Editor's note: Our Post Seed VC event is coming up on Dec. 1 in San Francisco. We'll have Chamath Palihapitiya (Founder of Social Capital), Aydin Senkut (Felicis), Jeff Lawson (Founder & CEO, Twilio) and more. Check out the full lineup and register for tickets before they jump! Post Seed is brought to you by Vator, Bullpen Capital, and Haystack.
There has been a big debate over the last few years over whether the Series A crunch is real or not. What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
At the same time, he is also a Venture Partner at GGV Capital.
Prior to investing, he held various product and marketing roles as small, consumer-facing mobile companies, the most recent one being acquired by Apple.
In the past, Shah has been a formal consultant to a handful of VC firms including General Catalyst, Kleiner Perkins, Draper Fisher Jurvetson, Trinity Ventures, Bullpen Capital, and GGV Capital.
While working and investing, he has also been a consistent writer about technology and investing.
VatorNews: What is your investment philosophy or methodology?
Semil Shah: Find a team where the team members have shared experience and have professional or personal experiences which can be mapped to the future they want to build. And, find people who are resilient in the face of ambiguity and/or bad luck. Resilient people with core talent are willing to do things other normal people aren't.
VN: What do you like to invest in? What are your categories of interest?
SS: I don't really focus on categories, so it's hard for me to answer. Looking back, a third of my investments have been consumer (usually transaction-oriented), a third enterprise-facing (apps and infrastructure) and a third deep tech, or industrial tech, or emerging tech.
VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?
SS: In terms of total value today, it would be Instacart. This stood out to me at the time because of the focus of the founder and I knew it was a huge market undergoing many changes. In terms of multiple, maybe DoorDash, which is in a somewhat similar space as Instacart, though different.
I think both are misunderstood by the market and will be terrific outcomes.
VN: What do you look for in companies that you put money in? What are the most important qualities?
SS: The combination of talent plus evidence of resiliency in the founders.
VN: What kind of traction do you look for in your startups? And can you be specific? Are you looking for a number of customers or order volume?
SS: On the consumer side, I have invested in people I knew before they had a customer; for those I don't know, I like to use the product first. On the enterprise side, I like to see one big customer -- and I talk to them. If someone can put something useful in the hands of a big company or many small startups, that's enough validation to explore further.
VN: How long does it take before you meet a startup and make an investment and how do you conduct your due diligence
SS: It can take a few days all the up to months. The diligence can be as short as a few phone calls to weeks of walking around and thinking about someone or something.
VN: Given that these days a Seed round is yesterday's Series A, meaning today a company raises a $3M Seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes to get that Seed round? Since it's a "Seed" does it imply that a company doesn't have to be that far along?
SS: I have given up naming these rounds. It's tiring. I just stick with the Paul Graham rule -- It's a Series A when a professional VC prices the equity (converts the notes) and calls it a Series A.
VN: What are the attributes of a company getting a Series A?
SS: In 2016 and beyond, momentum is always the winner; in the absence of momentum, a very elite team that's moving fast in a big market.
VN: Given all the money moving into the private sector, I believe there's more money going into late-stage deals in 2015 than there was during the heyday, back in 2000, do you think we're in a bubble?
SS: There is a bubble somewhere, but I have no clue where it is. Could it be in student debt, or enterprise software? I don't know.
VN: If we're in a bubble, how does that affect your investing?
SS: I just care about the rate at which seed companies make it to Series A. That rate is tightening up, so it affects my investing by applying more scrutiny to decisions.
VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?
SS: I have chronicled this tirelessly on my blog, www.semilshah.com.
I have no background in finance or technology, and I had an interest in investing but a very tough time cutting into the industry, so I started my own fund, and I got lucky. I hope my luck compounds.
VN: What do you like best about being a VC? What makes you excited?
SS: If I had to boil it down, it's a test of trying to think about a complex future which is unknown, and instead of just pontificating about it, I can put my name and money behind an idea and watch people at companies bring those things to life.
VN: What is the size of your current fund?
SS: Just shy of $10 million.
VN: What is the investment range?
SS: I start off with $100,000 to $250,000 checks but have plenty of capital for things that are working.
VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?
VN: Where is the firm currently in the investing cycle of its current fund?
SS: I'm a bit more than half-way through investing capital in my fund III.
VN: What percentage of your fund is set aside for follow-on capital?
SS: About 20 percent, but then I have secondary pools of capital I can leverage at will.
VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?
SS: Again, I have no idea. I invest when I have the opportunity.
VN: In a typical year how many startups do you invest in?
SS: So far, it's about 20-30 because I'm so early, so a high loss ratio, but that will change and lower over time as I grow up as an investor.
VN: Is there anything else you think I should know about you or the firm?
SS: Like The Joker mused in The Dark Knight, "Our operation is small, but there is room for.... aggressive expansion."