More Shots on Goal vs. Reserves

What’s the Optimal Pre-Seed Fund Strategy?

Here’s a secret about venture capital: most investors lose money on most of their bets. But the few that win? They win so big they make everything else irrelevant.

This creates a strange problem. Imagine you’re playing a game where 90% of your lottery tickets are worthless, but the winning 10% pay out wildly different amounts. Some return 3x your money. A few return 30x. And maybe, just maybe, one returns 1,000x.

Your strategy depends on one question: Should you buy as many tickets as possible, or should you save money to buy more of the tickets that start looking good?

This is the central debate in early-stage venture capital. It’s called “reserves versus no reserves,” and it’s one of the hottest arguments in the industry. For a firm like Team Ignite, which plans to invest in roughly 100 startups per year with low initial ownership each, getting this right isn’t academic. It’s the difference between a decent fund and a spectacular one.

Let’s run the numbers.