reserve ratio

Definition

The percentage of a VC fund set aside for follow-on investments in existing portfolio companies. The math that determines whether your investor can actually support you in the next round or just awkwardly watch.

Example Usage

Their reserve ratio is only 30%, so when we needed a bridge round, they could participate but not lead, which was super helpful.

Origin

Portfolio construction terminology from institutional investing

Fun Fact

The ideal reserve ratio is hotly debated—some funds use 50%, others 75%—and getting it wrong means either abandoning winners or doubling down on losers.

Source: Venture capital fund management terminology

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