Fund managers
How can a pre-seed venture fund make its portfolio model understandable to LPs?
a pre-seed venture fund: Make the portfolio model understandable through a capital bridge and explicit operating assumptions.
Make the portfolio model understandable through a capital bridge and explicit operating assumptions. Fund size, costs, initial checks, reserves, ownership, and company count must fit together. A balanced model still requires access, judgment, and capacity to execute.
Start with the decision
Show a base case and a smaller-close or larger-check case. Label every assumption and explain which decisions change. Keep formal fee treatment and actual fund terms subject to the governing documents and qualified advisers.
The illustrative scenario
This is an educational workbook. The company or fund and all numerical inputs below are fictional. They are not ADIN results, customer claims, market benchmarks, or a forecast.
The fictional fund plans small initial investments before companies have repeatable revenue. It expects to reserve capital for selected later rounds. The LP is reviewing whether check sizes, ownership assumptions, and support work fit the fund budget.
Early paper marks can move before meaningful liquidity. Separate investment selection, subsequent financing, ownership dilution, and cash distributions when discussing progress.
Reconcile the portfolio plan with its capital budget
This fictional model starts with $30,000,000.00 of commitments and sets aside $5,000,000.00 for modeled lifecycle costs and $10,000,000.00 for follow-ons. That leaves $15,000,000.00 for initial checks. A target of 30 investments at $500,000.00 requires $15,000,000.00 before any other unmodeled uses.
The cost amount is a hypothetical budget, not a quoted fee or an industry norm. Actual fees, expense allocation, offsets, fund term, investment authority, and distributions depend on the governing arrangements. A balanced budget does not establish that the manager can obtain the allocations, ownership, or results assumed in the strategy.
Compare the proposed number of companies with investable capital after the model's costs and reserves. Treat a target ownership percentage as an assumption until terms support it. Reduce the final close or increase the initial check and identify what changes first: company count, reserves, operating resources, or the strategy itself. For this article's question, use the resulting constraint to request the specific evidence or document provision rather than treating the spreadsheet as the decision.
| Item | Illustration |
|---|---|
| Fictional fund commitments | $30,000,000.00 |
| Modeled lifecycle costs | $5,000,000.00 |
| Modeled follow-on reserves | $10,000,000.00 |
| Available for initial checks in this model | $15,000,000.00 |
| Target initial investments / check size | 30 / $500,000.00 |
| Initial-investment capital required | $15,000,000.00 |
Use this worksheet
Answer the questions with a source, date, owner, and next action. Mark an unknown as unknown. Use public or permissioned information and involve a qualified specialist when a question requires expertise beyond the team’s competence.
- What capital is investable?
- How many initial checks fit?
- What is reserved?
- What ownership is assumed?
- What changes in an adverse scenario?
Questions specific to this scenario
- What is funded by the first check?
- Which follow-ons qualify?
- How are unsuccessful investments represented?
Request the portfolio model, reserve policy, ownership assumptions, dated company evidence, and a reporting sample that distinguishes marks from cash. Include companies that failed or did not raise again.
A concrete next test
Rebuild the initial-check and reserve model with a smaller final close. Ask which portfolio assumptions change and what evidence supports the ownership target. Compare early company milestones with paper marks so the LP can distinguish learning progress from cash realization.
Interpret the result
The model should expose dependencies, not imply forecast precision. LPs need to see where a target requires unproven allocation access, favorable pricing, or operating support beyond the manager's demonstrated capacity.
Compare the proposed number of companies with investable capital after the model's costs and reserves. Treat a target ownership percentage as an assumption until terms support it.
Sources and method
These primary resources provide background for the concepts. The fictional scenario, calculations, and worksheet are ADIN educational examples; the sources do not report or validate those invented results. Reviewed October 11, 2026.