Fundraising
Hard Commitment
A legally binding LP commitment to a fund, as opposed to a soft commitment which is an informal expression of interest that carries no legal obligation.
When a VC fund is fundraising, LPs progress from soft commitment (I'm interested, planning to invest) to hard commitment (signed subscription documents, legally obligated to wire capital on capital calls). Soft commitments help GPs gauge demand and build momentum, but they can fall apart — particularly when market conditions shift.
Funds should not count soft commitments toward their total raise until they convert to hard commitments. A fund that claims $100M in commitments where $40M are still soft is meaningfully different from one with $100M all hard.
In Practice
During 2022's market downturn, many emerging managers discovered that institutional LPs who had given soft commitments quietly backed out during the fundraise. GPs who had planned launches based on soft commit totals were caught short.
Why It Matters
For LPs, the move from soft to hard commitment is the point of real financial and legal obligation. For GPs, building a fund on soft commitments is risky — running a first close based primarily on hard commits is far more reliable.