General Partner (GP)

Behind every venture capital or private equity fund that backs an Indian startup or buys into an unlisted company sits a General Partner, the GP. The GP is the active manager: it raises the fund, decides where the money goes, sits on boards, and eventually engineers exits. The passive money, from pension funds, family offices, insurers and wealthy individuals, comes from the Limited Partners (LPs), who write cheques but stay hands-off.

How a GP gets paid

The GP's rewards follow a now-familiar structure, often summarised as 2 and 20. It typically charges an annual management fee of around 2% of the fund to cover salaries and operations, and then keeps roughly 20% of the profits once LPs have got their capital back and a minimum return. That profit share is called carried interest, and it is where serious GPs make their real money. The arrangement aligns incentives: the GP only gets rich if the LPs do well.

The Indian context

In India these funds are regulated by SEBI as Alternative Investment Funds (AIFs), organised under Categories I, II and III. A GP usually invests a slice of its own capital, often called the GP commitment, so it has skin in the game alongside LPs. The space has grown sharply as domestic capital, DPIIT-recognised startups and GIFT City structures pull more money into private markets, though SEBI has been tightening disclosure and accreditation norms to protect investors.

The taxation of carried interest in India remains a debated, evolving area, and structures are often set up carefully to manage it.

My take: for ordinary readers, the GP concept matters because AIFs are increasingly marketed to high-net-worth investors with a steep ₹1 crore minimum ticket. Before committing, judge the GP the way LPs do, on its track record across full fund cycles, the size of its own commitment, and how transparent it is about fees and carry. A great GP is worth the premium; a mediocre one simply collects management fees while your capital is locked up for years.