How much should a venture fund reserve for follow-ons?

Testing the plan
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There is no right reserve ratio for every fund, and allocators who back emerging managers hold different views. What you can test is whether the reserve budget follows from the strategy, whether it leaves enough for the initial portfolio, and whether the manager has a clear way of deciding where follow-on capital goes. The decision rule matters at least as much as the percentage.

What a reserve budget is for

Reserves let a fund keep or build ownership in companies that need more capital. They are an output of other choices: the ownership the manager wants to hold, how often companies are expected to raise again, whether the fund follows into strength or supports companies through difficulty, and how long the investment period lasts. Change any of these and the right reserve changes with it.

The trade-off is unavoidable

At a fixed fund size, reserves and the number of initial positions move in opposite directions. A manager who raises reserves without reducing positions, or the reverse, has changed the strategy, not just the model. When you review a plan, check that the reserve ratio and the company count were set together.

What practitioners report

Published sources give useful reference points, with the caveat that none of them establishes the right share for a given strategy.

  • A survey of more than sixty emerging fund managers worldwide, conducted by Blue Future Partners and published through OpenVC, reported a median fund size of $56 million, a median initial check of roughly $850,000, and 55 percent of committed capital held for follow-ons.
  • Some managers argue smaller funds should hold little or nothing. Hunter Walk wrote in 2026 that early-stage funds of $100 million or less should hold almost no reserves for follow-on.
  • Alex Edelson, who allocates to emerging managers, has described his preference in bands by fund size, with limited reserves or none at all preferred for funds of $20 million and under.

These views are different answers to the same question, which is why the manager's reasoning is more useful than any single figure.

Selection matters more than the ratio

Laura Thompson at Sapphire Ventures illustrated the point with modeled scenarios: she held the reserve strategy constant and varied which companies received the follow-on capital. The ratio stayed the same; the outcomes did not. For an allocator, that shifts the question from "how much?" to "how will you decide where it goes?"

Questions to ask the manager

  • How did you arrive at your reserve ratio, and what would change it?
  • What is your follow-on policy: do you follow into strength, support companies through difficulty, or both?
  • Who decides on a follow-on, and what evidence does that decision require?
  • What happens if the reserve budget runs out before the investment period ends?
  • How do reserves interact with pacing? Capital held for years is not deployed.

Reading the answer

A strong answer connects the reserve budget to the ownership the manager wants to keep, explains the decision process for follow-ons and acknowledges the trade-off with company count. A weak answer cites a standard percentage without explaining why it fits this fund. Neither tells you whether the manager will pick the right companies to support, which is a question for the record and references.

Related questions

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Sources

These examples show why a reserve near half the fund is a familiar reference point. They do not establish the right share for every strategy.