The individuals that set up the PE fund and run it are referred to as General Partners. They identify and acquire companies, make operational improvements to those companies and subsequently sell them after about 5 years.
In order to make these acquisitions they need capital, typically the General Partners will contribute up to 5% of the funds value, the remainder of the capital comes from investors referred to as Limited Partners.
To secure this capital the General Partners will go on a Roadshow (they may use Placement Agents to do a lot of the running around) to pitch to prospective Limited Partners.
Having secured funding the last thing the General Partners want is to have to keep a whole bunch of Limited Partners in the loop, so they tend to aim for a smaller number of Limited Partners (circa 10), each contributing hundreds of millions of dollars, although there may be a lower threshold for high net worth individuals.
Although capital is initially committed by the Limited Partners it will not actually be contributed until the General Partners need it. Capital is only drawn down or called when the General Partners begin making investments, closing deals and adding companies to the fund’s portfolio. This initial round of investments is referred to as First Close.
It is often still possible for new Limited Partners to invest in the fund at this stage, until the fund has made sufficient investments to hit its Final Close threshold, at this point no new Limited Partners may invest.