Capital Commitment is a number of funds, which investors provide in case of investment. The investment in venture capital and the buyout is restricted to the institutional investors and wealthy private individuals or family offices, which become limited partners with their investment, in case of the structure of the fund is characterized as a limited partnership. During the fundraising, they provide the committed of funds. The money, which is committed, is called committed capital. Capital commitment is particularly important to the functioning of markets where buyers and sellers arrive sporadically and search costs are relatively high.
Pros and cons of using capital commitment
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Author: Milena Kurczek