Jan 31, 2023 · 1h 22m · news
Homebrew’s Hunter Walk & Satya Patel: Why $100M is Not Enough to Execute a Seed Strategy | 20VC #972 · 20VC with Harry Stebbings
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In this episode of 20VC, Homebrew co-founders Hunter Walk and Satya Patel sit down with Harry Stebbings to analyze their ten-year partnership and their strategic transition to a self-funded investment model. They share valuable insights on constructing equal partnerships, resisting deployment pressure, and navigating changing market cycles.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 12.7% of the talking time here. How this is scored →
Harry as informed peer 4.3 Guest teaching 3.9 Guest disagreement 1.9 Harry pushing back 2.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:08:58 Satya explicitly rejects Harry's view on returning capital
Satya directly takes the counter-position to Harry's anecdote about shutting down bad startups, arguing that venture capitalists are in the business of losing money and should let founders attempt pivots rather than forcing capital returns.
Hardest push from Harry ▶ 52:54 Harry pushes back on inflated portfolio valuationsHarry forcefully rejects the industry narrative that overpriced startups will simply 'grow into their valuations,' citing a ludicrous real example from his portfolio of a $500k ARR company valued at $700M.
Biggest teaching moment ▶ 28:40 Hunter corrects Harry's assumption on multi-stage leadsWhen Harry asserts that multi-stage leads won't leave room for $100k-$500k non-lead checks, Hunter reframes the dynamic by explaining that multi-stage funds actually prefer collaborative, low-ownership checks that add value without taking equity.
Harry holds his own ▶ 1:07:42 Harry calls out senior GPs protecting paper marksHarry uses a firsthand insider account to demonstrate his industry knowledge, calling out senior VCs who refuse to shut down non-performing startups purely to protect their personal reputation and paper marks.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Genesis of Homebrew and Founding the Partnership | 2 | 2 | 1 | 0 | Harry prompts the guests with introductory questions about the origins of Homebrew, and Satya and Hunter explain their decision-making process with humor and personal anecdotes. | |
| Laying the Foundations of a Successful Partnership | 3 | 3 | 1 | 1 | Harry inquires about essential alignment points for founding partners, leading Satya to detail energy dynamics and shared criteria for homebrew investments. | |
| The Power of Consensus Decision-Making | 5 | 4 | 2 | 4 | Harry shares his own fund's policy of avoiding blocking deals to preserve outlier potential, prompting Hunter to explain why Homebrew's consensus model actually strengthens founder unity without missing false negatives. | |
| Equal Partnerships, Deal Attribution, and Conflict Management | 4 | 4 | 2 | 2 | Harry raises LP demands for single key-person deal attribution, but Hunter explains they filtered for institutional LPs who valued equal partnerships from the start. | |
| Structural Commitments and Maintaining Relationship Health | 3 | 3 | 0 | 0 | Harry asks for operational specifics regarding their partner offsites, and Satya explains how structured quarterly check-ins maintain partnership health. | |
| The Role of Financial Equality and Partnership Alignment | 4 | 4 | 1 | 1 | Harry brings up financial sources of partner friction, allowing Hunter and Satya to detail how starting later in their careers enabled an equal, non-greedy economic structure. | |
| Shifting to a Self-Funded "Family Office" Strategy | 6 | 5 | 3 | 5 | Harry challenges their non-lead $100k-$500k check model, arguing multi-stage leads won't leave room, but Hunter corrects this framing by demonstrating how multi-stage funds actually prefer their collaborative, low-ownership checks. | |
| Portfolio Construction and Strategic Price Agnosticism | 5 | 5 | 2 | 3 | Harry asks whether investing personal capital makes them price insensitive, prompting Hunter to differentiate computational price agnosticism from strategic evaluation of lead investor quality. | |
| Resisting Deployment Pressure and Managing Fund Scale | 4 | 4 | 2 | 2 | Harry brings up deployment pressure faced by managers, and Hunter explains how fund scale forces strategic compromises that sacrifice partner happiness. | |
| Vintage Diversification, Reserves, and Barbell Capital Strategies | 5 | 4 | 1 | 2 | Harry offers expertise on vintage diversification across cycles, leading Hunter to detail the subtle pressure of pro-rata follow-ons in bull markets. | |
| Leveraging SPVs and Relational Long-Term Greed | 3 | 4 | 1 | 1 | Hunter and Satya discuss how SPVs allow targeted follow-on capital without pre-raising massive funds, emphasizing relationship-driven VC over transactional models. | |
| Valuation Realities, Markdowns, and Liquidity Management | 6 | 4 | 3 | 6 | Harry calls out inflated portfolio paper marks and mocks the phrase 'growing into valuations' using a real example of a $500k ARR startup valued at $700M, forcing Hunter to justify their markdown methodology. | |
| Partner Dynamics and GP-LP Liquidity Alignment | 5 | 4 | 2 | 3 | Harry highlights the potential conflict when GPs sell early for DPI to help raise new funds rather than holding for LP upside, which Satya nuances based on LP relationships. | |
