The Story Behind Haystack’s Investment In Okteto

In the summer of 2020, an odd time for sure, my friend and Lightspeed colleague Guru told me about a team he loved but felt was way too early. We took the intro from Guru, and wow am I glad I did. Guru, we owe you some nice wine. That introduction led to the beginning of Haystack’s relationship with the Okteto team, and today they proudly announced their Series A led by another friend, Villi from Two Sigma. You can read all about Okteto on their site and on today’s feature in TechCrunch.

This isn’t a product or tech blog, though. This is the space where I like to reflect on how people come in and our of work lives. The work with Okteto has been a dream scenario, simply put. It starts with the CEO. Ramiro is simply one of the most authentically compassionate tech founders I’ve had the pleasure of working with. And in the battlefield of work, Ramiro has a quiet yet steely resolve to quarterback his team. Co-founders Pablo and Ramon round out what is an incredible technical team tackling some of the thorniest problems in application architecture. Okteto formed based on the founders’ belief that the development process itself needed cloud-native tools to move faster and more efficiently.

Okteto was an investment opportunity that was a bit slower to grow on us. My colleague Aashay also spent time with the team and as we dug in, we both gained confidence in the initial adoption. We struck a deal with Ramiro to lead his round, and we cut back our position slightly to bring in folks like Salil and Lee, good friends with a wealth of experience (and options!) in these types of early companies. That proved to be a great decision, with all of us helping Okteto a little bit get to this stage, and laying the groundwork for Villi to get excited about partnering. it all came together nicely.

There is a lot of work to do for Okteto and the team. It’s still very early on the journey. That said, it is a moment to reflect a bit on how Haystack was able to “get lucky” to see this opportunity — years of relationships and trust, Guru trusting us that we would take care of the opportunity, Aashay digging in and evangelizing it when it wasn’t obvious, Salil and Lee joining efforts and their invaluable guidance, and Ramiro becoming an unofficial team member of Haystack, all leading to another friend, Villi, gaining comfort to join the ride. If only every investment lined up like this.

The Story Behind Haystack’s Investment In Schoolytics

In the summer of 2021, and old friend Eric Ries introduced us to Aaron and Courtney from Schoolytics. I was initially skeptical of the idea — to build a data and metrics platform for all sorts of schools — but in the very first meeting with Aaron, the CEO, my interest was piqued. I’m glad we pulled on the initial thread, because that eventually led to us investing in Schoolytics, which just announced their seed funding this week.

I will admit that initially I was a bit hesitant to go into this market. Most of the education-based startups that have broken out (and believe me, we missed two big ones — Quizlet and Outschool — though we have Cambly which is still going strong) go for a direct-learning model, using technology and platforms to go directly to students and learners. That makes sense and is an exiting category. But what about distributing software to schools, public or private? What about universities, major or community schools? As an investor, those are not the most attractive or exciting buyers to persuade. In order to penetrate these markets like Edmodo or Google has, one needs a rock-solid platform that’s initially free and delivers value immediately — quite a tall order.

Enter Aaron, Courtney, and the Schoolytics team. Aaron and Courtney met while at Chegg, another ed-tech startup that made it to IPO. In our DD, we learned that Courtney recruited and initially managed Aaron, and that she was impressed immediately any Aaron’s product leadership. That was evident in the first pitch with Aaron, no doubt, and what initially gave us belief in making this investment. Then, as we dug further, we realized Courtney herself had secretly collected a PhD in Economics (!!!) before Chegg, and while being a working mom (!!!), is incredibly active in her kids’ schools PTAs. She never mentioned this in her bio or pitch.

Haystack is excited to also co-lead this investment with a long-term friend, Nakul Mandan and his team at Audacious Ventures. Nakul is one of two friends who literally helped will Haystack into existence nine years ago; now as Nakul starts his debut fund, we have been helping him, we hope. We ended up lining up on this investment given the quality of the team (Aaron and Courtney, wow!) and also the momentum in the business, which you can read about here. If you have kids in school (should be many of you!). please do forward this to your schools so that more schools, administrators, and parents can capture better analytics on what is happening inside these important places.

If you’ve been a reader of this blog over the years, hopefully by now you know the pattern here — these investments are in companies, products, and networks, but those are built by people, and we are blessed to get to meet lots of people every day (thank you, Eric, for this one). We select some well, and others don’t work out. We miss a lot. But when things line up with co-investors who are long-term friends and product leaders (and community leaders) who live and practice their craft, it’s simply a pleasure to get a front-row seat when teams like this embark on such meaningful work.

The Story Behind Haystack’s Investment In Databook

In the fall of 2019, as we were opening a new fund (Haystack V), and old friend/mentor of mine Josh Stein pinged me about a deal he was leading in a company called Databook. He and his colleague did a lot of work on the sales intelligence space and asked us to considering joining. We rearranged schedules and brought the team down to Palo Alto for coffee to meet Anand Shah (no relation!), the CEO, in person.

Knowing that we didn’t have a lot of time, we pressed Anand to get to know him, learn about his business, and all the other things we wanted to know. We promised him a decision in 48 hours. This was a more full seed round, as Databook had a product in market with customers and revenue. Anand fit the pattern of the type of founder we like to back — a product-oriented founder who uncovered a secret in their previous role (for Anand, in management consulting) through deep analysis. We offered to take the rest of the round, and that proved to be a good decision.

In the last two years, Anand and the Databook team have carried the product and team to new heights. The team raised a strong Series A during the pandemic, led by Microsoft, which is a feat in and of itself. They’ve added to the core team, executive ranks, and started nabbing some big logos. This all came to a head early in 2022 with Databook receiving a significant amount of investment interest, even in the face of volatile capital markets. The result is today, Databook announces their Series B round led by Bessemer, with DFJ Growth participating. We’d like to congratulate the entire team on this mini-milestone, especially attracting high quality partners in the face of wonky markets.

One of lessons learned in venture is that selling software into the sales department of technology companies is a good lane to explore because the sales orgs do drive revenue and the old line “the VP Sales has a credit card.” The other lesson is that long-term relationships like the one I have with Josh really drive the engine of the Bay Area deal flow. I met Josh over a decade ago. He was a board member at a company I worked for, Swell. I consulted for DFJ for a bit, too. It was always very easy to share opportunities with Josh because he treated founders well and brought a wealth of SaaS experience to those discussions. In this case, Josh shared something back to us, and we are grateful he did.

 

The Market Is The Greatest Critic

Maybe over 10 years ago, I remember a Twitter thread with @cdixon. He was defending startups against critique, citing that journalists and other startup ecosystem players shouldn’t publicly criticize startups because startups are really hard, most of them fail, and it’s the market that delivers the harshest critique. When this thread originally unfolded, I recall disagreeing with Chris, but a decade later, after pouring my heart into some failed startup experiences, it turns out Chris was right.

But, he was talking about private early-stage startups being hammered on social media.

When companies list on public stock exchanges, have thousands of employees, and hefty annual revenues, they are of course no longer early-stage startups. They are also subject to the whims of public market investors, ranging from institutional pools of capital, talking heads on TV and Twitter, sophisticated crossover funds, to celebrity hedge fund magnates. Unlike private investors who have their funds locked up for almost a decade and can only cheer from the sidelines through thick and thin, public companies can attract activist investors one day and lose long-term investors one random morning, sending their stock prices into oscillation or free fall.

