How Semil Shah Built Haystack

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Sep 10, 2023

Semil Shah, the founder of Haystack, shares insights from his journey in venture capital, detailing how he built the firm from the ground up. He discusses the emotional trials of fundraising, the importance of relationships, and key strategies for investing in early-stage companies. Semil highlights the evolution of investor expectations and the challenges of maintaining communication in a changing landscape, reflecting on mistakes made along the way. His story emphasizes the delicate balance between personal and professional responsibilities in the competitive world of venture capital.

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ANECDOTE

Haystack's Origin

Semil Shah initially struggled to break into venture capital, despite industry connections and consulting work.
Friends advised him to start a small fund as a "rap sheet," leading to Haystack's creation.

ANECDOTE

Early Success and Mindset

In Haystack's early years, Semil invested in unicorns like DoorDash, Instacart, and HashiCorp, exceeding expectations.
He initially viewed Haystack as a stepping stone to a traditional VC job.

ADVICE

Securing Capital and Respecting Investments

Semil recommends not attempting a full-time fund without a capital partner to anchor it.
He emphasizes the importance of respecting every dollar invested and understanding its origin and purpose.

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Semil Shah is the Founder of Haystack, an institutional venture capital firm that backs outlier founders at the earliest stages. Semil started Haystack in 2013, and has since invested in X unicorns like DoorDash, Instacart, Figma, HashiCorp, Ironclad, Carta, Applied Intuition, and Opendoor.

This episode takes us behind the scenes of Semil’s two decade journey building Haystack from scratch. We’ll dive into how he raised and deployed each of the first six Haystack funds, including all the mistakes made along the way, plus the details around Haystack’s new $75 million and $25 million funds announced the date this episode was published.

Read Haystack's announcement here: https://semilshah.com/2023/09/10/announcing-haystack-vii-same-model-fresh-funds-and-new-era/

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Spotify: https://open.spotify.com/episode/24ujuXZ2uws48bvwOh9NcR
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Disclaimer: Mercury is a financial technology company, not a bank. Banking services are provided by Choice Financial Group and Evolve Bank & Trust; Members FDIC.

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Topics discussed include:

Juggling multiple jobs while living paycheck to paycheck his first eight years in Silicon Valley
Failing to get his first job in venture three times
Investing in the Seed rounds of unicorns DoorDash, Instacart, Hashicorp, and Envoy within the first six months of starting Haystack
Why he initially thought Haystack would be a short-term thing
Turning down multiple lucrative job offers two years in
How the best LPs evaluate VC funds on the “Entry Ownership to Fund Size” ratio
Semil’s strategy of “crawl, walk, run” to increase Haystack’s check sizes over time
The pain he felt failing to hit his target fund size on the first four fundraises and how he handled it
Why everyone should “pre-market” a fundraise, and how to do it
The things most founders don’t appreciate about raising a venture fund
Fighting to invest in Ironclad’s Seed round before he had his next fund raised
How LPs reference VCs, and how a VC can become referenceable
Why Haystack Fund IV was the scariest fund to raise
How Semil builds relationships with LPs
The hardest questions he faced raising each fund and what other VCs should anticipate while raising their own fund
How LP investment committees make decisions
What’s going on behind the scenes at most large venture LPs today
Why the traditional advice of “finding an anchor LP” makes no sense
Spilling his secret on the best quarter to fundraise
Why VCs should fundraise with a hard cap on fund size
Why every VC should appreciate and remember how LPs supported them through the pandemic
All the details on Haystack’s new $75 million and $25 million funds
Semil’s plan for the next 10 years
Three pieces of advice for emerging fund managers

Where to find Semil:

Twitter: https://twitter.com/semil
LinkedIn: https://www.linkedin.com/in/semilshah/

Where to find Turner:

Newsletter: https://www.thespl.it
Twitter: https://twitter.com/TurnerNovak

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