The smallest realistic venture capital fund size is $2.5 MM, realistically more like $5 MM, and this would be domiciled in Delaware, the cheapest place to form and run a fund. The reason for the $2.5 MM minimum is that set up and operating costs can easily be $200,000 or more for a fund. Set up can cost $50,000 or more, and annual expenses can easily run $25,000 or more. As a rule of thumb, you don’t want your fund expenses to be 10% or greater of the fund size. At a $2 MM fund size, the low estimate of $300,000 for expenses is 15% of the fund size.