I have worked at Sapphire for 15+ years 😳.

And in this time, I have gained a unique insight into the world of General Partners (or the "GP" as most people call them) and what they actually do day to day, year to year. 

I've spent these years not just observing, but working directly with General Partners (as Sapphire has acted as the FCA operator and manager of many GP/LP funds), and I've also been a General Partner in several investment funds myself.  Over time, I have learned that the General Partner's role is more than managing money or making investments. It's probably more about persistence and, critically, developing and maintaining relationships. A GP pretty much does everything.

Below is a video summary of this article.

What Is a General Partner?

First, we need to understand what a limited partnership actually is. Historically, it has been the standard structure for most UK venture capital and private equity funds (except, of course, SEIS/EIS funds, but that is a different story) for over 30 years. The limited partnership structure requires at least one General Partner ("GP") and one Limited Partner ("LP"). The limited partnership (between the GP and the LP) is governed legally by the Limited Partnership Agreement (or "LPA"). The GP is the driving force behind the fund, responsible for its management, investment decisions, and ultimate performance. The LP provides the majority of the capital.

Consequently, it is the GP who plays the most active role in the limited partnership's day-to-day operations and is typically viewed as the venture fund manager, setting the fund's strategy, sourcing deals, making and overseeing investments.

But one key thing to remember above all is that it is the GP (and not the LP) who assumes unlimited liability for any limited partnership debts (a critical point, but more on that later). 

General Partner vs. Limited Partner

Understanding the above distinction between a GP and an LP is fundamental. While both are essential to a GP/LP fund's structure, their roles and responsibilities are distinct:

• General Partner (GP): Actively manages the fund, makes all investment decisions, and carries unlimited liability for the fund's debts and obligations (again, note the unlimited liability).

• Limited Partner (LP): Provides the capital for the fund but does not (and should not) participate in day-to-day management. The LPs have liability limited to the amount they've invested. So if an LP invested £50,000 into a GP/LP fund, the most they can lose is £50,000.

Therefore, the GP's main contribution is operational skills and investment expertise, while LPs contribute the capital that powers the fund. 

How Is a General Partner Structured?

While the GP role may sound like it refers to a single person, it's usually an entity. Most GPs are structured as a limited company, in which the individuals who actively manage the GP/LP fund are directors or managers. This is very important and is done on purpose. It allows GPs to limit their "unlimited liability" exposure to only the assets in the partnership (i.e., usually what they invested in the partnership), protecting their own personal assets (such as their house!).

In some cases, a GP will use a Scottish carry vehicle to ring-fence the carried interest entitlement from the main GP/LP fund as well as the GP. This ensures that the carry is held, tracked, and distributed separately to investment team members. The Scottish carry vehicle has legal personality and can hold the carry entitlement and contract directly with the fund. It also ensures the carried interest is tax-transparent and treated correctly under the UK carried interest legislation.

The most common structures I work with at Sapphire are an English-based GP/LP arrangement and a Scottish carry vehicle. However, the optimal General Partner structure is ultimately driven by the specific legal, financial, and tax context in each case. If you are considering a GP/LP structure, it is essential to evaluate all these factors in detail. If we can help, fill out this form, and we will be in touch right away.

How Are GPs Compensated?

A GP in a venture capital or private equity fund is typically compensated in two ways: management fees and carried interest (commonly referred to as "2 and 20").

• Management fees (usually 2% per annum of committed capital) are paid for managing the fund's capital and operations. These fees are typically paid to the management company (a separate entity that may span multiple funds), but sometimes to the GP itself. Management fees cover salaries, research, and other operating expenses. The funds we work with at Sapphire typically charge 2% per annum.

• Carried interest (or "carry," sometimes also called the "performance fee") is the GP's share of the fund's profits,  commonly 20%, with the remaining 80% going to LPs. This aligns the GP's incentives with the fund's performance. In the majority of cases, the fund will have what is known as a "hurdle" which must be passed before any of the carried interest is paid. For example, in some funds, the LP must get back £1 for every £1 invested in the fund before the carried interest is paid. In others, it could be on a deal-by-deal basis with clawbacks. 

For a detailed explanation of carried interest (where I explain five different performance fee calculation examples), see my blog titled "Understanding Performance Fees in GP/LP Venture Capital Funds" - or via this link.

Note: the question of whether the above fees include VAT is a whole different issue and something I will cover in a future blog.

How Are General Partners Taxed?

In the UK, limited partnerships are treated as tax-transparent entities for income and capital gains purposes, meaning there is no tax assessed at the partnership level. Instead, profits and gains arising within the partnership are allocated to each partner (including the GP) in accordance with the Limited Partnership Agreement. Each partner is then responsible for reporting and paying tax on their respective share, subject to their particular tax status. For individual partners, this typically means self-assessment on their share of partnership income and gains; for corporate partners, corporation tax generally applies. Carried interest received by individual General Partners is subject to specific UK tax legislation (Part 3, Chapter 5 of the Income Tax (Trading and Other Income) Act 2005 and Chapter 5E of the Taxation of Chargeable Gains Act 1992). Where the relevant "substantial risk of capital" and other conditions are met, carried interest is generally treated as a capital gain, taxed at a higher rate of 28%, rather than as income. By contrast, UK trading companies (for example, portfolio companies in a Sapphire fund structure) are liable to corporation tax on profits, and shareholders may also be liable to further tax on dividends or distributions.

Launching a Fund: Setting out the GP Vision

One of my favourite parts of working at Sapphire is helping a new General Partner set out their vision for a GP/LP fund. I appreciate that the fund vision is critical and needs a lot of thought and discussion. This is typically where we can help. I have personally reviewed possibly several hundred information memorandums during my time at Sapphire, and I am sure I have drafted or edited almost as many. There can be a tendency to overthink this part of the journey. I have a few horror stories to share, but this isn't the right place (maybe over a beer 😉).

Of course, fundraising is typically one of the most challenging parts of a GP's job in launching a GP/LP fund. Many funds struggle to raise money and fail at this first hurdle. There is no way to guarantee this part. We have worked with some of the best teams (including well-known and respected individuals acting as a GP), which have failed to raise their minimum fundraising. Sometimes, even the best put-together fund team can fail (one thing I have noticed is that having a GP team that has a majority of individuals who are prestigious names but don't have direct venture capital experience can often fail to raise money. LPs can see through the illusion.   

Regarding how long does it take to launch a fund? Please read our blog titled "How Long to Set Up an Investment Fund: What to Expect" or via this link. But in summary, for a GP/LP fund, it can typically take up to three months or longer. Why so long, you ask? Simple. The GP/LP structure, with its Limited Partnership Agreement, can require significant legal input, and the legal part always takes time. 

The Art (and Anxiety) of Deal Sourcing

This is absolutely critical to the success of any GP/LP fund (and the career of any aspiring GP). After the difficulty of raising money, the next most challenging part begins. The actual sourcing of the deals (i.e., identifying which companies to invest in). Every GP we have worked with will do this slightly differently. Some spend their time networking while others are more analytical. The best GPs tend to be relentless and creative in how they attract investments. There are too many places to source deals from to describe them all here. It is estimated that as many as 51% of opportunities come from a mix of personal networks and referrals. Proactive sourcing, such as cold calling companies, can also source opportunities in hypercompetitive markets, and it is estimated that this can account for circa 28% of opportunities. At the end of the day, deal sourcing requires serious hustle, whether that is attending trade conferences, investor pitch sessions or even angel networks.

The one thing that every GP must be able to deal with is the agony of the missed opportunity. Every GP who has been in this industry long enough will have their own share of misses. We have our own. But remember, it's the hits that ultimately matter, and therefore your ability to source the best deals will be a critical component of your success as a GP. 

The Pressure and Responsibility of Due Diligence

I have been doing due diligence on companies for 30+ years in both the US and the UK. I have reviewed endless documents, grilled management teams, pored over contracts and debated possible deal breakers with my team and our advisors. If I had to sum it up, it's a high-stress activity. A missed material detail could possibly cost the LP dearly in lost capital and the GP their investment reputation. Ultimately, due diligence by the GP comes down to assessing two key areas: (1) the management and (2) the market. For the management, do they have what it takes, a sense of drive and enthusiasm, intelligence and ambition? Does the market have the potential for creating outsized returns, and is it ready for this product? Warren Buffett stated that his due diligence process has four simple criteria as follows:

First - Do you understand the business?

“Never invest in a business you cannot understand.”

Source: Berkshire Hathaway Shareholder Letters Archive

Second - Does the business have a durable competitive advantage?

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”

Source: Berkshire Hathaway 2007 Letter to Shareholders

Third - Is the management competent and honest?

“We look for three things when we hire people: intelligence, energy, and integrity. If they don’t have the last one, the first two will kill you.”

Source: Warren Buffett, quoted in Fortune Magazine, 1989

Fourth - Does it have an attractive valuation?

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Source: Warren Buffett, 1989 Berkshire Hathaway Shareholder Letter

GP Compliance and Reporting

I have included this section because most GPs will underestimate how much work goes into compliance and reporting. At Sapphire, acting as the FCA authorised operator and manager of many GP/LP funds, we understand how time-consuming this can be. Compliance reporting to the FCA is detailed work and must be done accurately (because you really do not want an FCA enquiry!). There is also reporting to investors and the GP board. Each is time-consuming and can be stressful to complete on time. Please don't underestimate the time it takes to do all these things. Working with an experienced administrator can help significantly (and we can recommend some if required - fill out this form, and we will be in touch right away).

My Advice to Aspiring GPs

If you're thinking about launching a GP/LP fund or acting as a GP to a fund, be sure to do as much research as you can beforehand. Acting as a GP can be both financially and intellectually rewarding, but it is hard and sometimes lonely. Financial rewards can take years to come (if at all), and if they go wrong, it can take years to unravel. The life of most funds we work with is typically five to ten years, so you will be working with the fund for a long time (personally, I think ten years is even underestimated because it can take years to wrap up a fund). Managing a venture capital fund can appear glamorous and exciting. It is, but there can be a lot of heartache and setbacks along the way. My one final piece of advice to you is to never stop learning. This is vital to stay ahead in the venture capital world. And don't be afraid to ask for help; I've seen even the most seasoned GPs lean on their networks in tough times.

Key Takeaways

• The GP role is about vision, discipline, transparency, and human connection, not just deals and numbers. The journey is long, patience and stamina matter just as much as deal-making.

• Success depends on building trust, communicating openly, and staying engaged through every stage of the fund lifecycle.

• The GP role is evolving, with increasing focus on ESG, technology, AI and diverse perspectives.

• Great deal sourcing is a blend of network, creativity, and relentless drive (no shortcuts).

• Legal and tax work can be significant; the right team and advisors are non-negotiable. Also, remember that compliance and reporting aren't just a box-tick; precision here builds enduring trust.

• Candour counts: reputations are built by being transparent when things don't go to plan.

• Continual learning, embracing new tech, and process refinement are vital for staying ahead.

• Partner alignment drives results; true success comes when GP, LPs, and the advisory team are in sync.

• And finally, always remember that the GP is also a stewardship role, protecting investor interests, not just delivering returns.

If you want to hear more about what it's really like to work with GPs, or if you're facing your own challenges in fund management, I'd love to connect. Sometimes, the best lessons come from sharing our stories (here is my LinkedIn link).

Next Steps:
If you would like advice on acting as a GP or would like to find out more about how to set up an investment fund, such as a GP/LP fund, need an FCA authorised operator and manager to manage the fund, or need pricing and options, fill out this form, and we will be in touch right away.