What Your VC Really Means by ‘We Have Reserves’

Founders often see a large VC fund, a recent fund close or a pro-rata right and assume future capital is available. The evidence from Capiter, Copia, Byju’s, Zilingo and Northvolt shows that reserves become real only when a company remains a priority and the financing can attract agreement around price, governance and risk.

In 2022, the founders of Capiter wanted their investors to put in more money.

Capiter, the Egypt and UAE B2B-commerce company, had raised a $33 million Series A in September 2021. Its backers included Quona Capital and MSA Capital, investment firms in the investor group, and Shorooq Partners, another Capiter investor. By the following year, the founders wanted a new financing to keep the company operating. The investors preferred a sale to Retailo, the Saudi competitor.

That was not a small disagreement about price.

For the founders, another round meant a chance to keep building. For investors, a sale looked preferable to extending a company confronting concerns over governance and burn, the speed at which it spent cash. The dispute left Capiter in arrears to employees and creditors, according to TechCrunch.

Capiter’s well-funded investor group still preferred a sale over another financing round. Photo: Dimitra M.K / Pexels, Pexels licence (free commercial use).

What made the episode particularly uncomfortable was the money sitting nearby. Shorooq launched its $150 million Bedaya Fund II in March 2022, listing Capiter as a portfolio company. Quona closed a $332 million Fund III in November 2022.

There was money nearby. It was not Capiter’s money.

That distinction is the question hiding inside a remarkable amount of startup runway planning: when an investor says it has dry powder, whose dry powder is it, and what must happen before it reaches your bank account?

The number that flatters everyone

Dry powder means capital a venture fund has committed but has not yet called from its own backers. It sounds like a full pantry.

But a pantry is not dinner.

A fund can hold cash for new investments, a few apparent winners, or deals still awaiting approval from its investment committee, the people authorised to make investment decisions. The fund’s own rules can also restrict how much it puts into one company or how late in its life it can invest.

The NVCA 2026 Yearbook, using PitchBook data through December 2025, reported $299.3 billion of US venture-capital dry powder. Yet it found that the capital was concentrated in large platform firms while smaller funds had materially less ammunition for follow-on investments.

The same period was harsh for companies needing another round. From 2021 through 2024, US VC investors put more than $160 billion more into investments than they received in distributions. Distributions were only 12% of net asset value in the third quarter of 2025, against a 17.8% long-run average. Down rounds, financings at lower valuations, reached a decade-high 15.9% of deals.

The industry had capital. Individual companies often could not reach it.

GI Network's view: A founder should treat an investor’s reserve as unconfirmed until the specific fund, the specific company and the specific round have passed an explicit internal decision.

A right to invest is not a duty to invest

A pro-rata right, the right to buy enough shares in a later round to preserve an investor’s ownership percentage, is often mistaken for protection. It is not. It is a choice.

A 2024 Journal of Corporate Finance study covering 30,602 US follow-on decisions found that previous capital invested and investor monitoring increased continued investment. Fund age and dry powder also affected decisions. A 2016 Management Science study reached a related conclusion: a fund’s remaining contractual horizon changes how it invests.

A 2025 Wharton and Bank of Israel working paper sharpened the point. Companies financed earlier in a fund’s life received more follow-on financing and had better exit outcomes.

Put those studies beside Capiter and a pattern appears that none of the reports states so plainly: follow-on money is not a balance-sheet fact. It is a ranking exercise.

Every portfolio company is competing with its siblings for attention, reserves and belief. A company that still looks capable of producing an exceptional return may receive support. A company with governance friction, a widening cash gap or an uncertain sale process may not.

This is where most people stop looking. They ask, “How large is the fund?” The better question is, “Where do we sit in its queue?”

The bridge that did not lead anywhere

Copia Global, the Kenyan company that sold goods through a network designed to serve underserved consumers, had raised $123 million across eight rounds. Its funding included a $50 million Series C in 2022 and a $20 million extension in December 2023. The US International Development Finance Corporation had approved up to $5 million for the Series C as a direct follow-on investment.

On May 24, 2024, Copia entered administration after failing to secure capital on terms acceptable to all existing stakeholders. By July, its administrators had abandoned rescue efforts and begun liquidation.

At first glance, the December extension looks like proof of enduring support. It may instead have been the last exposure stakeholders could agree to take.

A bridge can buy time. It can also be a controlled decision to protect an existing position while declining to fund the journey ahead. That is not necessarily bad faith. Facts change. But founders who count a bridge as an implied multi-round commitment are making a dangerous planning error.

It is the same trap examined in GI Network’s account of why a reasonable bridge can deter the next lead. Capital that solves this month’s problem can make the next financing harder to explain.

Copia carries a second warning. An approval is not cash, and one participating investor is not a unanimous syndicate. A financing has terms, control questions and a price. Every stakeholder must decide whether those terms still make sense.

When dilution is cheaper than trust

Byju’s, the Indian education company once valued at $22 billion, made the decision even starker.

In 2024, Byju’s proposed a $200 million rights issue, a financing offered to existing shareholders, at roughly a 99% reduction in valuation. Major shareholders included Prosus, General Atlantic, Sofina and Peak XV. Prosus, General Atlantic and Peak XV were among the major investor-shareholders; Sofina was another major shareholder opposing the process. They sought governance and leadership changes, pursued proceedings before India’s National Company Law Tribunal, and dissenting investors stayed away from the March 29 shareholder meeting. Prosus later wrote its 9.6% interest down to zero.

Byju’s showed that investors may accept dilution when confidence in governance has broken down. Photo: cherian_in / Wikimedia Commons, CC BY 2.0.

