#618: Roelof Botha — Investing with the Best, Ulysses Pacts, The Magic of Founder-Problem Fit, How to Use Pre-Mortems and Pre-Parades, Learning from Crucible Moments, and Daring to Dream

Roelof Botha — Investing with the Best, Ulysses Pacts, The Magic of Founder-Problem Fit, How to Use Pre-Mortems and Pre-Parades, Learning from Crucible Moments, and Daring to Dream | Brought to you by Wealthfront http://wealthfront.com/tim's high-yield savings account, Eight Sleep’s Pod Cover http://eightsleep.com/Tim sleeping solution for dynamic cooling and heating, and Shopify http://shopify.com/tim global commerce platform providing tools to start, grow, market, and manage a retail business. More on all three below. Roelof Botha (@roelofbotha https://twitter.com/roelofbotha) has spent over 20 years building companies in Silicon Valley. He began within the walls of nascent PayPal, which he joined in March of 2000 while completing his MBA at Stanford. He became CFO in 2001 and led the company through both its IPO in early 2002 and subsequent acquisition by eBay. Roelof joined Sequoia Capital https://www.sequoiacap.com/ in 2003 to help founders build enduring businesses. He leads the US/Europe business as Managing Partner and serves as Senior Steward of the global Sequoia Partnership. Roelof is a director of 23andMe, Bird, Ethos, Evernote, Inside.com, Landis, mmhmm, MongoDB, Natera, Pendulum Therapeutics, Square, and Unity Technologies. Previously, he was a director of companies that include YouTube, Tumblr, Xoom, Assurex, and Eventbrite. He also led Sequoia’s investment in Instagram. Please enjoy! This episode is brought to you by Wealthfront http://wealthfront.com/tim! Wealthfront is an app that helps you save and invest your money. Right now, you can earn two percent APY—that’s the Annual Percentage Yield—with the Wealthfront Cash Account http://wealthfront.com/tim. That’s twenty times more interest than if you left your money in a savings account at the average bank, according to FDIC.gov. It takes just a few minutes to sign up, and then you’ll immediately start earning two-percent interest on your savings. And when you open an account today, you'll get an extra fifty dollar bonus http://wealthfront.com/tim with a deposit of five hundred dollars or more. Visit Wealthfront.com/Tim http://wealthfront.com/tim to get started. * This episode is also brought to you by Shopify http://shopify.com/tim! Shopify http://shopify.com/tim is one of my favorite platforms and one of my favorite companies. Shopify http://shopify.com/tim is a platform designed for anyone to sell anywhere, giving entrepreneurs the resources once reserved for big business. In no time flat, you can have a great looking online store that brings your ideas to life, and you can have the tools to manage your day-to-day and drive sales. No coding or design experience required. More than a store, Shopify grows with you, and they never stop innovating, providing more and more tools to make your business better and your life easier. Go to Shopify.com/tim for a FREE 14-day trial and get full access to Shopify’s entire suite of features http://shopify.com/tim. * This episode is also brought to you by Eight Sleep http://eightsleep.com/Tim! Eight Sleep’s Pod Cover http://eightsleep.com/Tim is the easiest and fastest way to sleep at the perfect temperature. It pairs dynamic cooling and heating with biometric tracking to offer the most advanced (and user-friendly) solution on the market. Simply add the Pod Cover http://eightsleep.com/Tim to your current mattress and start sleeping as cool as 55°F or as hot as 110°F. It also splits your bed in half, so your partner can choose a totally different temperature. And now, my dear listeners—that’s you—can get $250 off the Pod Cover http://eightsleep.com/Tim. Simply go to EightSleep.com/Tim http://eightsleep.com/Tim or use code TIM at checkout. * [07:25] What’s the right way to say Roelof Botha? [08:14] 10 to the ninth: motivation in the margins of a Monday meeting notebook. [11:16] The Ulysses Pact. [13:38] Who was Roelof’s grandfather? [15:47] What is actuarial science, and why did Roelof choose it as his major? [20:05] Advice for young, aspiring entrepreneurs. [21:44] Don Valentine and his 2×2 matrix. [24:59] The founder-problem fit. [27:33] Don Valentine’s succinctness writ green. [29:46] Pre-mortems and pre-parades. [32:40] Why Sequoia is aptly named. [36:38] Keeping the team small can be such a big deal. [41:34] Book recommendations. [44:07] Finding balance in the relentless pursuit. [46:37] What it was like for Roelof to finally achieve his “10 to the ninth.” [47:40] The Sequoia Capital Fund. [49:40] How Sequoia’s fee structure maximizes value for clients and keeps the company strong. [58:15] Failure? It all depends on the scale of your ambition. [1:01:37] How Roelof guides founders who wants to sell too soon and for too little. [1:06:48] Founders Roelof considers influential. [1:09:39] Growing up Afrikaner. [1:12:43] How Roelof set his sights on graduating school in first place. [1:14:24] Silkworms. [1:16:40] What Roelof’s TED Talk about a secondary interest would entail. [1:18:05] Rugby. [1:21:26] Roelof’s physical routines for staying in shape. [1:24:17] Crucible moments. [1:27:18] How Roelof wound up in the world of Silicon Valley startups. [1:34:01] Early days (and challenges) at PayPal. [1:38:05] Memorable failures and the lessons they imparted. [1:44:32] Coping with VC’s high rate of failure as someone who hates to lose. [1:48:01] In case of doldrums, please present homemade pesto. [1:49:15] What Peter Thiel taught Roelof about changing his mind. [1:56:01] How professionalization in VC has developed over time. [2:02:25] Roelof’s billboard. [2:04:58] Parting thoughts. * For show notes and past guests on The Tim Ferriss Show http://tim.blog/podcast, please visit tim.blog/podcast https://tim.blog/podcast/?utm_source=podcast&utm_medium=podcast&utm_campaign=podcast-description. 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Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tim Ferriss?

