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Venture capitalists (VCs) typically get their funds from a group of investors known as Limited Partners (LPs). Here's a breakdown of the structure: 1. Limited Partners (LPs) These are the people or institutions who invest money into a VC fund. They include: Pension funds Endowments and foundations Family offices High-net-worth individuals Insurance companies Corporations Sovereign wealth funds 2. General Partners (GPs) These are the people who manage the VC fund. They decide: Which startups to invest in How much to invest When to exit an investment 3. VC Fund Structure LPs give money to the VC fund (typically locked in for 7โ10 years). GPs manage and invest that money into startups. Profits from successful exits are shared: usually 80% to LPs and 20% to GPs (called "carried interest"). ----------------------------------------------- +-----------------------+ | Limited Partners | |-----------------------| | - Pension Funds | | - Endowments | | - Family Offices | | - HNW Individuals | | - Corporations | +----------+------------+ | | Capital (e.g., $100M) v +-----------------------+ | VC Fund (Managed by | | General Partners) | |-----------------------| | - Finds Startups | | - Invests Capital | | - Manages Portfolio | +----------+------------+ | | Investment (e.g., $1M-$10M) v +-----------------------+ | Startups | |-----------------------| | - Build Products | | - Scale Companies | | - Aim for Exit | +----------+------------+ | | Exit (e.g., IPO/Acquisition) v +-----------------------+ | Profits Returned | |-----------------------| | 80% to LPs | | 20% Carried Interest | | to GPs | +-----------------------+
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