Committed Capital

What is 'Committed Capital'

Committed capital is a contractual agreement between an investor and a venture-capital fund that obligates the investor to contribute money to the fund. The investor may pay all of the committed capital at one time, or make contributions over a period of time. This often takes place over a number of years.

Also known as "commitments".

BREAKING DOWN 'Committed Capital'

When an investor commits capital to a venture capital fund, the investor typically has many years to satisfy the agreement. Often, contributions will be made over a period of three to five years after the fund is formed.

The private equity market can be viewed as riskier than the public equity market, as returns in the private market tend to have higher dispersion of returns than the public market. Therefore, investing in the right business ventures can offer substantial rewards for top tier funds.

RELATED TERMS
  1. Capital Commitment

    Future capital expenditures that a company has committed to spend ...
  2. Venture Capital Funds

    An investment fund that manages money from investors seeking ...
  3. Advance Commitment

    A promise or agreement to take some future action. For example, ...
  4. Venture Capital

    Money provided by investors to startup firms and small businesses ...
  5. Firm Commitment

    1. A lending institution's promise to enter into a loan agreement ...
  6. Vintage Year

    The year in which the first influx of investment capital is delivered ...
Related Articles
  1. Managing Wealth

    Learn The Lingo Of Private Equity Investing

    Once, only sophisticated investors worried about the private equity industry. But now, mainstream investors are developing an interest as well.
  2. Managing Wealth

    How To Start Your Own Private Equity Fund

    Here's a how-to guide on starting on starting a private equity firm.
  3. Managing Wealth

    A Look Into The Secrets Of Venture Capitalism

    Venture capitalists own an equity stake in the start-up and have a say in the functioning of the company. Investments are generally made in early stages of a company with long term high growth ...
  4. ETFs & Mutual Funds

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  5. ETFs & Mutual Funds

    Learn The Lingo Of Private Equity Investing

    Because of the non-public nature of private equity, it can be difficult to the learn the lingo. We break it down here.
  6. Managing Wealth

    Does Your Startup Need Venture Capital Money?

    Venture capital funding provides capital to grow a business. However, entrepreneurs will also lose some control over business decisions.
  7. Managing Wealth

    Seek An Adventure In Venture Capital

    Make a career out of chasing down the "next big thing".
  8. Trading

    Understanding the Accounting of Private Equity Funds

    Read about private equity accounting and how it is different than that of other investment vehicles. The nature of private equity makes a difference.
  9. Investing

    Financial Markets: Capital Vs. Money Markets

    Two commonly used components of the financial market are money markets and capital markets. Find out the similarities and differences between them.
  10. ETFs & Mutual Funds

    Top 5 American Funds for Retirement Diversification in 2016

    Discover five mutual funds from industry leader American Funds with high yields that are perfect for retirement savings diversification.
RELATED FAQS
  1. Do hedge funds invest in private companies?

    Understand how fund liquidity and investment returns as required by investors affect hedge funds' decisions to invest in ... Read Answer >>
  2. Can I make a contribution to my Roth IRA before I get paid quarterly?

  3. What is the difference between a hedge fund and a private equity fund?

    Learn the primary differences between hedge funds and private equity funds, both of which are utilized by high net worth ... Read Answer >>
  4. How is venture capital different from other kinds of equity financing?

    Learn how venture capital equity financing differs from other funding options and what companies need to be aware of prior ... Read Answer >>
  5. Which industries can benefit the most from venture capital?

    Read about the kinds of industries that tend to receive the most venture capital funding and why private equity investors ... Read Answer >>
  6. Where does venture capital come from?

    Obtaining funding from venture capitalists is the way to go for those who have great ideas with potential for becoming lucrative ... Read Answer >>
Hot Definitions
  1. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  2. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  3. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  4. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  5. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  6. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
Trading Center