There is a company in the Haystack portfolio that raised a seed round at the tail end of last year. They raised about $4M-$5M — plenty of capital for a 2 pizza team to run experiments on the road to product-market fit. The founders possess both great pedigree and clarity of thought; the company also happens to be operating in a category proven attractive to private markets over the last few years.
In the go-go era of late 2020 and throughout 2021, this company could have been a candidate for a fast follow Series A (<6 months after the seed) or even a pre-emption for a $10M+ investment from either a “Sand Hill” multi-stage firm or crossover fund. Going into the year, this was almost baked in as an expectation for management and the investors around the table. As the broader macro picture turned, growth stocks took a beating in the public markets, and mid to late stage privates came to a screeching halt through this year, the company re-evaluated a decision to enter the fundraising market in Q2. Ultimately, given the immaturity of the business, it did not feel as if the Series A market would come together for the company, and the founders did not want to spend the time burning cycles on a pitch to nowhere.
Once the decision was made and the overhang of a fundraise lifted, one could immediately feel a sense of radical clarity from the founding team and the first few employees. As simple as it sounds, the most important things came to light. Product. Customers. Hiring. The bones of the company that will take years to strengthen. They were really able to test the tightness of product-market fit and the elasticity of demand for their product. They even fired “a good logo” customer because it didn’t seem as if it would set them up for long term success. Hard to argue a counterfactual, but there’s a world in which they would have glossed over it to showcase during a fundraise. After spending my first few years in the venture business in a somewhat chaotic market state, the almost renewed sense of purpose I see from some founders in this moment is refreshing to hear and feel. And I feel it personally as an investor as well.
As an investor, one tells oneself to practice patience, to play the long game, not worry about noise vs. signal. I wrote this in late 2019, and while I have tried to internalize many of these lessons, they can become taxing and slip away in a time of frothy market mania. Fomo seizes the day, and shiny objects (markups, press, etc.) come to the forefront. So as much as some of the companies I work with are refocusing and centering on first principles, I too am trying to get back to the basics in my role as an early stage investor. Stretch out the personal time horizon and aim to become a choice partner for ambitious entrepreneurs when they’re just getting off the ground.