General Partner (GP)

Quick Definition

The fund managers who make investment decisions, manage portfolio companies, and have unlimited liability.

What is a GP?

General partners are the VC firm's decision-makers. They raise the fund, source deals, make investment decisions, serve on boards, and work to generate returns for LPs.

GP Compensation

GPs earn management fees (salary and operations) plus carried interest (profit share). Partners typically have 5-25% of the carry pool depending on seniority and deal attribution.

GP Commitment

GPs invest 1-5% of fund size with their own money. This skin in the game aligns GP and LP interests. A partner investing $500K in a $100M fund shares the downside.

Formula

GP economics in a $100M fund:

• GP commitment: 2% ($2M, split among partners)
• Management fee: 2% ($2M/year for operations)
• Carry: 20% of profits (split among partners)

If fund returns 3x: $40M carry to split.

Example

VC firm has 4 partners raising Fund IV ($150M):

• GP commitment: $3M (2%), $750K each
• Carry split: 50% to senior partner, 20%, 20%, 10%
• If fund 3x returns, $60M carry:
  • Senior: $30M, Others: $12M, $12M, $6M

Related Terms

[Most Favored Nation (MFN)]

A provision guaranteeing an investor will receive terms at least as favorable as any subsequent investor receives.

[Qualified Financing]

The minimum raise amount that triggers automatic conversion of convertible notes or SAFEs.

[Maturity Date]

The deadline by which a convertible note must be repaid or converted to equity.