and off-list references,
- LP approaches for establishing trust with fund managers,
- LP expectations for quarterly reporting,
- Diversity and inclusion in venture,
- Co-investments and SPVs
One of the big questions that Nate helps answer is: what kind of information is most important to limited partners? Nate offered that the best information venture capital investors can provide will help prospective LPs to ask better questions. The due diligence process is really a series of questions that helps LPs get a deeper perspective on whether the VC can be successful in executing their investment strategy.
Investors can ask better questions when they have better data. Like seed investors, the limited partners who back first-time venture funds are getting in on the ground floor of an entrepreneurial journey. There are many unknowns ahead, but venture capital investors and LPs can collaborate effectively if VCs provide the resources LPs need to ask good questions about where they are headed.
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