Episode summary
What Your Lawyer Isn't Telling You About LPA Terms | Apurva Mehta & JD Montgomery
Superclusters The Emerging Lp Podcast
· · 1 hr 12 min · Hosts: David Zhou · Guests: Apurva Mehta, JD Montgomery
Summary
The conversation focused on the fine print of LPAs and what experienced LPs want from venture managers: speed, honesty, and a repeatable framework. On co-investments, the guest argued that most allocators like the idea of optionality but fail because they cannot move fast enough or size positions consistently. The host and guests emphasized that the best LPs and GPs treat co-investing as a portfolio strategy, not a selection game around a few blue-chip names.
A major thread was how GPs signal they can preempt rounds and secure allocation. The guest said the strongest managers are in constant contact with founders and have a history of getting access before the next financing. They also discussed how some fund terms have become too loose, especially carveouts for opportunistic bets, secondaries, and investments in other funds, which the guest said can stretch a venture fund into a much longer vehicle than intended.
Later, they turned to solo GPs, firm concentration, and venture math. The guests expect capital to keep concentrating into fewer managers, with many 2020-2021 solo-GP launches becoming zombies. They were skeptical that fund performance databases capture the full picture, and both said venture investors should not rely on a theoretical 10 trillion dollar company outcome to make the math work.
Key takeaways
- The guest said co-invest only works when LPs can move quickly and size every deal with a consistent portfolio approach, not cherry-pick a few names.
- The guests said the best GPs preempt rounds by talking to founders constantly, not quarterly, and by building real trust with their strongest LPs.
- The guest pushed back on LPA carveouts for opportunistic investments and outside vehicles, saying they can turn a venture fund into a 20-year-plus obligation.
- Both guests expect capital to keep concentrating into fewer managers, with many solo-GP launches from 2020-2021 likely to become zombies.
- The guests were skeptical of fund database rankings and said venture math should not depend on a hypothetical 10 trillion dollar outcome.
Notable quotes
“if you can't handle something going to zero, then you shouldn't do one”
“Our best GPS are talking to their founders all the time”
“our best GP relationships we're talking to. We talk to all the time”
How the episode opens
Lawyers are to blame for some of this. And they're like, "You should put this into your docks to give you flexibility." And I was talking to this GP and they were like, "No, I don't want to put this in. I'm not going to do anything in real estate or whatever." You know, and like the lawyers a to redline and b to fee and there's some of that to blame to.
What are the typical kinds of terms that you guys redline when you see an LPA? — They had a carveout of up to 20%. it with other stuff but includes pulled investment vehicles. In year four of your deployment, if you write a 100k check to some preede fund, you were guaranteeing this to be a 30-year vehicle size. I mean, obviously carry ratchet. They had the ratchet at 3x. Yeah. So, this is another industry sticking point.
Superclusters is where we demystify the secrets, stories, and tactics behind the money that moves the venture capital world. I have always been a fan of timeless content, lessons that are as true today as they were yesterday as they will be 10 years from now. And in the making of Superclusters, I've always optimized for those kinds of discussions with our guests.
But today, inspired by a flurry of text between JD Aerva, and myself, we decided to dedicate our first episode of potentially more to contemporary debates and current discussions in the LP world. Both of our guests today need no introduction. You might have seen him on season 6.
Pervametta is the co-founder and managing director of Summit Peak, a fund of funds dedicated to backing exceptional emerging managers as well as founders. And JD on the flip side has broken a new record on the number of appearances in a single season.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- lp agreement terms
- lpa redlines
- venture capital co-invests
- gp best practices
- venture fund fees and irr
Companies and tickers mentioned
- AFRM
- OPEN
- C
- Affirm
- Anduril
- Airtable
- Opendoor
- Wish
- Summit Peak Investments
- Children's Hospital Endowment Portfolio
- The Juilliard School
- Citigroup
- Lehman Brothers
- Canterbury Consulting
- The George Washington University
- Stanford University
- aiCIO Magazine
- Institutional Investor
Watch the episode
Watch “What Your Lawyer Isn't Telling You About LPA Terms | Apurva Mehta & JD Montgomery” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The 3 Big Family Office Transitions That No One Talks About | JD Montgomery Part 2 -
Who should NEVER start a VC fund? | Sam Huleatt -
"I Write-Off Every Sourcing Slide" | Alex Felman
Superclusters The Emerging Lp Podcast, this episode and its artwork belong to Superclusters by David Zhou. Octagon is not affiliated with the show; this page is an independent summary.