  This episode is brought to you by Eight Sleep. My God, am I in love with Eight Sleep. Good sleep is the ultimate game changer. More than 30% of Americans struggle with sleep, and I'm a member of that sad group. Temperature is one of the main causes of poor sleep, and heat has always been my nemesis. I've suffered for decades tossing and turning, throwing blankets off, putting them back on, and repeating ad nauseam. But now, I am falling asleep in record time, faster than ever. Why? Because I'm using a simple device called the Pod Pro Cover by Eight Sleep. It's the easiest and fastest way to sleep at the perfect temperature. It pairs dynamic cooling and heating with biometric tracking to offer the most advanced, but most user-friendly solution on the market.

• 0:44Tim Ferriss?

  I polled all of you guys on social media about the best tools for sleep, enhancing sleep, and Eight Sleep was by far and away the crowd favorite. I mean, people were just raving fans of this. So, I used it, and here we are. Add the Pod Pro Cover to your current mattress and start sleeping as cool as 55 degrees Fahrenheit or as hot as 110 degrees Fahrenheit. It also splits your bed in half, so your partner can choose a totally different temperature. My girlfriend runs hot all the time. She doesn't need cooling. She loves the heat, and we can have our own bespoke temperatures on either side, which is exactly what we're doing. Now, for me, and for many people, the result: Eight Sleep users fall asleep up to 32% faster,

• 1:28Tim Ferriss?

  reduce sleep interruptions by up to 40%, and get more restful sleep overall. I can personally attest to this because I track it in all sorts of ways. It's the total solution for enhanced recovery, so you can take on the next day feeling refreshed. And good news: Eight Sleep has launched the next generation of the Pod. The new Pod 3 enables more accurate sleep and health tracking with twice the number of sensors. It's just a smoother, better experience that delivers you the best sleep on earth. At least, that has been true for me. Simply add this to your existing mattress, and you're all set. It is not magic, but sometimes it does feel like it. It just works. So, go to eightsleep.com/tim and save $250 on the Pod Cover.

• 2:11Tim Ferriss?

  That's eightsleep.com/tim, all spelled out, E-I-G-H-T, eightsleep.com/tim. Eight Sleep currently ships within the US, Canada, the UK, select countries in the EU, and Australia. You can also find the link in this episode's description.

• 2:31Tim Ferriss?

  This episode is brought to you by Shopify. Shopify is one of my favorite companies out there, one of my favorite platforms ever. And let's get into it. Shopify is a platform, as I mentioned, designed for anyone to sell anything, anywhere, giving entrepreneurs the resources once reserved for big business. So what does that mean? That means in no time flat, you can have a great looking online store that brings your ideas, products, and so on to life. And you can have the tools to manage your day to day business and drive sales. This is all possible without any coding or design experience whatsoever. Shopify instantly lets you accept all major payment methods. Shopify has thousands of integrations and third party apps from on demand printing to accounting to advanced chatbots, anything you can imagine.

• 3:16Tim Ferriss?