I have only been an investor through a bull market. I wrote my first check in 2013. I lived through the GFC in 2008, of course, and felt the pain of that in the job market just finishing graduate School. I moved to SF for the first time right as the dot com bubble burst, but I wasn’t in tech or investing, but I do remember getting most of my furniture and a desk from a dying startup in the Mission, where I lived.

The crash from Nov ’21 to Jan ’22 (and maybe more?) is the first crash I’ve experienced as an investor. Yes, it is a crash, for those who may not want to hear such language. The percentage share of value destroyed, primarily in “tech,” rivals that of the dot com crash over two decades ago. While I’m not an experienced market prognosticator, the current crash we are living through feels like more of a massive re-rating of pricing and valuations, given that these companies do actually have network scale business models and wide user adoption and engagement, across consumer and enterprise. Like many private investors, I spent a good part of the last week just talking with friends, learning from them, and listening. Here’s what stuck out to me:

Public market investors pulled money out for a variety of reasons. End of the year drawdown. Fear of inflation. Anticipation of interest rate increases. The beginning of the end of the “Covid Trade.” Stocks that once seem to define a new world changed by a virus — Zoom and Peloton — came crashing back to earth. There are other victims, too many to list here. Just look at Robinhood, or Toast, or any other high flying tech company, save for Facebook, Microsoft, Google, and Apple.

For me, when the dust settles, and the market comes back — and it will come back, no doubt — here’s my the big takeaway in my mind: Companies big and small will be examined through the lens of growth narratives driven by product diversity. It’s no longer good enough to just handle online storage, or to just facilitate online meetings, or to just empower consumers to freely trade securities. Public investors and quantum computers who can vote with their feet every millisecond are likely going to reallocate their money into companies that demonstrate the vision and execution to not only acquire assets like Instagram and WhatsApp, but also key infrastructure like Parse and Onavo; or assets like Slack and Tableau; or assets like Minecraft, LinkedIn, and Activision. The public markets will likely reward those companies who can diversify their product lines into messaging, analytics, gaming, and more — those special companies and business leaders who continue to bundle value into their platforms.

Lo and behold, I am not a public investor. Well, I did buy a bunch of tech names on my list this past week, but those are for long-term holds and a feeble attempt to correct misses I suffered in the private markets. So I have to digest this take-away and see what it means for me as a very early-stage private investor. When I invest, it’s often just a few people, tinkering. There’s no way to know what will happen. Those kids have to get the product right. Their timing needs to be right. They have to stay together and fight just to have a chance. For the nine years I’ve been investing, the money has been easy. Follow-on investors have bought the growth story, have given entrepreneurs the benefit of the doubt. I still think they will, but the best Series A/B and growth investors will look for more than just top-line momentum. They will be affected by this crash, too. They will likely have some version of the same conclusion I’ve arrived at. A point-solution is great and can work. You can go public on it. But to suffer the slings and arrows and be durable, the markets — the ultimate critic — will ask for more. 

Reflecting on Haystack’s Investment In Cognito

Nearly 8 years ago, when I was on the verge of finishing Haystack Fund I, I was introduced to a tall, lanky kid who was dropping out of Stanford. I was living in downtown Palo Alto at the time, so took him out to Fraiche for frozen yogurt. He was a very active participant in the Stanford Bitcoin Club, and I had a few friends in that group.

He and his classmate Alain were working on a ID verification system for KYC for companies who were experimenting with digital currencies, mainly Bitcoin at the time. In that initial fund, Haystack had some familiarity with Bitcoin. I invested in friend Vinny Lingham’s company, Gyft, which had a clever hack around providing a way for users internationally to diversify their digital assets. While not a “web3” company then, Gyft may have been one of the first legit “crypto exits” as it sold to First Data. Back then, one BTC was about $450.

These founders, John and Alain, were working on what was then called Blockscore. They raised a small amount, then went to YC, raised a bit more – never more than around $2M in the life of the company. They were really quiet, earnest kids running a small company and found lanes for revenue quickly. The team worked out of a small office behind some condos in Menlo Park. They never cared about hitting the fundraising trail, or getting any press or coverage. Some key employees left, and then came back. They received some acquisition interest over the years, but never anything that made them stray from the course.

Fast-forward to the end of 2021. BlockScore had changed their name earlier to Cognito, and were doing very well. Profitable. Still quiet. And larger companies began to take notice. Earlier this week, it was announced Plaid would acquire Cognito and the team for over $250M. Remember, these kids only raised about $2M. They didn’t get caught up in all the noise around them. LPs ask me about how long does it take for seed funds to return. I typically guide them to brace themselves for 7-10 years. Blockscore took 8 years, right in that range. I missed out on the chance to invest in Plaid’s Series B back in 2015, so we are now blessed with a return *and* stock in Plaid. Over the years, it’s been a pleasure to be a small river guide to John and Alain, and I know they cared deeply about their colleagues, their investors, and doing the right thing. Congrats to you all and the team, and best of luck on the next stage of the journey!

The Story Behind Haystack’s Investment In Envoy’s Series C

Back when Haystack just started out, we were fortunate to make a small investment in a friend, Larry. We documented that here years ago. Well, a lot has happened since then. Larry and the team at Envoy have experienced growth, survived through Covid, where their product was about checking into the workplace and managing conference rooms, packages, NDAs, and many other things — and they’ve come out stronger. It’s a testament to the team, for sure, but also to the resilience of software. Envoy has always been a product-led company, and that comes straight from Larry’s DNA.

Envoy has been very efficient with its capital raises. Today, the team announces their Series C financing, valuing the company over a billion dollars. But that’s just the numbers. To think about Envoy as a fast-growing company pre-pandemic which anchored around the corporate workplace, Covid and lockdowns presented, to put it lightly, a significant challenge. How did the company survive that? How did employees continue to believe and stay through that tough time? I really don’t know, but it’s amazing and a testament to Larry, the leadership team, and everyone there. To me, this speaks volumes on a resume. Everyone there gets to say “I am someone who sticks with things.” That feels rare today.

For those of us who know and love Larry, well – he is a truly unique individual. He never gives up. He never loses his cool. He never settles. Is he always a walk in the park? Nope. But he is consistent, and his deep conviction has been rewarded. I know he feels deep gratitude to everyone involved. I’ve heard it on the phone. I’m confident he survived this test and came out even stronger. And as we all go back to some kind of work, be it in the office, in co-working spaces, on retreats, and everything in between, I am excited to see what the Envoy team builds to meet the new world we are living and working in.

Predictions Are Useless, But Planning Is Indispensable

For those who know me, I am a planner. I truly enjoy it. And while I’m happy to be flexible when things don’t fall the way I’d like, I oftentimes build concurrent plans as options along the way, just in case those things happen. At the end of the year in years past, I fell into a trap of trying to predict what could happen in tech and startups and VC next year. 2020 proved that exercise to be worthless, so I didn’t do it this year and probably won’t ever do that again.

Perhaps instead, I thought, I should just share how I’m planning for things given the bumpy start to the year, where I was supposed to visit a good friend in Montana for the week to kick off the year – and was cancelled. Two other events in January – had to unwind them. Not a major complaint, but unfortunate in that I would’ve had long meals with great friends. Hopefully soon.

First, plans for me always start with the kids and family. What do they want to do over their breaks? How can I slowly ween them off their old toys toward new books or board games? Could one of them go away to camp this year — NO!!!! And how do I make sure each day from 5-8pm I’m in their zone, as much as I can be? What do we, as parents, need and want for the year? Honestly, I don’t know the answer yet.

