Fund Structure
Opportunity Fund
A separate, dedicated pool of capital raised by a VC firm specifically to make larger follow-on investments in its best-performing portfolio companies.
As portfolio companies grow, the initial ownership stake a VC took at seed or Series A gets diluted through subsequent rounds. An opportunity fund allows the firm to deploy additional capital into breakout companies to maintain or increase ownership without pulling from the main fund's reserves.
Firms like Benchmark, Sequoia, and Andreessen Horowitz have all run opportunity funds alongside their primary vehicles. These funds are typically 2-3x the size of the primary fund and reserved exclusively for the top performers.
In Practice
If a firm invested $1M at seed for 10% of a company, subsequent rounds might dilute them to 6%. An opportunity fund allows them to invest $10M at Series C to bring ownership back toward 8%, capturing more of the upside if the company becomes very large.
Why It Matters
Opportunity funds reveal a firm's true conviction about its winners. LPs in opportunity funds get concentrated exposure to already-proven companies rather than a diversified portfolio of bets — lower risk but also potentially lower return multiples.