How to write LP updates

As a fund manager, you should be sending LP updates. We owe it to our LPs to keep them informed on how we’re investing their capital. It also serves as an opportunity to put LPs to work by supporting the portfolio and remain top of mind for future deal flow.

It’s also valuable exercise to get out of the “micro” of day-to-day investing, and have a “macro moment” to reflect on the state of the fund.

If you only have a few minutes, here are a few takeaways on writing LP updates:

• Send LP updates consistently. One of the biggest mistakes new fund managers can make is not sending LP updates consistently. Most send quarterly updates. At Weekend Fund we send updates approximately every two months. Regular, detailed, and transparent updates builds trust with your LPs, which is particularly important if you want them to write a check into your next fund.
• Go beyond the basics. Of course you should introduce new investments, share updates from the portfolio, report performance metrics, and other key updates from the fund, but the best updates go a step further to educate and inform LPs. This might include your analysis on the market, perspective on emerging trends, or learnings from experiments.
• Be authentic. In general, people gravitate toward authenticity. Writing with personality is more engaging and magnetic. LP updates are an opportunity to share your unique voice and build your fund’s brand.
• Don’t share sensitive information without portfolio founders’ sign-off. Fund managers often have inside knowledge into how a company is doing. Some founders are extremely sensitive to information shared about their company, even when the news is positive. It’s prudent to get approval for any non-public information shared with LPs.

In this edition, you’ll hear directly from LPs on what they like to see in LP updates, a template you can follow for your fund, and examples of a real LP update from Weekend Fund.

Shout out to Beezer Clarkson (Sapphire Partners), Hang Yang (Allocate, LP), Maxim Nazarov (FinSight Ventures), Michael Kim (Cendana Capital), and Stella Garber (LP) for contributing to this post.

What LPs want to see

We asked LPs that have backed many funds, what they like to see in these updates. Here’s what they said:

LP updates are extremely important because we don't just invest our money and hope to hear back in 7-10 years about the result. We want to feel included. We want to learn. We want to help out if we can. And we want to be not just invested financially in the outcomes of the funds we put money into, but also personally in their outcomes. We want to help portfolio companies find customers and employees – we want to increase their chances of success (and our own ROI of course)! It's all in service of ROI but anyone who has built a startup knows how much work goes into it, and LPs want to at least feel involved.  Also, many LPs invest in funds as a learning opportunity. The updates are the primary artifact to support that learning.

I love investor updates that start with the big picture on how the portfolio is performing from a metrics perspective: MOIC, IRR, etc. This is typically followed by drilling into updates for bigger positions and what challenges macro or micro they may be facing. This is followed by updates on new investments and what makes them exciting. One of the biggest value adds for LPs is the broad view of the landscape that a VC has, so we want that macro view of what you are seeing in the market. Trends tend to hit smaller startups before they go mainstream, so insight into what those trends might be is really useful if LPs are operators and/or investors in other areas. Some of my fund investments include a perspective or "hot take" on something happening in the market with an insider perspective, which I always find valuable.

It’s important for LP updates to authentically reflect the brand of the fund and include comprehensive information from a quantitative and qualitative standpoint – while also being concise! That may be non-obvious because sometimes investors want to appear buttoned up, but I've appreciated hearing the investors' unique voices come through – and I LOVE seeing their personal life updates as well. This business is all about relationships.

— Stella Garber

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To build a stronger relationship with your investors, regular LP update emails are very important. Transparency demonstrates to LPs the kind of relationship you value, particularly because VC has historically been opaque. Including both highlights and lowlights helps demonstrate this transparency.

Additionally, you may want to have a regular call with your largest LPs.  At Cendana, we have a monthly call with each of our portfolio funds, where we get a lot of qualitative market and company insights from these calls. In between these calls, we get real-time insights from our Slack and WhatsApp channels.

Update emails to prospective LPs can be helpful with fundraising, especially if you do this over a period of time. Bi-monthly or quarterly updates can help foster the relationship so that you aren’t having to sell when you actually start your fundraising process.  Also, these updates importantly can be a potential prompt to have an update call. Casually offering to have a quick call can be effective.

— Michael Kim, Cendana Capital

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LP Updates are important for me! It's one of the key ways for GPs to build alignment, relationships and ultimately confidence with LPs. It’s effective in redefining the GP/LP relationship to be beyond transactional and more meaningful, strategic, and collaborative. VC is a relationship and trust business, and without a regular and transparent communication, there is no real relationship or partnership. No one likes to do business in the dark, especially in a partnership (GP/LP)!

I think not only the content but also a consistent cadence is important so it feels programmatic (outside of the special situations where additional communication is needed of course) and not a disparate activity. From a content standpoint, I appreciate seeing a summary followed by a detailed version of the update. Besides the latest investments, performance and portfolio updates, I also enjoy reading about, especially from emerging managers, how the firm is evolving. This can include new initiatives related to firm-building or the strategy, new promotions/additions to the team or members in the community. Also, knowing travel schedules, especially around certain events or cities has been a pleasant surprise – if it lends to an in-person catch up during those days in town, great, but knowing that they were in attendance or a keynote at certain events, or helping close a deal, etc. helps make it more real and tangible.

— Hana Yang, Allocate

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We are big fans of LP updates. They’re a great opportunity for GPs to build relationships with LPs – both existing and prospective. In our opinion, the best LP updates are holistic – those that provide all the basic financial info and stats any LP should know – and also include additive information such as how much of a fund is reserved and committed, average check, valuation, and ownership. We also greatly appreciate it when GPs share additional round dynamic details along with the GP’s check size – information like the round size, pre or post-valuation. Bonus points for GPs who include qualitative information – like how they sourced the deal, what the company does, where it’s based if there is a board or observer seat (and who holds it for the firm), who led the round and who the other co-investors are:

We love to see:

• Additional detail on how overall fund composition is growing, deals in particular sectors or geographies, or any other updates to the GP’s investment thesis.