Second, we have work. I feel lucky, my work doesn’t feel like work. Some small parts do, but very manageable. Instead, the question is around finding focus to have a chance to find signal amid the noise. I am lucky that I get to see lots of cool things early. I miss a lot in those early meetings. It’s part of the game. We are investing out of a brand new fund, and starting a new vintage is always a superstitious moment for me, intensified right now by all the randomness in the air. We are fortunate we have plenty of capital, a brand new fund, and we still focus on one thing – meeting people early, building relationships with them, and going along on a ride with them.

Third…. well, truth is I have some resolutions (mostly personal) and some big hairy work goals (stay tuned), but I need to add something here. Cooking is sort of a release, but it’s also in my home. Travel would be welcomed, but most of ’22 trips to start have been reversed back to the credit card. I’m a very social person, so am hoping the “hammer” part of Omicron passes quickly so the “dance” can be restored. Until then, it’s cooking, Star Wars, board games, and losing myself in the Zoom metaverse, a land that now feels like familiar territory.

Like I mentioned, predictions are useless, and so are plans — but planning, as Eisenhower said, is indispensable.

Looking Back On Tech, Startups, And VC In 2021

As a mini-tradition here on this blog, at the end of each year, I attempt to briefly summarize and contextualize the big events that happened in the world of tech and VC. It’s impossible to touch on everything, so for reflecting on 2021, I’ve tried to distill the points down to the most brief, digestible nuggets. While you likely don’t have the time or energy right now to read a longer-form narrative, I also don’t have that time or energy to reflect too much beyond this right now.

And with that, here we go: When I look back at tech and VC in 2021, I will view it through the lens of it being “The Tipping Point” year. Below, I will briefly attempt to tie this together, so here goes!

First, our nation’s scientific sector, mainly Big Pharma and Biotech, “tipped over” toward being perceived as a hyper-critical component of our nation’s backbone. Contrast this with years of negative press, price discrimination, political attacks, lawsuits, etc. – now, I’m not saying they’re all saints (see: Sacklers), but looking at the ledger, 2021 brought us a cocktail of new weapons (mRNA, mAB, forthcoming antiviral pills) with which to attack and manage Covid-19 and its onslaught of variants.

Second, and related to the first, is that the effects of the end of globalization tipped over into real issues our nation experienced. It’s one thing to have supply chain issues for consumables, but it’s not the end of the world. On a longer arc, I am very excited about the trend toward repatriation of production onshore, which will likely accelerate our shift toward automation (like a wholly automated coffee shop) and other production technologies (ex: 3-D printing etc.). But for now, we are stuck. It’s hard for find new/used vehicles. Shipping takes longer, after many have been addicted to on-demand. And most acute, right now, we haven’t been able to 1/ produce cheap Covid testing (despite other countries figuring this out) and 2/ ramp up production for antivirals. Sadly, these are connected – while the efficacy of these antivirals are amazing, they need to be given early on in contracting Covid, but with testing being hard, and manufacturing the pills behind in production, the overall impact of these are yet to be seen.

Third, the retail investor tipped the scales against the experts and incumbents. This tipping over came in various forms, mostly notably in the Gamestop saga fueled by Wall Street Bets on Reddit (and almost in the ConstitutionDAO saga). It’s a bit of a stretch, but I could make the case the mainstreaming of crypto fits into this, as well, fueling more widespread digital wealth accumulation through stalwart instruments (such as Bitcoin, Ethereum), hot new tokens (such as Solana), and the explosion of NFTs.

Fourth, our economy tipped over into a more permanent inflationary environment. Looking back, this should’ve been obvious after years of QE and tons of Covid-stimulus money. Thankfully, planned rate increases for 2022 are in the works, it’s unlikely we will see any more stimulus for a long time. In the background here, the advent of remote work via Zoom combined with more mobility to move within the country is a welcomed option for many who need to stretch the value of their dollars. A year ago, folks in the Bay Area would privately mock the “flight to Miami” – a year later, many folks I know have either moved there or visited multiple times for events. Orthogonally, much of this paragraph can likely be attributable to the groundswell for crypto and “web3” in 2021, as developers and creators are not only hoping to rebel against technology data aggregators, but also arming themselves financially as a hedge against this potentially toxic mix of fiscal and monetary policies.

Fifth and final, the “technology sector” tipped over as *the place to be* for investments. There are so many examples of tech tipping the scales in 2021. In crypto, Coinbase went IPO, OpenSea was my pick for breakout startup of the year, crypto funds booked unbelievable returns, and the absolute flurry of venture dollars rushing into new web3 projects on a scale never seen before. Tech firms went IPO at a torrid pace in 2021, breaking traditional mental models of “how big” something can be in terms of market cap and returns. All of this motivated many of the leading venture firms to begin restructuring their own firms to be prepared for 2022 and beyond. Specifically, major VC firms have been restructuring to 1/ handle crypto tokens, 2/ extend their reach into bio/pharma, 3/ to strengthen their position to hold valuable stock beyond IPO, and 4/ to scale assets to compete with the big cross-over funds who have more capital and data. And on an individual level, parts of the “Great Resignation” have infiltrated this sector – I believe we can expect more folks to look for something new, even in tech and VC.

When I reflect back on 2021 later in life, I will remember it as a “tipping point” year, a year in which the drastic changes of our times hardened into a new reality that will likely persist for many years ahead. Time to plan accordingly.

The Breakout Tech Startup Of 2021: OpenSea

It is that time of year on my blog. This year-end tradition has lasted happily longer than I would’ve predicted. Each year, as a “committee of one,” I declare the breakout startup of the year. Let’s briefly revisit the past: In 2012 it was Stripe; then Snap in 2013; Slack emerged big in 2014; we took a break in 2015-16; in 2017 all the rage was about Coinbase; in 2018, we had Airtable; in 2019, we had Superhuman; and last year in 2020, Hopin exploded on the scene.

This is going to be a short post for a few reasons out of my control. I’m not “full time crypto” and as a disclaimer don’t want this to come off as a definitive statement on crypto. And I know some folks will say, “Solana!” That’s valid. For this particular designation, I try to pick a startup where the end-user base is growing. Not perfect, but what it is. While I don’t write or tweet about crypto often, I have invested in the space in various ways that I will likely discuss at a later date. Putting this aside for now, here we go…. drumroll please….

Here, I present to you The Breakout Tech Company Of 2020: OpenSea

Why did OpenSea get the nod?

I try to use a simple framework, like I did for Stripe above – “the right person/people, the right product, the right place, and the right time.” OpenSea nailed all of them in the strange year of 2021.

1/ The Right People – The founders hail from Pinterest (built around collections) and other Bay Area software companies. Founded in 2017 by Devin Finzer and Alex Atallah, the early team had experience with marketplace dynamics, driving commerce online, and managing visual assets. Today, the company has quickly scaled to likely over well over 50 employees, likely at or approaching half a billion users, holding lord-knows how many collections and even more NFTs with GMV in the billions and growing, all powered by its breadth of assets and filtering systems, skills likely honed after years at software teams at places such as Palantir and Pinterest.

