Big Funds, Tiny Cheques: Why Founders Should Think Twice Before Taking Them

In the heat of a bull market, even the largest funds start behaving in unexpected ways. When everything is booming, the patterns only become clear later. 

One trend seen is how often big funds write very small cheques. 

Founders see this and feel validated, believing that if a large fund is backing them early, their idea must be exceptional.

But most of the time, it is not conviction driving these bets. It is a calculated guess driven by FOMO. 

In 2024, several large funds in India quietly participated in pre-seed rounds with cheques below one crore, often without any follow-on support. 

The AI Wave And The Bigger Picture 

The AI wave highlights this clearly. Everyone wants exposure to the next OpenAI, Anthropic, or AI infrastructure company. Large funds quietly place small bets across dozens of startups to gain visibility, secure pro-rata rights, and enjoy future bragging rights. If one or two succeed, they double down. If not, they move on. 

This behaviour is not unique to AI. It reflects a broader pattern seen in every bull market. Repeated up rounds create the illusion that early-stage investing is easy, prompting growth and late-stage funds to drift earlier and launch seed and Series A programmes to capture more upside. 

Billion-dollar funds often run early-stage programmes alongside their growth vehicles. When the cycle turns, weak fundamentals are exposed, momentum pricing stalls, rounds reprice, and down rounds trigger dilution and painful recap scenarios that many founders haven’t planned for. 

The pattern is predictable: boom pulls investors downstream; bust resets valuations and enforces discipline. Up rounds are not a guarantee of a durable business. 

Big Funds And The Small Cheque Strategy

Large funds have money to put to work. They raise huge sums from LPs during bull markets, and those LPs want to see it in action. Late-stage deals are hard to find and prices are high, so the money moves downstream. For a $500 Mn fund, writing five or fifty lakh cheques in pre-seed rounds is just a cheap lottery ticket. If it hits, fantastic. If not, no one bats an eye. 

Funds chase the next wave. Crypto in 2021, Web3 in 2022, AI from 2023 to 2025. Small cheques let them signal activity to LPs and appear plugged in. Behind the scenes, few are accountable for supporting founders. Their presence on a startup’s cap table may look impressive, but often it amounts to little more than a name and a cheque. 

Hidden Risks For Founders

Getting an early cheque from a big fund can feel like a win. But future investors will notice who is on your cap table. If that fund does not lead or follow on, it sends a quiet signal that they passed. Other investors may pause. In venture circles, this is called signaling risk. What feels like a win at first can quietly turn into a red flag. Investors who back with real conviction often avoid rounds that have half-hearted participation. 

A small cheque might mean little for a big fund, but for a startup, it can be a lifeline. Funds are focussed on spreading risk, while founders are focussed on survival. Founders need investors who roll up their sleeves, open doors, and offer real guidance. 

If things slow down, that first cheque rarely turns into continued support. The investors who stay involved are usually smaller funds or angels who truly believe in the company. 

In 2022, many Indian fintech founders saw this play out firsthand. Large funds that joined early with small cheques often did not follow on when times got tougher, leaving founders to rely on smaller funds and angels who stayed the course. 

When Markets Turn 

When markets turn, confidence disappears. Big funds that wrote small cheques move away to chase later deals. Founders are left explaining why their lead investors are missing. This has happened before in crypto, SaaS, Web3, and now in Artificial Intelligence. 

In 2022, over half the crypto startups backed by large funds saw no follow-on participation. The pattern is the same. Big funds enter early, write small cheques, ride the wave, and leave when it fades. 

Founders need believers, not tourists. Look beyond a name. Ask if the fund will stay when things get hard. 

In artificial intelligence, many funds wrote small cheques to every startup using the label AI. In India, over forty such companies raised small pre-seed rounds in 2024, but only a few received continued support. Most of that money was passive. Real company building needs conviction, not hype. 

Conviction Beats Brand Names 

Bull markets inflate confidence. Bear markets demand discipline. Conviction cannot be borrowed. If a founder accepts a small cheque from a large fund, it should be done with full awareness. For the fund, it is optional; for the founder, it concerns ownership, signalling, and survival. That is why founders should think twice. 

The real shortcut to the next round is not a big name but early investors who believe, help deeply, and stay through cycles.

Founders have often taken $500K from $500 Mn funds, assuming it would accelerate their Series A. In reality, it rarely does.

True believers accelerate growth. In every bull market, big funds write small cheques. In every bear market, it is the small believers who build lasting companies.