Follow-up and investor relations
How do capital calls work for LPs?
Short answer
A capital call is a request from the GP asking LPs to send in part of the money they already committed. LPs do not wire everything on day one. The GP calls capital as it is needed, such as when a deal is ready to close. Partnership documents often cover the notice period, the amount and the consequences of missing a call. Many LPs review them with a securities attorney.
What the GP asks for and when
The call only makes sense once you see who sits on each side. The GP is the person who found the deal, structured it and will work it after close. In my experience the GP usually puts up 5 to 10% of the equity needed, sometimes as much as 20%. Then the GP raises the rest from LPs.
Here is the general mechanic. An LP signs documents that commit a total amount. That is the commitment. The cash is not all wired at signing. When the GP needs money, for example to close an acquisition or cover a cost, the GP sends a written notice asking for a portion. Each LP then funds its share by the date in the notice. Many funds call capital pro rata, so every LP sends the same percentage of its own commitment.
The unfunded part of your commitment is often treated as money you may be asked to send. A family office should plan for that. Keep enough liquidity on hand so a call never forces you to sell something at a bad time.
How LP risk is often described
"The LPs typically have their risk limited to the amount they invested in the deal, and they're really looking for upside based on the efforts of somebody else, which would be the GP."
That is the trade. In many deals the GP takes on more responsibility and holds more control, while the LP gives up control in exchange for a defined amount at stake. Capital calls are how that amount is funded over time. Terms vary by deal, so many LPs ask a securities attorney to walk them through what they are agreeing to.
In this clip I explain how GPs and LPs split roles, equity and liability in a deal.
Summary and key takeaways from this video
What I would read twice before signing
The call terms live in the partnership or subscription documents. They differ from deal to deal. These are the items I would look at first.
- How many days of notice the GP must give before money is due
- What the GP can use called capital for, such as acquisitions, fees or expenses
- Whether calls are pro rata across all LPs
- What happens if you miss a call, since terms vary by deal
- Whether the GP is putting in its own capital alongside yours
The default terms are the part many new LPs skim. Do not skim them. A missed call can have real consequences. Many LPs have a securities attorney read the language before they commit. This page is not legal advice.
What this means if you are the one raising
If you are a GP, calling capital in stages can make the ask feel smaller and more concrete. Joe, a fund manager on one of our panels, said the asks that attract him are short and tied to a discrete set of goals. He wants a line of sight to the capital actually going to work. A clear call notice that says what the money is for speaks to that.
Here Joe describes why a short, focused ask with a clear use of funds gets his attention.
Summary and key takeaways from this video
Be plain with your LPs about timing. Tell them early when you expect a call. LPs who are surprised by a call remember it. At Family Office Club we see this often when a sponsor and an investor meet for the first time. The ones who set expectations up front are more likely to get a second deal.
From my books and event talks
One point on capital calls that LPs often miss is how they connect to dilution. Some deals may offer ways to take part in later rounds, and terms vary widely. I would ask how future calls and dilution are handled before signing, and many investors talk to a securities attorney about that language.
"But if you just have that right of participation that doesn't expire based on the terminal sale, then you may be able to participate there without having to respond to capital calls and without having to get diluted 10 more times."
On the record
- In Richard's experience, the GP often puts up 5 to 10% of the equity needed in a deal, and sometimes as much as 20%.
- LPs are often described as having risk tied to the amount they invested, while the GP is often described as carrying more responsibility and control.
- A co-GP may or may not earn fees off the LPs as a normal GP would, and that is negotiated.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Capital Raising Frequently Asked Questions Webinar, Capital Raising FAQ Webinar, Raising Capital in the Toughest VC Market | Family Office & Investor Strategies for 2025. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around capital call terms, default and penalty provisions and LP liability limits. Do not use AI to write your own legal agreements.
Your next steps
- Find the capital call section in the partnership agreement and note the notice period.
- Ask the GP how often calls are expected and what they will fund.
- Keep enough liquid cash set aside to cover your unfunded commitment.
- Consider reviewing the default and penalty terms with a securities attorney.
- If you are a GP, write a clear call notice template before your first raise.
More questions on this
Do LPs send all of their money when they sign?
Usually not. They sign a commitment and send money when the GP issues a call. The documents usually describe the amount and timing.
What happens if an LP cannot fund a call?
Consequences are usually described in the partnership documents and vary by deal. Many LPs talk to a securities attorney about the exact terms.
Can a family office come in on the GP side instead?
It can, if it adds strategic value, sources the deal or negotiates a co-GP role. Whether it earns fees off the LPs is negotiated between the parties.
Related questions
- Do I need an investor portal for my fund?No, many managers do not use a portal when they first start raising a fund.
- How often should I send investor updates?There is no single rule, but a short update every quarter is a common baseline for private investments, with a quick note in between when something material happens.
- What should a quarterly investor letter include?A quarterly investor letter should cover results against plan, cash and burn, anything that went wrong, changes to the cap table or debt, and what you will do next quarter.
- How do I communicate with investors when a deal underperforms?Tell investors early, plainly and in the way they prefer to be reached.
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