Dec 2, 2015 · 29m · 20vc
20 VC 093: Where Is The Micro VC Market Going with Samir Kaji @ First Republic Bank
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Harry Stebbings interviews Samir Kaji of First Republic Bank to analyze the rapid growth, fund economics, market trends, and future consolidation of the micro VC landscape on episode 93 of The 20 Minute VC.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 25.2% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 3.4 Guest disagreement 1.0 Harry pushing back 1.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 4:54 Rejecting the Micro VC label
Samir explicitly voices his dislike for the term 'micro VC', framing it as a sub-optimal label before reluctantly agreeing to use it for the interview.
Hardest push from Harry ▶ 27:49 Host challenges guest on VC difficultyHarry directly challenges Samir's assertion that returning capital is the hardest part of venture capital, asking if raising money isn't actually harder.
Biggest teaching moment ▶ 10:59 Detailed fund economics mathSamir educates the host on venture fund return mechanics, illustrating why a $500M fund needs $14-15B in portfolio exits compared to just $1.5B for a $25M fund.
Harry holds his own ▶ 18:54 Host cites real-world fund examplesHarry demonstrates strong sector awareness by bringing up specialized structures from Notation Capital, Arena VC, and Bold Start Ventures.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Samir Kaji's Career Journey from SVB to First Republic | 1 | 2 | 0 | 0 | Harry prompts Samir about his background and transition into Silicon Valley Bank. Samir shares his serendipitous entry into banking during the 1999 dot-com bubble after selling vacuum cleaners. | |
| Defining Micro VC and Analyzing Fund Economics | 3 | 4 | 2 | 1 | Samir gently critiques the term 'micro VC' before defining typical fund characteristics. Harry asks about management fee dynamics on small funds, prompting Samir to break down GP economics and carry alignment. | |
| Drivers Behind the Growth of Micro VCs | 2 | 5 | 1 | 1 | Samir explains the structural drivers behind micro VC growth, providing data on historical fund returns and exit math. Harry questions whether this proliferation of funds is ultimately healthy for the startup ecosystem. | |
| The Funding Barbell, AngelList, and Vertical Specialization | 5 | 3 | 1 | 2 | Harry displays notable market knowledge by raising the funding barbell, AngelList dynamics, and naming specific firms like Notation Capital and Bold Start. Samir outlines market bifurcation and vertical specialization. | |
| Future Outlook for the Micro VC Market | 3 | 3 | 1 | 3 | Samir shares his five-year market predictions and quick-fire answers. Harry challenges Samir's view on VC difficulty, pushing on whether raising capital is harder than returning it. |
Statements from this episode (14)
Kaji: $10M-$15M funds cannot support living expenses in major tech hubs
“Well, it's not. I mean, if you think about a 10 or fifteen million dollar fund that's putting out three to 400,000 dollars in fees, especially in certain markets, the Bay Area and New York, it's impossible to live.”
Kaji: Nearly all micro VCs charge 2% to 2.5% management fees
“So, I mean, I think, you know, in general, if you sort of look at all the new micro VC firms that have been formed in the last, you know, four to five years, nearly all are between two and two and two and a half percent management fees.”
Kaji: Micro VCs will shift toward 1% management fees and 30% carry
“I do think we will start to see some that are more carry focused . I don't know if we'll get to zero percent, but I think we will see some firms raise funds where it's more of like a one in 25, a one in 30. A one And perhaps even higher carry based on hitting …”
Kaji: Nearly 300 micro VC firms exist globally in 2015
“Today there's close to 300 you know, globally, of which 225 are here in the U.S. And there's another 50 to a hundred that are fundraising.”
Kaji: Only 10% to 20% of micro VCs will deliver expected returns
“I think a very few percentage of these micro firms are going to produce the type of returns expected. And I think it's going to hit sort of the normal distribution of which, you know, 10 to 20%, you know, have a nice return model. The rest are going to, you kn…”
Kaji: 48% of micro VC funds are $25 million or less
“Most of the micro VC firms, and about 48% are 25 and under in, in size. Those are, those typically have no endowments, very, have no pension funds, very rarely have any sort of institutional backing, but are primarily family office High net worth backed.”
Kaji: Series B and C valuations are less bloated than seed
“If you look at the valuations of B, C and D, I'm sorry, B and C companies, The valuations aren't, you know, overly bloated relative to what we see at the very later stage, D and above, and also at the seed level.”
Kaji: AngelList tourist investors will pull back during market downturns
“A lot of people investing on Angelus are tourist investors, or they're investing during a very good time, but if the market turns and if there is a contraction at some point, A lot of those investors are going to retract.”
Kaji: $5M-$10M micro VCs will launch on AngelList over traditional funds
“The next generation of sort of these proof of concept funds that are, you know, five or ten million dollars are more likely to get down on Angelus than they are, you know, standalone LP funds”
Kaji: Active micro VC firms will drop to 100-150 by 2020
“Number one, I think we're going to see a contraction in this space. The number of active micro VCs I think is going to drop to close to a hundred to a 150 by the year, 2020.”
Kaji: Active VC funds peaked at 1,100 during 1995-2000
“We saw a run up in the number of active venture funds from 95 to 2000, peaking at 1100.”
Kaji: Maples, Dearing, Anderson, and Clavier pioneered the micro VC trend
“Folks like Mike Maples and Michael Daring Steve Anderson, Jeff Clavier they started the micro VC trend and they started raising these small funds when it wasn't even a thought.”