Fund Structure
Investment Period
The first phase of a fund's life (typically years 1-5) during which the GP actively deploys capital into new investments.
The investment period is the window during which a VC fund makes new portfolio company investments. Typically covering the first 3-5 years of a fund's 10-year life, the investment period is when the GP deploys the majority of the fund's capital into initial positions. After the investment period closes, the GP can still make follow-on investments in existing portfolio companies (using reserved capital) but cannot make new investments. The end of the investment period also often triggers a reduction in management fees (from 2% to 1.5% or less) since the active sourcing and closing work has diminished. GPs who deploy capital too quickly during the investment period face pressure to invest in lower-quality opportunities to fill the fund; too slowly and they may have unused capital as the investment period ends.