The strongest signal a VC can receive is when a founder they've backed asks to become a Limited Partner, especially after an exit. It proves the VC's value far exceeded the capital provided, demonstrating deep trust and authentic partnership.
The decision for an early-stage VC fund to maintain a reserve strategy is highly debatable. A fund should only reserve capital for follow-on rounds if it possesses a distinct information advantage, such as deep operational involvement that provides superior insight into a company's unit economics.
While providing services for equity seems aligned, it can harm a VC's ability to win competitive deals. This model turns every interaction into a negotiation over scope and compensation, creating friction that a straightforward investment model avoids, thereby fostering a more genuine partnership.
An even more compelling signal than a portfolio founder investing is when a founder you passed on becomes an LP. It proves your firm's feedback and rejection process are so constructive and respectful that it builds a strong reputation, even with those you don't fund.