Tag: Semil Shah

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Pear VC’s Anand Iyer goes solo with new $200M fund for crypto developer tools

Engineers are the bedrock of any tech product, and blockchains are no exception. As the race between different chains heats up, communities of loyalists are duking it out to attract developers to their blockchain of choice in hopes that doing so will turbocharge growth. And competition aside, without adequate infrastructure and tooling, the big ideas and promises of web3 don’t have any shot of seeing the light of day.

That’s why Anand Iyer, who has worked at Microsoft as a “developer evangelist” trying to incentivize engineers to build on the company’s stack, is looking to do the same in crypto — this time, as an investor. Iyer, a serial entrepreneur with two successful exits, spent the majority of last year honing in on his interest in web3 as a visiting partner at Pear VC and an instructor teaching a DeFi masterclass to over 2,000 students.

Now, the blockchain aficionado who got his start in trading Bitcoin in 2013 is joining the ranks of a growing group of solo GPs raising venture funds built on their own name and reputation. Iyer has raised $20 million in what he says was an oversubscribed round for his inaugural fund, Canonical Capital, he told TechCrunch. Participants in the fundraise include a number of family offices and individuals from the VC and tech communities, including Coinbase Ventures’ Shan Aggarwal, a16z’s Marc Andreessen and Chris Dixon, Judith Elsea,  Lux Capital, Mar Hershenson, Haseeb Qureshi from Dragonfly Capital, Dan Romero, Semil Shah, Amy Wu from FTX Ventures and Bilal Zuberi, among others, the firm says. 

Canonical has already made 16 investments in seed and pre-seed startups spanning the developer infrastructure landscape, Iyer said. Its portfolio includes Solana-based NFT marketplace FormFunction, low-code multi-chain dApp tool Thirdweb, and web3 messaging startup Notifi. The firm expects to make 40 to 50 investments in its first fund, writing checks between $250,000 to $500,000, it says.

Canonical Crypto's market map of opportunities in web3 infrastructure

Canonical Crypto’s market map of various segments within the web3 developer infrastructure landscape Image Credits: Canonical Crypto

Iyer sees his fund’s relatively small size as a key differentiator in a competitive space. Traditional venture firms such as Sequoia, a16z, and Silver Lake have all made recent forays into web3 developer infrastructure startups.

“I didn’t want this to be a fund that was too big, or greater than 20 million, because I can participate in many rounds. I can also invest in the very, very early stages, so I’m not trying to compete necessarily for a certain percentage of ownership. I can write relatively small checks and still be a meaningful part of the startup journey very early on,” Iyer said.

Despite that developer infrastructure is a hot space for venture investors of late, Iyer says he still sees it as an untapped area within crypto.

“If you look at DeFi apps, or dApps today, I feel like they’re built by early adopters for early adopters,” Iyer said, adding that in order to expand its reach, crypto needs more product people building infrastructure tools.

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Don’t worry about VC’s returns if you can exit your startup early

If you’ve been watching the recent wave of shows on disgraced startups (from Theranos to WeWork), you might be under the impression that startup founders have no sense of responsibility.

In my experience, however, the opposite is much more common: Entrepreneurs tend to feel guilty about things that are just part of startup life. For instance, many founders feel quite badly about merely admitting that they wouldn’t say “no” to a good enough acquisition offer, or telling their investors they’d do so.

Why does it matter if founders tell investors that they might take an exit before their company reaches IPO scale? I think the reasoning goes something like: “What’s good enough for me might not be good enough for my backers,” or a life-changing amount of cash for a founder might be too small an investment multiple for an investor.

And sometimes, these concerns is not just guilt rearing its head, but also the fear that VCs won’t let an acquisition go through if it happens too early in a startup’s lifecycle.

There are many reasons to stick it out at your startup, but if you’re worried about your investors when faced with an exit, here’s why you shouldn’t be.

Time is another element of VC math that founders don’t always consider — a 3x multiple in six months is not the same as a 3x multiple in three years.

In VC Land, 1 > 10

Letting people down is never pleasant, but that’s how it can feel to sell a startup early. Will investors be disappointed that your company never fulfilled its destiny? Well, yes, but only to a certain extent, and that’s where portfolio math comes into play.

Investors hedge their bets by making many investments, though they still hope that each of those bets pay off. However, they also know that it won’t happen. They’re in the game fully aware that that some of their investments will simply have to be written off, and a handful more will land somewhere in between success and outright failure.

But investing in startups still makes sense, because outliers will return their original investment value many times over.

In venture capital, big home runs have become a fixture. They have a name, too: “Fund makers,” and they signify an investment that generates more liquidity than the entire fund backing it.

In a 2014 post on TechCrunch, VCs John Backus and Hemant Bhardwaj coined a new term for these fund makers: “dragons.” They encouraged fellow investors to favor them over unicorns. “Unicorns are for show. Dragons are for dough,” they wrote.

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How first-time fund managers are de-risking

After what felt like winter, investors say startup deals are back on — although the numbers suggest they never stopped. As Semil Shah of Haystack VC phrased it in a blog post, “It’s game on, pandemic or bust.”

This is good news for founders and big funds, but the investment landscape becomes more complicated when it comes to up-and-coming venture capitalists. “My impression of the current mood amongst traditional limited partners is that most have slowed down considerably in terms of net new investments, new relationships,” Shah told TechCrunch.

So rebound or not, we’re in a volatile time, and first-time fund managers are looking for unique ways to de-risk themselves.

One route: Put liquidity up high in your pitch deck. Moore Ventures, a new fund focused on investing in diverse teams working on sustainability, is experimenting with an unconventional fund structure. Instead of traditional ventures where returns come from multiple rounds of financing and an exit either through acquisition or IPO, Moore is concentrating on successful liquidity strategies throughout a portfolio company’s life.

