This is a common structure. It's confusing to people who don't know finance or startups when they first see it.

Even VCs don't get all of their fund money delivered into their bank account when they raise a funding round. It's inefficient and undesirable for everyone involved to have to move all of the money up-front, at once.

If you talk to anyone in startup funding or finance they'll be familiar with the term "capital call" which describes how committed capital obligations are delivered at a later date than the initial deal: https://en.wikipedia.org/wiki/Capital_call

I've been involved in many startups, and this type of fundraising is not common, or at least it wasn't common before a few years or so ago

The whole concept of talking about "runway" is basically calculating how much cash in the bank, that is actually in your bank account, will last. And this arrangement is different, as there are contingencies. In the past, VCs would just give you money in a particular series, and then if your business did well, they'd eventually give you more money in a later series. But it wasn't like they announced it all up front in, say, a Series A, but a big chunk of the money would only be delivered if you met milestones.

No, it's not common for the startup itself to make capital calls. The phrase (and your link) refers to capital calls made by VC firms to their limited partners. Same thing in PE.

> Amazon agreed to invest up to $50 billion in the startup

> Nvidia invested $30 billion

> Microsoft, one of OpenAI’s longtime partners, also participated

There is a lot of non-cash, never-will-be cash, investment here. Credits for compute.

I think more people are aware that VCs raise commitments for a fund that they can pull in via capital calls than are aware that startup funding from VCs come with hurdles to clear.

This is perhaps because the most common round to raise is a small/early one, and these tend not to have hurdles. Founders that only ever raised these rounds wouldn't necessarily know what happens in later/bigger rounds.

Also, I wonder if capital calls come with hurdles as well? That is, can an LP refuse to put in more money if the VC's recent investments have not done well? I would think not, since it typically takes many years to determine whether investments were good or not.

Gotta hit that high IRR as a fund manager and the clock starts when the cash comes in so capital calls are appreciated by fund managers. Unless they are emerging managers (the startup equivalent in finance) and their LP’s are less than institutional and ghost them when the capital call hits.

It’s confusing because it’s meant to be confusing. Bigger numbers are more impressive.