The Power of Sharing: Lessons from Running a VC Fund and the Benefits of Public Work

The Power of Sharing: Lessons from Running a VC Fund and the Benefits of Public Work

Running a micro VC fund is no easy feat. It requires dedication, perseverance, and a deep understanding of the industry. As someone who has been in this field for the past year, I have learned some valuable lessons that I believe can benefit anyone considering venturing into the world of venture capital.

One of the first things I realized is that most VC funds are failures. Just like startups, the majority of VC funds do not even achieve 1x returns. This is a sobering statistic that highlights the importance of doing thorough homework before deciding to start a fund. Speaking with at least 10 micro VCs before diving in can provide valuable insights and help you make an informed decision.

Additionally, it's crucial to be in a solid financial situation before starting a fund. While it may seem like an exciting opportunity, the reality is that most of the money in your fund needs to be used for investing, not for your personal livelihood or other expenses. Even if you have a $10 million fund, your yearly budget may only be around $200,000. This means you may need to adjust your lifestyle and expectations, as your salary may be significantly lower than what you initially anticipated.

Furthermore, bootstrapping a micro VC can be incredibly challenging. Not only do you receive minimal to no salary, but you are also often prohibited from making money outside of your work. This can put a strain on your personal life and financial stability. Many fund managers also invest a portion of their own capital into the fund, typically around 1-5% of the fund size. These capital calls are usually spread out over three years, adding another layer of financial commitment.

Despite the risks and challenges, the potential upside of running a successful micro VC is significant. The "gold standard" for profitable VCs is a "3x return" benchmark, meaning if you achieve returns three times the initial investment, you are considered excellent. This level of success can be equivalent to working a steady job at Google for ten years. It's important to keep in mind that the journey to raising a fund is not a sprint but a marathon, with the average time for a microfund manager to raise a fund being around two years.

Another aspect to consider is the limitation on the number of investors you can accept into your fund. According to SEC rules, you can only accept 99 accredited investors. This means you cannot accept small investments here and there from friends; instead, you must seek out accredited investors who meet specific criteria. This requirement adds another layer of complexity to the fundraising process.

Transitioning to a different topic, let's explore the case for sharing your work in public. While some studies suggest that keeping your intentions private can increase the likelihood of accomplishing a goal, sharing your progress can also be beneficial. For example, sharing your weight loss progress on social media platforms like Twitter can help you stay motivated and accountable.

Austin Kleon, author of "Show Your Work," advocates for becoming a documentarian of what you do. By sharing your work in public, you can reflect on your progress and plan your next steps more effectively. This approach allows for a more iterative process, ensuring that what you're working on aligns with the needs you have identified.

Sharing your work in public also opens doors to collaboration and the exchange of ideas. Great ideas often arise from a network of information within a transparent community. By sharing your ideas, you increase the chances of connecting the dots between your ideas and those of others. This can lead to valuable connections, mentorship opportunities, and potential partnerships.

Working on an idea in isolation can stifle the creative process. Sharing your work in public, even though it may feel uncomfortable at first, can be incredibly rewarding. It allows you to connect with like-minded individuals who share an interest in your field. Joining online groups or attending offline meetups can help you find the people who care about your work and foster meaningful connections.

It's important to note that sharing your work in public should not distract you from actually doing the work. It should complement your workflow and enhance your productivity and creativity. Once you establish the habit of sharing regularly, it will become second nature and feel strange to work in isolation.

In conclusion, running a micro VC fund comes with its own set of challenges and rewards. It requires careful planning, financial stability, and a deep understanding of the industry. Similarly, sharing your work in public has its benefits, including increased accountability, collaboration opportunities, and a more iterative approach to your projects. To make the most of these insights, here are three actionable pieces of advice:

1. Do thorough research and speak with multiple micro VCs before starting your own fund. Gain insights from experienced individuals to make an informed decision.

2. Prioritize financial stability and be prepared for a lower salary than expected. Understand that the majority of your fund will be used for investments, not personal expenses.

3. Embrace the power of sharing and find the right communities to connect with. Share your work in public, reflect on your progress, and forge meaningful relationships with like-minded individuals.

By combining the lessons learned from running a micro VC fund and the benefits of sharing your work in public, you can navigate the challenges of the venture capital industry while maximizing your potential for success.