How to Maintain a Relationship with Limited Partners (LPs)

 Today, we’re going to talk about maintaining relationships with limited partners.

First, I’ll define what a limited partner is. An LP, or limited partner, is one of the members of a partnership. It’s the contributing members of the pool of capital that venture capital funds have and that they use to exchange equity or ownership with actual explicit dollars.

So I’m going to talk to you today about maintaining relationships with limited partners and why it’s important. The first thing to remember and think about, and this could be with investors, whether you have a startup, Or you have a venture capital fund. It’s clear and honest communication. Everyone knows things aren’t always going to go well. Recessions happen. Mistakes happen. Sometimes your projections are not met. We all have growing pains. We all live and we learn. The one thing that’s most important to remember with your investors is to just tell the truth. And what’s most important is being ahead of the truth before they get it from anyone else. So if anything happens in your organization, whether it’s an issue with team members, whether it’s an issue with fundraising, whether it’s an issue with meeting milestones in the organization, anything it is, any big material change, make sure to be the first source of information, the first person to be communicating this challenge with your limited partner base.

The second thing that I’ve learned as well is keep it short. The more that you explain, the more it seems like you’re trying to justify something. So do be honest with the big changes, the material changes. Do be the first person to communicate them to your limited partners. And then also make sure that you don’t take five paragraphs, a long letter to report these things.

Ideally, you do one, immediately there’s a problem and you communicate, this is what we’re planning to do. And then you do a follow-up within a specified period of time, clarifying this is what we’ve done and this is how the problem has been resolved. Make sure that you communicate as soon as the issue happens, and when you’re concerned about it getting out, and then once it’s resolved. Because that will reinstate the trust. The reason that you communicate, and the reason that you are authentic and transparent, etc., is the building of trusting relationships. And a big part of building trusting relationships is demonstrating responsibility and integrity. You say that you’re going to do something, and you do it. You show what’s happening transparently, and it actually is comprehensively the facts. There’s nothing that you missed out on it. And you have an accurate understanding and depiction of the past, present, and future of your business.