We analyze the threshold properties of small area selectively oxidized vertical cavity lasers. Agreement for threshold gain versus laser size is found using the experimental intrinsic threshold voltage matched with a gain theory, as compared to a two-dimensional optical cavity simulation. Our analysis indicates the increasing threshold current density of small area lasers arises from both increasing threshold gain and the concomitant increasing leakage current. We further show that the optical loss can be reduced for lasers with areas as small as 0.25&mgr;m2while maintaining sufficient transverse optical confinement by displacing the apertures longitudinally away from the cavity and reducing the oxide thickness. ©1997 American Institute of Physics.