portfolio construction

Definition

The strategy for how a fund allocates capital across different investments, stages, sectors, and check sizes. The art of arranging your bets so at least one or two have to work out mathematically.

Example Usage

Our portfolio construction targets 25 companies at $2M initial checks with 50% reserves, optimizing for 2-3 breakout winners.

Origin

Modern portfolio theory adapted to venture capital's power law dynamics

Fun Fact

Despite sophisticated portfolio construction models, VC returns often come down to luck—did you happen to invest in that one company that 100x'd?

Source: Investment strategy and portfolio theory applications

Related Terms

Intermediate

ownership target

The percentage of a company a VC aims to own to make an investment worthwhile relative to their fund size. It's why large funds often can't invest in your seed round—they need bigger slices.

🚀 Startup / VC

Advanced

Equity Dilution

The process by which your ownership percentage shrinks with each funding round until you own approximately as much of your company as you own of the Pacific Ocean. It's like splitting a pizza with more and more people, except you baked the pizza and now you get one olive.

🚀 Startup / VC

Intermediate

product-led growth

A go-to-market strategy where the product itself drives customer acquisition, retention, and expansion rather than traditional sales teams. Users fall in love before ever talking to a salesperson.

🚀 Startup / VC

Intermediate

runway extension

Actions taken to make existing capital last longer, typically through cost-cutting, down-rounds, or revenue generation—whatever keeps you alive until the next funding round. Financial life support for startups.

🚀 Startup / VC

Beginner

founder-friendly

A marketing term VCs use to describe their approach, supposedly indicating fair terms and supportive behavior. In practice, it often means 'we won't screw you quite as hard as the other guys.'

🚀 Startup / VC

Advanced

unicorn hunting

The venture capital strategy of seeking only investments with potential to return the entire fund, requiring massive exits. A portfolio approach that ignores solid doubles and triples in favor of swinging for nonexistent fences.

🚀 Startup / VC

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