Your startup may be competing with a VC’s existing portfolio

In Southeast Asia, venture capital funding has significantly decreased, with only four funds completing their raises in 2025 compared to 17 in 2024 and 33 in 2023. Despite the overall funding reaching a four-year high at US$4.22 billion in June, five megadeals accounted for 93% of the total, leading to a narrowing market for ordinary new investments.

Founders raising venture rounds often observe other startups, considering who has recently closed, which funds are talking to, and the pricing for the next deals. A venture fund typically reserves capital for both new investments and follow-on investments in portfolio companies. This balance is crucial, as constructing a fund involves decisions on fund size, initial check sizes, target ownership, number of portfolio companies, and reserves for future rounds.

When a portfolio company returns for additional capital, the general partner (GP) has often gathered extensive information on the company's performance, management team, customer behavior, and progress against the original plan. This data allows the GP to reassess the investment thesis and determine whether additional capital is warranted. However, the decision to allocate more capital is not solely based on the company's past performance or the manager's familiarity with the business.

The fund must evaluate the marginal expected return on each investment opportunity, considering factors such as reserve ratios, separate growth or opportunity vehicles, co-investment structures, and stage or vehicle mandates. While a new company may appear attractive on its own terms, it must still meet the fund's hurdle rate and demonstrate that it can earn the return the vehicle was built to pursue.

The fund may also have alternative uses for its remaining capital, including companies it already owns and understands well.