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On my run today I was thinking about GP – LP interactions. This line of thought was prompted by a contrast between two interactions, or rather one interaction and one non-interaction, that I’ve had in the past few days.
The interaction was I had with one of my LPs over the last 24 hours. They emailed asking for a reference on someone who indicated they knew me and had invested with me. I didn’t know the person, but knew a few people who did, and quickly sent emails getting addition info for my LP. With a small amount of effort I was able to generate some useful feedback, including triangulating on the deal he was suggesting we were investors in together (it was a true statement prospectively as it’s something I’m working on.) I was also able to get some specific one degree of separation feedback for my LP.
I contrasted that with the non-interaction that I’d recently had. I’m an investor in about 30 VC funds (so, in addition to being a GP in my funds, I’m an LP in a bunch of other funds.) I’m a very easy LP – I basically try to be available for the GP whenever they want, be supportive, make my capital calls on time, and be low maintenance. I invest in VC funds for several reasons, including my belief that long term it’s a good investment (and my overall performance across this category of investment bears this out.)
In the case of the non-interaction, I made an intro between an entrepreneur and the GP. I do this sparingly (per my Don’t Ask For A Referral If I Say No policy) – I’ll only do this if I think the fit is a good one. I think most of the people I’ve invested in and work with know this, but who knows. Anyway, in this case I haven’t heard anything back from the GP. When I thought about this, I realized there were several GPs I’ve invested in that are terrible at responding to me. Now, this might just be me, and not their LPs in general, but my guess is that the dynamic is a typical one given my knowledge of their individual tempo and work patterns.
I realized as I was thinking about this that I have very little respect for this type of behavior. I think you should treat your investors with the upmost respect, be extremely responsive to them, and to go out of your way to try to be helpful when they interact with you. When I reflect on the interactions I’ve had with my investors over the last 25 years, I always tried hard to be responsive, even if we had a disagreement, difficult conversation, or difference of opinion.
I tried to come up with a rationale for blowing off an LP. None of the obvious ones – I’m too busy, it’s not a priority, it’s not what I’m paid to do, I’m not interested – made any sense. And I couldn’t come up with any non-obvious ones that did either.
In every GP / LP relationship I’ve ever been involved in, there comes a moment in time when the GP needs something from the LP. This is true at the beginning of the relationship when the GP is asking the LP for an investment. It seems incredibly short sided to me for GPs to forget that they will once again need something from the LP and, instead of being responsive through the life of the relationship, only pay attention when the GP needs something.