Nearly every institutional venture fund is organized as a Delaware limited partnership, with a separate limited liability company serving as the general partner. The GP entity — which bears fiduciary duty to the fund — is typically owned by the individual partners or principals of the management team. Below it sits the fund LP itself, into which limited partners commit capital. A third entity, the management company (often a Delaware LLC or S-corp), sits parallel to the GP and employs the investment team, receiving the management fee stream. This three-entity stack — management company, GP entity, and fund LP — is the standard architecture Gurpreet Bal advises clients to establish at formation, as each entity serves a distinct legal and tax purpose. The management company receives ordinary income from fees; the GP entity receives carried interest, which qualifies as long-term capital gain after applicable holding periods. Separating these income streams, and separating management from liability exposure, is the central reason for the multi-entity structure.
The Limited Partnership Agreement is the constitutional document of the fund. It governs capital contributions, drawdown mechanics, distribution waterfalls, carried interest, management fees, LPAC rights, key person provisions, investment restrictions, and no-fault dissolution procedures. Alongside the LPA, each limited partner executes a Subscription Agreement and Investor Questionnaire, confirming their accredited investor or qualified purchaser status and making investor representations. Side letters — bilateral agreements between the GP and individual LPs — layer on top of the LPA and grant specific LPs preferential terms such as fee discounts, co-investment rights, enhanced information rights, or provisions required by ERISA-regulated investors and government entities subject to FOIA. Gurpreet S. Bal advises GPs to treat their side letter portfolio as a governance liability that must be carefully tracked, because MFN provisions can silently cascade terms from one LP to dozens of others. The Management Agreement between the fund and the management company memorializes the fee arrangement and is a separate document from the LPA.
A standard venture fund has a ten-year term, often extendable by one to two additional years with LP or LPAC consent. The investment period — during which the GP may make new portfolio investments — typically runs three to five years from the final close. After the investment period expires, the GP may generally make follow-on investments in existing portfolio companies but may not deploy capital into new positions. The harvest period, spanning the remainder of the fund's life, focuses on portfolio management, reserve deployment, and realizations through M&A exits, secondary sales, or IPOs. Gurpreet Bal advises fund managers to plan reserve allocation discipline from the outset, because undercapitalized follow-on reserves are among the most common structural mistakes in early funds. Typical fund sizes range from $20–50 million for a seed fund, $75–150 million for an early-stage fund, and $250 million or more for a multi-stage or growth fund, with strategy and target ownership percentages driving portfolio construction math.
The Limited Partner Advisory Committee (LPAC) is a governance body composed of representatives from a subset of significant LPs. It does not have investment authority — that remains exclusively with the GP — but it plays a critical oversight role on conflict-of-interest matters. The LPAC typically approves or ratifies GP decisions involving conflicts, including investments in portfolio companies alongside a GP affiliate, valuations of portfolio securities when market prices are unavailable, extensions of the fund term or investment period, and waivers of investment restrictions. Gurpreet S. Bal advises GPs to thoughtfully construct LPAC membership and to document LPAC approvals carefully, as inadequate conflict management procedures represent a material regulatory and fiduciary risk. LPAC members often include institutional LPs with the leverage to negotiate specific governance rights at fund formation, making the composition of the LPAC a reflection of the GP's LP relationships and fund economics. Providing clear LPAC procedures in the LPA — including quorum, voting thresholds, and recusal obligations — is essential drafting work that should be done before first close.
Gurpreet S. Bal is a Partner at Foley and Lardner LLP in Silicon Valley, where he advises venture funds, fund managers, founders, and investors on fund formation, venture financings, M&A, and corporate governance. He has represented clients in hundreds of transactions with aggregate deal value exceeding $60 billion across AI, semiconductors, fintech, and emerging technology.