  They probably have a way to plug and play and make it happen. Shopify is what I wish I had had when I was venturing into e-commerce way back in the early 2000s. What they've done is pretty remarkable. I first met the founder, Toby, in 2008 when I became an advisor and it's been spectacular. I've loved watching Shopify go from roughly 10 to 15 employees at the time to 7,000 plus today, serving customers in 175 countries with total sales on the platform exceeding $400 billion. What does that really mean? That means every 28 seconds, more or less, a small business owner makes their first sale on Shopify. More people in more places of all ages every single day.

• 3:58Tim Ferriss?

  They power millions of entrepreneurs from their first sale all the way to full scale. And you would recognize a lot of large companies that also use them who started small. So get started by building and customizing your online store, again, with no coding or design experience required. Access powerful tools to help you find customers, drive sales, and manage your day to day. Gain knowledge and confidence with extensive resources to help you succeed. And I've actually been involved with some of that way back in the day, which was awesome. The Build a Business competition and other things. Plus with 24/7 support, you're never alone. And let's face it, being an entrepreneur can be lonely, but you have support, you have resources, you don't need to

• 4:39Tim Ferriss?

  Feel alone in this case. More than a store Shopify grows with you and they never stop innovating, providing more and more tools to make your business better and your life easier. Go to Shopify.com slash Tim. That's S H O P I F Y dot com slash Tim. All lowercase for a free 14 day trial and get full access to Shopify's entire suite of features. Start selling on Shopify today. Go to Shopify.com slash Tim right now and check it out. They have a lot to offer. Shopify.com slash Tim.

• 5:14Tim Ferriss?

  At this altitude, I can run flat out for a half mile before my hands start shaking.

• 5:18Speaker 01

  Can I ask you a personal question?

• 5:20Speaker 02

  Now would be an appropriate time.

• 5:24Speaker 01

  I'm a cybernetic organism living tissue over metal endoskeleton.

• 5:37Tim Ferriss?

  Hello, boys and girls, ladies and germs. This is Tim Ferriss. Welcome to another episode of the Tim Ferriss Show, where it is my job every episode, certainly this episode, to deconstruct, in this case, a world-class performer, to tease out the habits, routines, lessons learned, favorite books, et cetera, that you can apply to your own lives. My guest today is Roelof Botha. That's spelled R O E L O F B O T H A. Roelof has spent more than 20 years building companies in Silicon Valley. He began within the walls of nascent PayPal in the early, early days, which he joined in March of 2000 while completing his MBA at Stanford. He became CFO in 2001 and led the company through both its IPO in early 2002 and subsequent acquisition by eBay. And we have quite a few stories about all of that.

• 6:22Tim Ferriss?

  Roelof joined Sequoia Capital in 2003, one of the most famed legendary and effective venture capital firms ever in the history of venture capital, to help founders build enduring businesses, which he has done many, many times now. He leads the US-Europe business as managing partner and serves as Senior Steward of the Global Sequoia Partnership. Roelof is a Director of 23andMe, Bird, Ethos, Evernote, Inside.com, Landis, MongoDB.

• 6:50Tim Ferriss?

  Natera Pendulum Therapeutics Square and Unity Technologies. There are more. Previously, he was a director of companies that include YouTube, Tumblr, Zoom with an X, Assurex, and Ventbright. He also led Sequoia's investment in Instagram. Speaking of Instagram, we can find him on Instagram @RolfBoetha, on Twitter, same, and LinkedIn as well. We'll provide all of those in the show notes at tim.blog/podcast. With our further ado, please enjoy this very wide-ranging conversation with Roelof Botha.

• 7:25Tim Ferriss?

  All right.

• 7:28Tim Ferriss?

  So for those who are wondering why I'm laughing, I forgot to press the record button, and I'm glad that we were able to catch it. Roelof, so nice to see you again. It's been quite a few years, and I'm so thrilled that you've been able to make time and that both of us have been able to make time to have this conversation. So thanks for being here. Thank you for hosting, Tim, and look forward to the conversation. So I thought we would start with a question that I asked before we pressed record on our backup and not the primary, and that is, how do you pronounce your full name properly if you were in your homeland? My parents would call me Roelof Botha. Roelof Botha. Pretty close. I'm not going to pass for an Afrikaner, but... Your pronunciation is excellent. I'll respond to that.

• 8:14Tim Ferriss?

