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The Story Behind My Investment in Protocol Labs

Almost three years ago now (summer of 2014), a friend said I should spend some extra time looking at a new small company that had formed out of Stanford. I remembered seeing the company at Y Combinator’s Demo Day in August 2014. The presentation was memorable for the scope and clarity of the company’s mission. I got the introduction to the founder and back-channeled him a bit before meeting — everyone I talked to didn’t just say he was smart, they all paused and said something to the effect of, “No… I mean, he’s different. He’s really, really smart.”

Those endorsements became quite evident when I met Juan Benet. You can read about his background here, or even more interesting, I’d encourage you to watch some of many his speeches and lectures on YouTube here. After meeting Juan the first time, I wanted to invest. Looking back on the email chain we had back then, he was incredibly gracious, flexible, and patient with me. However, while I knew I wanted to invest, I didn’t fully understand the scope of his mission at that time. In a somewhat embarrassing (yet recurring) request, I asked to invest, but also that we meet again and that he help me understand the real drivers behind Filecoin, IPFS, and his vision.

At that time, I had been reading up on Bitcoin and the blockchain, I’d held a decent little chunk of BTC personally, and I had invested in Gyft, which leveraged Bitcoin to help with overseas payments (and was eventually acquired by FirstData), and I had invested in Chain, which is building enterprise-grade blockchain infrastructure for the financial services industry (and is one of the leaders in this category in the financial services world), and I had invested in SFOX, advanced trading platform for professionals to exchange cryptocurrency (which is on fire right now, too). Also at that time, I started writing more about the blockchain and how venture investors could play in this space. You can read that primer here. And, since then, Bitcoin hit its own “Crunch” and then came back to life. Ebbs and flows.

While I was following my interest and trying to educate myself on the business implications of a blockchain, it was Juan who opened my eyes to how some of these new startups — new Internet protocols, really — could actually rebuild and reshape how information is stored, retrieved, and moved across the Internet. What if the web was designed in a manner such that applications didn’t need to be centralized? What if control and decisions could be both distributed and live on the edge of the network? What if scarce resources could be mined, discovered, and added to the network, creating incentives for new participants to engage, lower costs across the board, and improving efficiencies along the way? Juan patiently explained to me, in lay terms, how a distributed system architecture was his ultimate vision and a future he was passionate about building.

I won’t try to explain all the intricate details of what Protocol Labs is building with Coinlist (the exchange for pre-ICO offerings, in partnership with AngelList), or with IPFS, aka Inter-Planetary File System (the open source project which oversees a content-addressable, peer-to-peer hypermedia distribution protocol), or with Filecoin (Protocol’s forthcoming token that will be issued to incentivize storage on the IPFS network), but you can click on the links here to read more about them. And when it comes to the long-term implications of Protocol Labs, I would simply point to this elegant post by USV’s Brad Burnham, who is an investor in the company and advises them closely. It is simply exciting to read Brad’s post and ponder the massive potential this technology and network holds.

I am fortunate to be a small early investor in Protocol Labs. Juan was gracious in teaching me about his world. Reflecting on this investment, I’m reminded of a theme which seems to recur for me in this world of technology investing — it is the founders who generally tip investors off about the future — not the other way around. While I was somewhat prepared to meet Juan back in 2014, I hadn’t yet been exposed to the type of company he was trying to build. I had to gain the conviction in real time, and lucky for me, I trusted my gut and my network and went forward.

The Story Behind My Investment In CARMERA

Years ago, when I was working at a startup, I made my first trip down to SXSW. It was a blast. That weekend, I happened to stay in a house along with a bunch of folks from Disqus. I knew Daniel, the founder, a bit from before, as most people writing blogs online knew and respected Disqus. Daniel was in Austin with some of his team, including Mat (now at Slack), Tyler (now at Bebo), and Ro (the founder of CARMERA). We had a blast that weekend and those folks from Disqus were both gracious and a lot of fun to hang out with.

Fast-forward a few years later, I stayed in touch with the team from that trip. Though I haven’t talked to Daniel or Mat in some time (Hello, guys!), I did spend time with Tyler as he was thinking about his next moves. And, I was fortunate to get a phone call from Ro as he was thinking about his next startup — which happened to be in a totally different industry.

I told Ro that I wanted to invest in whatever he was doing, within reason. (I would’ve done the same with Tyler, except he was in the healthcare space, which is an area I haven’t invested in at all — I think that highly of Tyler.) I met with a Ro a few times and, as is the case with most investments, he opened my eyes to a new emerging trend that I hadn’t been exposed to — V2V, or vehicle-to-vehicle communications. At that time in 2014, while I had heard of Veniam and met the founder, it didn’t intuitively occur to me that moving vehicles would not only communicate with the cloud, but that they would also communicate with other vehicles because decisions would need to be processed locally. Of course, now with hindsight, that is obvious.

