Most fund-level mistakes happen at portfolio construction, not at the deal level. Get the cheque-sizing math right and you make money on average; get it wrong and even great picks won't save you.
Three numbers determine everything:
Initial cheque = (Fund × (1 − reserve)) / N
For a $50M fund, 25 cheques, 50% reserves: ($50M × 0.5) / 25 = $1M average initial cheque.
$50K – $250K. Size for at least 1% ownership; ideally 3–5%. At pre-seed valuations of $5–10M post, this means $50K–$500K cheques. Many specialist pre-seed funds prefer 3–5% and concentrate.
$250K – $2M. The most common range. Lead funds write $500K–$1.5M for 8–15% ownership. Co-investors and follow funds write $100K–$500K. Position lead vs. follow upfront — don't switch mid-conversation.
$2M – $15M. Leads target 15–22% ownership at $30M–$80M post-money. The price gets set by competition; ownership target gets enforced by cheque size.
The single biggest fund-construction debate. Three approaches:
You hold back enough to maintain ownership through one or two follow-on rounds for the top half of your portfolio. Most disciplined for new funds.
You make small initial cheques and reserve heavily for the winners. Higher variance but mathematically correct given the power law.
Lots of small initial bets, light reserves. Common for pre-seed, increasingly out of fashion at seed.
Empirical rule: 10–15% of your portfolio will absorb 70% of your reserves. If your reserve plan can't accommodate tripling-down on your top 3 names through Series A and B, you're under-reserved.
Leading means setting the price, doing primary diligence, and taking a board seat. It costs more time. The trade:
Set your max initial cheque and stick to it. The temptation to write a $2M cheque when your model says $1M is enormous when you have conviction. If you can't follow your own rules under enthusiasm, your portfolio construction is theatre.