The Capital Calls Guide

A capital call (also called a drawdown) is a formal notice from you, the GP, to your LPs requesting they fund a portion of their committed capital. LPs don't wire their entire commitment on day one. Instead, you call capital as you need it — for investments, fees, and fund expenses.

This is one of the fundamental mechanics that makes venture capital work. LPs can deploy capital across multiple funds simultaneously because they know they won't need to fund everything at once. And you get the flexibility to deploy capital on your timeline, not theirs.

The total amount you can call is capped at each LP's committed capital. Once an LP has funded 100% of their commitment, you can't call more — unless they've agreed to increase their commitment. Your LPA defines the rules: maximum call frequency, minimum notice periods, and what constitutes a valid purpose for a call.

Every capital call is distributed across LPs pro rata — meaning proportionally based on each LP's commitment relative to the total fund. If you committed 10% of the fund, you fund 10% of every capital call. Simple in theory, but the details matter.

The formula is straightforward: LP Call Amount = Total Call Amount x (LP Commitment / Total Fund Commitments). But edge cases arise. What happens when an LP defaults and their commitment is reduced? What about LPs who joined at a subsequent close and need to “true up” their share of prior calls? Your fund administrator handles these calculations, but you should understand the mechanics.

Your LPA governs every aspect of how capital calls work. Before you issue your first call, read the relevant sections carefully — or better yet, have your fund counsel walk you through them. Getting the notice requirements wrong can create legal exposure.

A subtle but important point: many LPAs distinguish between “commitment period” calls and “post-commitment period” calls. During the commitment period (typically the first 4-5 years), you can call capital for new investments, follow-ons, fees, and expenses. After the commitment period, you can generally only call for follow-on investments, fees, expenses, and to fulfill prior commitments. Calling capital for a brand-new investment in Year 6 would likely violate your LPA.

The capital call letter is a formal legal document. It needs to be professional, complete, and unambiguous. Your LP should be able to read it, know exactly how much to wire, where to wire it, and when — with zero follow-up questions.

Timing matters more than most GPs realize. Call capital at the wrong time — say, December 28th when everyone's finance team is on holiday — and you'll spend January chasing wires. Smart timing reduces friction, minimizes defaults, and keeps your LP relationships smooth.

“Your LPs are not ATMs. Give them time to plan, and they'll fund every call without complaint.”

Let's walk through a real scenario. You're the GP of a $10M seed fund. You've signed a term sheet to invest $300K in a SaaS company. You also have $50K in quarterly management fees due and $15K in fund expenses to cover. Here's how the capital call process unfolds.

It happens. Despite best intentions, sometimes an LP can't meet a capital call. Maybe they have a personal liquidity crisis. Maybe their family office is restructuring. Maybe they've simply overcommitted across too many funds. Whatever the reason, you need to handle it decisively, fairly, and according to your LPA.

A capital call line of credit (also called a subscription line) is a short-term loan to the fund, secured by your LPs' unfunded commitments. It lets you fund investments immediately and call capital from LPs later. For funds above $20M, this is nearly standard. For smaller funds, it's becoming more common.

The IRR impact is worth understanding. By delaying when capital is called from LPs, you shorten the holding period for each dollar — which mathematically increases IRR even if total returns are unchanged. Some institutional LPs are wise to this and will ask for IRR reported both with and without the credit facility. Be prepared to provide both numbers.

Not all capital calls are created equal. From an LP's perspective, investment calls (deploying capital into companies) and fee calls (funding your management fees and expenses) feel very different. Investment calls are what they signed up for. Fee calls feel like paying a bill.

Most GPs combine both in a single call for efficiency. Your capital call notice should clearly break out the components so LPs can see exactly how their money is being used.

Some LPAs allow management fees to be offset against the first capital call of each year (or called in advance for the year). Others require quarterly fee calls. Understand your LPA's fee mechanics — they affect cash flow for both you and your LPs.

When 15 LPs are wiring money into your fund's bank account within a 10-day window, things can go sideways. An LP wires the wrong amount. Another forgets the reference line. A wire comes from an account you don't recognize because the LP funded from a different entity. Reconciliation is the process of matching every incoming wire to the correct LP and the correct capital call.

If you're managing this in spreadsheets with 10+ LPs, it takes hours per call and errors creep in. By call number five, your spreadsheet has more tabs than formulas, and your fund admin is spending half their time on manual reconciliation. This is exactly the kind of operational pain that scales poorly.

If you're issuing your first capital call, a spreadsheet and a PDF template might be fine. By call number three, you'll wish you had a system. By call number ten, you'll need one.

The capital call workflow has clear, repeatable steps that are perfect for automation: calculate pro rata amounts from your LP records, generate personalized notices with each LP's specific amounts, send notices via email, track receipt of wires, and reconcile.

“The first capital call takes a week of your time. With the right tools, the tenth takes an hour.”

Archstone handles the entire capital call workflow. You specify the total call amount and purpose, and the system calculates each LP's pro rata share, generates personalized call notices, sends them via email, and tracks funding status in real time. When wires arrive, you match them to LPs with a click, and the capital accounts update automatically. No spreadsheets, no manual PDFs, no reconciliation headaches.