LP Academy / How to become an LP / Lesson 7 of 8
Building your venture allocation
How much to commit, how to spread it across funds and years, and the four routes into early-stage investing.
About 7 minutes. Educational only, not advice.
Start from the whole portfolio
Venture is a small, illiquid, high-variance slice of a portfolio. Most advisors who work with individuals suggest keeping private investments, including venture, in the range of five to fifteen percent of investable assets, and only after you have an emergency fund, no expensive debt, and a diversified core. If a fund commitment would be a meaningful fraction of your net worth, it is too big.
Spread across time and managers
One fund is one bet on one GP in one vintage year. Funds raised in different years invest at different prices, and GPs differ. Experienced LPs try to commit to several funds over several years, so that no single year or manager dominates. Five to ten funds across three to five vintage years is a common target, built slowly. If that is not realistic for you, one fund is still a legitimate way to start, as long as you size it knowing it is a single bet.
The four routes
There are four ways to invest in early-stage companies, and they trade off control, work and diversification:
| Route | Who picks | Your effort | Diversification | Typical minimum |
|---|---|---|---|---|
| Angel investing | You | High | Low unless you do many | $5K to $25K per company |
| Syndicates and SPVs | A lead, deal by deal | Medium | You build it yourself | $1K to $25K per deal |
| A venture fund | The GP, over years | Low | Built in, 20 to 40 companies | $25K to $250K per fund |
| A fund of funds | A manager picking GPs | Lowest | Highest, with an extra fee layer | Often $250K and up |
A fund is the middle path: you outsource the picking and the paperwork, you get a portfolio in one decision, and you give up choosing individual companies.
Sizing a fund commitment
Remember that commitments are called over three to four years, so a $100,000 commitment is roughly $25,000 to $35,000 a year of actual cash. Match that to what you can set aside without selling something at a bad time. Then keep the uncalled balance somewhere safe and boring.
Before you move on
What percentage of your investable assets could go to zero without changing your life? How many funds, over how many years, could you realistically commit to?