Comparison
Committed Capital vs Called Capital: Key Differences Explained
Committed capital is the total amount LPs have legally pledged to a fund. Called capital (also known as paid-in capital or drawn capital) is the portion that has actually been transferred to the fund. The gap between the two is 'dry powder' — capital committed but not yet deployed.
What is Committed Capital?
Committed capital is the total capital that limited partners have contractually agreed to provide to a fund over its life. When a VC firm closes a $200M fund, it means LPs have committed $200M in aggregate — but this money is not transferred all at once.
Committed capital is a binding obligation. LPs who fail to fund capital calls when requested can face serious penalties, including loss of their interest in the fund. Most fund LPAs give GPs the right to call capital over 3–5 years (the investment period), with the balance available for follow-on investments and fund expenses.
What is Called Capital?
Called capital (also called paid-in capital, contributed capital, or drawn capital) is the actual cash that has been transferred from LPs to the fund in response to capital calls. It is the subset of committed capital that has been deployed or is available in the fund's bank account.
Capital is called in tranches as investment opportunities arise. A fund might call 20% of committed capital in year one (for initial investments and fees), another 25% in year two, and so on. The denominator in DPI and TVPI calculations is paid-in capital — the actual cash invested, not the total commitment.
Key Differences
| Feature | Committed Capital | Called Capital |
|---|---|---|
| Definition | Total LP pledge to the fund | Capital actually transferred to the fund |
| Timing | Agreed at fund close; not transferred yet | Transferred in tranches via capital calls |
| Fund size vs deployment | Fund size = committed capital | Called capital grows as capital calls are made |
| Return metrics | Not used directly in return calculations | Denominator in DPI, TVPI, and MOIC |
| Uncalled capital | Committed but not yet called = dry powder | N/A — called capital is what's been drawn |
When Founders Choose Committed Capital
- →Describing a fund's total size to LPs or founders
- →Calculating the management fee base (often on committed capital)
- →Understanding the fund's total capacity for investments
When Founders Choose Called Capital
- →Calculating DPI or TVPI (denominator is paid-in capital)
- →Understanding how much cash the fund has actually deployed
- →Tracking how far into the investment period the fund is
Example Scenario
A $150M fund closes in January. By December of year one, $30M has been called across 10 investments and management fees. The committed capital is $150M; the called capital is $30M. A portfolio company is acquired at 5x — returning $20M. The DPI at this point is $20M / $30M = 0.67x (not 0.13x of the full $150M commitment). TVPI uses the same $30M denominator.
Common Mistakes
- 1Using committed capital as the denominator in return calculations — it overstates the return required and understates early performance
- 2LPs confusing the fund's 'size' announcement with how much cash they need to have ready immediately
- 3Not modeling the J-curve effect: called capital grows before returns materialize, making early TVPI appear low
Which Matters More for Early-Stage Startups?
Both numbers matter for different purposes. Committed capital defines the fund's total investment capacity and strategy. Called capital is the basis for all return calculations — it's the actual cash at risk. Founders asking VCs about reserves should ask about uncalled committed capital — that's the dry powder available for future rounds. LPs should understand both to properly model their cash flow needs over the fund's life.