20VC: Haystack’s Semil Shah on Whether Founders Are Bypassing Seed Funds in Favour Of Less Dilutive Multi-Stage Funds, How Fund Strategy Changes With Fund Scaling & Why The Hardest Challenge is Price Discipline
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC
4.4 • 637 Ratings
🗓️ 16 September 2019
⏱️ 42 minutes
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Summary
Semil Shah is the Founder & General Partner @ Haystack, one of the valley's leading seed funds of the last 5 years with a portfolio including the likes of Instacart, DoorDash, Carta, OpenDoor, Hashicorp and more $Bn companies. Alongside his role at Haystack, Semil is also a Venture Partner @ Lightspeed Venture Partners. Prior to founding Swell, Semil was on the operating side as an early advisor and employee at Concept.io (Swell), acquired by Apple in August 2014.
In Today’s Episode You Will Learn:
1.) How did Semil make his way into the world of venture from his start writing about startups and financing rounds? How did that also lead to his role as Venture Partner @ Lightspeed today?
2.) What does Semil mean when he says, "the most talented founders are bypassing seed firms and seed rounds"? How does this mean that seed funds need to respond? For founders, what are the pros and cons of taking a multi-stage fund at seed? Will they really get GP time with such a small check? How should they also think about potential signalling risk?
3.) Does Semil share Harry's concern with regards to pricing today? What do multi-stage funds investing at seed do to pricing? Why is staying disciplined on price the biggest challenge for Semil? How does Semil assess his own price sensitivity and when to stretch? Does Semil believe that ownership is built on first check or overtime?
4.) How does the strategy for Semil change moving from a $25m fund to a $50m fund? Why does Semil think that temporal diversification is such an important element to bake into a portfolio? What are the benefits? How does Semil think about effective reserve allocation today? What does that investment decision-making process look like the 2nd time?
5.) How has Semil seen the ecosystem for VC fundraises change over the last 5 years? What would Semil like to change about the ecosystem of LPs? What blanket rule does Semil believe that LPs should introduce for new managers to ensure discipline? For Semil, how did the fundraise differ for the latest $50m fund compared to the prior $25m fund?
Items Mentioned In Today’s Show:
Semil’s Fave Book: Reboot by Jerry Colonna
As always you can follow Harry, The Twenty Minute VC and Semil on Twitter her
Transcript
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| 0:00.0 | We are back for another week on the 20 minute VC with me, Harry Stebbings, at H. Debbings 1996 with two Bs on Instagram, but to the episode today, and this guest has built one in the best of Semmel Shah, founder and general partner at |
| 0:21.1 | Haystack, one of the Valley's leading early stage funds over the last five years. I mentioned the |
| 0:25.8 | portfolio before, with investments in the likes of check this out. Instacart, Door Dash, Carter, |
| 0:30.8 | Open Door, Hesci Corp and more billion dollar companies. Semmel's also, alongside his role at Haystack, |
| 0:36.3 | a venture partner at Lightspeed Venture Partners. And prior to founding Haystack, Semmel's also, alongside his role at Haystack, a venture partner at Lightspeed Venture Partners, |
| 0:38.5 | and prior to founding Haystack, Sammo was on the operating side as an early advisor and employee at |
| 0:42.9 | concept.io, or Swell, acquired by Apple in August 2014. But before we dive into the show state, |
| 0:49.0 | I have to talk about the company that's taken this ecosystem by Storm Brex, the company which |
| 0:53.7 | built the corporate |
| 0:54.4 | card for startups and who is the fastest company to reach unicorn status in history. |
| 0:58.9 | Brax's founders, Henrique N. Pedro, built a payments business in Brazil, but kept getting |
| 1:02.8 | rejected for a corporate card in the States. So they built Brax, with no personal liability, |
| 1:07.6 | up to 20 times higher card limits, and huge rewards like 7x points on Uber and Lyft, |
| 1:12.7 | 4x on Brex travel, and 2x on SaaS software. If you're a VC-backed startup based in the US, |
| 1:18.1 | see if you qualify for a Brex card at brex.com and get card fees waived for life by entering |
| 1:23.4 | the code Harry during sign-up. And before Brex, the consumer experience for corporate cards |
| 1:27.7 | was broken, and it's the same for bookkeeping. I doubt you started a business to track financial |
| 1:31.9 | statements or make cash flow spreadsheets. However, now we have Pilot, and Pilot for bookkeeping |
| 1:36.5 | gives you back the freedom to focus on your business. Every month, your dedicated account |
| 1:40.6 | manager will send you an accurate, detailed financial report. Pilot does a cruel basis |
| 1:45.1 | bookkeeping and quickbooks online, so you'll never locked into a proprietary platform, plus you'll |
| 1:49.6 | work with the same person each month, so you can rely on them to become an expert in your business. |
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