2/ The Right Product – OpenSea is able to ride the early parts of this large technology wave with a tried and true native internet business model: the marketplace. Coinbase, which went public earlier this year and is approximately valued at $75B+/- at the time of writing this, also had a similar model of source, which laid the foundation for multiple business lines. Like eBay at the beginning of the modern Internet, perhaps one way to think of OpenSea as this new web’s eBay, and upon that foundation, who knows the various other business opportunities that could emerge. As 2021 comes to an end, OpenSea boasts extremely high market share in its category. It’s also worth noting that this is all happening at a time when those who hold valuable tokens worldwide have learned to smartly diversify their digital holdings to preserve their wealth for the long-term. NFTs and other tokens provide a new financial frontier to explore as magnates diversify.

3/ The Right Place, The Right Venue – In tech, “crypto” is *the* place to be. OpenSea emerged at the right time. Crypto was a groundswell during the pandemic and lockdowns. Coinbase went IPO in 2021. It feels like a long time ago as I write this, but it’s still so early. Not even 12 months ago. During Covid, the lockdowns, crypto seemed to become the consensus next technology wave, colloquially codified as “web3.” Since Coinbase went through Y Combinator in 2012 (OpenSea also a YC alum), the past 10 years since then have seen the slow and steady rise of crypto networks and applications — case in point, no one really talked about Solana much a year ago. There are many examples like this today. As a response to the opportunity, a whole new crop of investment firms (with very different models) emerge. During this time, the largest venture capital brands (in size and AUM), such as a16z, Lightspeed, Sequoia, Union Square, and others have molded their brand position toward this new future — to be clear here, this is not an exhaustive list and a16z and USV in particular have been making investments  in this category dating back to 2011. New powerhouse firms have emerged, as well, such as 1confirmation, a16z Crypto, Dragonfly, Multicoin,  Paradigm, Placeholder, Variant, and many others.

4/ The Right Time – As different types of NFTs caught fire and exploded in aggregate size, OpenSea’s marketplace model and filtering systems emerged at the right time to capture the wave early. Other marketplaces have spawned up with a similar thesis, and I’m sure some will carve out their own niches (just like happened with eBay), but right now, OpenSea had a 3-4 head start which may be hard to beat in this particular model.

5/ The Right Deal – Like Hopin the year before, OpenSea rode its success into multiple competitive financing rounds in 2021. This is the part where I have to admit that I met Devin 3-4 times across different stages of OpenSea way before the pandemic, and despite the declarations from his early investor Nick Tomaino, who kept introducing me to Devin, I didn’t invest. Each time. That is a big mistake on my part. It was right under my nose, but at the time, I didn’t fully appreciate why it caught fire with game artists and managing their assets in a marketplace. Folks like Tomaino, who founded 1confirmation, a16z Crypto, and a host of other early investors (after YC) saw the possibilities, and smartly leaned in. Today, OpenSea has raised over $125M across funding rounds, the latest valuing the startup well over $7B. Like Hopin, the acceleration in private value are at levels rarely seen. So, I’ve met Devin a bunch of times, and he can probably tell you, I was a nice guy but I didn’t see it. I owe Devin and Alex a public “congrats” – it’s amazing to see what has unfolded!

Catching Lightning In A Bottle

This has been an interesting week. Yesterday, HashiCorp listed on the NASDAQ under the ticker $HCP, for HashiCorp Cloud Platform. Over nine years ago, a close friend introduced me to one of his star colleagues, Mitchell Hashimoto, who wanted to get some advice on how to better publicize his side project at the time, “Vagrant.” I vividly remember meeting him – 21, graph paper notebook, left-handed writer with clean penmanship. I was not 21 at the time, and he stood out. Months passed and that holiday season, I decided to “start a small fund” and when he ended up putting a seed round together, I asked to invest a small amount.

This proved to be an important introduction and important decision.

When I reflect back on the journey of HashiCorp. it is something larger than I could’ve imagined. As a very early investor, the reality is that I end up remember helping Mitchell when he was by himself in those early days. I wasn’t working “on a company.” I was becoming a friend to Mitchell. Despite our age difference, he was great to interact with. I could barely believe someone just out of college and over a decade younger than me could be so organized, clear-minded, and precise.

When I look back at the ledger, Haystack helped HashiCorp – or rather, helped Mitchell gain the space, with Armon, to create what is now Hashicorp. But, HashiCorp helped Haystack even more. By investing in HashiCorp so early, within a few years Haystack held a crown jewel, “N of 1” shares of stock in a company that was impossible to copy. I meet lots of new fund managers and try to help them – many ask questions about arcane topics of fund management when they’re starting, when in reality all that matters is DGD = “do good deals.” Once you do a few good deals, you can worry about the rest. But if you don’t DGD, there’s no point. As an early investor just starting out, you have to catch lightning in a bottle, and for me and Haystack, HashiCorp was that bolt of lightning.

When folks ask me to recite what makes HashiCorp special, there’s the tech angle, sure. You can read all about that online from people smarter than I am. To me, what was special is that, when we funded HashiCorp, there was just Vagrant. Then over time, Mitchell’s close college classmate Armon Dadgar became a co-founder, and that was a special addition. I’m a big music fan, and the way I explain this period to those who inquire, is that Mitchell and Armon were like a pair of musicians who cut seminal rock albums during a two-year period – a flurry of open source projects, such as Packer, Serf, Consul, Terraform, and Vault, and others. These all folded underneath the umbrella of HashiCorp. Today we marvel at companies like Google transforming into conglomerates like Alphabet, or Facebook into Meta… HashiCorp is somewhat akin, a patchwork of businesses that are so large and strategic, many of them could stand on their own.

But, as always, HashiCorp as the umbrella is greater than the sum of its parts.

Ultimately, as I’m writing this on a Friday night with a quiet household, my wife away for the night, my kids tucked into bed early — after a week of many warm messages, I feel incredibly grateful for the chain of events over the past decade which led me to write a post like this. I’m grateful my friend Courtney introduced me to Mitchell; I’m grateful Mitchell was willing to accept my help and guidance, and that he made room for me when I was starting out; I’m grateful for mentors like Glenn and Puneet who carried me along for the ride as I was learning to be an investor; and I’m grateful I had the opportunity to catch lightning in a bottle.

It’s hard to really look back. When I transport back to that time, in early 2013 when I could barely muster the funds to make a commitment to my own fund, I somehow had the opportunity to follow my instincts with Mitchell. At that time, I didn’t have a career at all, I was just flailing. We just had our first kid that April. We weren’t sure if we could stay in the Bay Area long-term. We didn’t know what the future held, but life was moving fast and out of our control. Fast-forward to this week, that resolve was rewarded. Over the years, I’ve learned a lot more about how much luck can drive outcomes in this part of the world. I’ve learned just how hard it is to commit everything to a goal, and the cost of that commitment. I know I could never do what Mitchell, Armon, Dave, or their colleagues do — but I am lucky that I get to be close to greatness so early, to see that greatness up close, if even for a fleeting moment in the long arc of life.

Haystack Announcements: New Fund, Same Model

I’m pleased to announce that Haystack is about to begin investing out of a brand new fund – Fund VI, raised in May 2021 – in January 2022. Our new fund is $50M, just like the previous Fund V. Haystack has shown a deep commitment to disciplined fund sizes, time diversification in portfolios, highly-curated co-investor syndicates, and selecting founders, creators, and CEOs we can build relationships with. So far, this formula has worked well.

A new fund simply wouldn’t be possible w/o three groups of people: The founders we are lucky to work with and back; the countless seed & VC partners who continue to vouch for Haystack; and the LPs who had our back during the pandemic. Thank you.

Now, some personnel news.

