Many aspects of venture funding remain a mystery, even to those working within the industry. When we launched Sapphire Partners to invest in venture funds , we noticed the role of limited partners (LP), the folks who invest in venture funds and whose capital is then in turn invested in startups, was particularly opaque — even for entrepreneurs and VCs who had been through several fund-raising cycles.
This isn’t surprising.
Limited partners are traditionally pretty private folks. They usually consist of endowments, pension funds, foundations, fund-of-funds , family offices, and other asset managers looking to gain exposure to the tech startup industry. LPs can also be legally restricted in what they can say publicly. Some LPs must register with the SEC, and the SEC has rules about what a SEC Registered Investment Advisor can (and cannot) say publicly. There can also be restrictions in the LPA (Limited Partner Agreement, the legal agreement that governs the relationship between LPs and VCs when an LP invests in a fund) that can limit whether an LP can disclose the fund(s) they are invested in publicly.
All that said, we wanted to help clarify what we believe is a critical link between funders and founders, bring the LP perspective to the dialogue and help all parties better understand how to engage and leverage their LPs. We saw how hungry the tech ecosystem was, and is, for more information on how the venture ecosystem works and believed that demystifying the role of the LP might open new avenues for discussion and collaboration — and ultimately generate greater value for the entire ecosystem.
To that end, we collaborated with other like-minded LPs to launch in 2016. We gathered all the LP voices that we could, the blogs, the articles, the podcasts and aggregated them on a website so that if one was looking to hear what LPs were saying, you could look in one place. Or if one was on Twitter: .
OpenLP’s mission is to foster greater transparency and dialogue between LPs, GPs, and entrepreneurs. We wanted to aggregate the LP voices that were out there, amplify them so others looking for them could find them as well as encourage more LPs to join the dialogue. Over the last three years, we have been thrilled to see so many more LPs engaging with the tech ecosystem be it by speaking at conferences, blogging, tweeting, podcasting or other forms of content sharing. And we’re just getting started.
I wanted to take a moment and provide an overview of how OpenLP has evolved in the last three years — and share what is coming next.
Setting the Table
In my experience, there are times when an idea almost cannot help but be born simply because its time has come. And I think that was true for OpenLP. In particular, three key ingredients came together that allowed the OpenLP conversation to first be born, and then evolve into what it is today.
1. Timing is Everything
If OpenLP had started even a few years earlier, we might not have had the critical mass of LPs interested in participating for it to take off or a tech ecosystem that had come to embrace information sharing a wide range of ways. Specifically, by 2016, the venture industry was back on a notable upswing from the 2009 downturn with investment in venture funds alone almost double what they were as recently as 2013 — and 3.5x that of 2009.
Separately but related, we had also observed the very pronounced impact of venture investors and entrepreneurs writing, blogging, and participating in social media had on the ecosystem. Everything from Mary Meeker’s first internet report in 1995 (which is still going strong today ) to Fred Wilson’s first post on AVC in 2003, Brad Feld’s seven books on startups , Aileen Lee coining the now ubiquitous term “unicorn “ to describe a company valued at $1BN+, to Jason Lemkin’s first 2,000+ Quora answers , to Marc Andreessen’s first controversial tweet storm . Then there was the emergence of new voices in 2015, such as Notation Capital’s Origins , a podcast about the money behind the money (or in other words, LPs) and Arlan Hamilton’s “Dear White Venture Capitalist…” medium blog that quickly went viral.
2. It Takes A Village
Despite the volume of content, we noticed a lack of LPs voices in the venture space. We thought this was a shame because:
- LPs are investors in a range of funds (not to mention other asset classes like public stocks, currencies and real estate) and
- for many LPs, they have been investing for multiple decades meaning they have seen many many fund cycles, ways of managing a venture fund and investing in it
This affords LPs a vantage point from which they can contribute a more macro, industry-wide perspective — along with insights into how venture capital has evolved over time, observations on trends and the ability to highlight best practices. We wondered if this lack of LP voice was because entrepreneurs and newer VCs might be confused about the definition of a Limited Partner and the role they play in the industry. There is after all very few, if any, places to go to learn the business of running a venture fund in advance of doing it for one’s self. We also wondered if we aggregated the LP voices that were out there, would folks be interested in what LPs had to say?
