How Semil Shah Built Haystack
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/
—
Brought to you by Mercury, the bank built for startups. Join more than 100,000 startups and venture capital firms on Mercury, the powerful and intuitive way for ambitious companies to bank.
Sign-up now: https://bit.ly/3sQRzOw
Listen to my conversation with Immad, the Co-founder and CEO of Mercury:
Spotify: https://open.spotify.com/episode/24ujuXZ2uws48bvwOh9NcR
Apple: https://podcasts.apple.com/us/podcast/lessons-from-building-mercury-with-immad-akhund-co/id1694440669?i=1000619360042
Disclaimer: Mercury is a financial technology company, not a bank. Banking services are provided by Choice Financial Group and Evolve Bank & Trust; Members FDIC.
—
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
Production and distribution by: https://www.supermix.io/
For sponsorship inquiries: https://docs.google.com/forms/d/e/1FAIpQLSebvhBlDDfHJyQdQWs8RwpFxWg-UbG0H-VFey05QSHvLxkZPQ/viewform
EP 43: Semil Shah (Partner, Haystack) - The State of Venture, Investing in Figma, Hashicorp, Doordash and Almost Investing in Coinbase
In the 43rd episode Semil Shah, Partner at Haystack, joins to discuss whether the company brand name or partner matters more in VC, how he almost invested in Coinbase when it was at only $20M, the flywheel of VC and how it’s evolving and what he looks for in a founder.
(0:05) Welcome Semil Shah
(7:08) Early VC content creation
(18:12) Brand name vs partners in VC
(26:06) The VC flywheel
(35:03) Your role in venture
(45:00) What you look for in founders
(54:12) Where do your deals come from
(58:20) Open AI
(1:02:45) Dry powder
(1:06:27) How would you manage your third fund?
(1:14:40) Semil’s take on crypto
(1:21:02) Podcasting evolution
(1:27:24) Outro
Mixed and edited: Justin Hrabovsky
Produced: Andrew Nadeau and Rashad Assir
Executive Producer: Josh Machiz
Music: Griff Lawson
🎙 Listen to the show
Apple Podcasts: https://podcasts.apple.com/us/podcast/three-cartoon-avatars/id1606770839
Spotify: https://open.spotify.com/show/5WqBqDb4br3LlyVrdqOYYb?si=3076e6c1b5c94d63&nd=1
Google Podcasts: https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5zaW1wbGVjYXN0LmNvbS9zb0hJZkhWbg
Follow on Socials
📸 Instagram - https://instagram.com/cartoonavatars
🐦 Twitter - https://twitter.com/cartoonavatars
🎬 Clips on TikTok - https://www.tiktok.com/@cartoonavatars
About the Show
A Saturday morning podcast hosted by Logan Bartlett (Partner and Managing Director at Redpoint Ventures) covering the tech news with his friends and other people with industry expertise.
Executive Producer: Rashad Assir
Producer: Leah Clapper
Mixing and editing: Justin Hrabovsky
Check out Unsupervised Learning, Redpoint's AI Podcast: https://www.youtube.com/@UCUl-s_Vp-Kkk_XVyDylNwLA
🎥 Subscribe on YouTube: https://www.youtube.com/channel/UCugS0jD5IAdoqzjaNYzns7w?sub_confirmation=1
Follow on Socials
📸 Instagram - https://www.instagram.com/theloganbartlettshow
📱 X - https://twitter.com/loganbartshow
🎬 Clips on TikTok - https://www.tiktok.com/@theloganbartlettshow
About the Show
Logan Bartlett is a Software Investor at Redpoint Ventures - a Silicon Valley-based VC with $6B AUM and investments in Snowflake, DraftKings, Twilio, and Netflix. In each episode of The Logan Bartlett Show, we sit down with the people behind today’s most important startups and extract the tactics, lessons, and frameworks they’ve learned the hard way. Conversations span hiring to GTM, product, growth, fundraising and everything in between - collectively forming the ultimate playbook to make you a better CEO, investor or board member.
Tap follow and enable notifications to stay ahead of the game.
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 $1M Haystack Fund I to Today and How To Find, Win and Manage LPs as an Emerging Manager
Semil Shah is the Founder of Haystack, one of the leading pre-seed and seed firms of the last decade. Among Semil's portfolio include the likes of DoorDash ($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?
Items Mentioned in Today's Episode:
Semil's Favourite Article: Master of Play
Semil's Most Recent Investment: Impart Security
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
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
Recode Decode: Haystack founder Semil Shah
Haystack founder and Lightspeed Ventures venture partner Semil Shah talks with Recode's Teddy Schleifer about breaking into the VC world and how the industry is changing. In this episode:03:45 - How Shah got involved with tech07:57 - How hard should it be to get a VC job?16:10 - Misconceptions about venture capital21:33 - What exactly is a “venture partner?”26:08 - How important is luck to being a good VC?31:32 - Being a lone wolf and breaking in36:07 - Doing deals outside Silicon Valley46:31 - SoftBank49:41 - Venture capital in 2038
Learn more about your ad choices. Visit podcastchoices.com/adchoices
20VC: Semil Shah on How To Raise An Institutional Venture Fund, Why LPs Mostly Have Reserve Allocation Theory Wrong & Why IPOs and Acquisitions Are Severely Constrained
Semil Shah is the founder of Haystack, an early stage investment firm now investing out of it's fourth fund, with previous investments in the likes of Instacart, DoorDash, Giphy, OpenDoor & Managed by Q. Semil is also a Venture Partner @ GGV Capital, one of the leading multi-stage funds and in the past he has also been a consultant to the likes of Kleiner Perkins, DFJ, General Catalyst and more. If that was not enough, Shah also has an extensive career in media having been a contributor for both TechCrunch and the Harvard Business Review in the past. Due to all of this, Shah is known for being on the speed dial of some of the industry's most respected VCs with the likes of Marc Andreessen naming him one of his '55 Unknown Rockstars in Tech'.