Constant commercialization, if it works, could be music to a limited partner’s ears.

“Some will fall into the licensing model, some will be developing the product and then selling the design and manufacturing process to an existing company before expanding marketing and sales. Only if a company has the ability to expand its product base and scale will we plan to commercialize through the traditional company development process,” said Darius Sankey, a general partner at Moore Ventures.

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Bringing tech efficiencies to the agribusiness market, Silo harvests $3 million

Roughly $165 billion worth of wholesale produce is bought and sold every year in the U.S. And while that number is expected to go up to $1 trillion by 2025, the business of agribusiness remains unaffected by technology advancements that have reshaped almost every other industry. ‘

Now Silo, a company which has recently raised $3 million from investors led by Garry Tan and Alexis Ohanian’s Initialized Capital and including Semil Shah from Haystack Ventures; angel investors Kevin Mahaffey and Matt Brezina; and The Penny Newman Grain Company, an international grain and feed marketplace, is looking to change that. 

Silo’s chief executive, Ashton Braun, spent years working in commodities marketplaces as a coffee trader in Singapore and moved to California after business school. As part of the founding team at Kite with Adam Smith, Braun worked on getting Kite’s software to automate computer programming off the ground, but he’d never let go of creating a tool that could help farmers and buyers better communicate and respond to demand signals, Braun says.

“I was a super young, green, bright-eyed potential entrepreneur,” says Braun. Eventually, when Kite sold to Microsoft, Braun took the opportunity to develop the software that had been on his mind for four-and-a-half years.

He’d seen the technology work in another industry closer to home. Growing up in Boston, Braun had seen how technology was used to update the fishing industry, giving ships a knowledge of potential buyers of their catch while they were still out in ocean waters.

“When you’re moving a product that’s worth tens of thousands of dollars and has a shelf life of a few days there’s literally no room for error and there’s a lot you need to do,” says Braun. It’s a principle that applies not only to seafood but to the hundreds of millions of dollars of produce and meat that comes from farms in places like California. “What we want to do is we want communication and data to live int he right places at the right time.”

Braun says there’s limited data coming in to farmers to let them know what demand for certain produce looks like, so they’re making guesses that have real financial outcomes with very little data.

Silo’s software vets and supports buyers and suppliers to give farmers a window into demand and potential buyers a view into available supply and quality.

“What Silo is building has the potential to make marketing and distribution of agriculture incredibly more efficient, which is a win both for the suppliers and buyers. We’re excited to support and assist this team as they work to move agriculture forward,” said Eric Woersching, General Partner at Initialized Capital, in a statement.

Silo is using the new financing to make a hiring push and develop new products and services to support liquidity in its perishable goods marketplace.

While an earlier generation of agribusiness software focused on increasing productivity on farms, a new crop of companies is targeting the business of farming itself. Companies like AgriChain and GrainChain, also offer supply chain management software for farming, and WorldCover is creating insurance products for small farmowners in emerging markets.

The penetration of technology through near ubiquitous mobile devices, coupled with sensing technologies and machine learning enhanced predictive software is transforming one of the world’s oldest industries.

“I’ve come across quite a few marketplace platforms attempting to serve different segments of the agriculture supply chain, and none of which have come close to impressing me to the degree Silo has in their tech-forward approach to reducing the friction that comes with managing all aspects of the supply chain on their platform. Silo’s deployment of machine learning streamlines the process, requiring little to no change in their users’ workflow, and removes many barriers of their platform reaching critical mass,” said Matthew Nicoletti, commodity trader at The Penny Newman Grain Company.  

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Polis, the door-to-door marketer, raises another $2.5 million

Polis founder Kendall Tucker began her professional life as a campaign organizer in local Democratic politics, but — seeing an opportunity in her one-on-one conversations with everyday folks — has built a business taking that shoe leather approach to political campaigns to the business world.

Now the company she founded to test her thesis that Americans would welcome back the return of the door-to-door salesperson three years ago, is $2.5 million richer thanks to a new round of financing from Initialized Capital (the fund founded by Garry Tan and Reddit co-founder Alexis Ohanian) and Semil Shah’s Haystack.vc.

The Boston-based company currently straddles the line between political organizing tool and new marketing platform — a situation that even its founder admits is tenuous at the moment.

Polis is reinventing the door-to-door salesman

That tension is only exacerbated by the fact that the company is coming off one of its biggest political campaign seasons. Helping to power the get-out-the-vote initiative for Senatorial candidate Beto O’Rourke in Texas, Polis’ software managed the campaign’s outreach effort to 3 million voters across the state.

However, politically-focused software and services businesses are risky. Earlier this year the Sean Parker-backed Brigade shut down and there are rumblings that other startups targeting political action may follow suit.

Sean Parker’s govtech Brigade breaks up, Pinterest acqhires engineers

“Essentially, we got really excited about going into the corporate space because online has gotten so nasty,” says Tucker. “And, at the end of the day, digital advertising isn’t as effective as it once was.”

Customer acquisition costs in the digital ad space are rising. For companies like NRG Energy and Inspire Energy (both Polis clients), the cost of acquisitions online can be as much as $300.

Polis helps identify which doors for salespeople to target and works with companies to identify the scripts that are most persuasive for consumers, according to Tucker. The company also monitors for sales success and helps manage the process so customers aren’t getting too many housecalls from persistent sales people.

“We do everything through the conversation at the door,” says Tucker. “We do targeting and we do script curation (everything from what scrpt do you use and when do you branch out of scripts) and we ahve an open api so they can push that out and they run with it through the rest of their marketing.”