How to do LP reporting

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What is LP reporting?

In most setups you are required to report to the investors on a periodic basis about the fund’s performance. Most common is a quarterly reporting schedule. The requirement is usually specified in the LPA with reference to a reporting standard. This means you have to provide on a periodic basis a report that complies with the reporting standard that is referenced.

LP reporting vs. Financial Statements

In addition to the quarterly reporting, you need to draft Annual Financial Statements at year end (Think of balance sheets, Cash Flow statements, etc.) This is typically done by the accountants and more technically minded staff. Your quarterly report will likely contain a balance sheet and P&L as well, but it will not be a complete financial report. More on the Annual Financial Statements in the section on Accounting [Sign up for access]. In this section, we focus on the report that reflects the performance of the fund in a more industry specific format.

Schedule / Deadline

Most funds report quarterly and have a deadline of 45-60 days for the quarterly report to be dispatched after quarter’s end.

The Q4 report is normally sent together with the Annual Financial Statements (see above) which might be audited and take longer to produce. Therefore the Q4 report often has a deadline of 60-90 days after year-end.

However, we recommend to be quicker. We suggest to send reports at the end of the following months latest. So for example for the Q1 period ending March 31st, we suggest to get this send out before April 30th. Large LPs receive many reports, and being among the first might get you noticed.

Fancy format or keep it simple?

Most funds use the quarterly report as a marketing tool. It is sent to all LPs and provided regularly, so you might want it to look appealing. However bringing all numbers and texts into a “corporate design” means you need to have a graphic designer put everything together. This is costly and takes more time, but many funds seem to value it.

On the other end, we have come across reports from some top notch US funds that looked extremely simple. US funds do not have to comply with the elaborate European reporting standard [Sign up for access], so the reports can generally be shorter. But also these big brands didn’t invest in fancy styling. A thought: If you think you can impress through fund performance and not design, you can save yourself some time. You will find a simple word version of an Invest Europe compliant report here [Sign up for access].

PDF / Digital / Mobile?

Large LPs tend to be conservative and want to receive a PDF. We haven’t heard of a fund that was able to get around producing PDFs. Despite this, if you use Carta or some other tool, you might be able to provide the report as a dashboard to view on a desktop, or perhaps even a mobile screen. This is certainly nice and many people embrace it. But it is not a “must”.

Workflow

The most common practice seems to be that the report is produced internally by the fund’s finance team. They use their internal database [Sign up for access] to come up with all numbers and text, and then provide this input to a designer to turn into a fancy format. Finally, the report is dispatched to LPs via the fund administrator.

An alternative approach has the administrator produce the report with input from the finance team. So the administrator is leading the process. This works well but is more common if you are aiming for a less fancy report with a lower level of detail. Otherwise your admin will simply not have the information to come up with the report.

Additional LP reporting

Some LPs ask for additional information via side letters. We find it easiest to provide this information through Excel files or PDFs that you send alongside the basic quarterly report and at the same time.

If you have a large LP base and purposefully omit some sensitive information for the whole audience, you could also produce a standard pack of back up information that you share with a select group.

Sensitive information

Your LPA will likely contain a non-disclosure provision, so whatever you share with your LPs is protected and can’t be shared. However, the reality is that leaks are not uncommon.

So generally we suggest to be careful to announce too confidential things in the report that goes out to all LPs. This includes undisclosed financing rounds and future strategic plans of your portfolio companies. Just think of what would happen if any particular information would be leaked to the public. If it would hurt your portfolio company, think twice about disclosing it in your report.

Generally, it is quite common for VC people (investors, entrepreneurs) to invest in other VC funds. This can create conflicts of interest. If you have people with obvious conflicts in your LP list, you might want to send them a quarterly report that is stripped of all portfolio related information. We have not heard any person complain about this. People understand.

Standards and Templates

There are 2 main reporting standards broadly speaking - one for Europe and another one from the US that is als adopted in other parts of the world.

Invest Europe

Invest Europe publishes a very lengthy and elaborate standard. Most European funds need to comply with this one. More on this here:

Invest Europe compliant reporting [Sign up for access]

ILPA

The US equivalent is shorter and arguably easier to comply with. Details here:

ILPA compliant reporting [Sign up for access]

Real world examples

We will try to collect some private reports (without real numbers of course) here [Sign up for access].