LPs are developing new selection criteria to filter managers. They will actively screen out GPs who lean too heavily on continuation vehicles as a default liquidity solution or who prioritize scaling their own firm's growth through retail capital, due to concerns about conflicts of interest and alignment.

Investing in a General Partner (GP) provides ownership in a resilient business. The most valuable component is the contractual management fees, which act as a predictable annuity with ~60% operating margins. The carried interest is a significant, albeit lumpy, upside on top of this stable base.

The General Partner (GP) agreement, which governs the firm's internal operations, must be finalized before launching the fund. Delaying it until after the capital is raised gives the founding partners immense leverage to impose unfavorable terms on the rest of the team.

To achieve superior returns, Limited Partners should abandon a passive role and adopt a General Partner's proactive mindset. This means actively sourcing opportunities, building a network, and cultivating deep relationships, rather than just waiting for managers to pitch them.

The strength of a GP-LP relationship isn't measured by co-invest rights or fee breaks. It's demonstrated when a GP offers valuable advice or connections that improve the LP's overall portfolio, even when there's no direct financial gain for the GP. This uncompensated help is the hallmark of true partnership.

Using the standardized Due Diligence Questionnaire (DDQ) from the International Limited Partner Association (ILPA) is a strategic, LP-friendly move. It signals a high degree of transparency and a willingness to answer standard, often tough, questions without alteration, building trust with potential investors from the start.

A significant, yet uncommon, sign of an LP-friendly VC is returning a portion of the carry from Special Purpose Vehicles (SPVs) to the original fund's LPs. This acknowledges that the main fund's resources and reputation sourced the follow-on investment opportunity in the first place.

Lara Banks suggests that emerging fund managers should proactively ask LPs about their specific criteria for success. This conversation aligns expectations early, clarifies performance benchmarks for future funds, and prevents misalignment between the GP's strategy and the LP's evaluation framework.

An LP with prior experience as a GP has a distinct advantage in accessing top-tier funds. They understand what GPs value in an LP—responsiveness, transparency, long-term thinking, and trust. By acting as "the LP they wanted to work with," they build deeper relationships and gain an edge over LPs who have never been on the other side of the table.