One of the original LP bloggers in general and OpenLP in particular, Chris Douvos , put to rest this question loudly and clearly in a hallway conversation we were having: “You know, everyone wants to know what LPs are saying,” he said and then he took it a step further: “We should have a hashtag.”
Chris’ comment was the spark necessary to light the #OpenLP hashtag on Twitter and helped motivate us to launch the OpenLP.com website as a useful and useable repository for all LPs, GPs, and entrepreneurs who want to contribute to the discussion or just listen in.
OpenLP could not have happened though if it was just Chris and Sapphire. It took a village. Multiple LPs came together to contribute the original content necessary to kick off OpenLP. Subsequently, other LPs, GPs and entrepreneurs joined the conversation to share their perspectives via blogs, tweets, podcasts, and videos and the dialogue took off.
- Chris Douvos, Ahoy Capital
- Lisa and David,Top Tier Capital
- Judith Elsea and Tim Bliamptis, Weathergage Capital
- Michael Kim, Cendana Capital
- Cambridge Associates
- Lindel Eakman, Foundry Next
- Harry Stebbings, Twenty Minute VC
- Origins Podcast, Notation Capital
The range of LP/GP relevant topics covered over the last three years has never ceased to amaze me. Everything from how to split economics in a fund , the LP Anti-Portfolio to why you should invest in Europe and what makes a good annual meeting . In tandem, we observed more LPs discussing their investment decisions, operations and industry perspectives at conferences, on panels, podcasts and online.
3. Sapphire’s Role
To put it simply, we at Sapphire are venture nerds. We live in it, we study it, we clearly love it and we continually push ourselves to reimagine what it means to be a world-class venture investor. So, with that, in 2012, Sapphire launched our dedicated venture fund investing business, Sapphire Partners .
At Sapphire Partners, we believe an LP should be a strategic asset to the venture fund they invest in and bring more than money to the table. We want to be in service to both our GPs and the venture ecosystem in general. This means doing things like sharing our industry research , benchmarking and analysis with the greater venture community as well as doing bespoke analysis for our GPs.
This passion for venture, service mentality and in-house body of knowledge became the basis for our own contributions to OpenLP. It also meant we were fortunate enough to have the internal resources necessary to dedicate to launching and supporting the growth of OpenLP.
What’s Next for OpenLP?
But wait — there’s more!
We want to build on the amazing traction and the vibrant conversation taking place and do what we can to make it that much better. So we’re relaunching the OpenLP.com platform with new functionality to make it even easier to find, share and submit content to the LP/GP/tech community zeitgeist.
The new site makes it easier to submit content for publication, as well as new search functionality to help you sort through all of the past content to find the information you need. Of course, it’s still just as easy to sign up for the OpenLP newsletter to get those article digests in your inbox on a regular basis. And, we gave the branding and styling a major upgrade.
Our hope is that OpenLP can continue to be a vehicle for strengthening and deepening the GP/LP/tech wide discussion. We also hope you’ll join in the conversation — either on Twitter; or reading and contributing perspectives on OpenLP.com. Come join us!
Disclaimer: Nothing presented within this article is intended to constitute investment advice, and under no circumstances should any information provided herein be used or considered as an offer to sell or a solicitation of an offer to buy an interest in any investment fund managed by Sapphire Ventures. Information provided reflects Sapphire Ventures’ views as of a time, whereby such views are subject to change at any point and Sapphire Ventures shall not be obligated to provide notice of any change. Readers should not treat any opinion expressed in this article as recommendations to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Various opinions presented in the article are based upon information the guest blogger considers reliable, but neither Sapphire nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Due to various risks and uncertainties, actual events, results or the actual experience may differ materially from those reflected or contemplated in these statements. Nothing contained in this article may be relied upon as a guarantee or assurance as to the future success of any particular company. Past performance is not indicative of future results.
Originally published at https://sapphireventures.com.