Do funds always exercise pro rata?

No. Pro rata is a right, not an obligation. Reserves and portfolio-level allocation drive the actual decision.

What does a passed follow-on signal?

It depends. Portfolio construction, fund life, or firm-level view of the round can all cause a pass without reflecting badly on the company.

Can I ask for a written follow-on commitment?

You can ask, but most funds refuse — reserves are portfolio decisions, not per-company promises.

VC Reserve Strategy: What Founders Should Know

Reserves are the capital a fund holds back to invest in follow-on rounds.

VC Reserve Strategy: How Funds Allocate Follow-On Capital

The check size of a fund's initial investment is public. The reserve behind it — how much they've held back for your follow-on rounds — is not. Understanding it changes how you plan the next raise.

What reserves actually are

Funds typically deploy 50-60% of committed capital into initial checks and hold the remaining 40-50% in reserve for follow-ons. Reserve allocation is a portfolio-construction decision made per fund vintage.

Reserve ratio by strategy

Seed-only funds often carry 1:1 reserves (one dollar of follow-on per dollar of initial). Multi-stage funds carry 2:1 or 3:1 for their strongest bets. Ask your investor what their target reserve ratio is for portfolio companies at your stage.

How reserves get deployed

Most funds concentrate reserves on the top third of the portfolio. If your metrics don't put you in that tier, the reserve capital goes to another company. Pro rata rights are the floor — reserves are the ceiling.

Why fund vintage matters

A fund three years into a ten-year life has flexibility to write reserves. A fund seven years in is winding down and less likely to follow on. Ask what fund you're in and when it was raised — it changes their incentive at your next round.

Questions to ask

What's your reserve ratio for this fund? What triggers a follow-on check versus a pass? When does the fund's investment period end? Have you had to pass on follow-ons for portfolio companies you liked?

Frequently asked questions

Do funds always exercise pro rata?: No. Pro rata is a right, not an obligation. Reserves and portfolio-level allocation drive the actual decision.
What does a passed follow-on signal?: It depends. Portfolio construction, fund life, or firm-level view of the round can all cause a pass without reflecting badly on the company.
Can I ask for a written follow-on commitment?: You can ask, but most funds refuse — reserves are portfolio decisions, not per-company promises.