LPs vs GPs: The Players Behind a VC Fund

LPs vs GPs: The Players Behind a VC Fund

Imagine a heist movie.

You’ve got the brains, the money guy, the smooth-talking negotiator, and the wild card who’s always eating chips in the corner. Now replace the vault with a unicorn startup, and boom, you’re in the world of venture capital.

But the real action? It doesn’t start with founders or pitch decks.

It starts with the people behind the fund itself: the Limited Partners (LPs) and General Partners (GPs).

So let’s break down the drama, the power plays, and the payoffs in LPs vs GPs: The Players Behind a VC Fund.

LPs vs GPs: Who’s Who in the Venture Capital World

Think of a VC fund like a movie production.

LPs are the producers. They put up the money but stay out of the day-to-day.
GPs are the directors. They choose the cast (startups), run the show, and make the magic happen.

Both are essential. No money = no funds. No operator = no returns.

But their roles, incentives, and risks? Totally different. And that’s what makes LPs vs GPs such a fascinating dynamic.

LPs vs GPs: The Money vs The Hustle

Let’s start with the Limited Partners.

LPs are institutions with a lot of capital and a long investment horizon:

Pension funds
University endowments
Sovereign wealth funds
Family offices
Ultra-rich individuals who don’t want to manage investments themselves

They’re not looking for quick wins. They’re placing bets across multiple asset classes: stocks, real estate, private equity, hedge funds, and yes, VC funds. Venture capital is just one tiny (risky) sliver of their portfolio pie.

Meanwhile, GPs are the operators. They:

Raise the funds
Source and evaluate startups
Invest in promising founders
Sit on boards, help companies grow
Manage the portfolio for over 10 years
Try to generate huge returns

So, in the LPs vs GPs matchup, the LPs bring the capital. The GPs bring the hustle.

LPs vs GPs: Who Gets Paid and How?

The pay structure also shows who carries the risk.

LPs:

Provide 99% of the capital
Expect a return on investment
Have downside protection: they get their money back first
Get 80% of the profits from a successful fund

GPs:

Put in 1% of the capital*
Earn a management fee (usually 2% annually)
Earn carry (20% of the profits, after LPs are paid back)

Translation: LPs take the financial risk. GPs take the career and performance risk.

A bad fund means LPs lose money, and GPs lose their reputation.

* “99/1” is an industry rule-of-thumb, not a fixed law.

LPs vs GPs: Who Has the Power?

Here’s where it gets spicy.

LPs call the shots when:

Deciding whether to invest in a fund
Negotiating fund terms (fees, carry, reporting, etc.)
Choosing whether to back the next fund

GPs call the shots when:

Picking startups
Deciding how and when to exit
Allocating follow-on capital

It’s a delicate balance. GPs want autonomy to make bold bets. LPs want transparency and a shot at great returns. Too much control from either side, and the fund suffers.

So in LPs vs GPs, it’s less a power struggle and more a trust fall.

LPs vs GPs: What Each One Looks for

LPs care about:

Track record of the GP
Investment thesis
Risk profile
Fund size and strategy
Return potential over 10 to 15 years

GPs care about:

LPs who commit early
Long-term, repeatable capital
Minimal interference
Alignment on expectations

For both, relationships matter more than anything. The best funds are built on long-term trust, not short-term hype.

LPs vs GPs: Structure of the VC Firm

Alright, let’s zoom in on the actual firm: the group of people managing the VC fund. It's not just one guy in a Patagonia vest writing checks (though... yes, he’s probably in the room).

Here’s how the VC firm is typically structured, especially when you’re talking about the GP side of the LPs vs GPs equation:

General Partners (GPs): The Decision-Makers

These are the partners whose names are on the door (sometimes literally). They make the final calls on investments, sit on startup boards, and are responsible for raising and running the fund. If the fund performs well, they get the carry. If it flops… they might not get another shot.

Principals & Vice Presidents: The Up-and-Comers

These are GPs in training. They help with due diligence, manage relationships, and sometimes lead smaller deals. If they perform well, they get promoted or poached.

Associates: The Hunters

These are the ones scouring Twitter, Substack, pitch nights, and weird Discord channels for the next breakout founder. They do a lot of the initial screening and analysis. No carry (yet), but lots of cold emails.

Operating Partners, Platform, and Back Office

Modern VC firms don’t just write checks, they also try to help. These folks handle everything from marketing and recruiting support for portfolio companies to LP reporting and legal compliance. They’re the glue that keeps the machine running.

In short, the VC firm is the general partnership, and the people inside are the ones doing the work.
The fund is the product.
The LPs are the customers.
And GPs? They're the chefs in the kitchen trying to serve Michelin-starred returns.