First, a big “thanks” to Ian Hathaway, who logged ~4yrs with us at Haystack. Ian quietly made tremendous contributions to Haystack, helped the platform become more professionalized, drove internal systems, evangelized documentation, thought deeply about being hospitable, and much more. Thank you, Ian!

Second, please welcome Divya Dhulipala to Haystack, where she joins as a Senior Associate. We met Divya nearly two years ago through a close mutual friend who gave her an outstanding recommendation. Once I saw her work ethic for myself, I tried recruiting her for nearly two years since then, and now she is here. Yes!

Third, Haystack is proud to promote Aashay Sanghvi to Principal. Aashay has demonstrated both a high-powered work ethic combined with an innate sense of judgment around people, opportunities, risks, and planning. Please join me in congratulating Aashay on this well-deserved recognition.

Well, that’s really all we have to say for now. As a franchise, Haystack finally reached a point where we raise funds ahead of schedule, so we will rest up a bit this year-end holiday season, clear our minds, and reset our focus for a new journey ahead. Onward!

Reflecting On Haystack’s Investment In BentoBox

Almost seven years ago, mutual friends introduced me to Krystle Mobayeni. She lived in NYC but was visiting the Bay Area to raise money for her startup. I recall meeting her a few times in/around Palo Alto, in particular the new Blue Bottle as it opened up downtown. With her quiet voice and unassuming frame, I will admit it took me a few meetings to see what was going on with her new idea to empower local bars, restaurants, and food trucks — and then wham! — it hit me: Krystle was not just a product designer, but a product design genius.

Once I finally realized that (thanks, Krystle, for being patient with me), that became stage 1 of a long-term friendship and partnership with her. Haystack is proud to have not just invested in BentoBox since the very beginning, but in every subsequent round thereafter. More on this toward the end. For a fund as small as Haystack’s was back then (a modest $3.2M fund), we backed up our mini-truck (haha) to back Krystle. And I’m glad we did.

Krystle’s original insight was that while WordPress and Squarespace were workable for these SMBs, bars, restaurants, etc. needed a more focused version. The first time I walked through her product, it clicked — it almost worked like Slack. From there, she demonstrated an incredible ability to build a team, to delegate, to attract highly relevant investment groups with experience in food and hospitality, and to raise capital smartly. Again, more on this below.

We’d like to congratulate the entire BentoBox team on their hard work, dedication, and for plowing ahead through Covid. We all remember (maybe?) those initial months were brutal for SMBs and bars/restaurants, etc. Krystle and her team navigated shutdowns and continued to supply their customers with new product offerings to battle through. Speaking of battles, it should be noted that Krystle, while not vocal herself, raised capital from some of the best investors in the world (our friends at Bullpen, Threshold, and Goldman Sachs) — in particular, raising her last growth round during a pandemic while 8-9 months pregnant with her first child. (Read that line again.)

BentoBox was just acquired by Fiserv (public company) for an undisclosed sum. Krystle is not the type to seek any press around this, and if you Google this online, you won’t find much. That’s her style. And while it’s not my story to tell, what I can share is that Fund II was fortunate to make a meaningful holiday distribution to our Fund II LPs yesterday, entirely driven by Krystle and her team. For this, we are eternally grateful.

The Story Behind Haystack’s Investment In Scribe

When Noah Jessop joined Founder Collective a few years ago, we met in person just to meet each other. I’ve luckily been friends with the folks at Founder Collective for a while. To give you a sense of how thoughtful they are, they spent the time introducing me, brick by brick, to some of their LPs. They didn’t have to do that. But they did. And now Noah was part of that group, so we became fast friends quickly.

Noah went on to follow his passion for building and crypto into a new venture. And along the way, he said, “you should also meet Jennifer (his partner). I’m biased, but she’s kind of a big deal.” He was right. I met Jennifer Smith last summer during lockdowns and almost invested in her company, back then called Cursive. Immediately it was apparent, Jennifer is simply super impressive. Looking back, it was another case of me trying to do a bit too much due diligence. I should’ve just invested in her, but I didn’t. By the grace of some higher power, she reached out to me again last fall, and she had made a lot of progress. A lot. After a few days, I said to her: “I’m in and I’ll help you raise every single round from here.”

There are no free lunches with Jennifer. She put me to work. In that seed round, she locked arms with Amplify Partners — one of the premier enterprise technology seed funds. My old friend Mike Dauber won the right to lead the round. He called me about her and said he nearly jumped out of his chair to lead the deal. To Mike’s credit, Jennifer informed me that Mike just starting making customer intros even before she officially shook hands. That’s what it takes to win competitive deals in compelling founders.

Since that seed round, Jennifer and the team have been on a tear. The company — now called Scribe (check out their website) — has been winning over customers at an incredible clip. You can read more about the specific offerings Scribe packages up, but what’s perhaps most exciting as an early stage investor is to see the pace at which the team is attracting and recruiting senior executives to its ranks. Stepping back for a moment, the category Scribe operates in — the rapidly-changing landscape of RPA — is drawing Scribe and others into the market with great speed. Jennifer as a CEO has been ready for this moment, and the moment is now here.

Folks who are curious can read about the company’s fresh new Series A financing today led by Evan Feinberg of Tiger Global. It’s super exciting for the team and for me to watch Jennifer make this transition. When Evan was conducting his due diligence, he asked me if all the glowing interactions with Jennifer for real. Yes, indeed, they are for real. Noah was right, and smart. Congrats to Jennifer, Aaron, and entire (growing) team at Scribe!

The Story Behind My Investment In Jetstream

I met Tommy Leep over a decade ago now. He was working for Floodgate back then. We immediately became friends. Since then, he’s been on a journey – some ups, some downs. He made incredible contributions to Haystack as a friend and consultant for many years, and truth be told, I tried for long time to rope him into Haystack, but Tommy is smart on another level from most folks I know. He quickly identified that he needed to pick the people he wanted to back as founders outright, and that insight has catapulted Tommy to leverage AngelList to start his own dedicated micro fund: Jetstream. I am personally investing in Jetstream simply because I have always wanted to invest in Tommy and work even closer with him.

Tommy finally found his passion and calling in life. With Jetstream, he will be investing in the earliest rounds of climate-focused startups. It can sound cliche to highlight an investor who is now 100% focused on this sector, but knowing Tommy for as long as I have and as closely as we’ve worked together, I can assure others this is his calling. He is a Bay Area Native, someone who is most at ease outdoors, and someone who never really felt quite right in the traditional world of venture capital — and I cite this as a good thing. After 2020’s wildfires, something clicked for Tommy — he wanted to pick the founders he worked with, he wanted to focus on this problem as motivation for working toward something bigger, and he wanted to hang up his own shingle to do so.

There are plenty of rational reasons for me to invest in Jetstream. I know Tommy very, very well. Haystack likely won’t “focus on climate” as a sector, and so this is a great way for me to learn more about the emerging sector through Tommy’s experiences. Like many others, I feel more comfortable with participating in this challenge through these means — helping new companies get started that could lead to awesome solutions we can’t dream of today — versus other avenues of participation.

But there are deeply personal reasons for me to back Jetstream, to back Tommy. He is sort like family. My kids know him. He comes over monthly on his bike rides and hangs out in our backyard. Sometimes my kids will randomly ask, “Is Uncle Tommy coming by?” In my 10 years in the Bay Area in this world, I would be hard-pressed to find someone with the level of EQ power Tommy wields. There’s no doubt in my mind that when he commits to something like this, committing to finding and supporting founders in the climate space, that those founders will want Tommy along for the ride. it’s a big time of change for Tommy – he’s going to be a dad soon, he’s starting a new fund, and emerging from post-pandemic life into a new world he will make into his own.

