The GP's own fundraise
Before a VC firm can write a single check, it has to raise its own fund, essentially pitching itself to LPs the same way a founder pitches a VC. This is often called "fundraising a fund" or "raising Fund III" (etc.), and it typically takes 6-18 months, longer for a first-time fund with no track record to point to.
Who the LPs actually are
| LP type | Typical check into a fund | What they care about most |
|---|---|---|
| University endowments | $5m-$50m | Long time horizon, brand-name track record |
| Pension funds | $10m-$100m+ | Scale, institutional process, predictability |
| Fund-of-funds | $2m-$20m | Diversification across many managers, access to hard-to-reach funds |
| Family offices | $500k-$10m | Relationship, sometimes co-investment access |
| Sovereign wealth funds | $25m-$200m+ | Scale, geographic/sector alignment |
What actually gets a fund raised
For an established firm, track record, prior fund returns, especially DPI (distributions to paid-in capital, actual cash returned, not just paper markups), dominates the conversation. For a first-time fund, LPs instead evaluate the team's individual track record (did they make good angel investments before starting a fund?), the thesis (Lesson 6's logic, but for an entire fund's strategy, not one company), and access, can this specific team actually get into the best deals.
An LP isn't just buying a return. They're buying access to deal flow (Lesson 5) they couldn't build themselves.
The ongoing relationship
Fundraising a fund isn't a one-time event, LPs receive quarterly reports, attend an annual meeting, and are re-pitched every 2-4 years when the GP raises the next fund. A GP's reputation with LPs compounds across fund vintages the same way a founder's reputation compounds across companies, which is why the reporting discipline covered in Lesson 33 matters well beyond any single fund.
Checkpoint
- A VC firm must raise its own fund from LPs before it can invest, a process that mirrors a startup's own fundraise.
- LP types range from endowments and pensions to fund-of-funds and family offices, each with different check sizes and priorities.
- Track record (especially DPI) dominates for established firms; team, thesis, and access dominate for first-time funds.
If anything here still feels unclear, ask before moving to Lesson 27.