If there are a significant amount of funds contributed by limited partners sitting in a VC firm's bank account, something has most likely gone wrong with planning and/or execution. It can mean:
- a deal fell through;
- there is an issue with the fund's deal flow;
- there was no planning for pace of capital deployments vs pacing of capital calls;
- etc.
Note that this will also drag down a fund's metrics, and that of course, FDIC insurance limit is $250K.
This money could theoretically accrue interest - however remember that the VC firm and the fund manager owe a fiduciary duty to the limited partners to invest this money into startups (per the Limited Partnership Agreement). This money most definitely cannot be invested into cryptocurrencies, mutual funds, public company securities, etc.
