How concentrated or diversified should a venture fund's LP base be?

Nikhil Basu Trivedi · Sep 6, 2023

No single LP should hold more than 20% of a fund, and a handful of LPs should not hold the majority

Concentrated LPs would have outsized control over the firm's thinking and decision-making

34:53 20VC: Why Small Funds Outperform Large Funds & AUM is a Vanity Metric | Why 99% of Investments in AI Startups Will Go To Zero | Being a "Traction First" VC & Investing Lessons from Investing in Canva and Missing Figma with Nikhil Basu-Trivedi

Miles Dieffenbach · Aug 4, 2025

Ideally no LP exceeds 10% of a fund, but for a $50-100M fund a $10-30M check from a long-term partner still makes sense

Scope: applies to smaller funds; requires the LP be long-term aligned

32:07 20VC: Inside Carnegie Mellon's $4BN Endowment | Why 90% of LPs Shouldn't Invest in VC | The $140BN Problem with Multi-Stage Funds | The Hidden Math Behind DPI, TVPI, and Illiquidity with Miles Dieffenbach

Nikhil Basu Trivedi · Sep 6, 2023

An LP base composed entirely of endowments is risky despite their reputation for stability, so diversity across LP types is preferable

Endowments may all hit the same denominator-effect problems at the same time and tend to be aligned in what they care about

Scope: endowments are still great names and long-term oriented

35:23 20VC: Why Small Funds Outperform Large Funds & AUM is a Vanity Metric | Why 99% of Investments in AI Startups Will Go To Zero | Being a "Traction First" VC & Investing Lessons from Investing in Canva and Missing Figma with Nikhil Basu-Trivedi

Miles Dieffenbach · Aug 4, 2025

GPs should build a diversified LP base — a mix of endowments, foundations, family offices, founders and GP checks — to protect against LP churn

Liquidity crunches and family offices deciding to exit venture will inevitably happen, so diversification is the protection

Scope: acknowledges not every GP can choose their LP base

31:09 20VC: Inside Carnegie Mellon's $4BN Endowment | Why 90% of LPs Shouldn't Invest in VC | The $140BN Problem with Multi-Stage Funds | The Hidden Math Behind DPI, TVPI, and Illiquidity with Miles Dieffenbach

Mark Goldberg · Oct 25, 2024

Managers should build an LP base diverse in how people think and decide independently, rather than diverse only by institution type, and should avoid correlated LPs

It's easy to end up with LPs who are alumni of the same institution and therefore herd together; you don't want your LPs correlating with one another

32:13 Diversify lp base by independent decision making not just institution type

Tomasz Tunguz · Apr 21, 2023

There is no single right capital formation model for a venture firm — highly concentrated LP bases and very fragmented ones both work

Talking to many other fund managers revealed $200M funds with 80% from two LPs alongside funds built from lots of small checks

7:46 No single right lp concentration model both concentrated and fragmented work

Rob Go · Jun 23, 2023

LP concentration is acceptable — a single LP at 20-25% of the fund is not ideal but workable, and small funds will be concentrated one way or another

Small funds inevitably have concentration, and an LP's influence can be diluted by the next fund

16:13 Small funds inevitably concentrate lps so a single lp at 20 25 percent is workable