Earlier this year, I wrote a post detailing how I was able to transform Haystack into an institutional fund. As there continue to be more and more smaller and newer funds created per year, that post triggered a bunch of emails and follow-up questions, so I collected them to put together a short FAQ with some more detail that will hopefully help someone else out there. What I’ve found is some folks want to budget for time or meetings, and the like, and then when I share with them the actual stats, it’s both painful (see below) but also helpful to see it how it went down. It is mostly a random process, and now looking back, I was extremely fortunate this all happened relatively quickly.
Time for materials/strategy prep? 4 months
Time “in market”: 6 months
Time to close: 2 months
Number of LPs interacted with: 200+
Miles flown: 40,000
Nights away from home: 28 including 2 redeye
Haystack IV all-in: $22.3M (target $25M, soft cap $35M)
Final LP count: 59 (avg $370K/LP)
Largest LP commitment $5M
Smallest LP commitment $10K
VC Fund Founders as LPs: 5
Company Founders as LPs: 20
GP Commitment: 2%
GP Carry: 20%
What’s The Overall Mood of LPs With Respect To…
Overall Mood: They want distributions
Seed, sub $100M funds: They’re inundated with pitches
Single GP funds: For many, against their religion or procedural requirements
References: Increasingly, they’re going right to founders for info on GPs
Geography: Concerned Bay Area is saturated w/ high prices; increasing interest in seed for Seattle, NYC, LA, Boston
High-Level Surprises and Lessons…
Best/smartest LP questions asked? “Why are you doing this”?
What was feedback on the No’s? Main feedback was: check too small plus small ownership to date
What was the biggest mistake you made? Didn’t do a full enough deep-dive into portfolio construction (more on this in a later post)
What surprised you? How lucky I was at the end. It could’ve gone either way, fast; also, once you’re in a pipeline, it can go from very formal to random to the point where you can’t always stick to a plan; oh, and also, how quickly things move, to the point where you have to leave within 24 hrs while a conversation is warm, meeting people in airport lounges, “happening to be in town” to see specific people.
What will you do differently next time? I’m already planning, so a big head start, plus building on the relationships I made this time around.
I chipped a tooth (ever so slightly) but didn’t have time to fix it with all the travel; I would tell folks that I “”Kept my fund smaller so larger funds can pick up the tab”; My flying routine on longer flights was to wear sweatpants and my green StrictlyVC t-shirt; when I say lucky, I mean it – Haystack only became “institutional” as a fund with 10 days left in my campaign; and with the exception of my shoes, my entire main pitch wardrobe hailed from MTailor, a Fund II investment of mine.