Fund Structure
Last updated
Quick Answer
A line of credit secured by LP capital commitments that lets funds make investments before calling capital from LPs.
A subscription credit facility (also called a capital call facility) is a revolving credit line extended to a fund, secured by the uncalled capital commitments of its LPs. This allows the GP to make investments quickly without waiting for capital calls to be funded, smoothing cash management and potentially boosting IRR by delaying capital calls.
In Practice
A $200M fund with a subscription line can invest $20M immediately upon finding a deal, then call the capital from LPs 90 days later to repay the credit facility.
Why It Matters
While subscription lines improve operational flexibility and boost reported IRR, they've become controversial because they can artificially inflate time-weighted returns by shortening the measured investment period.
VC Beast Take
Sub lines have become table stakes for institutional funds, but they're creating an arms race of artificially inflated IRRs. Smart LPs now demand both gross and net-of-fees returns calculated with and without the sub line impact. The facilities are useful operationally, but the performance engineering is getting out of hand.
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A subscription credit facility (also called a capital call facility) is a revolving credit line extended to a fund, secured by the uncalled capital commitments of its LPs.
Understanding Subscription Credit Facility is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Subscription Credit Facility falls under the fund-structure category in venture capital. This area covers concepts related to how venture capital funds are organized, managed, and governed.
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