capital commitment – n: a contractual agreement between an investor and a company or venture capital firm wherein the investor commits to provide up to a specified amount of capital (money), or any portion thereof, over an agreed-upon period of time.

Example: If an institutional investor (“limited partner”) agrees to invest $10 million in a venture capital fund, that investor does not simply send the VC a check for $10 million. Rather, the limited partner makes a capital commitment to the VC for the life of the fund (or the defined investment period of the fund). When the VC wants to make an investment in a portfolio company, it makes a capital call to the limited partner for some portion of the investor’s total capital commitment – typically its pro rata share of the investment. When a capital call occurs, the investor is contractually obligated to provide the funds requested.

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Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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