There is actually some recycling allowed, as described in the "disclaimer" section. But the reason is interesting:
Many organizations that invest in VCs are extremely efficient, analytical operations. They model each investment in their portfolio carefully.
Imagine you are considering playing blackjack at a $1-per-bet table. You start with $100. You play well, so you expect to end up with about $97, since with good play, the house edge is about 3%. Two hours later, all your money is gone!
Did you lose every time? No. But you re-invested the proceeds of each game, and that modified your return expectations.
Similarly, when VCs have unlimited re-investment, it plays havoc with their investors' return calculations. Also - separate issue - if you re-invest late in a fund's life, you increase the odds that the fund closes up shop while it still has a bunch of active companies in its portfolio.
So while it's not prohibited outright, it's often restricted, and knowing that can help you understand certain behaviors.
Many organizations that invest in VCs are extremely efficient, analytical operations. They model each investment in their portfolio carefully.
Imagine you are considering playing blackjack at a $1-per-bet table. You start with $100. You play well, so you expect to end up with about $97, since with good play, the house edge is about 3%. Two hours later, all your money is gone!
Did you lose every time? No. But you re-invested the proceeds of each game, and that modified your return expectations.
Similarly, when VCs have unlimited re-investment, it plays havoc with their investors' return calculations. Also - separate issue - if you re-invest late in a fund's life, you increase the odds that the fund closes up shop while it still has a bunch of active companies in its portfolio.
So while it's not prohibited outright, it's often restricted, and knowing that can help you understand certain behaviors.