In Today's Episode You Will Learn:
1.) How Semil made the transition from the world of writing to investing alongside some of the best in venture with Haystack?
2.) Why do more and more managers want to introduce institutional capital into their LP base? What are the advantages? What are the drawbacks? Where does Semil see most managers going wrong when pursuing institutional capital for the first time?
3.) What does Semil mean when he states the importance of "pre-marketing"? How open is one in these pre-discussions with potential LPs? What is the right amount of time to be pre-marketing for? How does Semil determine whether to adopt a piece of LP advice and when not to?
4.) In the raising process, why does Semil never like to the use the deck when meeting in person? What core elements of the presentation did LPs always hone in on? What tips does Semil have to potential managers to ensure they can pitch at any time, not just the boardroom?
5.) How has moving from non-institutional to institutional fund, changed how Semil thinks about reserve allocation? Why does Semil believe that the majority of LPs have a wrong thesis to reserve allocation?
6.) Why does Semil believe the VC business model is severely constrained in terms of exits through IPO and acquisition? What does this mean for the use of secondaries? How will managers need to incorporate this into their strategy?
Items Mentioned In Today's Show:
Semil's Fave Blog: AVC
Semil's Most Recent Investment: Ironclad
As always you can follow Harry, The Twenty Minute VC and Semil on Twitter here!
Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC.
Lattice is the #1 performance management solution for growing companies. With Lattice, it's easy to launch 360 performance review cycles as often as you want. And you also get a continuous feedback system with OKR goal tracking, real-time feedback, and 1-on-1 meetings to make sure employees get feedback between reviews. Find out why the likes of CoinBase, PlanGrid, Birchbox and WePay trust Lattice as their performance management solution by heading over to lattice.com to start investing in your people. That's Lattice.com.
Recurly, the company powering subscription success, with Recurly's enterprise-class subscription management platform providing rapid time-to-value without requiring massive integration effort and expense and they have the ability to not only increase revenue by 7% but also reduce the all-important churn rate. That is why thousands of customers from Twitch to HubSpot to CBS Interactive trust Recurly as their subscription management platform. Check them out on recurly.com that really is a must.
20VC: Semil Shah on Why The Most Important Thing An Investor Can Do Is Attract Follow On & The Fundamentals of VC Branding
Semil Shah is the founder of Haystack, an early stage investment firm now investing out of it's third fund, with previous investments being Instacart, DoorDash, Managed by Q. In the past he has also been a consultant to some of the leading funds in the valley including the likes of Kleiner Perkins, DFJ, General Catalyst and more. If that was not enough, Shah also has an extensive career in media having been a contributor for both TechCrunch and the Harvard Business Review in the past. Due to all of this Shah was listed by Marc Andreesen as one of his '55 Unknown Rockstars in Tech'.
In Today's Episode You Will Learn:
1.) How Semil made his way into VC? How did he come to create Haystack?
2.) What were the challenges and concerns for Semil in raising and establishing his own fund?
3.) Question from Michelle Tandler: How does Semil send deals through to Series A? What is his 'cool' process? What are the commonalities of those that make it to Series A and those that do not?
4.) How has Semil approached the aspect of personal VC branding? How does he evaluate the rise of the personal VC brand in the last few years?
5.) Why does Semil believe he is not 'founder friendly' in the conventional sense?
Items Mentioned In Today's Show:
Semil's Fave Book: Burmese Days by George Orwell
Semil's Most Recent Investment: AquaCloud
As always you can follow The Twenty Minute VC, Harry and Semil on Twitter here! If you would like to see a more colourful side to Harry with many a mojito session, you can follow him on Snapchat here! This episode was brought to you by DesignCrowd, the online marketplace for custom graphic, logo and web design that helps startups, entrepreneurs, web developers and agencies outsource design projects to designers from around the world. How Does It Work? Once you have launched your brief, designers will begin submitting quality designs for you to review. With some constructive feedback, you can quickly generate a large gallery of designs that really do fit your needs. You can have exactly what you need within just three days. Once you have selected your favourite design, you will be sent all the files you require to update your branding. If you don't like any of the submitted designs, then DesignCrowd offers a money back guarantee. So checkout designcrowd.com/VC and enter the promo code VC100 to get an astonishing $100 off your next project.
Product Hunt Radio: Episode 5 w/ Semil Shah
In this episode Semil Shah (Product at Swell, writer, and investor) joins me, Ryan Hoover, to chat about one of my favorite topics, home screen apps. We also talk about Swell, Semil’s approach to investing, and washing vegetables in the shower. Enjoy. Products mentioned: - Swell - http://www.producthunt.co/posts/swell - Stitcher - http://stitcher.com/ - Soundcloud - http://soundcloud.com/ - Sunrise - http://www.producthunt.co/posts/sunrise - Circa - http://www.producthunt.co/posts/circa - Pocket - http://getpocket.com - Medium for iOS - http://www.producthunt.co/posts/medium-for-iOS - Clear - http://realmacsoftware.com/clear - Asana - http://asana.com/ - Last - http://last.co - Slack - http://www.producthunt.co/posts/slack - MessageMe - http://messageme.com - Quibb - http://www.producthunt.co/posts/quibb - Refresh - http://www.producthunt.co/posts/refresh-1-6 - Instacarthttp://instacart.com Subscribe on iTunes - https://itunes.apple.com/us/podcast/product-hunt/id862714883