2022 Was The Year We Decided To Not Raise Another Venture Capital Fund. What Happened Next..
When Homebrew Started Investing Its Own Money, The Reaction From Our Venture Capital Peers Surprised Me [Part One]
During the last several years venture firms approached fundraising like trips to an All-You-Can Eat buffet: fast, frequent, and without regards for the digestive impact. As they piled more LPs into more fund vehicles, and then deployed that capital faster than ever, it’s not a surprise that everyone involved is now dealing with the after-effects of a decade-long gorge.
Homebrew was born at the beginning of 2013, and grew itself modestly during the bull market that stretched into 2022. But ahead of the correction we decided to pull forward a goal we’d always dreamed of: going self-funded. That is, instead of primarily investing other people’s money into startups, invest our own. We’d still stay ‘Homebrew’ and keep the same team, but adjusted our strategy to better suit the new strategy. Instead of seeking to own 10–15% of a startup, we’d remove our ownership target and just focus on ‘do we all want to work together.’ And instead of an average check size approaching $2m, we’d scale back to mostly $100k-$500k (~20% of the time larger), in order to make it easier to fit into any round (also owing to the limitations of our bank accounts). For me and my partner Satya this was about creating a sustainable model where we can optimize for working with *any* company at *any* stage, albeit still hopefully as early as possible. So we made the decision in Fall 2021, began investing this way in January, and started talking about it publicly in March. Just as the markets collapsed! Correlation or causation? :) Anyhow, the choice we made was more about to starting to experiment with new approaches to venture rather than embracing or rejecting any single playbook.
The volume of reactions from our industry peers surprised me— notes, conversations, backchannels and so on. Truly I didn’t think people would really care. I mean, we’re a small fund among lots of other firms! Homebrew became either a projection for people’s own frustrations with the venture model or a ‘true north’ for others who were considering similar evolutions but had something…