In venture capital, recycling refers to a process whereby money that is returned to a fund (from an exit) are reinvested into additional companies rather than distributed to fund LPs.

If LPs are not particularly concerned with early liquidity, recycling proceeds can create higher long-term returns because more capital is deployed into companies overall. In addition to increasing total LP returns, recycling boost fund metrics like IRR and TVPI, which may impact a fund manager’s ability to raise future funds.