Copyright 2015 by M. D. Vaden
This is not the smallest mushroom you can find in the coast redwoods, but they are tiny and cute.
A good place to look is wherever you see old decaying twigs or branches on the ground.
These tend to be in the 3/8 inch size. Say 10 millimeters wide, give or take a little. The ones shown below emerged covered over, but eventually become cup shaped, and often develop what looks like tiny eggs inside the middle.
The tiny "eggs" are called peridioles, which contain spores. In most of the species, rain dispells them so they can reproduce and spread. The nest walls can be considered splash cups, and if rain falls at the right angle, the peridioles can be sent as far as a full meter away from the tiny mushroom.
Some species' peridioles ("eggs") have a tiny sticky thread attached that trails in flight. If that thread contacts a twig, it will catch or lasso, and the peridiole will encircle as its momentum is transferred.
Image: Bird's Nest Fungi, Prairie Creek Redwoods State Park