A short conversation (likely from a Precursor Ventures video) about venture fund reserve allocation, emphasizing keeping funds small, importance of strong initial underwriting at Seed stage, and the influence of founder relationships and predetermined reserve pools on follow-on decisions. The speakers discuss risks of prescriptive reserve percentages and how close relationships can bias follow-on investments.
Chapters
So my philosophy has always been if you keep your fund small enough and your first check underwriting is good, you can have a fund where the first checks can really dry performance. And I always worry more about underwriting decisions for reserves. They're just influenced by so much how well you know the founder, how big the position is, your perception. And look, we underwrite at Seed. I don't know as much about underwriting at Series Seed. That's not what you get paid to do.
Yeah. Even just at the point you raised about founders, you could have an incredibly high touch relationship with a founder and know so much about the business. And maybe the information that we'll learn, it's maybe not the best thing to follow on. I know there's a lot of fund managers, they probably just feel like they've already crossed the line and they can't go back. And they've supported them so much so they have to follow on. I think that happens when you've already allocated a specific pool and percentage of your fund because you know you're going to use it.
