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

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

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Sep 16, 2019

Semil Shah, Founder and General Partner at Haystack and Venture Partner at Lightspeed, dives into the evolving landscape of venture capital. He discusses how top founders might be opting for multi-stage funds over traditional seed funds, and the implications for both sides. Semil emphasizes the challenge of price discipline in today's market, sharing insights on ownership strategies. He also reflects on his journey from writing about startups to becoming a venture capital expert, providing a unique perspective on navigating changing dynamics in funding.

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INSIGHT

Bypassing Seed

Talented founders bypass seed rounds, seeking less dilutive capital from multi-stage funds.
Seed funds must adapt by offering stronger brands, larger checks, and extensive networks.

INSIGHT

Multi-Stage Funds at Seed

Multi-stage funds offer larger checks at seed stage, but their attention might be limited.
Founders should weigh the benefits of network access against potential signal risks.

ADVICE

Seed Fund Adaptation

Build relationships with founders early, add value, and offer smaller checks.
Focus on areas where larger seed funds might struggle to compete effectively.

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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