Committed Capital

DEFINITION of 'Committed Capital'

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.

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