Why LPs Are Overpaying For Follow-On Rights
From The Venture Capital Investor Podcast with Fexingo: Startup Investing for Limited Partners · 11:43
Show by Fexingo
Limited partners often sign into venture funds believing follow-on rights guarantee they can maintain their ownership percentage in winning startups. In reality, structural frictions like pro-rata caps, management fees, and GP discretion frequently dilute those stakes. This episode examines a specific case study from a 2024 fund close where top-tier LPs found their capital locked out of three major portfolio company rounds despite aggressive negotiation. We break down the mechanics of why maintaining position costs more than just writing checks, and how smart capital is now shifting toward secondary market liquidity or dedicated co-investment vehicles instead. If you are allocating to early-stage tech today, understanding the gap between promised rights and actual execution is critical for preserving long-term returns. #VentureCapital #LimitedPartners #ProRataRights #StartupInvesting #FundStructures #CarryWaterfall #PortfolioConstruction #SecondaryMarkets #CoInvestment #FundOfFunds #GPFeeStructure #DilutionRisk #TechAllocation #WealthManagement #BusinessStrategy #FinancePodcast #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo
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