This week, I caught up with an emerging VC fund manager who shared something interesting with me. His first two funds were small ones, so he’s been operating for several years. Now he’s preparing to raise his third fund, even though he knows the fundraising environment is rough. 

He said that raising those small funds ended up being beneficial. The management fee dollars were small, so he had a small operating budget. He was forced to be intentional about where he spent his budget and his time and to focus on the activities that mattered most and had the highest return. It’s paying off: those first two funds are performing well.

I’m a big fan of operating with constraints. Limited resources force you to focus your execution and learn from mistakes quickly, often spurring creativity. It was interesting to hear that this isn’t true just for start-up founders; it applies to fund managers too.