20VC: Homebrew's Hunter Walk and Satya Patel on Why $100M is Not Enough To Execute a Seed Strategy Today | Why They Decided not to Raise New External Funds | Where Are We in the Cycle & What is Truly F***** | Why Founders Should Take Secondaries Earlier
Hunter Walk and Satya Patel, co-founders of Homebrew, share their insights on the evolving venture capital landscape. They discuss the shift away from external LP capital to investing their own money, emphasizing the strategic benefits of this decision. The duo explores how wealth impacts partnerships and investment strategies, urging founders to consider taking secondaries earlier. They also highlight the importance of liquidity and the market cycle's effects on funding needs, advocating for transparency in investor-founder relationships.
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Partnership Foundings
Define shared success metrics and understand each other's strengths and weaknesses before starting a venture fund.
Discuss what energizes and drains each partner, ensuring clarity on roles and responsibilities.
insights INSIGHT
Consensus Decision-Making
Consensus-based decision-making in small venture partnerships unites partners and strengthens founder relationships.
It minimizes potential conflicts and ensures both partners are above the yes threshold.
question_answer ANECDOTE
Maintaining Strong Partnerships
Hunter and Satya use various methods to maintain their partnership, including external feedback and therapy.
They emphasize adapting to each other's growth and changes over time.
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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?
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch