Follow-On Reserve Calculator

Most institutional VC funds reserve 40-60% of total fund capital for follow-on investments. A 50% reserve ratio is the most common target — on a $20M fund, $10M goes to initial checks and $10M is held back for follow-ons. The right ratio depends on your stage: seed funds that follow into Series A rounds need more reserves (50-60%), while later-stage funds that lead rounds may reserve less (30-40%) since they deploy more capital upfront.

Pro-rata rights give an investor the right (but not obligation) to invest enough in a subsequent round to maintain their ownership percentage. If you own 8% of a company and it raises a $10M Series A, your pro-rata right lets you invest $800K to keep your 8%. These rights are critical because your best-performing companies are exactly the ones where you want maximum ownership — and without pro-rata rights, you'd be diluted in every follow-on round.

No — disciplined follow-on strategy is essential. Most fund managers follow on in their top 30-50% of companies, not every one that raises. Following on in struggling companies ('good money after bad') is a common mistake that depletes reserves needed for winners. Evaluate each follow-on decision independently: is this company among the best risk-adjusted opportunities you could deploy capital into right now, including new deals?

Running out of reserves means you can't exercise pro-rata rights in your best companies' later rounds, which is one of the most costly mistakes in fund management. You'll be diluted in exactly the companies driving your fund's returns. To avoid this, track your reserve balance quarterly, be disciplined about which companies get follow-on capital, and consider selling secondary positions in slower-growing companies to free up reserves for your top performers.