Interview with Semil Shah, founding GP of Haystack, on getting rejected from jobs at VC firms, innovation in the VC industry, Miami as a “tech hub”, and more

Interview with Semil Shah, founding GP of Haystack, on getting rejected from jobs at VC firms, innovation in the VC industry, Miami as a “tech hub”, and more — Some real talk — Semil Shah has been a prolific writer for a decade. He has done a lot of interviews over the years.

Here is an interview with Semil Shah, one of the founding general partners of Haystack Venture Partners.

In the last ten years, Semil Shah has become one of the most prolific writers in the world. Over the course of his career, he has conducted many interviews. The fact that he is one of the few practitioners-writers who can consistently capture the zeitgeist of what is happening in the startup world through the way he writes makes him one of a kind! Our chat here won’t cover the getting-to-know-Semil questions, but we will talk about a few other things. There is nothing more important to me than being real, not being popular!

The first question we will ask is one that is easy to answer. How would you describe your strongest beliefs regarding Silicon Valley in general, and venture capital, in particular, over the past decade that you believe have been most challenged in 2020?

There are so many things to consider these days, so perhaps the most helpful thing I can do is to mention the one that stands out (for me) from each list.

I have always been a firm believer in the fact that the Bay Area (which includes Silicon Valley) has a unique ecosystem that is almost impossible to replicate anywhere else in the world. This is one of my strongest beliefs. As there are countless posts and Tweetstorms as to why this is happening, I think it boils down to a culture that is intergenerational in the area, and that culture is one in which people are conditioned to accept delayed rewards, to invest in the ground around them, and to pay it forward as well. All of those attributes can be found nowhere else in the world and they are really hard to find. 

In terms of what I can see in NYC, there is a small amount of this happening. It’s quite possible that there are initial vibes like this in other places as well, but it takes generations upon generations to really embed it into the culture. Yes, over the course of the decade and in particular in 2020, that was a belief that was challenged violently over the course of the decade. There were very strict lockdowns in California and the Bay Area during this time. This created a lot of tension in the community, and now it’s shining a light on local governance, policies, education, etc. in a way that’s quite alarming. It was then that the fires of 2020 broke out. It was our very close friends who “tapped out,” if I may borrow a UFC term, from the Bay Area, a few years ago. Although this was one of the biggest challenges for me over the past 12-18 months, I am still very positive that the Bay Area is one of the most unique (and flawed) places in the world in this manner, but that has been challenged to a great extent by these natural and manmade obstacles.

My first impression of venture capital was that it didn’t scale, and like many others, I didn’t see how funds were able to scale into the billions of dollars per vehicle and still be able to drive a return without having to be a part of a very few massive companies, like Facebook, that were able to scale. While this is a more traditional viewpoint, one that has certainly been challenged since 2015 and really since 2020, the truth is that it is now readily apparent that the size of the end markets for cloud software is substantially greater than even the biggest bulls believed them to be at the time. It can be said that cloud-based software is available everywhere, and because the entire world is going online, and because of things like globalization or the specific responses to a pandemic, the terminal value of an investment position is usually orders of magnitude greater than what most traditionalists (like myself) thought it would be.

What are the chances of overcapitalizing an entire generation of companies in the hope of striking gold a few times in the future?

I am not sure if we should be concerned about this or not. The CEO and founder of a company have the freedom to operate in the manner in which they deem appropriate. While many of them could have gone public earlier, they choose not to most of the time. What do you think about that? Is it good or bad? It’s not clear to me. In Snap’s case, it was a good day! It may not be as good for others as it is for you? In the end, it is the founders and CEO who make the decisions, and it is a free market, and more importantly, it is the capital sources (LPs) who bankroll these growth and pre-IPO funds that keep the money flowing, so why not?

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