  I have heard a number of fireside songs in Afrikaans, I suppose it would be. Afrikaans. Having spent some time in South Africa in the last year, but we're not going to spend a lot of time on that. I want to, though, spend time on note-taking and also different visual cues that you've used at different points in your life. And so here goes the first question. The first question is, I have, and you can't believe everything that you read on the internet, but something in front of me that says you used to have 10 to the ninth power written in the corner of your notepad, I guess, every week when you started at Sequoia. Is that accurate? And if so, could you explain why that's the case?

• 8:57Speaker 01

  That is accurate. When I joined Sequoia, it was clear that if I wanted to make it as a partner, you needed to produce meaningful gains. And I'd set myself the goal of producing a billion dollars in gains for the partnership because that would mean that I'd made it at some level. And so 10 to the 9, which is a billion, was my shorthand of reminding myself what I was striving for.

• 9:20Tim Ferriss?

  Now, what was the notepad used for otherwise? And was this on the top of every page? Or something you saw on a weekly basis? I'm wondering on these, the frequency with which you saw this? And also what the notepad was used for otherwise?

• 9:36Speaker 01

  This notepad was used generally for note-taking, but it was really on Mondays in particular, when we had a partner meeting, where we would review all the decisions for a particular day. And that would be the notepad where I'd make notes about the companies that we were listening to, my own views on companies, what did I worry about, what did I think was interesting? And so that was the most important day at some level. You know, we refer to it as the Olympic finals at Sequoia. It was the Monday partner meeting and the importance of getting those decisions right. And so that was the day where I needed to remember very acutely what was I striving for? So I'd done this when I was younger too. I don't know if you'd heard this?

• 10:12Tim Ferriss?

  I had, and we're going to get to that. But let me ask you, before we flashback and do the sort of wavy Austin Powers flashback to childhood, which I will do in a minute, with the 10 to the 9th, did you have in your mind a particular timeframe for that? Or was it just a reminder of the magnitude of the goal before you, if you wanted to move the needle?

• 10:34Speaker 01

  I didn't really have a time dimension at the time. Things have changed a lot in the venture business. Technology has infused so much more of the world. I kept reminding myself, when I was at PayPal in 2000, there were about 200 million people on the planet that had internet. 200 million.

• 10:49Tim Ferriss?

  That's wild.

• 10:50Speaker 01

  And the vast majority of them were on dial-up. By the time I joined Sequoia in 2003, we didn't even have broadband reaching 50% of the US population yet. So the numbers were still much smaller and technology didn't have the scale that it does have today. And so I just thought eventually get to a billion. Now, honestly, I feel like it's 10 to the 10 that you need to strive for because, you know, technology has infused so much of what we do.

• 11:15Tim Ferriss?

  So let's do, as promised, the rewind to childhood. And I'll let you take this ball and run with it wherever you want to go. But I did read a bit about your high school system of having your goals visible to you while you were studying. At least that's based on a bit of reading. I think this is actually from, it should be accurate because it's from sequoia.com or the articles thereof. So could you please elaborate on what you did back during that era of your life?

• 11:46Speaker 01

  I thought I needed, there's a concept in psychology called the Ulysses Pact, which is this idea that in the birth of Ulysses, he wanted to hear the sirens. So he had all his soldiers, all his sailors, wax up their ears, time to a mast, and that way they could sail past and he could hear the sirens and they wouldn't succumb to them. And so in psychology, the Ulysses Pact is this idea that you make a pact with your future self, knowing that your future self is going to be weak. And so my technique for doing this, not having read about psychology yet, was to put notes in front of my desk, on the door, leaving my room, and candidly all over my room, reminding me what I was aiming for. And in high school, it was to be the top 10 in my state at the end of high school. At

• 12:28Speaker 01

  college, it was to be number one. And I would just put all these reminders of what my goals were. So if I was tempted to get up to go make a cup of tea, or watch television, or take a break, I would just see what I'd written to myself. And I'm reminded of what I need to do if I want to achieve what I want to achieve in life.

• 12:44Tim Ferriss?

  Do you still use reminders like that of any type? Or do you feel like you've hit a certain escape velocity where that's no longer necessary?

• 12:54Speaker 01

  I still use some of those. I mean, when I was at Sequoia, you know, as you pointed out earlier, I had the 10 to the nine. I try to keep track of how I spend my time. When I was in college, I would literally write down the time that I started studying down to the minute. And then I write down the time that I got up so that I would have an accurate tally at the end of the day of exactly how much time I actually spent studying instead of just thinking that I was studying and just loafing around the house doing nothing. And so I use Evernote to do that. I organize key things that I want to accomplish for Sequoia and for each of the companies that I work with. So I always have this running list of what are the key things you need to focus on? The most important, the three most important things you need to accomplish for a given company over the next, say, six months as a reminder of the most important things.

