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Important to understand that when a VC raises a fund, it's just commitments from LPs, not all the money right away. So if a VC "raised" a huge fund and the mar
by peter422 4y ago
Important to understand that when a VC raises a fund, it's just commitments from LPs, not all the money right away.
So if a VC "raised" a huge fund and the market shifts and all the sudden their LPs might not like a bunch of huge capital calls, the VCs will become more conservative. Ultimately the VCs customer are the LPs, and they won't do anything that is going to piss off all their customers.
- dopeboy 4y agoCapital calls are legal obligations though, right? The "not liking" part is immaterial until the next fundraise and ask is made same LP?
- dannyw 4y agoIf you piss off your LPs you won't be fundraising another fund.
- peter422 4y agoCorrect. The fund also isn't going to be returned for 5-10 years, so even if you are making great investments that will have huge returns in 10 years, if you have a bunch of annoyed LPs now, you may still essentially get knocked out of the industry.
- EGreg 4y agoOh please, I've had investors sign legal documents that they'll invest, be legally obligated, and then reneg on those during crypto winter or some other downturn. More than once. The only thing you can rely on is the big ones with a reputation to uphold.