Fundraising
Conditional Commitment
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Quick Answer
An LP's agreement to invest in a fund contingent on specific conditions being met, such as reaching a minimum fund size or obtaining a key person.
What it is
A conditional commitment is an LP's pledge to invest in a fund that is contingent upon the satisfaction of specified conditions precedent. Common conditions include the fund reaching a minimum size threshold, obtaining commitments from other specified anchor investors, maintaining key persons, or achieving specific governance structures. The commitment becomes binding only when all conditions are satisfied.
In Practice
The family office made a $10M conditional commitment to the emerging manager's first fund, contingent on the fund raising at least $50M in total commitments within 12 months and hiring a senior operating partner with public company experience.
Operational context
What good looks like
The term is tied to a real workflow, not just a definition.
Ownership, timing, and evidence are clear.
The reader can tell what decision the concept supports.
Related terms point to the next useful explanation.
Why It Matters
Conditional commitments create chicken-and-egg problems for fundraising: LPs won't commit without others committing first. Emerging managers need to carefully manage the sequencing of conditional vs. unconditional commitments.
VC Beast Take
The best approach for emerging managers is to secure a few unconditional anchor commitments first, then use those as momentum to convert conditional commitments. A fund built entirely on conditional commitments is house of cards.
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Term Family
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Frequently Asked Questions
What is Conditional Commitment in venture capital?
A conditional commitment is an LP's pledge to invest in a fund that is contingent upon the satisfaction of specified conditions precedent. Common conditions include the fund reaching a minimum size threshold, obtaining commitments from other specified anchor investors, maintaining key persons, or...
Why is Conditional Commitment important for startups?
Understanding Conditional Commitment is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Conditional Commitment fall under in VC?
Conditional Commitment falls under the fundraising category in venture capital. This area covers concepts related to how startups and funds raise capital from investors.
Sources & References
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