The older a VC firm gets, the more complicated it can become. Like any business, complexity can arise over time as a company grows. More staff, more investments, bigger funds. “Managerial overhead” grows.
It’s why I’ve always been impressed with Foundry Group. They minimize managerial overhead, by plan. They do not want to add to their partnership ranks. They want to keep their funds the same size (more here at “Fund Size Does Matter”).
And, after a few funds, they’re going to call it a day. No plans to build a legacy or a franchise. No need to plan for inter-generational succession and the complicated economic discussions that take place (read “How Are VCs Paid?”).
When Kepha started, I had the chance to meet up a few times with Brad Feld of Foundry. I had a strong view of what I wanted the Kepha team to be like, but my conversations with Brad absolutely crystallized what I hoped Kepha would be. Here’s an example of Brad’s thinking (from “Happy Birthday @sether”):
In 2006 we started talking about creating Foundry Group. The early conversations were clear – this would be an equal partnership, not a “Brad thing” with other people working for me. The last thing I wanted was a hierarchy of any sort, especially since I’d fully embraced the concept of a network in all aspects of my life. Seth embraced this and on day one when we started Foundry Group was an equal partner with me.
I think there’s a lot to be said for simplicity and focus as a VC. Eric and I try to keep things simple at Kepha: no Associates, equal economics, equal voting, and very focused funds. I think minimizing managerial overhead frees up 25% of our time. It also makes for more fun days.
I can honestly say that our team loves what we do. Some days are stressful, and some days truly suck. But, I don’t think I’ve ever had a “bad” day since Kepha started.
So, to all my friends thinking of raising their own VC funds: Go for it!