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


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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?

Items Mentioned in Today's Episode:

Semil's Favourite Article: Master of Play

Semil's Most Recent Investment: Impart Security