Fund Structure
Portfolio Construction
The strategy a VC fund uses to deploy capital across investments — balancing number of investments, stage, sector, check size, and reserve allocation.
Portfolio construction is the deliberate strategy a VC fund uses to structure its investments. Key decisions: number of companies to back (fewer = more concentrated and higher conviction; more = diversified but smaller positions), initial check size (how much at first investment), reserve ratio (how much to hold back for follow-ons), stage focus (seed only vs. multi-stage), sector concentration (generalist vs. specialist), and geographic focus. Portfolio construction directly determines a fund's risk/return profile. A fund making 30 seed investments at $500K each with 30% reserves has fundamentally different expected return characteristics than one making 10 Series A investments at $5M each with 50% reserves. Many top VCs argue portfolio construction is the most underappreciated lever in VC fund returns.