Insights by Fusion42

Insights by Fusion42

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Insights by Fusion42
Insights by Fusion42
Venture Capital No-Reserve Strategy
💰 Investor-X

Venture Capital No-Reserve Strategy

➡️ Who does it really benefit?

DeReK WaTSoN's avatar
DeReK WaTSoN
May 14, 2024
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Insights by Fusion42
Insights by Fusion42
Venture Capital No-Reserve Strategy
1
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  1. ⭐️ The norm vs. the…. mmm not sure yet, let’s see where this goes

    Examines traditional VC strategies versus the no-reserve approach.

  2. ❤️ Why GPs Love to Sell the No-Reserve Dream

    Explores why General Partners advocate this strategy enthusiastically.

  3. 🌡 Why LPs Might Bite

    Discusses what draws Limited Partners to consider the no-reserve strategy.

  4. 🥚 The Harsh Reality of All Eggs in One Basket

    Highlights the risks and potential downsides of the no-reserve strategy.

  5. 🤑 Startups Get the Short End of the Stick

    Analyzes how startups are impacted by the absence of reserved follow-on funding.

  6. 🎫 No Proof This is the Golden Ticket

    Critically assesses the effectiveness and empirical support of the no-reserve approach.

  7. ✅ Straight Talk for Founders

    Provides founders with practical advice on evaluating VC strategies.

  8. 📢 Main Takeaway

    Summarizes the critical perspectives and final thoughts on the no-reserve strategy.



⭐️ The norm vs. the…. mmm not sure yet, let’s see where this goes

The traditional VC method for deploying capital involves stashing cash from the initial fund raise (maybe 30%) for the winning portfolio companies, follow on rounds, ensuring funds are ready for topping up investments during subsequent funding rounds to keep the momentum going and to avoid dilution. Contrarily, the no-reserves strategy is akin to going all-in at a poker game on the first hand—dumping all cash into initial investments and relying on syndicating with LP’s and others for follow on rounds via Special Purpose Vehicles (SPVs).


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