• 13:38Tim Ferriss?

  I want to jump next to a headline. And this is, I believe, a headline in a local newspaper when you graduated from high school. You can correct me if I get any of these details wrong. And it was, and again, I'm not going to pronounce this correctly because I will play it safe and use my, my Long Island accent. So both his grandson is number one, I believe, was the headline. Could you use that as a segue into explaining who your grandfather was? But also I'd love to just know how that headline landed for you and what it felt like.

• 14:15Speaker 01

  So my grandfather was the equivalent of the Foreign Secretary for South Africa. And I think he served for close to 20 years in that capacity. He was ambassador for South Africa to Germany, to Denmark and to the United Nations. In his time, he'd met Reagan and Thatcher and Kissinger and these are the sort of people he interacted with. And he was a part of the national party, the government that ran South Africa until the first democratic elections in 1994.

• 14:42Speaker 01

  My grandfather was an agent for change. Even though he worked in the party that was the ruling party that had enforced apartheid, he wanted to galvanize change from within. So he was part of the group that announced the unbanning of the ANC in 1990. And he actually served in Nelson Mandela's first democratically elected government from 1994 till 1996, when he retired. So he was a very well-known, very prominent politician. You know, by some measure, when I was a child growing up, he was probably the second most powerful politician in the country. I was named after him. It was literally, you know, the convention in the African culture was that the firstborn son gets the father's father's name. And so that's why I was named after him. But because he was so well-known, it meant that I also lived in his shadow.

• 15:27Speaker 01

  And I was often referred to as so-and-so's grandson, you know, pubg's grandson. And so the headline referred to him. And I was proud of my achievement and I was proud of my grandfather. But at some level, I also wanted to be myself and to prove myself and not be always referred to as, you know, in reference to somebody else.

• 15:47Tim Ferriss?

  So we may come back to that. But you seem like someone who has repeatedly not taken the path of least resistance, which I mean is a compliment for sure. Let's talk about actuarial science. Now, I must say, one of the funniest things that has happened to me in the last few days is in the process of doing research for this, you may know this, but if you throw your name into Google, the first thing that pops up is role of both a South African actuary, which I love. I just think that's fantastic. So could you please explain why you chose actuarial science as your degree? And also, by way of doing that, just explain what actuarial science is.

• 16:31Speaker 01

  So I finished high school in 1990, the year the ANC was unbanned. And honestly, at the time, it was unclear whether South Africa would have a peaceful transition to democracy. If you looked at the history of most other African nations that had gone through this kind of a change from sort of a quote-unquote colonial past, the picture wasn't pretty. And so when I chose what to study, part of the dimension was, would it give me an ability to work and live abroad? And actuarial science was something where after you got your undergraduate degree, you'd study professional exams and become a British qualified actuary. So technically, I became a UK actuary, which meant that I could work in the UK and Canada and Australia and a couple of other Commonwealth countries. And so that portability of my qualification

• 17:15Speaker 01

  was a really important decision point. The other one was the most difficult degree to get into. You could get a bursary to study for it. My family couldn't afford college, so I got an insurance company to actually pay for my tuition. And it was challenging. So what actuaries do, by the way, is they run insurance companies, pension funds. So whether that's life insurance or general insurance and are involved with the investment management for those companies as well. So think of it as a financial engineering degree. So technically, I majored in actuarial science, economics and statistics. So there's a heavy emphasis on mathematical statistics as part of the degree.

• 17:51Tim Ferriss?

  So in addition to the math, and I don't have the full context here in front of me, but does UCT stand for the University of Cape Town? Am I getting that right? I may not be.

• 18:01Speaker 01

  Yes.

• 18:01Tim Ferriss?

  All right.

• 18:04Speaker 01

  Not the university that most people know of, right?

• 18:09Tim Ferriss?

  Right, exactly. So I wanted to just confirm that and build off of what you said to add, and this is, I guess, an indirect quote, the way that I'm going to read it, but Professor Robert Dorrington at UCT has said, quote, "Actuaries are trained to think 30 years into the future and accountants are trained to think a year in arrears." Do you feel like your training, or maybe the attributes that led to you choosing actuarial science, ported well to entrepreneurship and venture capital? Or do you think that's too much of a reach?

