venturecapital

I still believe as an early stage (say, pre-seed) Fund I, you SHOULDN'T have reserves.

✅ Your goal is to raise Fund II 3 years later = show access, not return because pre-seed funds' tvpi are meaningless before years 6/7 when actual DPI *could* start kicking in, and default-dead startups die

✅ Reserves = DCA up = even bigger returns needed because your last check has produced no return yet

Most of times pre-seed funds having reserves will put good money after bad.

Solution: raise less for Fund I so that you only write checks to add new portcos, and raise Fund II on the back of showing access

Couldn’t agree more. Small funds carving out follow-on capital is a double-edged sword — every marginal dollar at that stage should carry the same risk/return profile. Reserves often distort that.

One addendum to your solution: “raise less for Fund I and recycle up to 150% if needed.” It shows LPs you can generate distributions while still having room to take conviction bets when warranted.

yes, modulo if you have distrib during the investment period, typically 2-3 years max as a pre-seed fund 1, period where recycling is usually allowed by the lpa