Lessons from Running a Micro VC and Prioritizing Product Love Before Growth

Jul 20, 2023

4 min read

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Running a micro VC fund has taught me numerous valuable lessons and insights about the world of venture capital. From understanding the high failure rates of VC funds to the importance of prioritizing product love before focusing on growth, these lessons have shaped my approach and perspective in this industry. In this article, I will share the top 11 lessons I've learned from my experience as a micro VC, along with actionable advice for aspiring fund managers and startup founders.

Most VC Funds are Failures:
The reality is that the majority of VC funds fail to achieve even 1x returns. Similar to startups, the success rate is relatively low. This highlights the importance of doing thorough research and due diligence before deciding to start a fund. Speaking with at least 10 micro VCs can provide valuable insights and help you make an informed decision.
Financial Considerations:
Starting a micro VC fund requires a solid financial situation. If a significant portion of the fund needs to be used for personal expenses, it can negatively impact your personal life. Even with a $10 million fund, the majority of the funds should be allocated for investments, not personal livelihood. It's crucial to have a clear understanding of your budget to effectively run your company.
Sacrifices and Bootstrapping:
Running a micro VC often involves making sacrifices, especially in terms of personal income. Bootstrapping can be challenging since making money outside of your work is generally prohibited. It's important to be prepared for the financial sacrifices that come with the job and have a long-term perspective on potential rewards.
Manager Investments:
In most cases, fund managers invest a portion of their own capital in the fund, typically ranging from 1% to 5% of the fund's size. This aligns the fund manager's interests with the success of the investments and demonstrates commitment to potential LPs (limited partners).
Time and Patience: Raising a micro VC fund takes time, with an average duration of around two years. Patience is key during this process, as it involves building relationships, demonstrating track record, and effectively communicating your investment thesis. Understanding the timeline and being prepared for the long haul is crucial for success.