Venture Trailblazers, October 1, 2026. Adeo Ressi in conversation with Charles Hudson, founder of Precursor Ventures.
On October 1, Adeo Ressi sat down with Charles Hudson for Venture Trailblazers, the VC Lab series where investors who built their firms their own way talk through how they actually did it. 1,046 people registered for the session, and we still finished the hour with more than 100 questions left in the Q&A.
Charles has raised five funds and about a quarter of a billion dollars at Precursor Ventures. He has never let a single fund get above $100 million, he runs the firm with no investment committee, and he writes the first check into 80 to 100 companies per fund, usually before there is a product to look at. Over the hour he and Adeo covered how he named the firm, how he sizes funds, how he decides, what he looks for in a founder when there is no data, what the Cursor round did to pre-seed pricing, and what 1999 taught him about this AI cycle.
Watch the full conversation here: Charles Hudson on Venture Trailblazers, the complete session.
Five funds in, Precursor has never gone above $100 million, and that was a choice Charles made on purpose and keeps making. Here is the reasoning behind it, and how to run the same math on your own Fund I.
The short version
- Precursor has raised five funds and about a quarter of a billion dollars. Not one of them has gone over $100 million.
- The original cap came from what LPs in 2014 would let him model as a best case outcome.
- He could raise bigger now and says so plainly. He has not, because a bigger fund changes which outcomes he is allowed to be excited about.
- Your fund size is a promise about the exits you can celebrate. Size it backward from the exit you actually believe your strategy produces.
The original constraint came from the LPs, not from him
When Charles went out with his first fund in 2014, institutional seed had only just been accepted as a real asset class. He showed up selling something a stage earlier than that.
"I know you just figured out seed. Have I got a story for you. I’ve got this brand new thing you’ve never thought of called pre-seed."
At the time, a billion dollars was the conceptual ceiling on an outcome you could put in a model and still sound grounded. Precursor targets roughly 2% ownership at exit. Do the arithmetic and the fund size falls out of it. If the biggest exit you are allowed to assume is a billion, then 2% of it is $20 million, and the fund has to be small enough that a handful of those return the whole thing.
Charles put it this way: "A lot of them said, well, if a billion dollars is the ceiling, how are you going to generate the cash-on-cash returns that you want? I was like, well, we have to keep the funds small, because we’re not going for high ownership."
Adeo spelled the same math out on the call for the managers listening. A $60 million return on a single investment is one or two times a Precursor fund. On a $1 billion fund it barely moves the number.
He could raise bigger today, and he still will not
The ceiling LPs believe in has moved a long way since 2014, and Charles said he knows it.
"If I put out a fund model today, I think I could probably go to LPs and say, well, we’re going to assume that we’re going to have one $5 billion and one $10 billion company."
That single sentence changes everything downstream. A larger assumed outcome supports a larger fund, which supports a larger team, more reserves, bigger checks and a different ownership target. Most managers treat that as free upside. Charles treats it as a tradeoff, and he has spent five funds declining it.
The real reason is about who gets to celebrate
This is the part that never shows up in a fund model, and it is the reason the decision has held for twelve years.
"I never wanted to be in a situation where we have some massive outcome, where the founder makes $75 million and we make $25, and it’s life-changing for that person for multiple generations of their family, and I’m kind of like, it doesn’t matter to my fund. I never want to be in a world where your success and the things that make you happy mean nothing to my organization."
Read that again as an operating constraint rather than a sentiment. If your fund is big enough that a $100 million exit is noise, then you have signed up to be indifferent to most of what your founders will ever achieve. You cannot sit in a board meeting and mean it when you say this is a great outcome, because it is not a great outcome for you.
What the Passport exit looked like from a small fund
When Passport Shipping sold to Global-e, Precursor threw a party. Charles was specific about why it felt good.
"The individuals who worked at the company did well. Obviously the founder did well. But all the small funds who were in that company also did well, so everybody was happy."
And the counterfactual: "If I’d been at a billion-dollar fund, I don’t know that I would have been as excited about the scale of the return, because the size of the problem you’ve signed up to solve is just different with a big fund."
Precursor has had larger wins too. The Athletic went to the New York Times, DroneDeploy was acquired by Procore for around $850 million, and Elroy Air is on a path to the public markets. The point is not that small funds only produce small exits. It is that a small fund gets to count all of them.
How to size your own fund backward from an exit
If you are putting a Fund I model together, the sequence Charles used is the one to copy, and it runs in the opposite direction from how most first-time managers do it.
- Start with the exit you actually believe in. Not the biggest exit in your sector last year. The median good outcome your thesis produces, and the realistic top end.
- Decide the ownership you can hold through dilution. Precursor underwrites about 2% at exit, which is honest for a first-check strategy with a small reserve.
- Multiply, then work out how many you need. Exit times ownership gives you the gross proceeds per winner. Decide how many winners it is reasonable to expect from your portfolio size.
- Set fund size so a realistic number of winners returns it several times. If it takes an outcome you have never seen in your market to get to 3x, the fund is too big for the strategy.
- Check the human version of the answer. At that fund size, what is the smallest exit you can genuinely be happy about? If the answer is nine figures, be sure your founders know that.
Three questions to pressure test your fund size
- What exit value does my model need, and have I seen that outcome happen in my market more than once?
- If my best company exits for $50 million, is that a win for my LPs or a rounding error?
- Am I raising this number because the strategy needs it, or because it is the number that makes the management fee work?
That last question is the uncomfortable one, and it is the one LPs are quietly asking.
Frequently asked questions
How big is a Precursor fund? Every one of the five has been under $100 million, totaling about a quarter of a billion dollars across the firm.
What ownership does Precursor target? Roughly 2% at exit, with checks typically between $250,000 and $500,000, and some at $750,000 for companies raising larger rounds.
Does a small fund limit which LPs you can raise from? It does, and Charles was direct about that in the same session. Large institutional allocators have minimum check sizes that a $10 million fund cannot absorb. We covered his advice on that in approaching institutional LPs as an emerging manager.
What this means if you are raising Fund I
Your fund size is a promise about which outcomes you are allowed to be happy about. A fund that is too big for its strategy does not fail loudly. It just quietly stops being able to celebrate anything under nine figures, and your founders notice before your LPs do.
Sizing your own fund without guessing
Charles sized backward from an exit he believed in. Most first-time managers size forward from what they hope to raise, then retrofit a strategy onto it. The structure is where that choice gets locked in, because a fund built for 2% ownership and 80 first checks is a different legal and operational animal from one built for 15% and twelve.
Start Fund exists for exactly that: a compliant fund structure stood up in under a day, sized for a first-check strategy rather than cut down from a larger firm’s template. 1,003 funds have now launched through VC Lab across more than 90 countries, and the small ones that work are the ones where the structure matched the math from day one.
Watch the full session
Everything above comes from the hour Charles spent with Adeo on October 1. You can watch the complete conversation here, and the rest of the Venture Trailblazers series is on the VC Lab YouTube channel.
Want the whole session in one place? Charles Hudson’s advice for emerging fund managers is the full recap, with a timestamped index of every topic.
Launch your own fund with VC Lab
VC Lab is a free program that takes you from a thesis to a deployed Fund I, with the legal, LP and operating work handled alongside you. The managers who come through it are the people asking Charles questions like these in the first place.
Apply to VC Lab, or start at govclab.com.