| The Craziest Ideas: Tattoos and Venturing into Venture | 4 | 5 | 2 | 2 | Harry prompts predictions on the market downturn, leading Hunter to explain why companies funded ahead of product-market fit are facing silent disappearance or collapse. | |
| Employee Equity Realities and Enduring Corporate Success | 5 | 4 | 2 | 3 | Harry introduces Jason Lemkin's premise that recent unicorn employees will receive zero equity value, which Satya validates for hype-driven startups lacking fundamental business metrics. | |
| Realigning Startup Motivations and the Product-Market Fit Fallacy | 6 | 5 | 6 | 6 | Harry candidly reveals a scenario where senior VCs refused to shut down a failed startup to preserve paper marks, prompting Satya to forcefully take the opposing side and argue VCs should let founders ride out pivots. | |
| Definitions of Success and the Quickfire Round | 4 | 3 | 1 | 1 | Harry navigates personal reflections on money and success into a rapid-fire session where Satya shares his contrarian belief that distribution beats product in early stages. |
Statements from this episode (37)
Patel: Partnerships require understanding what gives and saps energy for each person
“We talked about that shared vision, but I think just as important is understanding what gives energy and saps energy for each person so that within the context of the day to day, there's clarity around what role each person will play and what they're willing a…”
Patel: Homebrew operates without deal attribution and makes decisions by consensus
“And, you know, we, we've never had any of those kinds of issues because we don't do deal attribution. Every decision is made by consensus and we both work with every company in, in some, you know, type of way.”
Stebbings: 20VC partners will never be blocked from pre-seed investments
“I always say to him, I will never block you doing a deal. If you want to do a deal, and I don't want to do it, you can do it, because I don't want to lose the outliers.”
Walk: Consensus decision-making is foolish for venture funds with 3+ partners
“If there were three or more of us, consensus would be You know, a foolish goal wouldn't serve us or the founders well.”
Walk: Homebrew never missed an outlier investment due to consensus rules
“We look back And we've struggled over 10 years to find an occasion where lack of, you know, if there was lack of consensus, it meant we didn't do the deal. And I don't think we have any, you know, quote unquote outliers that were, you know, false negatives bec…”
Walk: Homebrew only raised capital from LPs supportive of equal partnerships
“The LPs we ended up with were all LPs who were excited about equal partnerships. The ones who passed on us were ones that wanted a single key mat, like this notion of, well, it's great to have multiple GPs, but at funds under a hundred million dollars, we real…”
Walk: Homebrew uses external 360-degree feedback interviews with founders every two years
“We do three, six used to do every other year, like an externally led, 360 degree feedback real process with our founders and some of our co-investors. Not, you know, like a survey, you know, or an NPS score, but like, Talking 30 minutes to each of our founders…”
Walk: Homebrew launched with explicit commitment to no firm growth or succession
“We also started with the idea of no succession plan, no growth.”
Walk: Success does not solve unaddressed co-founder disagreements
“And I think a lot of those tensions are often what caused conflict either because they weren't discussed early enough or because there's disagreement from the get-go and you figure, you know, success will solve all things. And that's not true.”
Patel: Homebrew partners hold quarterly two-person offsites to assess relationship health
“We do a quarterly offsite with just the two of us every quarter, and a part of that conversation is, how happy are you? Right, like along a bunch of different dimensions.”
Walk: Homebrew co-founders had millions saved before starting the fund
“I think, like, not that this is, you know, sort of unspoken, because I think we've both talked about this, but, like, we also started this later in our careers, right? Like, we were both in our, you know, mid-late thirties, and I think it's, like, we both We w…”
Walk: VCs refusing founder liquidity risk exploiting entrepreneurs while collecting fees
“Like the very least you're missing opportunities to de-stress founders in a way that will increase the probability of a wonderful outcome. And at the worst, you know, you're exploiting, you know, founders who have all their eggs in one basket, you know, while …”
Patel: Small early secondary liquidity helps founders do their best work
“And I think we're of the opinion, like there's no hard and fast rules around this, like obscene amounts of liquidity is obscene, but small amounts of liquidity can really free up a founder to do their best work.”
Patel: $100M seed funds are awkwardly sized tweeners in current venture markets
“In today's market at the seed stage in particular a hundred million dollar fund is a bit of a tweener. You've either got to be larger to be able to write large checks and get the ownership that you need in order to win the best opportunities and deliver the ty…”
Walk: Homebrew took less allocation than offered in 10 of 11 deals
“In 10 of the 11 investments that we made last year, we were offered more allocation than we took, because what we care about is really sort of working with great founders and great co-investors.”
