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 $1M Haystack Fund I to Today and How To Find, Win and Manage LPs as an Emerging Manager
Semil Shah, Founder of Haystack, shares his insights from a decade in venture capital, including his experiences with successful startups like DoorDash and Instacart. He discusses the challenging dynamics of fundraising, revealing common mistakes VCs make when pitching to LPs and his strategies for emerging managers. Semil also explores the importance of maintaining disciplined fund sizes, the intricacies of managing LP relationships, and the lessons learned from past mistakes in his investing journey.
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volunteer_activism ADVICE
Build a Track Record
Emerging managers should build a track record on AngelList before seeking institutional capital.
Having other GPs vouch for you, based on working relationships, significantly improves fundraising success.
volunteer_activism ADVICE
Creating Urgency with LPs
Create urgency with LPs by setting deadlines and assuming a pass if you don't hear back.
Don't wait around; move forward on your timeline.
question_answer ANECDOTE
Fundraising Challenges
Semil was introduced to a major university endowment head by a prominent fund leader.
Despite prior connections and a strong track record, the endowment head declined a meeting, highlighting fundraising difficulties.
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Semil Shah is the Founder of Haystack, one of the leading pre-seed and seed firms of the last decade. Among Semil's portfolio include the likes of DoorDash ($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?
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch