Limited partner (LP)

The investors IN a venture fund — pension funds, endowments, family offices, wealthy individuals.

Example

A university endowment committing $20M to a fund.

LPs are the reason a VC needs enormous outcomes. They expect the whole fund returned several times over, and only a few companies will do that.

General partner (GP) — The people who run a venture fund, make the investment decisions and sit on boards.
Fund — A pool of committed capital with a fixed life — typically ten years — that a VC invests and then returns to its LPs.
Venture capital (VC) — Professional investors who manage a fund of other people's money and invest it in high-growth startups in exchange for equity.
Fund returns / power law — Venture returns are dominated by a tiny number of enormous winners rather than by average performance.

How a VC fund actually works — A VC is not a person with money. They manage a fund with its own investors, and that single fact explains almost everything they do. (15 min)