Patel: Self-funded investing frees investors from needing fund-returner outcomes
“The flexibility that we have in not having a fund now is that we don't have to think of every investment as having the potential to return the fund, right? Every investment just has to be a good return.”
Walk: De-risked seed investing does not exist
“I don't think there's such a thing as like, De-risked seed. Like you should be betting on companies that in a success scenario can be wildly, wildly successful and worth a, you know, incredible amount of capital and want, you know, to own a percentage of those…”
Walk: Homebrew now prioritizes lead investor quality for seed participation
“We used to not care who the other investors were. We're like, we're going to help you and we'll get other people great around us. Now we actually care about quality, you know, of the lead investor.”
Walk: Raising a $200M-$300M fund would have sacrificed team happiness
“Raising 203 hundred million dollars, you know, like some of our peers and going to market in a model where we brought on another GP, we expanded our team, we brought on another platform person. Like, I actually think we could, you know, Hit exceed our benchmar…”
Walk: Venture fund size dictates investment strategy
“People attribute this to Mike Maple's affiliate and it's a hundred percent true. Like your fund size is your strategy, right?”
Patel: Homebrew deployed capital over 3.5 years versus market's 18-24 months
“Even in the market over the last decade where everyone was putting their funds to work in 18 to 24 months, Our funds were being put to work it in three to three and a half years.”
Stebbings: Vintage diversification was irrelevant for VC returns over the past decade
“I think vintage diversification, you'll really see the benefits of in this next cycle. Yeah, I look at mine now, and it's like, I'll have some 20, 21 pricing in there, but I'll always have 23, 24 pricing in there. And I think that's really where you see it, be…”
Patel: Homebrew testing whether non-lead seed investors can maintain lead influence
“One of the experiments we're running here is kind of the testing the thinking around can capital and counsel be separated over the course of time, right? And so one of the things we're trying to evaluate is in some cases when we do a smaller check, can we stil…”
Patel: Homebrew created two SPVs in 2022 leading Series D and E
“As an example, I think we've done a handful of SBVs now, but we did two last year, which led the Series E and Series D rounds for two of our later stage companies by virtue of having built that relationship and taking advantage of the market dislocation, where…”
Patel: Momentum investing fails to generate outsized returns in changing markets
“Everyone was focused on being part of every company that seemed like it had momentum because everybody else was investing in it, and that looked great because the bull market ran longer than it did, but in markets that change, like, that's not a strategy that'…”
Stebbings: Venture funds are refusing to write down inflated portfolio valuations
“What I'm seeing is no one's marking their books down, and they're keeping them all at the incredibly inflated prices, and claiming that that's still how it is.”
Patel: Homebrew requires a 5x-10x return potential for follow-on investments
“We've always tried to evaluate, like, as an example with a fund and a follow-on investment, do we believe we can earn at least five to 10 X from here? And if we believe that, then we're more likely to be a buyer. And if we don't, then, you know, we're more lik…”
Patel: VCs rarely regret early distributions, but heavily regret holding to zero
“Most investors, investors don't realize, like, they're not gonna regret the upside if they put money in their pocket, but if they don't take the upside and things go away, they're gonna have a lot of regret.”
Patel: Quality inside LPs do not demand forced early DPI
“I think if you've got the right LPs, they've seen enough in this business to understand that generating DPI through pressure isn't the best long-term outcome for the, for them and for the GPs. And then existing LPs have more data to evaluate progress and under…”
Walk: Downturn will worsen for Series A-D startups lacking investability
“I think it'll get worse for series A through D companies that can't remain, you know, sort of like default investable.”
Walk: Overcapitalized startups face silent disappearance, low-value acquihires, or noisy collapse
“And so I think for most of those companies, layoffs are going to turn into silent disappearance low value acquihires or noisy collapses.”
Walk: Several Homebrew portfolio companies delayed IPOs despite being ready
“You know, we have a few that I think could have been public, you know, already, but have decided, you know, for various reasons to hold off, and I think when they become public, they'll be even stronger companies.”
Patel: VCs should let struggling startups ride if founders can pivot
“VCs, we're in the business of losing money, right? Like, there's a reason that the power law is a thing, and if you still believe that the founders are smart enough to try to figure something out, even if it's a pivot, then you let it ride, and you see if they…”
Walk: Venture slowdown will benefit early product-market fit startups
“And so in some ways, I think part of our portfolio that's really going to benefit from the slowdown Are the early product market fit, you know, companies that now have some capital in the bank, but don't have to, aren't getting the crossover investors, pitchin…”
Patel: Attitude matters more than aptitude in early-stage hiring
“At the earliest stages when it comes to hiring, I think attitude is more important than aptitude.”
Patel: Distribution wins over product in early-stage startups
“It's not the best product that wins, it's the best distribution that wins, and that the best distribution creates a feedback cycle that allows you to have the best product over time, but distribution wins over product in the early days.”