Capital Call
A formal request from a fund's GP for LPs to wire a portion of their previously committed capital.
A capital call is how a venture fund actually collects money: rather than LPs wiring their full commitment upfront, the GP calls capital in tranches as needed to fund new investments, follow-on rounds, management fees, and fund expenses. LPs are contractually obligated to fund capital calls within a specified window (commonly 10 business days) or face penalties, including potential forfeiture of their interest in the fund.
This structure improves capital efficiency for LPs, who can keep uncommitted funds invested elsewhere (public markets, other funds) until actually needed, rather than sitting in cash for years waiting to be deployed by the GP.
A commitment is not a one-time wire. A $5M commitment means being ready to send up to $5M, in tranches, on short notice, for as long as the fund's investment period and follow-on needs run — which turns a commitment into a standing liquidity obligation. LPs who over-commit across many funds discover the pain in market stress, when calls keep coming precisely when other assets are hardest to sell.
A call notice typically states the amount, the purpose, the due date, and wire instructions. Because those notices carry bank details, wire fraud aimed at LPs is a real risk — verify any changed instructions through a known contact before sending.
Some fund agreements include an overcall provision that lets the GP call capital beyond an LP's commitment, usually capped and used to cover another LP's default or fund expenses. Know whether yours has one before signing, because it changes the maximum cash you might have to produce.
An LP commits $2M to a $100M fund. In year one the GP calls 25% of commitments, so this LP wires $500,000 to fund the first investments and the year's management fee. The remaining $1.5M is an unfunded commitment the GP can call later during the investment period.
LPs should maintain a capital-call reserve or liquid credit facility for their full outstanding commitment across all funds — missing a capital call deadline can trigger real financial and reputational consequences with a GP.
What happens if an LP misses a capital call?
Consequences vary by fund agreement but can include interest penalties, forced sale of the LP's interest at a discount, or in severe cases forfeiture of prior contributions and remaining fund interest.
Can a GP call 100% of committed capital at once?
Usually the agreement allows calls as needed up to the commitment, but in practice GPs call in tranches tied to deployment. Calling everything up front would defeat the capital efficiency LPs are paying for and would raise questions about the GP's deployment discipline.
What is an overcall provision?
A clause allowing the GP to call capital beyond an LP's original commitment, usually capped and typically used to cover a defaulting LP's shortfall or fund expenses. It raises the maximum an LP might have to fund.
How should an LP prepare for capital calls?
Keep a liquid reserve or credit facility covering unfunded commitments across all funds, track expected call pacing, and if a liquidity crunch is coming, talk to the GP before the deadline — not after.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.