Ownership Is the Strategy

Why even a breakout company won’t save you if the numbers don’t add up

Everyone in venture loves to talk about the power law.

Everyone forgets to talk about the denominator.

You’ll hear it in every pitch:

“This company alone could return the fund.”

What no one says out loud is what percent of the company they actually own. Because that’s where the story breaks. Not in the company — in the cap table.

In a power law game, identifying a winner is only half the battle. Owning enough of it to matter is the rest.

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A 10x That Doesn’t Move the Needle

Let’s be brutally clear: the most common venture exit ($200M) is a life-changing outcome — for founders. For small funds, it’s often enough to return material DPI. But for a $500M AUM fund holding 1.8% post-dilution? It’s background noise. Nice in the LP letter, irrelevant in the cash-on-cash returns.

This is the hidden math behind venture returns — and the core flaw in many larger strategies pretending to be early-stage. A beautiful markup, a hot logo, a splashy press release — none of it matters if the ownership is too thin.

You don’t get paid for proximity.

You get paid for position.

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Size Is Not Strategy

Large funds drift. They chase hot logos, stretch for access, and compromise on price or ownership just to stay in the round. They optimise for AUM, not IRR. Smaller funds, when managed well, can do the opposite:

• Move fast

• Lead early

• Negotiate for double-digit stakes

• Protect their pro rata

• And build real exposure to outliers

A 15% stake in a $500M exit returns 1.5x DPI on a $50M fund.

A 1.5% stake in a $10B decacorn returns just 0.3x DPI on a $500M fund.

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What LPs Should Be Underwriting

Forget the logo count. Ignore the party round co-signers. Underwrite the math:

• What % do they own on initial check?

• How much reserve are they holding for the winner?

• What’s the dilution forecast to Series C and beyond?

• Do they have super pro rata, board rights, governance visibility?

The LPs who win in venture underwrite ownership and durability — not exposure and excitement. Because you can be right about the company and still lose on the fund.

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What Strong Looks Like in Practice

Here’s how different tier one fund strategies translate in the real world:

Core Seed Funds:

• Write $1M - $3M initial checks

• Target 10% - 15% Ownership

• Portfolio of 20-40 companies

• Reserves for follow-on

• Companies are on average 3 years old

• Companies have initial product-market fit and revenue

Core Pre-Seed Funds:

• Write $300K - $1M initial checks

• Target 10% - 20% Ownership

• Portfolio of 20-40 companies

• Substantial reserves for follow-on

• Idea-stage, pre-product companies

• Only founders and typically no team

Micro Funds:

• Write $50K - $500K initial checks

• No Ownership targets

• Portfolio of 20-40 companies

• Very low/no reserves for follow-on

• Non-lead participant in syndicates

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Back the Builders, Not the Branders

The best GPs know the difference between chasing winners and constructing returns. They treat every entry point like it matters (because it does). They pass on overpriced deals. They walk away from hype. They optimise for ownership like it’s the whole game — because it is.

They don’t just know the winners.

They own them.

In the next vintage of venture, logos will be cheap. Ownership will be rare. And only one of them will be bankable.