Venture Partner

What's the difference between a partner and a venture partner?

A partner is inside the firm: an owner or executive who participates in the firm's economics and its investment decisions. A venture partner is engaged by the firm to help with specific work, most often sourcing and evaluating deals or supporting portfolio companies, and is usually not an employee at all. The title signals a relationship, not a rank.

Lightspeed Venture Partners states the arrangement on its own team page. The firm says it and its affiliates engage and retain the services of consultants, operating advisors, operating partners, operating executives, venture directors, venture partners, partners or senior advisors, collectively the Venture and Operating Partners, to assist the firm in sourcing and evaluating new investments or supporting Lightspeed's leadership in other ways, including by providing strategic insights related to portfolio companies and investment opportunities, as well as supporting portfolio companies directly post-investment. Then the sentence that settles the question: most Venture and Operating Partners are non-employees.

Note also how that firm presents them. Venture and Operating Partners are listed as a separate group from the people titled Partner under its investors heading, which is a structural distinction visible from outside the firm.

What is a venture partner?

A senior person, usually a former operator or executive, engaged by a venture firm on a part-time or deal-by-deal basis to bring deal flow, domain judgment or portfolio support. The engagement is contractual rather than an employment relationship, the economics are typically tied to specific deals rather than to the firm's overall carry, and the scope varies so much between firms that the title alone tells you very little.

What does venture partner mean?

It means whatever the individual firm's engagement letter says. There is no market standard and, more to the point, no regulatory definition. The phrase does not appear anywhere in Form ADV's instructions or glossary. Whether a person holding the title has any formal status with the regulator turns entirely on what they actually do.

The compliance status, which is where the title gets interesting

Not being an employee does not put a venture partner outside the adviser's compliance perimeter. Three definitions decide the question, and none of them mentions the title.

Supervised person. The Investment Advisers Act defines a supervised person as any partner, officer, director or other person occupying a similar status or performing similar functions, or employee of an investment adviser, or other person who provides investment advice on behalf of the investment adviser and is subject to the supervision and control of the investment adviser. That last clause is the one that catches a venture partner: providing advice on the adviser's behalf under its supervision is enough, with no employment required.

Access person. Rule 204A-1 defines an access person as any supervised person who has access to nonpublic information regarding any client's purchase or sale of securities, or nonpublic information regarding a reportable fund's portfolio holdings, or who is involved in making securities recommendations to clients or has access to nonpublic recommendations. The rule adds that if providing investment advice is the firm's primary business, all of its directors, officers and partners are presumed to be access persons.

Management person. Form ADV's glossary defines a management person as anyone with the power to exercise, directly or indirectly, a controlling influence over the firm's management or policies, or to determine the general investment advice given to the firm's clients, and states that principal executive officers, directors, general partners and trustees generally are, as are the members of the firm's investment committee or group that determines general investment advice. Where there is no investment committee, it reaches the individuals who determine general investment advice.

Put those together and a practical test emerges. A venture partner who sits on the investment committee is likely a management person regardless of employment status. A venture partner who sources deals and gives advice under the firm's supervision is likely a supervised person and, with access to holdings or recommendations, an access person. A venture partner who makes introductions and nothing else may be none of the three.

Form ADV's separate advisory affiliate definition reaches all of the firm's officers, partners or directors, or any person performing similar functions, all persons directly or indirectly controlling or controlled by the firm, and all current employees other than those performing only clerical, administrative or support functions. Schedule A asks for information about direct owners and executive officers and Schedule B about indirect owners, so a venture partner appears there only by virtue of ownership or officer status, never because of the title.

A worked example, on the economics

Compensation is where the title diverges most between firms, and the usual structure is participation in the carry on specific deals rather than a share of the firm. Figures below are hypothetical; they illustrate the arithmetic rather than a market standard.

Suppose a venture partner is entitled to 10 percent of the carried interest on deals they source, and one such deal produces $50,000,000 of profit in a fund charging 20 percent carry.

• Fund-level carry on that deal: $50,000,000 x 0.20 = $10,000,000.
• The venture partner's share: $10,000,000 x 0.10 = $1,000,000.
• Now put that in proportion. If the fund's total carry across its whole portfolio is $40,000,000, the venture partner's participation is $1,000,000 / $40,000,000 = 2.5% of the firm's carry from that fund.

The last line is the point. A deal-by-deal carry arrangement can produce a large absolute number on one good outcome while leaving the individual with a small share of the firm's overall economics, and with no claim at all on the management fee. That is the structural difference from a general partner, who participates in both.

Two further variables worth asking about explicitly, because they change the answer materially: whether the carry participation is subject to the fund's whole-of-fund waterfall and clawback before anything is paid, and whether it vests over the life of the fund or is earned at the point of sourcing.

Common mistakes

• Reading the title as a rank below general partner. It is a different kind of relationship, not a junior version of the same one.
• Assuming a venture partner can commit the firm. Unless they sit on the investment committee, they usually cannot, and a founder should ask directly who decides.
• Assuming non-employee status means no compliance obligations. The supervised person definition reaches a person who provides investment advice on the adviser's behalf under its supervision, employment or not.
• Looking for the role on Form ADV. The phrase appears nowhere in the form's instructions or glossary; only ownership, officer status or control puts someone on Schedule A or B.
• Treating carry participation as equivalent to a general partner's. Deal-by-deal carry is a claim on specific outcomes, with no share of the management fee and no share of other deals.
• Quoting a compensation benchmark. No venture partner compensation survey figure could be verified from a primary source, so none is given here.

How it relates to adjacent terms

A general partner is the contrast case and the difference is participation rather than seniority. A general partner shares in the management fee and in the fund's carry as a whole, signs the limited partnership agreement, and carries fiduciary responsibility for the fund. A venture partner typically has none of those.

An entrepreneur-in-residence occupies the adjacent seat on the other side. An EIR is generally at a firm to find or build their next company, using the firm's resources and network, while a venture partner is there to help the firm invest. The roles are often conflated because both are temporary, senior and non-standard.

An operating partner is the closest relative, and some firms use the two titles almost interchangeably. Lightspeed's team page groups them, along with operating advisors, operating executives, venture directors and senior advisors, into one category. Where the labels are distinguished, an operating partner works with portfolio companies after investment and a venture partner works on finding and evaluating the investments.