In this episode of the EUVC podcast, Andreas talks with Carmen Alfonso Rico, a self-described VC turned angel at Cocoa Ventures. and Evan Finkel, Head of Venture Capital Investments at Integra Global Advisors.
Carmen is leading the charge at Cocoa Ventures, a €15M fund headquartered in the UK and focused on backing pre-seed and seed-stage startups across Europe. Cocoa Ventures invests across sectors, emphasizing Carmen’s vision of supporting bold founders in their first institutional round. Notable investments include Speckle, Eventstore, FDM, Tilebox, Fractile from Cocoa I, and hopin, SideQuest, Hived, pre-Cocoa.
At Integra Global Advisors, an investment advisory firm serving ultra-high net worth families and charitable institutions with €700M in assets under management, Evan is targeting early-stage and emerging managers across the US, LatAm, Europe, and Israel. Notable investments include Plural, Fly, and Retail (EU).
Read on for:
The psychology and gamesmanship between LPs and GPs during the fundraising process. We dive into the various tactics LPs have for kicking the can down the road before taking a decision and the ways GPs can push LPs to accelerate their decision timeline, What’s fair and what should be out of play?
Insights on how LPs think when identifying strong GPs
The importance of integrity in the venture and
Management fees, carry and the need for incentive alignment
Watch it here or add it to your episodes on Apple or Spotify 🎧 chapters for easy navigation available on the Spotify/Apple episode.
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✍️ Show notes: Principles for Navigating LP/GP Dynamics in Venture Capital
Balancing Personal and Professional Relationships
Venture capital relationships between Limited Partners (LPs) and General Partners (GPs) can be complex and multi-layered. Our goal is to cultivate an environment where GPs understand how to navigate the delicate interplay between personal connections and the objective requirements of investment decisions.
Keep Business and Friendship Separate — In venture capital, personal and professional lines often blur, especially given the relationship-driven nature of the industry. GPs need to understand that LPs have diverse and dynamic priorities. Decisions not to invest are often driven by broader allocation strategies, timing issues, or other financial constraints rather than personal judgment of the GP. It’s natural for GPs, especially emerging managers who are emotionally invested in their funds, to feel let down when friends pass on investing, but it’s crucial to recognize that LPs are balancing multiple competing priorities. Preserving this boundary ensures both the business relationship and the personal friendship can flourish without misunderstanding or resentment.
Timing is Everything — Timing plays a fundamental role in how LP decisions are made. LPs operate on distinct cycles that may not always align with a GP’s fundraising needs. When an LP passes on investing, it may have nothing to do with the quality or potential of the GP’s fund but instead reflect internal timing constraints or the LP’s current portfolio strategy. Successful GPs understand this nuance and approach LP relationships with a level of maturity that prevents personal offense and instead sees rejection as part of the broader landscape of venture investing. Timing mismatches shouldn’t be viewed as obstacles but as opportunities to maintain dialogue and position the relationship positively for future raises.
Gamesmanship in LP x GP Relations.
Fundraising in venture is about more than just pitching a good story—it involves building nuanced relationships, employing strategic negotiation, and knowing when to push forward and when to hold back.
Play the Long Game — Fundraising frequently involves an element of “gamesmanship” that must be managed carefully. Both LPs and GPs leverage tactics to protect or advance their positions—LPs might delay a decision to gain more visibility on the market or a particular GP’s performance, while GPs might hint at urgency to push LPs into committing. But in a tight-knit industry like venture capital, crossing ethical boundaries can have long-lasting consequences. Trust is foundational to venture investing, and once it’s broken, rebuilding it is immensely challenging. GPs who play fast and loose with closing dates or artificially create urgency can achieve short-term gains, but they do so at the expense of long-term credibility. The real winners are those who maintain transparency and integrity while still strategically guiding their fundraising process.
Transparency vs. Pressure — Understanding the balance between strategic pressure and transparency is critical for effective LPGP relationships. Creating urgency can indeed help spur LPs to action, but it should never cross the line into deception. The reality is that LPs talk—within their firms and across the broader LP community. A reputation for being straightforward, consistent, and honest about the fund’s position will ultimately carry more weight in subsequent funds. This transparency also reflects a GP’s confidence in their offering—if the value proposition is genuinely compelling, GPs don’t need to resort to artificial tactics. Knowing when to push and when to let the value of the opportunity speak for itself is a refined skill that builds long-term success.