An Unpredictable Reopening In Venture Capital

In the inconsequential world of venture capital, the past few weeks have been illuminating and unpredictable, with a particular focus on the human dimension.

Folks reading this likely are in-tune with the realities of today’s markets — we all know technology and startups are attracting more capital, we all know there is more capital entering the sector, we all know the sector itself is expanding globally, and we all know that the past two years of public offerings and market expansion has created wealth for those holding tech stocks, including venture investors and their limited partners.

More specific to early-stage tech investing, that market has moved to Zoom/video, combined with an influx of angels, syndicates, new funds, and others providing capital to creators. To many VCs, this new mode can feel great, more efficient, a wider aperture — it can also feel faster, more transactional, and as a result, potentially less rewarding. Put another way, wallets can grow inversely with personal fulfillment.

It’s easy to cast recent news as typical turnover in a dynamic industry. That would be too easy and miss deeper seismic shifts under our feet. It’s the fall of 2021. We are supposed to be fully open and over the pandemic, but the pandemic is still here. Parts of the country are fully open, other parts are sort of open. Even the most dysfunctional public school districts are back in class with kids (thank heavens!), but we are just weeks away from district-by-district debates about vaccine mandates for students. While we are re-opening to a new world, we are all realizing that, over the past 18 months, some of our best friends, neighbors, teachers, or favorite stores have moved — some voluntarily, many non-voluntarily. During that time, a mixture of West Coast soot and/or Gulf Coast rains invaded our air supply, adding to other aerosols floating around like disinformation or deadly mutations. If this wasn’t enough, the next Presidential Election will begin earlier than previous campaigns, setup to be an epic clash with big bumps along the way.

Now, let’s briefly dive into VC-specific challenges in 2021. Let me state upfront, no one is going to cry for VC, that is not the point. The reality most may not appreciate is that partnership structures can really exert a personal tax on participants — the weekly meetings, debates or fights, not to mention travel, events, dinners and missing tucking in their kids at night. Some have hit it so big there’s no reason to continue. Some don’t love it and shut downs helped shine a light on that reality. The battery of meetings lined up every week, though entirely self-inflicted, can clog arteries.

These folks have all been blessed in their own way. I always remind myself, I have the best job in the world. It is amazing and I can never take it for granted. I know many friends I work with feel this deeply. At the same time, these folks face human challenges that are independent of luck or fortune, all amplified during the darkness of shutdowns. And they take their commitments seriously. Committing to a new fund is like saying “sign me up for another 10 years.” That’s a daunting amount of time when cast against the past 18 months of being cooped up, examining every bit of our lives under the most intense microscope. There are countless blessings, but no one can escape the curses that come their way.

Stepping back from venture, we all have likely discovered cracks during the introspection of Covid. Now that we are on a path to re-opening and getting a lay of the new land ahead of us, we will have to face these new realities and assess “How do I want to deal with this?” Some of these are tactical; many of these are deeply personal. Where do I want to live? Who do I want to spend more time with? What I have sacrificed on this path that I need to repair? What is important to me that I have to protect? What is ephemeral or everlasting? No one has experience with “How do you reemerge after a pandemic?”

I’ve been extremely lucky to have spent time sitting next to and working with folks who are very successful at this role in our ecosystem. One trait shared among many of these folks, they are quietly insanely diligent and thorough in planning for their loved ones, friends, and fellow collaborators. They also realize time cannot be earned back, and so they’re making bolder moves to take care of items they want to focus on, mistakes they want to fix, things that need to be repaired. We will see much more of this over the next 12 months. And it’s not as simple as a “generational transfer” — its roots run deeper into relationships with spouses and kids, how our economy is bifurcating, how our neighborhoods are changing composition, how fragmented the American experience can vary by state, how unsettling a life in the Zoom metaverse can be, and so on. In the early stage of a post-pandemic world, we are realizing the last 18 months affected everyone, sometimes in unpredictable ways, and those who have the luxury to remake decisions are taking out the cocktail napkin, dreaming up new dreams, and looking for new adventures in a new world that will unfold in ways we can barely imagine today.

VC Market Dislocation: The Fundamentalists vs The End Marketers

I shared this last month on Twitter and was delayed in posting it here o the blog. I called it “2021 Venture Capital Market Dislocation.” Credit to my friend Leo Polovets who encouraged me to write this out.

  • Adam Nash tweeted this earlier, paraphrased: The VC industry went from looking for $1 billion-dollar outcomes to $10 billion-dollar outcomes to $100 billion-dollar outcomes in less than 24 months.
  • This end-market acceleration has occurred during a time of zero-interest rates (not being touched until 2023, per Fed), high IPO liquidity, huge chip stacks at various VC funds, and making investments via Zoom.
  • Investing in technology feels like the only game in town now in a pandemic world. Public investors are now full in privates; growth investors are doing As and Bs like they’re seeds; traditional VC firms are straddling seed and Series A (tho many have multi-stage arms); and seed investors, angels, rolling funds, syndicates, accelerators are conducting massive experimentation to unearth the next great thing.
  • —> That is a massive mindset-shift for traditional/institutional firms, especially those with long cultures of pegging valuations based on public comps, exit comps, software multiples, etc. This creates a schism:
    • The Fundamentalists: This group’s DNA is hard-wired to valuing businesses based on revenue growth potential. They’re willing to pay a premium, but based on this methodology.
    • The End Marketers: These groups are either newer entrants or established players who have quickly shifted with the current market. They view “slots” for ownership at seed, Series A, or Series B as finite pieces of coveted real estate that they only have 2-3 chances to own. After that, the early land-owners (here, investors) can keep the best companies captive to themselves.
  • We don’t yet know if the “End Marketers” or the “Fundamentalists” will be right. What I personally believe is the FOMO around limited real estate for VC ownership in those earliest rounds is very real and warranted. For billion-dollar plus funds who need $10B+ outcomes to move the needle, the fear of missing the next Snowflake, Zoom, or Airbnb at Series Seed, Series A, or Series B can motivate even the most discipline Fundamentalists to break their own heuristics and pin their hopes on the promise of End Markets.

Ironclad: Transforming The Whitespace In Digital Contracting

Many years ago on this site, I wrote about The Story Behind Haystack’s Investment In Ironclad. Little did I know then what would unfold. Vertical enterprise software took off. Collaboration became the rage. The economics of software and the stickiness of well-crafted products became hard to beat. And, a friendship and partnership formed — all unlocked by one seemingly trivial decision.

Fast-forward to today — and we have Ironclad. The potential of this company can be hidden to even savvy observers. The magnitude of the problem, and therefore the opportunity, takes a bit of time to appreciate. The way I explain it to folks who inquire is – imagine all the business logic (and hence, potential for code) implicitly contained in a legal document or contract. Now, imagine if technology could help extract, load, and transform that logic into an automated workflow. To date, contracts have been nearly untouched by digital transformation because they’re so complex and interconnected. Ironclad’s vision from Day 1 was to embark on a journey to win these battles and finally bring contracts to the modern age.

For legal scholars and leaders, technologists, and contract specialists who are interested in the transformation of contracting, be sure to check out Ironclad’s State Of Digital Contracting, a quarterly online event that brings together world-class legal and technical minds to imagine what cutting-edge technologies, such as artificial intelligence, can transform how legal teams work and how contracts are formed, updated, and enforced.

