Partnership investing is boring.
You give someone your money and, once a quarter, they give you a report that says what they did with your money. That's because, for the most part, fund investors fall into two categories: institutions and individuals.
If you're an institution, you basically care about returns and that's it. You run X amount of capital and Y percentage of that is allocated to venture capital. You've decided to spread that across Z funds and you hope your portfolio meets some threshold. You attend annual meetings and hop on investor calls as a means of oversight and to help you decide whether or not to invest in a future fund.
For the VC that means if you're returning money to your institutional investors, that's about all you need to worry about.
If you're an individual, you've probably put in less money, so... if we're being honest with ourselves, you're not that important to most VCs. You're in for maybe $250k or half a million dollars, but that isn't the chunks of $5mm and $10mm that are going to help this fund raise a $250mm fund. As most sub $25mm funds are stepping stones to something larger, you're kind of a stepping stone.
I'm sure the VC was grateful that you helped get them off the ground for their first fund, but as they march towards larger and larger funds, they really don't need money in your size anymore. Sometimes, minimum investment levels grow with the size of the fund, up and over what most people can do. Other times, they might not even let individuals participate in future funds at all.
Either way, VC funds aren't really built around creating much of an experience for their Limited Partners.
For smaller funds, I think this is a real mistake. Not everyone is going to be able to grow to becoming an institutional fund right away, or, in my case, not everyone wants to. If your first or second fund is going to rely on individual investors, you need to provide a "why" for individual investors that is more than just returns.
In other words, you can't sell money to rich people.
Realistically, your investors won't see much in the way of returns after the first couple of years other than on paper. Exits take five, six, seven years or more. Your first time fund investors are only going to have directionality and an indicator that you did what you said you were going to do in terms of strategy. Without cash in their hands, they're largely going to make an investment decision based on how they feel about being invested with you.
This is something that is largely within your control. Did you communicate with them? Were you transparent not only about your decisions, but about when those decisions aren't working out? What did they learn from being in your fund? Did you help make them better investors and did you create a dynamic where they helped you become a better investor? Who did they meet while being invested with you?
Rather than see LP interactions as a chore or a burden, new fund managers should see this as an opportunity to extend the community around their fund. That happens most when the LPs represent a diverse group of industries and perspectives who want to be helpful to portfolio companies and founders. The GP-LP relationship shouldn't be so one dimensional around returns, and I would argue that, in the seed stage, it's sub-optimal. LPs could represent meaningful co-investors on deals and great mentors to founders. Just yesterday, I walked out of breakfast with an LP of mine with three or four meaningful introduction offers from this LP who ran a public company for 30 years. That was more valuable to me than the money they put into the fund--and it makes our relationship more valuable to him than just whatever the returns look like.
Obviously, your returns need to be there, but keep in mind these people don't need to be in your fund. They don't have a directive to be invested in venture and they're not aiming to make some target return to pay out benefits or university operating expenses, etc.
They need to *want* to work with you and they want to feel like you want to work with them, too. And you should, because they have a lot to offer.