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

Posted on 21st November 2022 by Harry

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

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