Ro and his team formed in NYC and went into stealth mode with CARMERA. I was lucky to be a very early investor in the seed round along with folks like Resolute, Notation, and Jud, among others. Later on, they scored a fantastic Series A round from Matrix, with Hardi Meybaum from Matrix joining the Board of Directors. (If you want to read more about the company, also see Erin Griffith’s piece in Fortune here.)

I could go on and on about why CARMERA is a fascinating plan in the burgeoning landscape of autonomous vehicles, but in this case, I would encourage you to spend time on their website: I would say their website is one of the most unique and creative and informative startup websites I’ve seen today.

Finally, my seed investment in CARMERA is yet another example of how venture investing as I hope to practice it is a “people flow” journey — not a deal flow business. It is one of the many things I’ve learned by watching a great investor at work. I am grateful Ro and I became friends years before he started on this journey, and I am thankful I get to go along for the new one.

June 6, 2017: AMAx3

On June 6th, I may break an Internet record — or, at least, try to. Next Tuesday, I will participate in three (3) separate, live “AMAs,” also known as “Ask Me Anything.” I have done of few of these already, and as someone who loves good questions and likes to quickly type out answers (or opinions), I’m excited for this back-to-back-back session that’s coming up. As with any AMA, I don’t really have any agenda other than to be in the moment, share a raw point of view, and ride the wave of random questions. Here’s the schedule if you care to follow along or submit any questions in advance:

Tuesday, June 6th: AMA Schedule

10:00 am pst | Product Hunt: [Full Transcript]

11:00 am-ish pst | Twitter: [Full Thread]

12:00 pm pst | Quora: [Full Session]

Guest Series On StrictlyVC: Q&A With Limited Partners In VC

** UPDATE ** I’ve added links to each specific interview posted on StrictlyVC with each of the LPs:
-Sarah Anderson @ Cintrifuse – click here
-Susan Chen @ UTIMCO – click here
-Atul Rustgi @ Accolade – click here
-Amit Tiwari @ INVESCO – click here
-Hunter Somerville @ Greenspring – click here


As longtime readers may recall, for the past few summers (2014, 2015, and 2016) when Connie Loizos from StrictlyVC takes off for a few weeks in the summer to meander around coastal Maine with her kids and family, I get the lucky opportunity to write some columns and share some interviews in her absence. This year, like the recent heat wave, the summer will arrive early — starting this Friday and for the week of Memorial Day, I will step in for Connie and share some Q&As with folks from the limited partner (LP) community — the money behind the money of VC.

From what I gather (as I haven’t been investing too long), the LP community was typically a quiet crowd, rarely making public statements or sharing their views openly. That has certainly changed in the short time I’ve been investing. Now LPs blog, tweet, share videos, speak at conferences, and even start directly investing in companies, on occasion. I reached out a small handful LPs I know personally and invited them to participate in this special series — while some politely declined on account of their investment group’s unstated rules of remaining out of the public eye, we were lucky enough to recruit five (5) LPs to share their views on five (5) different questions, with each LP receiving the same question. The group of five LPs composes of four (4) Fund of Funds, which aggregate capital to invest in VC and PE funds, among other types of funds, and one (1) university endowment; there are two (2) women among the group, as well. Each LP will share their views about their current view of the Bay Area ecosystem, how LPs are investing directly into companies, how they monitor VCs on social media, and much more. [Please note that I do not personally have a business relationship with any of the LPs who will be in this series.]

As a newer investor trying to learn, I find this trend of LPs sharing their views and being more public as good for the ecosystem. I believe founders should have a better understanding of the source of where the money comes from — this isn’t to say that they should delve too deep into it (it’s not that exciting!), but I believe it’s important to never take for granted where the money does come from. I want to support efforts to shine a spotlight on LP thinking, such as the podcast series by Notation Capital (“Origins”) or when Harry Stebbings (“20 Minute VC”) has an LP on his show. I’ve now followed and interacted with a small handful of LPs on Twitter over the years, as well, and many of them have gone out of their way to help me get better at what I do. So, thanks to all the LPs who participated in this mini-series (which starts this Friday, May 26), and to Connie, who gets a well-deserved break a bit earlier this year.

