Where is venture headed in Q4? Vote your top 3 trends. Then join the live breakdown and agentic AI demo on Thursday, October 22.
Vote Now
Previous Post
Next Post
1

Asked by

Community Member

on

in

General

early exists in the fund should distribute proceeds or reinvest

When a fund exits an investment early, should the proceeds be distributed to LPs or reinvested into new or follow-on investments? How do you typically decide, considering fund lifecycle, LP expectations, and market conditions? Would love to hear your thoughts!
2 See in Base
0

Answered by

Community Member

on

Proceeds from early exits are typically distributed to LPs as specified in the fund's Limited Partnership Agreement (LPA). Capital recycling, or reinvesting proceeds into new investments, is generally discouraged for Fund I as it extends the fund's life and complicates explanations to LPs. Decisions should consider the fund's lifecycle, LP expectations, and market conditions, but distributing proceeds aligns with standard practices and LP agreements.
0

Answered by

Community Member

on

This is governed by your LPA. If your LPA has a recycling clause, the capital from early exits typically gets recycled into the fund and re-invested. Otherwise, the capital is re-distributed to LPs.

Join VC Lab

Raising your first fund? VC Lab has helped launch 1000+ venture firms, with no fees and no equity taken. The average Start Fund reaches first close in 58 days.
Apply Now