There is actually some recycling allowed, as described in the "disclaimer" section. But the reason is interesting: Many organizations that invest in VCs are e

There is actually some recycling allowed, as described in the "disclaimer" section. But the reason is interesting: Many organizations that invest in VCs are extremely efficient, analytical operations. They model each investment in their portfolio carefully. Imagine you are considering playing blackjack at a $1-per-bet table. You start with $100. You play well, so you expect to end up with about $97, since with good play, the house edge is about 3%. Two hours later, all your money is gone! Did you lose every time? No. But you re-invested the proceeds of each game, and that modified your return expectations. Similarly, when VCs have unlimited re-investment, it plays havoc with their investors' return calculations. Also - separate issue - if you re-invest late in a fund's life, you increase the odds that the fund closes up shop while it still has a bunch of active companies in its portfolio. So while it's not prohibited outright, it's often restricted, and knowing that can help you understand certain behaviors.