The standard story says investors will pay to avoid dilution. Byju’s shows why that story is incomplete. An investor can rationally accept the destruction of an existing stake if another cheque would leave it exposed to governance, reporting or control problems it believes have not been fixed.

Zilingo, the Singapore fashion-technology company, reached a similarly bleak endpoint. It raised $226 million in 2019 from Sequoia India, Temasek, Burda and Sofina at a reported valuation near $970 million. Temasek and Sofina mattered here as Zilingo shareholders alongside the other large investors, not as distant names on a cap table.

After accounting concerns, a management dispute and unsuccessful sale efforts, shareholders placed Zilingo into creditors’ voluntary winding-up on February 17, 2023. They formally stated that liabilities made continued business impossible.

Deep-pocketed shareholders did not equal recapitalisation. Famous names did not equal a rescue plan.

India’s broader exit market was not uniformly shut. Public-market exits represented about 76% of Indian VC exit value in 2024. Better exits can return cash to investors and restore confidence for credible companies. They cannot repair a company whose shareholders no longer agree on the facts or the next move.

Why the next cheque needs a stranger

Northvolt, the Swedish battery manufacturer, had raised billions from Volkswagen, Goldman Sachs Asset Management and public-sector lenders. It also secured a $5 billion debt package in January 2024.

Then came production delays and BMW’s cancellation of a $2 billion order.

Northvolt entered US Chapter 11 in November 2024. During restructuring, prospective investors reportedly waited for somebody else to commit first. On March 12, 2025, Northvolt filed for Swedish bankruptcy after what it described as exhaustive financing efforts. Volkswagen recorded a €200 million impairment for 2024.

Northvolt had prior capital and strategic backers, but no new anchor for its turnaround. Photo: Taylor / Wikimedia Commons, CC BY-SA 4.0.

The missing ingredient was not simply money. It was an anchor: a credible party prepared to validate the turnaround.

For a capital-intensive business, existing shareholders may require a new lead, a customer commitment or government risk-sharing before recommitting. They are waiting for someone else to share the risk and establish a believable price.

Europe had €459 billion of private-capital reserves across private equity and venture capital in 2025. Northvolt shows why a regional total can mislead. A continent can hold vast nominal capital while one company cannot secure a viable financing.

Africa offers a different route. AVCA recorded $1.8 billion of African venture debt in 2025, while only six funds closed $107 million. M-KOPA, the Kenya-based company, secured more than $250 million by combining a Sumitomo-led equity investment, Standard Bank-led debt and insider follow-ons.

That financing is an important qualification to the Northvolt lesson. It was not an insider-only rescue, and the research brief does not document a successful distressed recapitalisation led solely by incumbents. But M-KOPA shows that insiders can support a company when outside capital providers can each underwrite a defined part of the risk.

Stripe provides the cleaner successful recapitalisation test. The US and Ireland payments company raised more than $6.5 billion at a $50 billion valuation on March 15, 2023. Existing investors including Andreessen Horowitz, Founders Fund, General Catalyst and Thrive participated. New institutions including GIC, Goldman Sachs Asset and Wealth Management and Temasek also joined.

Stripe said it did not need the money for operations. The funding addressed employee liquidity and tax obligations.

The distinction matters. Stripe’s insiders participated, but they did not have to carry the round alone or persuade the market that an emergency operating rescue was viable. It had a defined use of proceeds and new price-setting institutions. That is genuine syndicate strength.

What the evidence does not prove

An external anchor is not a law of nature. The academic evidence shows that previous investment and close monitoring can increase an investor’s willingness to follow on. A fund that invested early, still has reserves and retains confidence in management may lead a round itself.

But the cases point to a narrower, more useful rule. The more distressed, capital-hungry or contested the company becomes, the less credible a vague promise of insider support is. In those moments, a new lead, customer validation or risk-sharing partner becomes evidence that the round is financeable rather than merely survivable.

That is why proof of funds can prove almost nothing. Capacity without mandate, conviction and an approved decision is only potential.

What founders should ask before calling it runway

Do not ask current investors for broad reassurance. Ask for evidence that can survive the next board meeting.

First, identify the exact vehicle that owns your shares. A firm may have announced a new fund, but your investment may sit in an older one. Ask when its investment period began and when it ends.

Second, ask what deployable reserve remains after fees, signed deals and follow-ons approved for other portfolio companies. Firm-wide assets under management are not an answer.

Third, force the portfolio-rank question. Is your company being assessed as a likely winner worth defending, or as a position the fund is prepared to dilute?

Finally, ask what would make the investor commit: a named new lead, a customer contract, a governance change or a lower burn rate? If the conditions are vague, do not model the capital as available.

This is not pessimism. It is the discipline serious companies use when fundraising stalls: replacing friendly signals with financeable evidence.

GI Network would identify which promises of insider support are documented rather than assumed, test whether the funding gap and use of proceeds can be underwritten, align the materials with the requirements of an external lead, and rehearse the objections an investment committee will raise before outreach begins.

The Four-Question Reserve Test

Before putting an insider follow-on into your runway plan, use the Four-Question Reserve Test:

1. 1.Whose fund is it? Name the exact vehicle, its age and its remaining authority to invest.
2. 2.What is actually free? Strip out fees, signed deals and reserves already committed elsewhere.
3. 3.Where do we rank? Establish whether your company is a priority investment or simply an existing holding.
4. 4.Who sets the next price? Identify the committed external lead, customer validation or other anchor that makes insiders willing to join.

If any answer is soft, treat the money as soft.

Venture-capital dry powder is not your runway. It becomes runway only when a particular investor decides that your particular company is worth backing again, on terms another credible party can live with.