co-investment rights

Definition

Special privileges allowing certain LPs to invest additional money directly into specific portfolio companies alongside the fund, usually with lower or no fees. The VIP backstage pass of venture investing.

Example Usage

Our university endowment negotiated co-investment rights and put an extra $10M directly into the hot AI startup at the same terms as the fund.

Origin

Practice emerged in 1990s-2000s as large institutional LPs demanded better economics on winning deals

Fun Fact

Co-investment rights have become so sought-after that some LPs choose funds partly based on access to co-investments, knowing the best deals could return multiples while avoiding management fees.

Source: Institutional investment documentation and venture capital LP agreements

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