Micah Rosenbloom of Founder Collective argues that keeping fund sizes small is a strategic choice. It aligns the firm with founders by making smaller, life-changing exits viable, maintaining founder optionality, and focusing on multiples rather than management fees from a large AUM.

Large venture funds generating substantial management fees can become misaligned with founders. Their behavior may shift to prioritize fee generation over maximizing returns, whereas smaller, specialized firms' success is more directly tied to their portfolio companies winning.

To maintain discipline and resist raising larger funds, Founder Collective ensures its General Partners are collectively the largest Limited Partner. This structure forces intense alignment with other LPs, prioritizing cash-on-cash returns (DPI) over the asset-gathering and management fees that larger funds often optimize for.

CVC rejects the standard fund-wide carry model. Instead, its executives' compensation is heavily tied to the performance of the individual deals they manage. This 'deal team carry' creates true ownership, aligning them with both the upside and downside of their specific investments.

For a new fund manager, the most strategic path is to focus on generating excellent returns on their first few small funds. This builds a track record that ensures future fundraising ability. Rushing to a larger fund size prematurely risks poor performance that can end a career.

Benchmark intentionally remains a small firm with a small capital base. They acknowledge this isn't the most financially lucrative strategy for the partners but believe it maximizes their professional happiness and ensures deep, aligned partnerships with early-stage founders.

Bill Maris argues that smaller funds (<$750M) consistently outperform larger ones due to simple math. A multi-billion-dollar fund needs to return a value that can exceed the entire annual VC-backed exit market to achieve a 3x return. Smaller funds have more achievable targets and can offer founders more focused support.

To ensure "radical alignment," solo capitalist Oren Zeev pays himself zero from management fees, reinvesting 100% back into his funds. As the largest LP in every fund and with a 30% carry, his entire economic incentive is tied to long-term value creation, not fee generation, which is highly unusual.

Founder Collective intentionally keeps funds sub-$100M to ensure that moderate, life-changing exits for founders (e.g., $95M) are also significant wins for the fund. This strategy prioritizes founder flexibility over the binary, “unicorn-or-bust” pressure imposed by larger funds.