You hear it constantly in VC.
“We just had our first close.”
“We’re closing the fund next month.”
But what does closing a fund actually mean? What happens, step by step, between “we’re raising” and “we’re closed”?
First, what a “close” even is
A fund doesn’t usually raise all its money in one dramatic moment. It holds closes. A close is a checkpoint where a batch of LPs legally commit and the fund can start putting that capital to work. Most funds have a first close (enough to get going), then rolling closes over the next 12 to 18 months, then a final close.
A sample first close timeline
YMMV, of course, but here’s a timeline I recently saw from an emerging manager working towards their first close. It runs about 1 month and goes something like this:
- Day 0: Fund counsel delivers the closing documents (e.g. Limited Partnership Agreement)
- Day 1: The GP emails prospective LPs to announce the close, key dates, point them at the docs, etc
- ~2 weeks in: LPs indicate non-binding interest through an “Indication of Interest” form.
- ~3 weeks in: Subscription documents signed.
- ~4 weeks in: Close.
Non-binding interest (the “soft circle”)
Before anyone signs anything, the GP wants a read on who’s actually in, and for how much. LPs signal this through an indication of interest: a short form that allows them to say (among other things) “I’m likely in for around $X.”
Subscription documents (the “hard circle”)
This is where it gets real. To actually commit, an LP executes subscription documents: the subscription agreement, signature pages to the LPA, and perhaps a questionnaire confirming they’re accredited or a qualified purchaser.
The close
Depending on the fund and check sizes, LPs either wire their full commitment now or get “called” over time.
None of this is magic. A close is really just: get the docs, tell your people, size the interest, sign the paperwork, lock it in.
