The idea of product/market fit has been around for a long time. And, while founder/market fit is a newer concept, it turns out to be just as important.
Recently, Beezer Clarkson at Saphirre Ventures wrote a post titled Raising A Fund? 9 Questions That Help Get You To GP/LP Fit. If you are a GP raising a fund, you should go read this post right now. In it, Beezer goes through, in depth, the top questions she recommends you ask an LP to determine GP/LP fit.
- What are you currently investing in?
- Why venture and how long have you been investing in it?
- How much capital do you have under management, and how much of that is invested in venture?
- How many venture managers are you currently allocating to? Will you be allocating to any new managers this year?
- What strategies and geographies are you actively investing in?
- What is your preferred check size and fund size?
- What has been your history of supporting fund managers in follow-on funds? When you have not followed on in a fund, why not?
- Who is on the investment committee and what is your process for allocation approvals?
- Outside of great returns, what are your expectations of GPs post investment?
Seriously, go read Beezer’s post.
There’s an interesting graph in the post, which shows that a typical LP is going to add less than five new managers a year to their portfolio (and, on average, only two or three.) While an LP takes a lot of meetings, they don’t do a lot of investments.
GPs – does that sound familiar?