The Story Behind My Investment In Remix

A little over two years ago, the founder of Chariot, a company I was involved very early with, told me about another founder in his YC batch that he liked. He wasn’t sure if it was a good business (at the time), but he really vouched for the founder, and so in February 2015, we met for breakfast in Palo Alto. I went into the meeting thinking I wouldn’t invest, and left the meeting feeling the same way, though I really liked Sam. As he was a friend of Ali’s, I offered to informally help and just get to know him.

A few weeks passed and we met again a few times, and I ultimately decided that, “why not?” and so I cut a small check into what was then called “TransitMix.” I remember being at home after wiring the funds and cruising around Sam Hashemi’s personal site and thinking, after getting lost cruising around his site for a good 30 minutes — I didn’t invest enough!

What I didn’t realize in meeting Sam initially or getting to know him early is that he is truly a genius product designer. Take a look at his portfolio and see for yourself:; and check out the company where he is CEO is now called Remix:

Since writing that smaller seed check into Remix (and, boy, do I wish I could’ve had a bigger fund to write a bigger check), the company has quietly ramped up SaaS revenue at a rate I have yet to see in my young portfolio. Every quarter, Sam sends an investor update that starts with metrics and the phrase “New Quarterly ARR.” I love that. Sam has really grown as an executive since I met him, now leading cross-functional teams and building what could be a truly global company.

Finally, Remix is in a space traditionally shunned by traditional VCs. Selling to government entities isn’t quite as sexy as an enterprise-wide deployment. Yet, we all must feel in some way that traditional enterprise SaaS solutions are saturated, but that “hidden markets” like state and municipal governments exist and are quite huge. It’s a perfect time for software to flow like water into these new arenas. I have made a number of seed investments against this thesis, and they are starting to attract traditional venture dollars because those who know see the market opening. Stay tuned for more on this topic.

Recruiting A Board Member

Working with many seed-stage companies, a large component of my decision-making and work revolves around being helpful as the company approaches a “Series A investment.” This term can mean different things to different people, so I’ll simply state how I define it — To me, Series A is when a professional, institutional investor (usually at a VC firm) writes a check for 75% or more of a $5M+ round, pricing the equity, converting the notes, and joining the Board of Directors. In theory, it is a long-term commitment from the institution’s point of view, and that VC is likely reserving up to two times the initial investment amount to keep investing in the company if it grows.

From the point of view of a founder, “getting to the Series A” is a big milestone, anchoring deeply in the mind as seed capital is now relatively easy to find. While everyone wants to “get there,” of course, reality is a bit different, and Series A investors are constrained by how many boards they can sit on, and their own partnerships often act as a governor on pacing such that, more or less, VCs are maybe joining 1-2 boards per year. Much has been written about these behaviors, so I’ll just briefly leave this here as context for what I really wanted to convey in this post, which is…

For founders hoping to prepare for a Series A, think of the milestone slightly differently. As an exercise, think of it as “Recruiting a Board Member.” When framed this way, a founder could ask him/herself slightly different questions: Who would I like on my board? What style of engagement do I want, or need? Do I want my board member to have a specific background, or network?

Not many founders have the luxury of choice, I know. But I do see so many founders who are earnestly charging hard at this milestone, and then are surprised when it takes longer, or doesn’t work out the first time — so, rather than thinking of it as a milestone, I’d like more folks to think about it like hiring, like a recruiting event. When trying to recruit a great hire at a company, a startup will prospect and try to win over the heart and mind of a great candidate. But if great people aren’t ultimately joining the company, what could that mean? Or, if a company in that moment can’t recruit a board member, what could that mean about the opportunity?

I wanted to pose these questions because I see a large disconnect here. The founder wants to hit a milestone, raise more money, and keep going — the VC is hoping to be selective, to make a long-term commitment, and to join the board of a company. I am trying to find early-stage founders who one day want to recruit a board member. It’s a slightly different mindset, but one I’ve found to be definitive. I believe if more founders approached this milestone as a recruiting event instead of a financing event, more of them would be more successful at getting to the A and closing it quicker.

Visualizing Haystack

Over here, I’m usually one to write about things, to use words, arguments, structure to share a point of view. Yet, after four years as a small investor (2013-2017), I wanted to examine some data and work with a designer to visualize it. Note, it’s not perfect data, nor data that one should draw any strong conclusions from, but from the world of early-stage investing, there are — for better or worse — more things to look at. With that grain of salt in mind, here are three graphics I’ve shared on Twitter over the past few days.


The graphic above depicts the total number of dollars raised by companies in the Haystack portfolio. Of course, part of this is a vanity metric, but to me just starting out, is still interesting.



The graphic above shows a comparison between initial ownership, initial check size, and the numbers of deals Haystack has done per quarter. Here, I wanted to see how initial ownership tracked over time.


