Portfolio Construction Planner

Most seed-stage funds target 20-30 initial investments to have enough diversification for venture power law math to work. With fewer than 15 investments, you are making a concentrated bet that your selection ability is far above average. With more than 40-50, you may not be able to add meaningful value to each company or maintain enough ownership to move the needle on fund returns.

The standard range is 40-60% of deployable capital reserved for follow-ons. The right number depends on your strategy: if you plan to lead or co-lead follow-on rounds, reserve more (50-60%). If you only plan to exercise pro-rata rights, 30-40% may suffice. Under-reserving is a common mistake — you do not want to miss the chance to double down on your biggest winners.

First-time fund managers often under-reserve because they want to maximize the number of initial bets. A good starting point is 40-50% in reserves. This gives you enough initial investments for diversification while retaining capital to support your winners. You can always invest reserves into initial checks if your follow-on opportunity set is smaller than expected, but you cannot create reserves that do not exist.

No. Follow-on capital should be concentrated into your best performers. The typical follow-on rate is 30-50% of portfolio companies. Investing follow-on capital into struggling companies (known as 'good money after bad') is one of the biggest mistakes in venture. Your reserves exist to double down on winners, not to prop up losers.