- For a **pre-seed fund in capital-intensive sectors**, set a **long enough investment period** to match how slowly companies may hit the milestones that justify follow-ons.
- In the **LPA**, keep the main period for **new platform investments**, but explicitly allow **follow-on and protective investments after the investment period ends**.
- Best practice is **not** to give broad authority for brand-new deals after the period, only for:
- follow-ons in existing portfolio companies
- protective investments
- completing prior commitments
- Also be realistic: **small pre-seed funds often cannot reserve enough** to maintain meaningful pro rata in capital-intensive companies, so strategy and fund size must align.
References:
- https://decilehub.com/base/1-general_questions/163971-how-much-discretion-should-the-gp-retain-regarding-follow-on-investments-reserves-and-investments-made-after-the-primary-investment-period
- https://decilegroup.com/articles/pre-seed-fund
- In the **LPA**, keep the main period for **new platform investments**, but explicitly allow **follow-on and protective investments after the investment period ends**.
- Best practice is **not** to give broad authority for brand-new deals after the period, only for:
- follow-ons in existing portfolio companies
- protective investments
- completing prior commitments
- Also be realistic: **small pre-seed funds often cannot reserve enough** to maintain meaningful pro rata in capital-intensive companies, so strategy and fund size must align.
References:
- https://decilehub.com/base/1-general_questions/163971-how-much-discretion-should-the-gp-retain-regarding-follow-on-investments-reserves-and-investments-made-after-the-primary-investment-period
- https://decilegroup.com/articles/pre-seed-fund