Lessons from Running a Micro VC and the Philosophy of Knowledge

Lessons from Running a Micro VC and the Philosophy of Knowledge

Starting and managing a micro VC fund is no easy task, but it can be incredibly rewarding for those who are passionate about the field. However, before diving into this venture, it is crucial to understand the challenges and requirements involved. Here are some key insights from running a micro VC fund and how they connect to the philosophy of knowledge.

1. Success and Failure in VC:
   Running a VC fund, whether micro or not, comes with a high risk of failure. It is estimated that 9 out of 10 VC funds do not even achieve 1x returns. This statistic is similar to the failure rate of startups. It is essential to remember that if you genuinely enjoy the work, the challenges will not feel like burdens. However, many people fail to do enough research before starting their funds. To make an informed decision, it is advisable to consult with at least 10 micro VCs and thoroughly understand the financial implications.

2. Financial Considerations and Sacrifices:
   Being in a solid financial position is crucial when starting a micro VC fund. The majority of the fund's capital needs to be dedicated to investments rather than personal expenses. For instance, if you have a $10 million fund, your yearly budget to run the company would be around $200,000. This budget does not account for your salary, which is often significantly lower than what you could earn in a traditional job. It is essential to recognize the financial sacrifices and understand that bootstrapping a micro VC fund can be incredibly challenging in terms of income generation.

3. Fundraising and Investment in VC:
   In most cases, fund managers invest a portion of their own capital into the fund, typically ranging from 1-5% of the fund's size. Additionally, the process of raising a fund can be time-consuming, taking approximately two years on average. Furthermore, SEC regulations limit the number of accredited investors a fund can accept to 99. This means that fundraising requires careful planning and cannot solely rely on small contributions from friends. Understanding these limitations and regulations is crucial for running a successful micro VC fund.

4. The Philosophy of Knowledge:
   The philosophy of knowledge offers unique insights that can be applied to various aspects of life, including running a VC fund. One crucial lesson is the concept of self. According to philosophical thought, there is no central, indivisible "I." We are a collection of cells, driven by various forces. This understanding challenges traditional notions of identity and encourages a more nuanced perspective.

5. The Fuzziness of Abstractions:
   Philosophy teaches us that the concepts we use in everyday life are often fuzzy and break down when pushed too hard. As humans, we have a tendency to describe things using abstractions without fully understanding their precise meanings. This fuzziness can lead to misunderstandings and misinterpretations. It is essential to recognize the limitations of language and strive for clarity when communicating complex ideas.

6. Practical Applications of Knowledge:
   While theoretical knowledge may seem impractical at times, it often has unexpected applications in real-world scenarios. Curiosity, rather than immediate practicality, drives individuals to seek a deep understanding of a topic. This pursuit of knowledge can lead to groundbreaking discoveries and innovations. It is crucial to recognize the value of theoretical knowledge and its potential for practical applications.

7. Clear Communication and Intellectual Ambition:
   Clear communication is essential in philosophy, as well as in any field. When big ideas are communicated unclearly, they can attract inexperienced but intellectually ambitious individuals. This can lead to a market for writing that sounds impressive but lacks substance. It is important to differentiate between impressive-sounding rhetoric and well-grounded arguments to avoid falling into the trap of intellectual vanity.

8. Discovering Useful Knowledge:
   Rather than dismissing ideas as useless, it is important to seek out knowledge because it is useful. This shift in mindset encourages a more practical approach to learning and discovery. When precise meanings are assigned to words and concepts, the realm of philosophy aligns with that of mathematics. This alignment provides a roadmap for exploring abstract ideas and can lead to practical insights and innovations.

9. The Gradual Slope of Knowledge:
   The process of acquiring knowledge and understanding is a gradual slope, much like climbing a mountain. Starting with specific and practical ideas, one can gradually expand their understanding to more general concepts. This approach is accessible to anyone, regardless of their background or expertise. It allows for a broader exploration of knowledge and encourages interdisciplinary collaboration.

In conclusion, running a micro VC fund requires careful financial planning, a solid understanding of the fundraising landscape, and a passion for the work. Combining insights from the world of VC with the philosophy of knowledge can provide a unique perspective on the challenges and opportunities that arise in this field. Here are three actionable pieces of advice for aspiring micro VC fund managers:

1. Conduct thorough research and consult with experienced micro VCs before starting your fund.
2. Develop a clear financial plan that accounts for the limited budget available for running the company.
3. Embrace the philosophy of knowledge and strive for clarity in communication, recognizing the practical applications that can result from theoretical exploration.

By combining these practical considerations with philosophical insights, individuals can navigate the world of micro VC with a more comprehensive understanding and a greater chance of success.