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May 3, 2007

Top Ten Limited Partner (LP) Lies

Now and then I'm fond of running top ten lists, including my list of top ten VC lies a little while back. Well, that latter post provoked another venture guy to send me, with a request of anonymity, the following entertaining list of the top ten lies of LPs, the institutions that fund venture firms. It's a bit "inside baseball", so feel free to ask for explanations, but I think it's great stuff.

10: We don't invest in first or second funds, see #1
9: We have committed this years allocation
8: We don't believe in this asset category unless we can get into Sequoia
7: My committee would never let me do a deal outside of the valley
6: Our diligence is very deep (bottomless unless you are about to close and any of my close LP friends are in)
5: Your past results don't fit into our quantitative model that is highly predictive of future success
4: We don't invest less than $100M per fund (and we expect early-stage returns)
3: We are independent thinkers
2: We would really like to be in the second close
1: See #10... we don't invest in first or second funds unless Harvard / MIT / Stanford are already in

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