What Makes a Micro VC Fund Successful in 2023?

TL;DR

Not all micro VC funds will succeed, as many new entrants flood the market. Success depends on factors like network centrality and follow-on funding rates, with a few funds likely generating the majority of returns. The landscape is competitive, with branding becoming essential for differentiation among investors.

Transcript

uh hi everybody awesome nice job um I'm going to try to keep this to 15 minutes then we'll do some Q&A the best question askers will get these awesome t-shirts so yeah so think of good questions um I was telling Thomas uh that I'm going to be the most depressing Talk of the entire day um so I apologize in advance uh I don't hopefully some of you kn... Read More

Key Insights

• 👶 Not all micro VC funds will be successful, as the industry is becoming crowded with new entrants.
• 👾 The concentration of returns in the micro VC space will likely follow a power law distribution.
• 🧑‍🏭 Network centrality and the ability to secure follow-on funding are important factors in determining the quality of micro VC funds.
• 🏙️ Micro VC funds primarily exist in the Silicon Valley, but the trend is starting to spread to other cities.
• 🚨 The LP community is interested in emerging fund managers to identify potential opportunities.
• 🦠 Branding and online presence are becoming increasingly important for micro VC funds to differentiate themselves.

Questions & Answers

Q: How can the effectiveness of emerging investors be measured without a track record?

The speaker suggests looking at factors like follow-on rates, network centrality, and sector focus as indicators of the quality and potential success of micro VC funds.

Q: Are micro VC funds mainly concentrated in the Silicon Valley?

Yes, the speaker notes that micro VC funds are predominantly centered in the Silicon Valley, although the trend is starting to spread to other cities like New York.

Q: Is there a correlation between network strength and fund performance?

Yes, network centrality, or the strength and quality of a fund's network, has been found to correlate with fund performance. Funds that have strong links to other high-quality investors are more likely to be successful.

Q: Are there any notable patterns in the size and partnership structure of micro VC funds?

The analysis does not delve into the partnership structure, but it observes that micro VC funds with a track record tend to seek larger fund sizes as they gain success.

Summary & Key Takeaways

• The speaker discusses the emergence of new micro VC funds and the challenges they face in standing out from the crowd.

• They highlight the importance of measuring the quality of these funds based on factors such as follow-on rates and network centrality.

• The analysis shows that there will likely be a concentration of returns among a few successful micro VC funds, similar to what is seen in larger VC firms.