First Close vs. Final Close
Getting LPs to commit early in a fundraising process is one of the most challenging hurdles GPs face. This challenge is compounded by the natural hesitation LPs have regarding uncertainties in a fund’s early stages.
Reducing LP Hesitation — LPs are inherently cautious about joining first closes. The first close is often seen as riskier due to the potential for the fund’s direction to shift significantly afterward. Changes in fund size, shifts in team composition, or strategy pivots all introduce risks that LPs prefer to avoid. GPs who understand this can address LP hesitations more effectively. The best way to reduce this hesitation is to establish and maintain consistency—having a clear, well-communicated strategy, and minimizing any changes after the first close. This consistency signals to LPs that they aren’t signing up for a moving target, which can greatly reduce perceived risk and increase their comfort level.
Creating Incentives for Early LPs — Addressing LP hesitancy also requires GPs to be creative about how they incentivize early commitments. It’s a classic “chicken and egg” problem—LPs want to see who else is committed before making their own decisions, yet GPs need those commitments to create momentum. GPs can address this challenge by being exceptionally clear about the benefits of early participation, whether through favorable terms or by demonstrating the strength and stability of the fund's early commitments. Offering some form of preferred treatment for early LPs—such as slightly better economics or deeper involvement in fund decisions—can also help incentivize initial buy-ins. This approach requires careful balancing to ensure it doesn’t dilute the overall fund economics or create disparities, but when done thoughtfully, it can provide the early traction needed.
The Complexity of Re-Ups and Fundraising Strategy
Re-ups are not simply a continuation of an LP’s existing investment—they reflect a complex set of variables that GPs must navigate carefully.
Challenges in Re-Ups — Securing re-ups from existing LPs is often more challenging than it appears on the surface. A lack of re-up can send unintended negative signals to prospective LPs about a GP’s performance. However, LPs may have many reasons for not re-upping that have nothing to do with the GP’s capabilities—internal policy changes, reallocations to different sectors, or shifts in overall strategy can all play a role. GPs must be adept at managing the messaging around re-ups, ensuring that new LPs understand the context behind an existing LP’s decision not to re-up. Proactive communication here is essential—not all LP departures are a reflection of GP performance, and clarifying the reasons helps mitigate misconceptions.
Engage Beyond the Raise — Relationship-building doesn’t stop once an LP has committed to a fund or passed on it. GPs who continue to engage with LPs outside of active fundraising cycles build trust over time, transforming the relationship into a partnership rather than a transaction. Regular, candid updates about fund performance, thoughtful market insights, and openness about challenges all help in building a strong rapport. When the time for re-ups arrives, LPs who feel continuously engaged and informed are far more likely to reinvest, as they’ve been on the journey rather than being brought in just when new capital is needed.
Succession Planning for GPs
Succession planning isn’t just about replacing people—it’s about aligning long-term visions and providing continuity for LPs.
Managing Divergent Visions — GP succession planning becomes especially complex when partners diverge in their vision. It’s natural for partners, even those with a long history of working together, to develop different ideas of where they want to take the fund. Addressing this divergence openly, and at an early stage, prevents confusion down the line. LPs value transparency, particularly when it comes to understanding the leadership and strategic vision of a fund. GPs should communicate any potential changes as soon as possible, presenting a coherent plan that reassures LPs about the fund’s future.
The Upside of Divergence — Divergence in visions isn’t necessarily negative—it can lead to greater clarity and more focused strategies. When GPs split to pursue different approaches, LPs often benefit from the increased specialization and refined strategies that come out of these transitions. The key is ensuring that LPs are not left in the dark and that the split or succession is handled with clear communication and demonstrated alignment with long-term goals.
Management Fees, Carry, and Aligning Incentives
Fees and carry are not just about compensating GPs—they are about ensuring that GP and LP incentives are aligned.
Balancing Fees for Operational Stability — Smaller funds often find themselves in a difficult position when it comes to management fees. On one hand, they need to front-load fees to cover operational costs during the crucial first years of the fund; on the other hand, over-reliance on these fees can signal to LPs that the fund might not be sustainable. It’s about finding a balance—fees need to be sufficient to support the team and execute the fund’s strategy but should not detract too much from the capital available for investments. GPs who can demonstrate a thoughtful approach to fee management, ensuring lean operations while maximizing invested capital, are more likely to gain LP confidence.
