Well, most don’t. Not most traditional firms.
Most venture capital have a certain percent of the fund that is the “capital commit”, i.e. the % of the fund the partners chip in.
Usually this is from 1% of the fund size at the low-end for very established funds to 5–10% for newer funds. The LPs (the “Limited Partners”), the folks that give VC funds money to invest … like to see skin the gain.
As funds get more successful, and larger, and more “oversubscribed” … the % of skin in the game goes down. And often, even that 1% is paid for by the more established partners.
Still, 5–10% of a even a small-ish $50m fund is >a lot< of money. 5% x $50m fund = a $2,500,000 “capital commit” from the partners. Usually, the partners have made this money with some sort of success before. In some cases, they haven’t. And they can get loans to cover the capital commitment (they pledge their “management” fees to cover the loans). Or often, one of the partners has had some liquidity, but the other hasn’t. Often then the capital commitments aren’t symmetrical between the partners. Finally, another answer is to start small. If you start with a $5m or $10m fund, you can sometimes get a Billionaire (or something similar) to stake you. It’s not that this is at all common. But it has been the source of a number of small first funds. For a $5m fund, you only need One LP. For a bigger fund, you need Lots of LPs. Chris Sacca’s first fund did >200x. There are folks that will take that risk to get that sort of return. Also, other Big Venture Funds will often stake very small firms to get them off the ground (in exchange for some type of access to their deal flow).
Bear in mind, it’s >hard< to start a fund, no matter how it may seem on TechCrunch.
There aren’t that many LPs that really want to invest in brand name managers. And most LPs only want to invest in folks with a track record (which makes sense). So most “new” funds more often than not have at least one GP with a proven, or at least, semi-proven track record in venture capital (see e.g., newer funds like Data Collective, Homebrew, Cowboy, Sherpa, Amplify, Cloud Capital, etc. etc. — all had at least one GP with a strong venture track record even as “new” funds. Or sometimes, at least a very strong angel VC track record).