Limited Partners Want More and Better Communications From General Partners

It's not unusual for the general partners of venture capital and private equity firms to take their investors, known as limited partners, for granted. One reason may be structure: once the LPs have committed to invest, they are contractually bound to do so for as long as a decade or more. Another may be that LPs have traditionally been fairly passive in managing their investments and relationships.

Like a lot of things in the economy, the LP-GP relationship is changing, particularly in the area of LP relations. LPs are getting more demanding, of both the time and attention of their general partners.

I'm at the PEI Investor Relations and Communications Forum in New York, and this is one of the biggest topics of discussion.

"LPs appreciate having you ask 'how are we doing,'" said Mark Barnhill of Platinum Equity. Barnhill added that LPs appreciate having access to investing partners, and keeping them fully informed about developments at the fund and at the fund's portfolio investments.

The last thing LPs want is to be surprised, or to hear about something from someone else before hearing about it from their GPs.

Bottom line: communicate, communicate, communicate. Keep your LPs informed before, during and after you take their investment. In these times, when LPs have an infinite number of private equity options, you can't go wrong using communications as a relationship-building tool.