Every frustrated founder asks this question: "If they have $150 million under management, why can't they just write me a $1m check?"
It's a fair question. The math seems simple. The reality is a little more complicated. All most founders consider is the first order maths.
Having worked in VC and in CVC (Corporate Venture Capital - it is slightly different) I had many a dinner with prospects and targets and many founder friends at the time genuinely confused. One friend, almost begging for investment, to propel his company couldn't understand why our $100M corporate fund wouldn't write him a $500k check. His confusion was genuine - and totally logical from his perspective... the amount seemed "meaningless", relative to the fund size, for him.
Put yourself in the fund's shoes and everything changes.
The Time Economics Nobody Talks About
The blunt truth: Your $1m deal gets the same partner attention as their $15M deal, and the vehicle is not cheaper.
When a partner eyes a deal and instructs the team to conduct due diligence, that time costs exactly the same whether they're investing $200k or $20M. The team (partner, associate, analyst, lawyers etc...) still needs to:
- Attend IC meetings
- Review and execute legal documents and changes
- Sit on the board
- Manage the relationship
What this means: If they have 15x more money in another deal, spending equal time on yours is mathematically irresponsible to their LPs.
The back-office reality: Closing costs are higher for smaller deal than larger deals as a percentage because there is a floor. This is why we're seeing more convertible notes and SAFEs being used in even higher denominated investments. They're not just founder-friendly, they're economically necessary and help delay/bundle costs when it makes more sense.
Fund Mandates Aren't Suggestions
Here's what most founders miss: VCs are essentially money managers with contractual obligations. They have a fiduciary responsibility.
When they raise a fund, they sign legal documents promising LPs they'll:
- Aim to own X% of companies
- Write checks of Y size
- Focus on Z stage companies
- Generate specific (targeted) returns
A practical example: A $300M fund targeting 15-20% ownership with $5-6M initial investments literally cannot participate in most seed rounds. If you're raising $1M at a $5M pre-money, they'd get 16% = perfect fit. But they probably can't justify the time cost.
If you're raising $2M at a $18M pre-money, they'd need to invest $4M+ to hit their 20% target but that would mean leading a round 2x the size you actually want to raise.
The disciplined reality: Mandates exist because LPs need predictable risk profiles. Breaking mandate isn't just bad business. It's breach of fiduciary duty.
Fund Stage Determines Check Size
From my experience across different fund types: There are really three categories of "big" funds:
Established growth funds: They'll occasionally write small checks, but only as options on larger future rounds. Expect aggressive pro-rata rights and liquidation preferences to compensate for the risk mismatch.
New fund managers: These are your best bet for unusual check sizes. They're building track records and network access. A $10M first-time fund might invest in Series B of a known startup just to get in the room with other investors.
Angel-turned-institutional: Super angels who've raised funds but maintain angel-like flexibility. They understand both sides but face new institutional constraints.
The Surgical Approach to Investor Research
Instead of shotgunning your approach, do your homework. Aggressively filter funds for fit based on past investments (size, industry), reach out to founders, attend events and shmoose analysts to get tidbits. The little homework you do compounds massively into less wasted meetings and less "psychological and emotion" uncertainty.
Before any meeting, ask:
- "What's your typical check size and ownership target?"
- "Which stage do you lead vs. follow in?"
- "What exceptions exist in your mandate for smaller deals?"
- "How does your IC evaluate investments outside your sweet spot?"
Shout out before they shout: Qualify investors before they qualify you. Most founders waste months pitching the wrong fund types.
The Partner Factor: Why Personal Conviction Trumps Everything
Here's the reality nobody talks about: Every "exception" to fund rules happens because one partner puts their reputation on the line.
When a partner brings a deal to IC that's outside their mandate - too small, wrong stage, unusual structure - they're essentially saying "I believe in this soooo much I'm willing to stake my credibility on it." That's not a decision taken lightly.
What this means for you: You're not just selling your company, you're selling a partner on becoming your internal champion. They need to believe in you enough to go to bat against their own investment committee.
The practical reality: A junior partner at a $500M fund probably can't champion your $1M round. But a senior partner with 3 successful exits? They have the political capital to break rules for the right deal.
This is why warm introductions matter. It's not just about getting in the door. It's about getting to someone with enough influence to fight for you when the economics don't perfectly align.
The Convenient Truth About Investment Decision
In early stage investments there is no right or wrong at the time. It's part gut feeling, part trust, part hope and a large dose of luck. But it's the partner's personal conviction that turns those feelings into actual checks. Getting the investment is half the battle; leveraging that partner relationship after is just as important.
Understanding these constraints isn't about accepting limitations, it's about optimising your time and trying to improve your chances of success. Your primary focus should be execution, not fundraising. You're building a company, after all.
