The Twenty Minute VC

Semil Shah: Lessons Learned Scaling from a $1M to a $50M Fund | 20VC #951

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. ---------------------------------------------- Timestamps: 0:00 What is Semil running from and towards? 3:07 How do you decide on each fund’s size? 4:35 Pre-Seed Rounds 9:22 Overlap of Talent and Entrepreneurialism 12:33 Series-A Investing 13:23 Why limit your AUM? 15:28 How often do you lead deals? 19:31 How low will you go on ownership? 22:13 Speed of Investment 23:27 Investment Mistakes 26:30 The Lifecycle of Raising a Fund 29:36 How to Find New LPs 32:42 Biggest Mistakes GPs Make in Fundraising 36:14 How to Create Urgency with LPs 40:39 Kickers on Funds 41:56 Biggest Fundraising Mistake 47:52 Why is LP Churn Coming & Difficulties in Raising 50:14 LP Incentives 54:31 The Chanels & Walmarts of Venture 58:46 Where have LPs made mistakes? 1:03:57 How to Distribute an Endowment Fund 1:06:36 What Sins VCs Commit 1:09:02 What Sins GPs & Founders Commit 1:12:07 Favorite Article & Why 1:12:55 Biggest Worry about Venture Landscape Today 1:15:31 Most Underrated Angel Investor Today 1:16:57 Single Hardest Moment of Haystack Journey 1:17:44 Single Biggest Return 1:19:35 Biggest Miss - OpenSea 1:21:46 Best Investment Advice 1:23:10 Most Recent Publicly Announced Investment ---------------------------------------------- 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? ---------------------------------------------- Subscribe to the Podcast: https://www.thetwentyminutevc.com/semil-shah/ Follow Harry Stebbings on Twitter: https://twitter.com/HarryStebbings Follow Semil Shah on Twitter: https://twitter.com/semil Follow 20VC on Instagram: https://www.instagram.com/20vc_reels Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok ---------------------------------------------- #SemilShah #HaystackVC #Venturecapital #venturecapitalist #vc #HarryStebbings #20vc

Harry StebbingshostSemil Shahguest

Nov 20, 20221h 24mWatch on YouTube ↗

WHAT IT’S REALLY ABOUT

Semil Shah Reveals Hard Truths About Scaling a Seed VC Fund

Semil Shah discusses his journey building Haystack from a $1M proof-of-concept fund into a $50M seed franchise, and why he’s resisted scaling AUM beyond $100M. He breaks down ownership targets, check sizes, and why discipline around fund size, deployment pace, and deal selection matters more now than ever. A large portion of the conversation focuses on emerging managers: how to raise from LPs, build real track records, avoid common fundraising mistakes, and manage LP relationships over multiple vintages. Semil also reflects on industry-wide “sins” of the last cycle—oversized funds, lazy checkpoints, and disrespect for capital—and how both founders and GPs must adapt to a harsher, more Darwinian environment.

IDEAS WORTH REMEMBERING

5 ideas

Keep fund size tightly aligned with realistic ownership and exit math.

Semil caps Haystack funds at ~$50M (and under $100M going forward) so 5–10% seed ownership can still translate into meaningful outcomes at exit without needing to own 15%+ or lead every deal.

Avoid conflating elite talent with true entrepreneurial grit.

Hot seeds with big-company product leaders and prestige logos often underperform because many are political operators, not ‘uncivilized’ builders; Semil explicitly looks for prior evidence of hustle, adversity, and self-driven money-making behavior.

Be flexible on role in the round, but decisive when you truly want to lead.

Haystack is willing to be lead, co-lead, or meaningful follower (5–10% ownership) and avoids party rounds; Semil believes speed and conviction win the deals he *must* lead while flexibility maximizes the quality of the overall portfolio and co-investor set.

Emerging managers must build real evidence and ‘chatter’ before chasing institutions.

He advises running small proof-of-concept vehicles (e.g., via AngelList), doing visible good deals, and earning references from established GPs so LPs hear your name repeatedly before you show up with a deck.

LP relationships are multi-fund games, but not all LPs deserve to be kept.

Semil has intentionally blocked certain LPs from future funds for aggressive or shifting demands, arguing GPs must protect long-term alignment even when those LPs are ‘hot names’ others would covet.

WORDS WORTH SAVING

5 quotes

We slowly creep up the cap table.

— Semil Shah

Are talented people also entrepreneurial? I don’t believe that.

— Semil Shah

Our job isn’t to invest when Accel or Lightspeed invest; our job is to invest a round before that.

— Semil Shah

If you don’t respect where the money came from, it’s going to be really hard to advance.

— Semil Shah

The business is that simple: DGD — do good deals.

— Semil Shah (quoting Paul Martino)

Fund sizing, ownership strategy, and resisting AUM expansion at HaystackSeed and Series A market dynamics, “hot rounds,” and founder profilesEvaluating talent versus true entrepreneurial drive in foundersLeading vs. following in rounds and how syndicate collaboration changes with fund sizeEmerging manager playbook: LP discovery, track records, decks, and closing tacticsLP behavior, mistakes, and upcoming “churn” in venture allocationsIndustry-wide “sins” of the last cycle and how founders/GPs should correct course

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