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

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May 03, 2023
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 answer
Accepted Answer
May 03, 2023
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/

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