How Much Do You Budget for Your Investments?

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This is our budget and that's the same as a hundred million dollar fund how did you do resource allocation on the initial budget. We decided that nominally let's assume the same investment cadence 10 to 12 investments a year whereas before maybe we had an ownership a goal of 10 to 15 percent and thus an average check size of one and a half million dollars or whatever. The idea and hope is that by year three of this model we're not pulling from savings we are taking carry from the continued carry from years one through 10 home brew one through three which is funding years three through seven of home brew forever.

Hunter Walk and Satya Patel are Co-Founders and Partners @ Homebrew, one of the leading seed funds of the last decade. Following 10 years of stellar returns with investments in the likes of Chime, Plaid, Gusto and many others, they decided to not accept any further LP capital and to only invest their own money moving forward through Homebrew Forever.

In Today's Discussion on Homebrew We Breakdown:

1. ) The Foundings of a Great Partnership:

What was the moment when Hunter and Satya decided they were going to go out and raise their first fund with Homebrew I?
What are the core principles that all founding partners need to align on before they start a firm together? What questions should they ask of each other?
Why does being independently wealthy coming into a partnership make the partnership easier and more efficient to operate? What changes when the partners have money already?

2.) What Changes When Moving From LP Dollars to Personal Capital:

Why did Hunter and Satya decide to not raise any further capital from external LPs?
Asset allocation-wise, how did they determine how much is the right amount to set aside for the first 2 years of investing? How many investments do they want to make with that cash?
How does investing their personal capital change their deployment pace and cadence?
How does it change their approach to reserves management and follow-on financing?
How does it change their approach to pricing? How price sensitive are they today?

3.) Analyzing the Seed Landscape Today:

Why do Hunter and Satya not think that a $100M seed fund is enough to properly execute a world-class seed strategy today?
Who is their competition with the new strategy? How does it change their relationship with large multi-stage funds? How does it change their relationship with seed funds?
Do they agree that the last generation of sub $20M micro-funds will not raise another fund in this cycle? How did their entrance impact the seed landscape over the last few years?
Why are LPs also to blame for many of the original seed managers raising larger and larger funds?

4.) Companies: Money and People are The Problem:

Why has too much money been such a problem for many Homebrew portfolio companies over the last few years? How has too much money changed their execution plans?
What happens to the "living dead" companies with many years of runway but no product market fit?
Who does this market cater to well? Who will thrive in this market?
What have people forgotten about both startups and venture in the last 2 years that we have to remember?
Why is this generation so entitled and expectant? Why are startups not a get-rich-quick scheme?