Haystack Follow On Alluvial Diagram

In this final graphic (for now), I wanted to visualize the range of funds (firms and corporations) which have followed-on to Haystack investments.

The Story Behind My Investment In Kubos

After investing in Saildrone a year ago, I tweeted something late at night about meeting founders with “oceanic” ambitions. A friend on Twitter (Jonathan Van) from Texas wrote back, emailed me, and said he’d put a bit of money in this company in Texas that had “oceanic” ambitions, but for space. “Okay?” I thought to myself. He introduced me to Marshall Culpepper.

Marshall and I met for coffee in Palo Alto. I was blown away by the depth of his background — an early employee and major open source contributor at Appcelerator and Jboss, as well as a stint at Mozilla. I knew one of his bosses and called him after, and he cited Marshall as one of the strongest technical contributors he’s ever worked with. Then, Marshall was an early employee at Spire, a VC-backed satellite startup. Aside from his technical acumen, Marshall is also a dreamer about outer space. So, then he went off to build a new, unique product: Kubos.

There’s no way I can credibly detail how uniquely awesome Kubos is, so please read Marshall’s take on it, in his own words. Marshall and his team have been incredibly scrappy to date, having only raised a bit of money previously, and working out of Denton, Texas, far away from the west coast. Initially, I also passed on investing.

I met Marshall, and I liked him, but I didn’t fully understand the space (no pun intended… sort of), so I went off to investigate it. I talked to a bunch of friends who were at space-related companies. I tried to see if some of the larger defense companies would use an open sourced platform like Kubos. Everyone was mostly cool to the idea. Marshall was in Texas. I didn’t “get” the space. Might as well say “no” as politely as I could.

Marshall accepted the “no” like a professional and we continued to email, chat, and became friends. I had a good investor friend visiting the Bay Area, and we were talking about recent deals we’ve done, I remember lamenting to my friend that I am looking for a specific type of person as a founder/entrepreneur, and without realizing it at the time, I cited many of Marshall’s characteristics. As I eventually told my friend about Kubos, he quipped back, surprised: “Wait — and you didn’t invest?”

I pinged Marshall and asked if he’d let me revisit. I did a bit more work and realized there was potential white space both at larger non-space companies (for instance, could Microsoft one day have its own micro-sat constellation? yes) as well as for the newer satellite startups that were popping up around the world. We reconnected and I invested a bit into Kubos. Marshall and the team have been a breeze to work with. And recently, Marshall raised a proper seed round led by Tim Draper, who has some experience investing in space, and firms like GGV Capital, Draper Dragon, and Autochrome.

People will often ask me, “What sectors are you interested in?” or “What kind of deals are you looking for?” I struggle with answering those questions directly, because the real answer is slightly different — I am looking for, I am interested in finding people like Marshall, people who have cross-functional depth in their industries, people who aren’t too worried about dilution, who aren’t worried about what other startups are raising or doing, who are noodling on their craft on a lazy Saturday afternoon because they wouldn’t even know what else to do. That is a decent description of Marshall, so if you know others like him, you know where to send them.

The Story Behind My Investment In Citizen

When one of your best friends and seed-stage co-investors texts you about a company “you’ve just got to meet,” that certainly gets my attention. Thanks to that good friend in NYC, I was able to meet Andrew, the CEO of a company called sp0n. Yes, that’s right — sp0n. I have no idea what it means, but it is a real company and I wired my money to them.

Andrew and I clicked right away. I am always on the prowl for a new opportunity, and especially in the consumer space. As I’ve mentioned, it’s been harder for me to get excited about the consumer concepts and networks that have come my way. I am sure I’m missing some good stuff, but I want to make sure what I’m funding either (a) has a path to distribution in a large market; or (b) is a product so unique, I am compelled to see it exist in the world.

Investing in Andrew, sp0n, and its first product — Citizen — is most certainly (b), but I also believe it could be (a). Over the years, you may have noticed that I reference Chris Nolan’s Batman in tweets often. I am a mega-fan of his trilogy. I wrote it about here. And, as I got to know Andrew, I talked about it often. He felt the same way.

