First Close
First close is the initial closing of a fund when it begins officially operating and accepting initial LP commitments.
Allocator relevance: Affects economics timing, governance influence, and exposure to early deployment decisions.
Expanded Definition
At first close, a fund can begin calling capital and investing, even while it continues fundraising. Early LPs may receive favorable terms or strategic positioning, and they often influence early governance norms through LPAC formation and side letter negotiations.
For allocators, first close matters because committing early can mean higher uncertainty but also better access and alignment.
How It Works in Practice
The manager reaches a minimum viable level of commitments, closes initial subscriptions, and begins operations. Later LPs may join at subsequent closes with true-ups.
Decision Authority and Governance
Allocators must align diligence timelines to close schedules. Governance considerations include early LPAC formation and how conflicts, fees, and reporting standards are established from the start.
Common Misconceptions
- First close implies the fund is “fully ready.”
- Early closes always have the best terms.
- Joining later is always safer.
Key Takeaways
- First close starts the investment clock.
- Early LPs may shape governance and terms more.
- Evaluate readiness, not just timeline.