How Much Should You Actually Own In Portfolio Companies? A Practical Guide to VC Ownership
In venture capital, one phrase shows up in almost every partner meeting: “What’s our ownership?”
For years, VCs have been trained to think that if you don’t own 10–20%, you’re not really in the deal. But is that always true? And in a world of larger rounds, competitive syndicates, secondaries, and multi-asset strategies… how much should a VC really care about ownership %?
Short answer: You should care about ownership — but you should care about fund outcomes and influence first, and treat ownership % as a tool, not a religion.
Let’s unpack this with some simple math.
1. Why VCs Historically Obsessed Over Ownership
Start with the classic early-stage VC setup:
Fund size: $50M
Target net return: 3x
Portfolio size: 20–25 companies
Reality: 1–3 companies will drive most of the returns
If a company in your portfolio becomes a $1B exit, what you get as a fund is basically:
Payout = Ownership % × Exit Value
Let’s compare:
At 3% ownership in a $1B company:
Payout = 0.03 × 1,000,000,000 = $30M
At 10% ownership in a $1B company:
Payout = 0.10 × 1,000,000,000 = $100M
Now compare those numbers to the $50M fund size to get to the simple fund return math:
3% ownership → $30M = 0.6× the fund
10% ownership → $100M = 2× the fund
Same company, completely different story at the fund level.
This is why traditional VCs say things like “we need 10–15% ownership.” They’re not just being greedy; they’re trying to make the fund math work:
You want a few winners that can return the fund (or multiple times the fund)
To do that, you usually need enough ownership in those winners
If your strategy assumes 1–2 big winners, then you can see why VCs want double-digit ownership. That’s what allows a single company to matter at the portfolio level.
So historically, ownership mattered because of:
Fund return math – you need your winners to move the needle.
Influence & governance – meaningful ownership often comes with board seats and stronger rights.
Follow-ons – higher ownership + pro-rata lets you keep your share in the winners as they scale.
2. When Ownership Obsession Becomes a Problem
The problem isn’t caring about ownership. The problem is turning ownership into a rigid dogma:
“We don’t do anything below 12%.”
“If we can’t lead, we pass.”
“We prefer 20% in a decent deal over 5% in a world-class company.”
That mindset can quietly damage your strategy.
You Lose Access to the Best Deals
Top founders with multiple term sheets don’t optimise for your target ownership. They optimise for:
Who they trust
Who adds value
Who helps them raise the next round
If you insist on 15–20% in every deal, you self-select out of the most competitive, highest-quality rounds.
You Risk Misalignment with Founders
Forcing very high ownership early can over-dilute the team:
Founders give up too much too early
Morale and future round dynamics get tricky
Future investors might see a “heavy” early investor as a problem
This is especially true at pre-seed and seed, where the company is fragile and dilution hurts more.
You Confuse Inputs with Outputs
Ownership % is an input.
DPI, TVPI, and net return are the outputs.
A fund with 5–8% in several mega-winners can massively outperform a fund with 15–20% in a handful of “nice but not amazing” companies. In other words:
Better to have a smaller slice of a truly great company than a big slice of something that never gets escape velocity.
3. Different Strategies → Different Ownership Logic
How much you care about ownership should follow from what kind of fund you are.
(a) Classic Early-Stage Lead Fund
If you’re a concentrated early-stage fund that likes to lead:
Target ownership per deal: 10–20% at entry
Reserving for follow-ons: often 40–60% of fund for pro-rata
Goal: a few companies that can each return the fund or more
Ownership is a core design variable here. If you end up owning 2–3% in everything, your probability of returning the fund goes down sharply unless you somehow land multiple decacorns.
(b) High-Volume Seed / “Option” Strategy
Some funds and solo GPs play a different game:
Smaller checks in more companies
Ownership bands of 1–5%
Focus on access to many potential outliers, not control
Sometimes backed by an opportunity fund to scale into the winners
Here, the logic is:
“We don’t need 15% in each. We need exposure to as many potential category winners as possible, and then double down in the few that work.”
Ownership still matters, but it’s secondary to access and selection.
(c) Growth, Secondaries, and Structured Deals
In growth or secondaries:
The company is later-stage, with more data and less binary risk.
The cap table is crowded; big clean primary rounds are less frequent.
You might be buying from existing shareholders, not setting the terms.
In that world, the core questions are:
Are we buying at a compelling entry price?
Is there a credible path to liquidity in a reasonable time frame?
Does this position, at this price, materially move our fund if it works?
Here, a 1–3% stake in the right company, at the right price, can be a fantastic trade. Ownership matters for fund math, but the game is more about pricing, risk, and liquidity than hitting a magic %.
4. Putting Numbers on “Does This Position Matter?”
Instead of asking “Is this 10–15%?” ask:
“If this company hits a reasonable upside case, how much of our fund does it return?”
A simple framework:
Decide what “meaningful” means at the fund level:
For example: a position should be able to return at least 30–50% of the fund in a plausible upside scenario.
For each deal, ask three questions:
What’s a realistic high outcome? (not fantasy, not worst-case)
At our ownership %, what’s the payout if that happens?
How many times our fund size is that?
Let’s run a quick example.
Fund size: $50M
Expected high outcome: $300M exit
Ownership: 8%
Payout = 0.08 × 300,000,000 = $24M
Compare to the fund:
$24M ÷ $50M = 0.48× the fund
So, in a realistic strong outcome, this position can return almost half the fund. That’s meaningful. You don’t need 15% if the company can get to a large enough outcome and your entry price is sane.
On the other hand:
If you own 2% in that same $300M outcome:
Payout = 0.02 × 300,000,000 = $6M
That’s only 0.12× the fund
Still nice. But now this position alone can’t really carry your fund; you need multiple similar wins. That’s fine if your strategy is to hold many such positions—but dangerous if your portfolio is concentrated.
5. A Practical Internal Rule of Thumb
Here’s a simple internal philosophy that balances discipline with flexibility:
Fund-first, ownership-second
“We care about whether this position can return a meaningful chunk of the fund. Ownership % is how we achieve that, not the goal by itself.”
Use ownership bands, not hard lines
“Our target at Seed is 10–15%, but we’re willing to do less for exceptional companies or where we can scale exposure via pro-rata, co-invest, or secondaries.”
Be honest about your model
If you’re a concentrated lead fund, then you must care about ownership and follow-on.
If you’re a broad access / option-style fund, you care more about getting into great companies than about owning a huge slice of each.
Never worship ownership over quality
A rigid 15% rule that keeps you out of the best companies is worse than a flexible 5–10% rule that gets you into genuine outliers.
In other words:
Ownership is not the objective.
Exceptional outcomes at the fund level are the objective.
Ownership is just one of the tools that gets you there.