I have been investing in a few new companies which are selling software to different levels of government. Traditionally, this is not an attractive customer to go after — long sales cycles, RFP bidding, local politics, and so forth. But, that is changing. I’ll have more to share on this in the coming months, but software built by startups is penetrating different levels of government. On top of this, sadly, we are in an age where crime, especially in our growing cities, is on the local television news, on Twitter, and broadcast on Facebook Live. Tensions among citizens and law enforcement are deep, and this was before 2017 began, not to mention tensions within different bodies of law enforcement, both local and national.

sp0n has now launched the mobile app, Citizen, which you can download and use on iPhone or Android/Google, though note right now, it’s only available for use in NYC. I’m biased, but I’d encourage you check out their video, here. I know that launching in one city is often a way to aggravate other users, but Citizen has a legitimate excuse — their setup requires significant work to get right before a city launch. I can tell you that Andrew and his team are obsessing about getting it right in NYC and have a plan to rollout at the right time. Inside Citizen, NYC residents can get real-time crime alerts around them, browse a newsfeed of incidents, view and/or broadcast live video, and eventually, I can imagine much more. Having watched the NYC “Citizen Network” grow over the past few months, it’s clear there’s a need for this type of product, and I am lucky to have been introduced to Andrew and to be a small part of the ride to see if it can work, city by city, citizen by citizen.

Quickly Unpacking Intel’s Acquisition of Mobileye

Another day, another mega-acquisition of a technology company — this time, it was the iconic Silicon Valley company, Intel, which shelled out $15B for Israel’s Mobileye (also a public company) in the high stakes battle to win the war in the shift to autonomous vehicles. In the Valley, when a company with “local” investors exits, everyone takes notice because the exits are rare and points on the board is how folks keep score, classy or not. For Mobileye, a company many miles away, it’s investors aren’t as well known here but, my oh my, this is a massive outcome. For all the articles out there, I found this piece in The Wall Street Journal and The Information‘s Amir Efrati’s piece on the deal the most informative.

Here are my quick takeaways from the deal:

1/ Tech Tsunamis Approaching From The Horizon: As Benedict Evans succinctly pointed out, “Intel missed mobile almost entirely and trying to make sure it doesn’t miss the next tech waves.” Those waves go beyond self-driving automobiles and cover many different areas under the umbrella of “robotics.” As Evans’ colleague Chris Dixon tweeted, the larger play for Intel, as exhibited in its other purchases, demonstrates a commitment to bet “on the next computing platforms: self-driving cars (Mobileye), drones & VR/AR (Movidius), deep learning (Nervana).”

2/ Hanging On for an M&A Bailout: One of the local narratives discussed more frequently is the idea that large incumbent and/or non-tech companies will use cash reserves to buy startups. If only it were that easy. Clearly, there is some dislocation between public and private markets, as Mobileye was purchased for nearly 30x forward revenues and at over a 33% premium. Additionally, many of these larger buyers may have even more cash on hand as companies repatriate overseas cash back onshore.

3/ Chips Are Hot: Not only are chips red hot (you’d know this if you follow Lux Capital’s Josh Wolfe on Twitter), the combination of pairing proprietary chips with software has pitted tech giants Intel in a strategic chess match with competitors like NVIDIA (which is widely viewed to have the most dominant position for AI-based chips) and Qualcomm (another mobile giant playing in similar sandboxes). In the case of Mobileye, Intel is investing in the lucrative area of collision avoidance for vehicles (including drones?), a critical part of the “brain” for image detection and autonomy that is or will be required by regulations. Elite car manufacturers like BMW, Audi, and more are already in deep partnerships (obviously) with the new “brain” companies. (Amir’s post and the WSJ links above go into a bit more detail on these matters.)

4/ Platform Shifts At Scale: When new platforms emerge, new ideas have a chance to reach scale, and investors (obviously) pay close attention to follow these trends. Twenty years ago, we witnessed a shift to the web; a decade ago, it was a shift to mobile; and today, founders and investors are placing their bets for the next shifts, whether those be related to areas virtual reality, blockchain infrastructure, or artificial intelligence, among others. We won’t know which of these will win, or how big. What we do know, however, is after GM bought Cruise for over $1B, and after this massive $15B purchase by Intel, that the shift from human-driven cars to automated vehicles is a platform shift so deep and wide, that companies like Intel, among others, believe it will generate upward of $100B over the next two to three decades.

5/ “A Server On Wheels” – that’s Intel’s CEO’s description of the car. This sea change has manifested itself in many ways — generalist technologists are now turning their sights on automotive technology, searching for opportunity; large incumbent companies that manufacture vehicles or are broadly focused on the automotive sector/experience, flush with cash, are actively investing real sums in this new ecosystem, up and down the stack, and even so far into car-based information and entertainment systems; and every investor feels pressure to have some exposure to this shift, investing in all sorts of direct- and adjacent plays around cars to collect road, vehicle, and other key data that will power the brains of the car, or entertain us while computers drive us around.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2017 Semil Shah.

“I write this not for the many, but for you; each of us is enough of an audience for the other.”— Epicurus