A Guide to LP Reporting Best Practices for VCs

Belle Raab

The foundation of a great relationship between General Partners and their Limited Partners (LPs) is based on trust and transparency. A great way to foster this dynamic is by sending regular, insightful communications to your LPs.

While it can feel intimidating to go outside the box and share details about your fund performance in addition to the standard LP reporting requirements, this is a great way to stand out as a General Partner. With competition for funding being as intense as it is in today's climate, it's a smart move to go above and beyond to impress LPs and establish a trustworthy reputation as a GP.

A guide to LP reporting best practices for VCs

This guide was created in partnership with Aduro Advisors, a premier Fund Admin led by industry veterans. We partnered with Aduro for a webinar where we discussed the process of reporting to Limited Partners and best practices in-depth. This guide is a summary of that discussion.

The contents of this guide include:

  • The importance of the LP reporting
  • LP reporting best practices
  • Sending LP updates as a fundraising strategy
  • What to include in an LP Update
  • A quarterly LP reporting update template

LP update templates for VCs

If you're not sure where to get started with your communication with LPs try checking out LP update templates for VCs or asking other GPs in your network for examples of what they're sharing with LPs.

Some basic LP communication rules to follow include:

1. Send your updates on a regular cadence

2. Go beyond just the basics

3. Be authentic with your communications

4. Don't share sensitive information about your companies

For more tips check out: Tips for Writing LP Updates for Emerging Managers (with Templates)

For more inspiration check out Visible's LP template library for inspiration.

Resources for reporting to LPs for venture capital investors

Check out these additional resources to inspire your next LP communication.

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It’s common for venture firms to start raising their next fund in the last year of capital deployment, typically years 3-4 of a fund’s life. This poses a sort of chicken-and-egg problem because many of the common fund performance metrics that Limited Partners use to drive allocation decisions only become reliable, and therefore more meaningful, around year six (Source: Cambridge Associates). Farooq Abbasi, founder and General Partner of Preface Ventures, created a Seed Stage Enterprise VC Funding Napkin to help GPS think through alternative fund metrics that help communicate performance outside the traditional indicators that LPs use to measure success for more mature funds. The Seed Stage Enterprise VC Funding Napkin is inspired by Christoph Janz’s Saas Funding Napkin which helps answer, “which KPI's indicate a company is in a good position to raise another round of funding in this environment?”. This version created by Preface Ventures answers the question for fund managers, “What needs to be true about a seed-stage fund to raise another fund”? Join us next Tuesday, February 27th for a discussion with Farooq Abbasi from Preface Ventures about the fund performance metrics GPs should share when their current fund is still 'early'. Learn more and register for the webinar below. Webinar Topics The issue with ‘typical’ fund performance metrics for ‘early’ funds Overview of Preface Venture’s Seed Stage Enterprise VC Funding Napkin Deep dive into alternative early performance benchmarks How to keep track of alternative fund performance metrics How to leverage alternative fund performance indicators into your fundraising narrative Inside look into how Preface Ventures keeps LPs up to date Q&A About Preface Ventures Preface Ventures is a New York City-based firm started in 2020 led by Farooq Abbasi. Preface invests $500-$2M at the pre-seed and seed stage into startups who are building the Frontier Enterprise structure. Preface has 20 active positions in Fund II and 7 active positions in Fund III. (Learn more)
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