GP (General Partner)
In a venture capital fund, the General Partner (GP) plays the pivotal role of managing the fund and making investment decisions.
They perform due diligence, negotiate deals, and provide ongoing support to portfolio companies.
In return for their efforts, GPs usually earn a management fee and a share of the profits, known as carried interest or "carry".
A fund's life cycle is generally around 10 years, divided into an investment period and a harvesting period.
During the investment period, the GPs actively seek and invest in startups.
During the harvesting period, the focus shifts to growing those investments and eventually exiting for a profit.
Both periods come with their unique challenges; finding the right startups to invest in and securing profitable exits are by no means guaranteed.
Setting up a venture capital fund involves a lot of legal and financial work, not to mention the efforts needed for deal sourcing, due diligence, and ongoing portfolio management.
The terms set forth in the Limited Partnership Agreement, such as management fees, carry, and hurdle rates, significantly impact the fund's attractiveness to potential LPs and its overall performance.