I always joke with Jason that, when we originally met, I was not interested in the idea of Ironclad. That turned out to be foolish on my part. But what I did get right was identifying Jason as a unique leader. In the years that have followed, Haystack has proudly invested in every single round of the company. That is not something we normally do or frankly have had the opportunity to do. It feels great just to write that out; it is an honor to be a small part of their ride. As always, I’m reminded of a great quote from Mike Maples about what he looks for in a founder, paraphrased: “I’m looking for someone to get in trouble with.” Jason and Haystack, we got in some trouble, and am looking forward to more. Onward!

The Story Behind Our Investment in Rewatch.tv

Over the past 8-ish years, Haystack as, on occasion, been a thematic fund. Most of the time, though, the fund is more reactive. We meet lots of founders. We get to work with a few of them. And we follow them on their journey. I personally believe founders hold the secrets — certainly, I do not. Our job is to identify those with the secrets and support them on their path.

However, once a while, there are some spaces or markets that are so big, they’re too big too ignore. When Haystack began, the fund made a series of investment in on-demand networks, and that led to investments in companies like Instacart, DoorDash, Luxe Valet, and OpenDoor. And, over the past few years, the fund has invested behind the trend of live video — dating back to 2015, we made investments in companies like Daily.co (originally Pluot) and Mux, as well as collaboration tools like Figma, Ironclad, and People.ai.

Fast-forward to 2020, and it would be cliche to say live video and collaboration are a big deal. With the pandemic and lockdowns, live video (embodied by Zoom, and upstarts like Whereby, Hubilo, Gather.town, Branch.gg, RunTheWorld, and Hopin, etc., not to mention products like Vimeo spinning out) have taken the universe by storm. So when an old friend and mentor like Kent told us about a founding team he was investing again (he funded their previous company) in the video collaboration space, that got my attention quickly.

Kent is someone who has demonstrated great taste in people over the years, and ultimately when we invest early, we are largely backing people — but in this particular case, yes the people were great, but also the market was obviously enormous and the product sophistication on the founding team was simply too hard to ignore. Perhaps most important, the quality of conversations we had with the founders about who they were, how they gathered the insights around Rewatch.tv, and how they operate as businesspeople made things escalate from interesting to exciting at a fever pitch.

Rewatch.tv is perfectly positioned for our new world. Companies and creators are creating unbelievable amounts of video streams — what happens to them? How do you save them? How do you revert back to them? How do you leverage them to communicate remotely at scale? The explosion of video has created 101 new greenfield opportunities, from the infrastructure and API layers all the way to new applications like Rewatch.tv. It’s a tidal wave, and Haystack is lucky to be along for the ride with Connor, Scott, Kent, and the entire team.

Looking Ahead To 2021 – Planning, Not Predictions

No one really likes investor predictions (unless they’re like this), and I don’t either. Sometimes in the past, like last year, I’ve written them just to farce myself to think, but after last year, it’s doesn’t seem to be the right frame. So instead, what I’m going to share now is more about my preparations for 2021, knowing that the conditions on the ground could change dramatically. As such, I wanted to briefly share what my current “planning” is for 2021, full caveats for black swans excepted:

Vaccinations, Slowly, and with Caution – My belief is, as a member of the general (not at-risk, not essential worker) population in the state of California, that I will likely get my 1st vaccine dose in June, July, or August. Whatever that date is, the second shot (depending on which vaccine — I believe J&J, if approved, would be single dosage), would be a month later. It will take a bit of time for the magic to do its work (according to experts currently), and I’m personally not worried about side effects or negative reactions. My focus at this time will be my kids restarting school in September. If we get there, then I believe I’ll begin to feel more free about doing some normal things, but with caution still, largely because we are not sure if these are annual vaccines yet (so would I need another dosage end of year to coincide with next year’s flu season?). So, I’m cautiously optimistic, and once I get the vaccine, will carefully pick my spots in terms of social interactions, restaurant dining, and travel.

Phased Re-Entry, Then 2022 – In the back half of this year, I will hopefully begin a phased re-entry into doing some normal things. If we didn’t have 3 little kids, I’d probably rush back to do some travel, but that will have to wait. So for more normal behaviors for us to resume, we are thinking more about end of 2021 and really into 2022. That’s fine for me to process; the tough part is getting through February, March, April…. luckily I love what I do, and kids can be both a frustrating yet joyous distraction, so hopefully I can hold my nose until then.

Gatherings vs Meetings – I am a very social, extroverted person. The social isolation from the lockdowns have been difficult for me to adjust to. That said, I love having meetings, especially initial meetings, via phone or Zoom. This begs the question about the pre-seed and seed markets, given the environment right now. I firmly because the pandemic and lockdowns have shifted this market almost entirely to Zoom. It is frankly better for most early stage founders. It’s hard to envision this returning to normal. As an investor, I have to meet entrepreneurs where they are — that used to be the Bay Area and NYC primarily for me — not it will be on video. Now, gatherings are different. Conferences that I like to attend — man, I cannot wait to go. Those small curated events I went to would be almost impossible to conduct online. I also host a few private events per year and I’ve decided to not do it in 2021 (and didn’t really do one in ’20).

Rideshare vs Fixed Line – One big lesson reinforced to me in 2020 was to stay small, stay nimble. I know that sounds cliche, but I always think of the difference between rideshare options like Uber and Lyft vs all the money that California has burned away trying to get high speed rail up and running. Fixed costs are a bear. Being able to tap into resources when I need them is of even greater value to me now as we hopefully approach a post-pandemic world. I’ve been trying to refactor everything I do to move away from fixed things to variable ones, and if there’s one bright spot operationally from 2020, it would be this lesson.

Of caurse, just a year ago today none of us knew what was in store. It could happen again, or something as improbable. So, the best I can do is plan for what I think will happen, pay close attention, and adjust accordingly when the situation changes. No matter what, though, I do sincerely thank you for reading and wish you and yours a very Happy New Year and warm wishes for 2021!

Looking Back On Tech, Startups, And VC In 2020

At the end of each year, I sit down and distill what happened in our industry. For 2020, it would be trite to say it was a year like no other. Everyone I know is pretty tired of these topics. So, I’m keeping this extra brief and overly simplistic by design, but still writing it for me, to remember what changes occurred this year and what the ramifications could be on our work.

The analogy I use here is making a soup or stew. Imagine a big cauldron. There are starter ingredients to get the stew going. Then, you heat and combine them, add heartier elements to the base. And as the stew stews, you throw in more things to spice it up. It’s not the most elegant analogy, but as a former amateur cook, hopefully it works.

Before the coronavirus took root in the U.S. in late February, what ingredients were already in the cauldron? Oh, where to begin. The amount of dis- and misinformation has exploded. High-tech companies and the idea of “Silicon Valley” had continually drawn the ire of many in media and elected officials. Social media feeds addicted users, fertilizing anxieties and, in turn, finding new pores for conspiracy theories to take root. A presidential impeachment was attempted (after failing to prosecute the defendant for collusion), after years of sowing confusion within government agencies, after tolerating numerous cyber attacks, and after eliminating local and state deductions from federal income taxes. The nation’s economy was soaring, with technology companies driving the bus and small-medium businesses becoming the new consumer class; however, massive racial and wealth inequalities rippled under the surface of the cauldron, with tens of millions of citizens either living month to month, or systemically disadvantaged, or both.

