In the last year, as the founder of a micro VC fund, I have learned some valuable lessons that I believe can benefit anyone considering venturing into this field. It is important to understand that most VC funds are failures, with 9 out of 10 VCs not even achieving 1x returns. However, if you are passionate about this work, it won't feel like work at all.

In the last year, as the founder of a micro VC fund, I have learned some valuable lessons that I believe can benefit anyone considering venturing into this field. It is important to understand that most VC funds are failures, with 9 out of 10 VCs not even achieving 1x returns. However, if you are passionate about this work, it won't feel like work at all.

One of the key takeaways from my experience is that many people do not do enough homework before deciding to start their funds. Before diving into this industry, I highly recommend talking with at least 10 micro VCs to gain a comprehensive understanding of the challenges and opportunities that lie ahead. Additionally, it is crucial to be in a solid financial situation as this business can have a detrimental impact on your personal life. Even if you have a $10m fund, most of that money needs to be used for investing, rather than for your livelihood or other personal expenses. To put it into perspective, with a $10m fund, your yearly budget to run the company is only $200k. This means that your salary as a fund manager may be much lower than what you made at your first job out of college, like in my case, where my salary is less than what I made in 2004.

Bootstrapping a micro VC is incredibly challenging because although you receive little to no salary, you are also mostly prohibited from making money outside of your work. It is common for fund managers to invest 1-5% of the fund size into their own fund. Capital calls are typically spread out over the course of three years, adding to the financial strain. However, despite these difficulties, the potential upside is significant. Just like with startups, you risk a lot, but the rewards can be equivalent to working a steady job at Google for 10 years.

Raising a fund as a microfund manager takes an average of two years, which can be a lengthy and exhausting process. Moreover, there are restrictions on the number of investors you can accept into your fund. According to SEC rules, you can only accept 99 accredited investors, meaning you cannot accept small contributions from friends and rely on their support to gain momentum.

In my opinion, the early stage fundraising landscape is not a meritocracy. I believe that the future of funding should prioritize speed of execution rather than appearance or communication skills. It is important to challenge the existing norms and work towards a more inclusive and efficient system.

To conclude, here are three actionable pieces of advice for anyone considering running a micro VC fund:

1. Do your homework: Before making any decisions, talk to multiple micro VCs to gain insights and understanding of the industry's challenges and opportunities.

2. Ensure financial stability: Be in a solid financial situation before starting a fund, as the business can have a significant impact on your personal life. Understand that most of the fund's money should be used for investing, rather than for your own livelihood.

3. Challenge the status quo: Work towards a more inclusive and efficient funding system, where speed of execution is prioritized over appearance or communication skills. Aim to create a meritocracy where innovative ideas and execution capabilities are valued above all else.

Running a micro VC fund is not an easy journey, but with the right mindset, dedication, and strategic thinking, it can be a rewarding and fulfilling experience.