LP
Limited Partner
Definition
Limited Partners (LPs) are the investors who provide capital to venture capital funds. They have limited liability and are passive investors—they don't make investment decisions or manage portfolio companies.
In Simple Terms
LPs are the people/institutions that give VCs money to invest. Pensions, endowments, family offices, and wealthy individuals invest $100M in a fund, then VCs (GPs) invest that money in startups on their behalf.
Why It Matters
LPs are the source of all VC funding. Without LPs, VCs can't invest in startups. Understanding LP motivations (diversification, returns, access) helps you understand why VCs behave the way they do—they're accountable to their capital providers.
Example
Yale Endowment invests $50M in Sequoia's seed fund. Sequoia invests that money in startups. When those startups exit, Sequoia returns proceeds to Yale (minus their carry). Yale is the LP, Sequoia is the GP.