Carry and Performance Alignment — Carry structures should clearly link GP rewards with the fund’s success, incentivizing strong performance and discouraging underperformance. GPs who outperform deserve to be rewarded, but those who fail to deliver should also see that reflected in their compensation. A performance-based carry structure that scales with results helps align GP behavior with LP interests. This means that GPs have a vested interest not just in deploying capital but in ensuring that each investment delivers value. For LPs, this approach signals that GPs are committed to delivering returns and that their own compensation is intrinsically tied to fund success.
Challenges and Frustrations on Both Sides of the Table
Frustrations are inevitable in LPGP relationships, but how these frustrations are handled defines the success of those relationships.
GP Frustrations — One of the most significant frustrations for GPs is dealing with LPs who fail to honor their commitments. When an LP doesn’t follow through on a capital call, it puts not just the specific GP at risk but can disrupt the entire fund’s stability, affecting other LPs as well. GPs must handle such situations decisively. Moving quickly to default unreliable LPs is sometimes necessary to protect the rest of the fund, sending a strong signal that commitments are taken seriously. This decisiveness also reassures other LPs that their interests are protected, which is crucial for maintaining trust across the LP base.
LP Frustrations — LPs, on the other hand, often face frustration when GPs push for meetings that don’t add significant value. LPs have limited bandwidth and are juggling multiple relationships; wasting their time on non-productive meetings can harm the overall relationship. GPs must be judicious about their requests for follow-ups, ensuring that every meeting offers new insights, meaningful updates, or clear value. Respecting LP time is not just courteous—it’s strategic. LPs are more likely to stay engaged and supportive when they feel their time and investment are genuinely valued.
Closing Thoughts: Building a Transparent Ecosystem
Mutual respect, transparency, and consistency are the cornerstones of successful LPGP relationships.
A Culture of Openness — The venture capital landscape is inherently high-risk, and the best relationships are built on openness about both the challenges and successes that arise along the way. When GPs are transparent about setbacks, LPs can prepare accordingly, and often, this honesty builds deeper trust. Challenges are part of the journey, and addressing them directly is what fosters resilience within partnerships and strengthens the venture ecosystem.
Future Conversations — The discussions will continue, diving deeper into topics like the role of government institutions in VC, assessing fund performance across different economic cycles, and identifying behaviors that both LPs and GPs should avoid. These future conversations aim to bring clarity to the intricacies of the venture capital process, ensuring stronger and more transparent practices that benefit all stakeholders in the industry.
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EUVC Masterclass: Marketing & VC Fund Narrative
Your brand is everything. It’s what sets you apart, helps you win the best deals, attract LPs, and ultimately drive your growth. For emerging fund managers, building a credible brand and establishing the right marketing foundations early on are game-changers. Yet, many don’t know where to begin.
Your fund’s narrative is what makes the difference between an LP glancing at your deck or deciding they’re ready to write a check. It’s your brand that makes LPs feel confident they’re partnering with someone who knows how to make magic happen.
We’re planning a masterclass on building strong marketing foundations with a top industry leader. If enough people show interest, we’ll make it happen.
EUVC Masterclass: Benchmarketing for GPs & LPs
In venture, knowledge is power—and benchmarking is the key to unlocking it. Understanding where you stand against your peers is what makes you set realistic expectations, and drive portfolio performance.
For GPs, benchmarking can reveal the strengths and weaknesses of your portfolio, while for LPs, it provides a clearer picture of where your commitments stand in the broader market. Yet, many don't know how to effectively utilize benchmarking tools or interpret the data.
We’re planning a masterclass on mastering the art of benchmarking, led by a top expert in the industry. If enough people express interest, we’ll make it happen!
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We’re making it happen together with record-breaking polar explorer and climate investor Ben Saunders, who will share inspiring stories from his expeditions and life lessons. And the one and only Fred Destin will lead us in an introductory session on deep inner work, helping our group of top founders and investors disconnect to truly connect.
🗓️ The VC Conferences You Can’t Miss
There are some events that just have to be on the calendar. Here’s our list, hit us up if you’re going, we’d love to meet!
culttech summit | 📆 5-6 November | Vienna, Austria
GoWest | 📆 28 - 30 January 2025 | 🌍 Gothenburg, Sweden
GITEX Europe 2025 | 📆 23 - 25 May 2025 | 🌍 Berlin, Germany
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