Launch an institutional-grade VC fund in a day with no up front costs. 
Meet Start Fund
Previous Post
Next Post
0

Asked by

Community Member

on

in

Fund Operations

How Much Capital Can Be Deployed from First Close Investors Before the Second Close in a Fund?

I’ve been speaking to a few potential LPs and a question came up that I was hoping someone could answer. How much of the “first close investors” capital can be deployed before the second close? For example if I had a $10M fund target with a first close of $2M am I able to call and deploy that full $2M before raising the remaining $8M? And even if I’m legally able to do so under the terms of a LPA would this be considered off-market? Thanks in advance.
1 See in Base
0

Answered by

Community Member

on

No - a fund manager cannot call and deploy 100% of the capital from a first close before going on to raise the rest of the Fund. This would likely be fatal for the Fund - all limited partners must be on the same capital call schedule. 

Say you want to do a capital call for ~25%. So, if you close on $2m, you will pull down ~$500k. Then, you will do a second close, and do another ~25% on the next close etc.. until you close the whole fund. Then, you can change the capital call schedule - please go here to learn more about capital calls:

https://govclab.com/2023/05/07/vc-capital-calls/

Join VC Lab

VC Lab, the leading venture capital accelerator, empowers new and emerging managers worldwide to close ethical, high-performing funds in under six months. The program provides cutting-edge tools, expert mentorship, and a global network to raise more money in less time. Apply if you want to build a meaningful venture capital firm.

Apply Now
How do I start raising my first venture fund? What are the key considerations for becoming a Limited Partner?
How can I improve my emerging manager firm's deal flow? What strategies help attract institutional LPs?
How do I build a compelling investment thesis? What are best practices for portfolio management?
How can I differentiate my VC firm in a crowded market? What are the typical fund terms for emerging managers?