• While not always relevant for each update, hearing a bit of market commentary is always great, as well as how they’re finding their particular investment areas to be developing, what dynamics they see at play that they find encouraging, or areas to watch. If there are any relevant team updates to share, we like to see these as a heads up on future fundraising.

• Specific LP asks (and the more specific the better). Examples might include: Are there particular companies looking for specific intros or hirers? Are there market dynamics they would like to get their LP’s perspective and experience on? And if there is a redacted version a GP can send prospective LPs, we see that as a very impactful and effective way to keep folks updated without a heavy lift.

— Beezer Clarkson, Sapphire Partners

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My favorite part of LP updates are investment memos that share (1) unique decision-making frameworks and (2) unique market and/or product insights. Your (Weekend Fund’s) investment memos contain unique investment decision-making frameworks that:

• Fill in the missing gaps in my decision-making process and sometimes challenge my understanding of the world

• Highlight that VC is a constantly evolving game and that the body of VC knowledge is expanding.

LP updates are important for me because they highlight new and emerging trends and provide almost real-time market data directly from the operators. When I look at the earnings of public companies, the data is aggregated across multiple product lines, customer segments, and geographic regions. The data is delayed and altered by numerous middlemen. In a world where the pace of change is accelerating, I think it's becoming increasingly important to be as close to the source of the signal as possible.

— Maxim Nazarov, FinSight Ventures

LP update template

How do you get ready to send an LP update?

1. Draft a copy of the LP update (you can use the template provided below)
2. Reach out to portfolio founders for sign-off on the copy shared about their company
3. Contact some of your portfolio founders to collect “asks” to share with LPs
4. Once sign-offs are received, finalize the LP update
5. Make sure your LP mailing list is up-to-date and optionally add prospective LPs to the distribution
6. Send!

Here’s an outline of what an LP update might include (sections marked with an * are critical to include):

1. Introduction*
2. Commentary
3. Markups*
4. Performance Snapshot*
5. New Investments*
6. Portfolio Snapshot*
7. Portfolio Updates*
8. Personal Updates

Introduction

Open the update with a tweet-length summary of progress in the last update period: New investments, investments you’ve doubled down on, and major news expanded on further in the update. This is also a good place to include a note on confidentiality.

Commentary

In this optional section(s), include any commentary on trends you’re seeing, your perspectives on the market, updates on any projects/experiments you’re running and any changes to investment strategy. We’d recommend dedicating a brief section to each topic.

Markups

Markups are a proxy for fund performance and a positive event to share with your LPs. In general, it’s best to include the following:

• Size and stage of the round (e.g. “$16M Series A”)
• Lead investor (e.g. “led by a16z”)
• Markup (e.g. “10x”)
• Link to public announcement if available (e.g. “Codi’s TechCrunch announcement”)

Often early-stage investors will see portfolio companies raise additional capital on a SAFE or note at a higher cap than their original investment. True markups are based on priced rounds, calculated using the new price per share. You can include details of these SAFE or note rounds but don’t misrepresent them as markups.

Performance Snapshot

In this section, include a summary of your investment performance and key metrics. This typically includes:

• Fund Size
• TVPI
• IRR
• Investments
• Percentage Deployed
• Percentage of Reserves Remaining
• Percentage of Capital Called
• Most Valuable Positions

New Investments

This is arguably the most important part of the update. It’s an opportunity to introduce new portfolio companies, explain your investment rationale, and get LPs excited to support the new additions. While each update may differ based on the company and their stage, it’s generally best to include:

• Name of the company
• Link to their site
• Tagline
• Investment amount and terms of the round
• Product deep dive and why it’s a magnitude better than other options
• Market overview and why timing is right
• Traction details, both quantitative and qualitative
• List of founders
• Co-investors in the round
• “Asks” that LPs might be able to help with

At Weekend Fund, we also include relevant research, an articulation of the underlying shifts the company is capitalizing on, and sometimes personal experiences that informed our investment decision.

Portfolio Snapshot

This is simply a list of portfolio companies, including the name, short description, and link to the site. Some managers also include industry tags (e.g. consumer social, fintech, web3), original investment check size, round invested, current market value, and list of founders.

At Weekend Fund, we create a view of our portfolio using Airtable for our LPs.

Portfolio Updates

This section highlights meaningful updates from a subset of portfolio companies. Updates include big product releases; notable press, blog posts, or podcasts; and “asks” from the founders.

While we don’t require our LPs to “work” for the portfolio, many are eager to do so and help with recruiting, partnership intros, and promotional support. This is why we raised from over 350 LPs – most of whom are talented operators and founders – at Weekend Fund.

Personal Updates

While optional, some LPs may want to get a peek into you and your team’s personal life. What are you doing outside of investing? What are you excited about? Where have you traveled recently? What are you reading? What are you thinking about?

Venture is a trust and relationship-driven industry. Personal updates aren’t a replacement to 1:1 connection but they can serve as an icebreaker and an opportunity for your LP partners to get to know you better.

Weekend Fund LP Update Template

Here is a Google Docs template to use for your own updates. It includes some examples from an update we shared with Weekend Fund LPs.

If you’d like feedback on your LP updates, feel free to shoot us an email at ryan@weekend.fund or vedika@weekend.fund.

If you’re a new fund manager, thinking of starting a fund, or just curious, subscribe to Signature Block. Lastly, let us know what topic you’d like us to cover in the next edition.

Until next time,
Ryan and Vedika from Weekend Fund :)