So, we’re making that 2020 stew. Things are heating up at the bottom, browning, caramelizing, smoking. It’s time to add to the base — and what does life bring? A global pandemic! If I think back to March and NYC, it is terrifying. All of a sudden, we shut down. We didn’t know how fatal Covid-19 would be, or how transmissive it was, or how it spreads. We ordered groceries online from Instacart, accepted them with plastic gloves, and washed bananas before peeling them. Investors conducted portfolio triage. We all read Sequoia’s Black Swan Memo with fear.

The initial reaction of most of our industry (and mine, frankly) was that we would see a major slowdown. Looking back, that was wrong. There was a brief slowdown associated with the shutdown, but government quickly reacted with multi-trillion dollar stimulus, the virus seemed to peak in certain places, and we learned much more about the virus properties — mainly that it was relatively safer to be with a mask outside with a very small group; that it didn’t seem to transmit via packages/surfaces; that children were far less likely to contract and/or spread the virus; and that closed-air indoor environments where people would congregate (bars, restaurants, churches, etc.) were responsible for super-spreader events. The government launched Operation Warp Speed to unleash innovation in the biotech sector to find a vaccine, antibody, or therapeutic for the vaccine. The portfolio approach taken here may turn out to be a sole bright spot given recent efficacy statistics.

By late May or June, the parts of the economy picked back up. And in the world of tech, startups, and VCs, this is when things shifted into a new gear. The lockdowns and need for physical distancing accelerated two decades worth of digital software adoption into the span of two months. Restaurants that weren’t on EATS or DoorDash needed to adapt to survive. Businesses that still relied on wet signatures for documents and FedEx had no choice but to turn to DocuSign and Notarize. Small merchants needed to tap into e-commerce platforms like Shopify and Faire. Many citizens turned to Airbnb as a preferred travel vendor, helping revive the company after a massive Q2 revenue drop. And of course, with business travel stunted and in-person meetings put indefinitely on hold, the world (including classrooms) turned to live video, schools turned to Brightwheel and Outschool, events were reimagined through breakouts like Hopin or Hubilo, or meetings on Zoom, Teams, or Whereby. This was all reflected in public and private startup valuations — Zoom rocketing to nearly a $150B public company at one point, and Hopin going from a $30M valuation to over $2B in value in less than 12 months time. I briefly chronicle *why* this all happened in this short post called “The Quest For The Next DocuSign.”

While the 2020 stew is almost ready, let’s throw in some garnish in the form of venture financing innovation. Throughout 2020, separate from these core ingredients, the world of venture capital witnessed its own cauldron of change. First, we saw an explosion of SPACs, with credit to Chamath for resurrecting the SPAC a few years ago. SPACs wield numerous advantages to all participants when designed thoughtfully. Second, AngelList unleashed Rolling Funds, a software innovation to abstract away the procedural and administrative complexity of raising and managing small venture capital funds, while empowering limited partners to move in and out of funds like SaaS subscriptions. An evolution on AngelList’s SPV product, Rolling Funds also empower angel/operators to not only scale up their early stage investments, but also to create a wider on-ramp for aspiring private investors to get their feet wet. Third, a new wave of “Solo Capitalists” emerged as VCs, raising and deploying at scale driven by a single figurehead. Back in 2010, this type of model would be an anomaly and likely not pass institutional committees; fast-forward to 2020, and it’s one of the most intriguing disruptions to the venture capital stack. The “who” of who gets to invest early, the funds competing for Series As and Bs now, and the new routes to go public all exploded in 2020.

The 2020 stew fortified some, and it severely harmed others. While the tech sector, startups, and the market for venture capital accelerated, certainly the same cannot be said for many other sectors of the economy. In the U.S., each state governor wielded control over their state’s Covid response, many of them in larger states abdicating some leeway to county-level authorities. This made for various responses and more conflicting public health messages to citizens, against the backdrop of having basic precautions like face masks become politicized elected leaders. The result – the virus raged through the U.S. and will end the year with over 300,000 known deaths as a result of Covid. LA will ring in 2021 as the latest pandemic epicenter. If this were not enough, we saw the George Floyd protests unleash a national movement and conversation around racial justice. Once September arrived, the west coast was engulfed in wildfires, the south and southeast battling hurricanes and storm surges, and other corners of the country — from the Dakotas to the Bayou. Those involved in the technology sector, those who saw no stoppage of work and shifted to Zoom, saw little to no change in their situation, and in many cases, were beneficiaries. Small and medium businesses, those in the services sector, hospitality, arts, and entertainment suffered greatly, and as the incoming President has signaled, all stimulus payments made to date may just be a down-payment on what’s needed in 2021 to help Main Street stand ground.

All of the above make up the bubbling cauldron that is 2020 in tech startups and VC. The hangover effect in the Bay Area became more dynamic as this year closes. Tens of thousands of households left the city of San Francisco. Many emigrated to surrounding counties, driving up real estate prices even more . The stretch of wildfires that surrounded the Bay Area in September proved to be a knockout punch for many residents — it was a really tough time. Imagine a dual-income household with small kids in school via Zoom, parents working via Zoom, and stuck inside in 100 degree weather with 8-10 days of extremely unhealthy air quality. I can’t prove it, but this tipped many people over. Once the fires subsided, major issues remained. Seeing newer companies reach scale in a remote and distributed manner (like GitLab), having the ability to buy/sell real estate online with networks like Opendoor, the impending impact of California’s and San Francisco’s looming budget crises, the impact of SALT deductions being stripped, and with much of the industry adapting quickly to a video-first environment, for the first time a considerable number of people I know who would have never left the Bay Area began to spread out — Europe, Seattle, Austin, and so many other places around the world.

And of course, there is Miami. For sure, you can bet I’ll end my “End of 2020” in tech/VC post talking about Miami. While the statistical odds of the world being put into lockdown because of a global pandemic were incredibly small, perhaps even smaller was the likelihood that a young mayor of a major U.S. city in a state without income taxes would not only woo and recruit technology founders, executives, and investors to his city on Twitter, but that he would engage in a way that triggered an ongoing dialog for weeks on end. Sure, parts of this have turned into a meme, but there is a real shift going on, not just in Miami. The new innovations brought to venture capital (listed above), combined with the conditions on the ground in California, combined with how SF as a city has been managed to date, combined with the rising antagonism toward the tech industry, combined with the rising costs of living — these have all been put under the microscope. Just like Covid seems to be most unkind to those with underlying conditions, the same could be said for regions or governments, where the underlying conditions could be budget largesse, anti-business policies, and a politics too far afield from the mainstream.

The final 2020 stew in the cauldron is a potent mix: A public health crisis, which triggered economic crisis, social crisis, and a mental health crisis, with a side of climate change crisis. On top of this, we all have friends who have now lost loved ones due to Covid, or lost income or means, or was forced to move to a new place, or has been isolated from his/her grandkids, and on and on. We have friends who experienced social and/or racial inequity and feel more comfortable to share it, and the audience is more comfortable to listen to it. We have had friends houses burn to the grounds, and friends who became climate refugees. If this weren’t enough, being at home without the daily routines of going to school or the office, commuting to decompress, going out to eat to get a break from doing dishes, and limiting social gatherings has eliminated the common distractions we used to carry ourselves through the day. Instead, we are more in-tune with all the craziness going on around us, in a year packed with crazy events. I’ll talk more about how I’m planning for 2021 as a result — not in the sense of making predictions, but how this year as informed my planning for next year. For now, I wish you all a very happy and safe new year.