20VC: Semil Shah on The Biggest Mistakes VCs and LPs Made Over the Last 24 Months, Why LP Churn is Coming, Core Lessons on Scaling from $1M Haystack Fund I to Today and How To Find, Win and Manage LPs as an Emerging Manager

The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

The Twenty Minute VC

Finance, Venturecapital, Tech News, News, Siliconvalley, Technology, Investing, Startups, Business

4.4 • 637 Ratings

🗓️ 21 November 2022

⏱️ 65 minutes

🔗️ Recording | iTunes | RSS

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Summary

Semil Shah is the Founder of Haystack, one of the leading pre-seed and seed firms of the last decade. Among Semil's portfolio include the likes of DoorDash ($DASH), Instacart, Hashicorp ($HCP), Opendoor ($OPEN), Figma (acquired by Adobe), Carta and many more exceptional companies. Semil's first fund is marked between a 30 and 40x fund, astonishing.

In Today's Episode with Semil Shah We Discuss:

1.) The Makings of Semil Shah:

What is Semil running away from? What is he running towards?
What does Semil know now that he wishes he had known when entering venture?
What is Semil's biggest advice to managers raising their first funds now?

2.) Fund Sizing: Growing vs Staying Disciplined:

Question from Hunter Walk: How does Semil determine the right size fund to raise with each fund
Question from Satya Patel: Why have you resisted increasing AUM?
In the last episode Semil mentioned a three-year deployment cycle for the fund, did he stick to it? What are the benefits and drawbacks?
What investing mistakes did Semil make over the last 3 years that he wishes he had not made?

3.) The Secret to Fundraising for a Fund:

What is Semil's biggest advice to emerging managers on finding new LPs? What works?
What materials do managers need to have in place for a new fundraise? Deck? Dataroom?
What are the most common mistakes VCs make when pitching LPs their funds?
How does Semil follow-up with potential LPs post-call? What works? What does not?
How does Semil suggest creating a sense of urgency for LPs to commit to a fund?
How does Semil feel about giving preferential terms to convince LPs to commit to the first close?

4.) The Current Landscape:

For VCs:

How will the current landscape impact emerging managers' ability to raise?
What advice would Semil give to them? Raise smaller?
Kyle Harrison said on the show recently, “differentiation will kill 80% of venture firms, especially the so-so ones”. Does Semil agree? Who is set to struggle? Who is set to thrive in this environment?

For LPs:

What does Semil think are the biggest mistakes LPs made over the last 2-3 years?
How will they respond in this market cycle?
If Semil were handed an endowment fund, how would he allocate today?
Does Semil agree, we will see a denigration of venture returns to those of PE like multiples? Why?

For Founders:

How does Semil advise founders on raising today when everyone says they are investing but very few really are?
How does Semil advise founders on how to think about valuation inflection points with respect to raising capital?

Items Mentioned in Today's Episode:

Semil's Favourite Article: Master of Play

Semil's Most Recent Investment: Impart Security

Transcript

Click on a timestamp to play from that location

0:00.0	Hashi Corp where we invested in the first round and that was just a huge win. I think it was like
0:05.3	the 25K turned into something like 30, 35 million bucks. Welcome back. This is 20 VC with me, Harry Stebbings.
0:11.5	Now, Stays Show is my favorite type of show. Two managers sharing war stories in deep discussion.
0:16.5	And there's no one better than Semmel Shots. Join me in the hot seat for this one. For those that do not know, Semmel is the founder of Haystack, one of the leading
0:23.4	preceding seed firms of the last decade.
0:25.9	Among Semmel's incredible portfolio is DoorDash, Instacart, Open Door, Figma, Carter and many
0:32.0	more.
0:32.5	Semmel's first fund is marked between a 30 and a 40x. And I want to say a huge thank you to Satya Patel and Hunter
0:38.5	Walk at Homebrew, Annandair, and Nakulmandan for some amazing questions suggestions today,
0:43.8	a real team effort on the schedule. But before we move into the episode today,
0:47.6	Harvard Management Company is constantly seeking out the next generation of great investors
0:51.9	and entrepreneurs. HMC has managed Harvard University's
0:55.6	endowment for nearly 50 years and was one of the first institutional investors in venture capital.
1:00.8	Their experience and long-term investment horizon makes some ideal partners to get world-changing ideas
1:06.4	on a path to viability and success. They work as a true partner, providing insightful perspectives to help managers succeed.
1:13.6	I personally have had the pleasure of working with the HMC team and can say that they
1:17.4	are truly exceptional partners and savvy investors.
1:20.4	Whether you are launching your first fund or your fifth, HMC welcomes the opportunity to partner
1:25.3	with both developing and established managers.
1:27.8	Have an idea you want to share with the team?
1:29.7	Just send it to venture at hmc.harvard.edu.
1:34.3	And speaking of amazing partners with HMC there, Mercury is building full-stack banking for startups,
	...

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