What are reserve funds and what should entrepreneurs know about them?

• Reserves are the amount of investment capital proportioned to individual investment companies.

• A firm in its early stages may see a VC make a $1m investment but may have set aside a further $5m to invest in future rounds.

• This is an amount well defined within the VC fund.

• However, VCs may have no reserves for a company in its later stage aiming for an IPO soon.

• A $50m fund with $25m initial investment could have $25m reserves to invest in future rounds.

• Under- reserving can see VC’s pick favourites and allocate future investments only to their top entrepreneurs.

• Over reserving is not a problem for entrepreneurs but is economically disadvantageous for VCs and LPS in the fund.

• Most VCs can raise a new fund when they have committed and reserved 70% of their funds which incentivises VCs to over-reserve.

We have an 88% placement rate for our 4 to 8 weeks training programs conducted in 2017/18 with students going on to secure jobs at marquee investment banks such as Goldman Sachs, Credit Suisse, Morgan Stanley, Citi Bank and Deutsche Bank among others. Please send your CV to info@cityinvestmenttraining.com to check your eligibility for the course.

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