root cash analysis

About 5-6 weeks back, I was going around saying that the impact of the credit crisis has hit VCs too as their PE does come from college (endowment) funds, to some extent.

Here's a better way to understand it.

When a VC "raises" a $100 million fund, what the firm really has done is gotten commitments from LPs that they will deliver $100 million over the life of the fund. The firm then issues "capital calls" over the next few years and gradually draws the money down. It is these calls that some LPs are reportedly starting to default on.