• 18:43Speaker 01

  I think it did, honestly. As I said earlier, the actuarial degree is about financial engineering, sort of the mathematics of finance, if you will. And so in a very practical sense, when I was at PayPal, the techniques I'd learned were useful in understanding the fraud problem that was latent at PayPal. And we were able to catch our fraud challengers months before others did. And it's part of the reason that PayPal survived. But of a twist of history, that that training actually was very specifically helpful in that situation. But this idea of thinking long term, there's a great article or a concept about the time span of discretion. What's the horizon over which somebody thinks and plans?

• 19:23Speaker 01

  And I think part of what we try to focus on, it's a part of what I think has made me a decent investor, is just trying to think much longer term, not just thinking quarter to quarter or a year out, but thinking about the possibility of what might happen with companies down the road. And we've had a chance to go read the original YouTube investment memo, for example. But there were three founders, friends of mine from PayPal days when we invested. I was the fourth person really to join the company when we invested. And there was a way of imagining what might happen if this actually works. What if it goes right? Because it's so easy to worry about all the things that can go wrong with every company. So I do think the training helped, but in the classic nature nurture debate, how much, you know, was I pre-wired to think that way or not? I don't know, these things feed on each other.

• 20:05Tim Ferriss?

  I'm not going to even make an attempt to separate those. I don't think I can do it in my own life. I won't even presume to be able to do it for anybody else. I would love to ask you, and we're going to bounce around a lot because I don't want to do this chronologically. I wouldn't do that if we were just having wine over dinner. So I'm just going to follow my interest here. And then perhaps we'll, we'll jump back to PayPal. So the first question, I suppose, is somewhat chronological. Under what circumstances would you recommend to a young would be entrepreneur that they go into consulting? Or would you generally advise against that path?

• 20:45Speaker 01

  I would generally advise against that as a career choice. I chose to work at McKinsey. I don't regret the decision I made, but for me, it was again, an opportunity to work with an international firm. I worked at McKinsey from ninety six to ninety eight, so South Africa just opened up from sanctions. We'd had sanctions from nineteen eighty five till nineteen ninety four. The country was starved for international talent. And so, you know, this international firm shows up, I could learn from people from all over the world, and they would give me an opportunity to either study or to work abroad. So that was a lot of the magnetism for me to join McKinsey at that time. I think if you're already in the US, go do something a little bit more direct. The best business school is actually being in business. It's actually going to join a company and actually experiencing what

• 21:30Speaker 01

  it's like. So if that's your ambition, if you want to be a consultant, there's nothing wrong with that. But I think as a way of delaying difficult decisions about what might happen in your career, it's a play it safe decision. It's not a risk-seeking decision.

• 21:44Tim Ferriss?

  So I have a number of friends, including fantastic meticulous doctor named Peter Attia, who spent time at McKinsey. And Peter, as one example, loves matrices. And specifically, he loves two by two matrices. And I'd love for you to explain who Don Valentine is. And we're gonna, we're gonna explore that a bit. But could you also explain what his two by two matrix was?

• 22:20Speaker 01

  So Don Valentine is one of the fathers of Silicon Valley, one of the fathers of venture capital. Don grew up in the semiconductor business. He was a national and fairchild semiconductor back in the nineteen sixties. And he started Sequoia Capital in nineteen seventy two. And we should get back to this later, but he made a very important decision calling it Sequoia Capital and not Valentine Capital. Don had an amazing career as an investor. He backed Apple, when a lot of people were unsure about backing a barefooted, not well dressed Steve Jobs. He backed Atari. He backed EA. He backed Oracle, Cisco, and

• 23:00Speaker 01

  the list goes on. He had a remarkable track record as an investor. And when I joined Sequoia, he was still around, still alive. He passed away two years ago. And very early on, he pulled me aside and he said, there's a two by two matrix of people we get to invest in. Exceptional, not exceptional, easy to get along with, not so easy to get along with. Your job today, real life, is to figure out in which of those four quadrants we normally make money.

• 23:27Tim Ferriss?

  I have not heard this story. I don't know the answer. I could hazard a guess, but why don't you tell us, number one, did you figure it out? And what is the answer?

• 23:37Speaker 01

  I think you have an intuition for it. It's exceptional, not so easy to get along with. And the reason it's, you know, when you think about the founder prototype or personality type, you know, most of us encounter challenges in the world and we just let it go. This is difficult. This doesn't work. This frustrates me and you just go, ah, whatever. And you move on to the next thing. Founders are these people who don't accept the way the world is. They want to change it. They encounter frustration and they do something about it. Going back to the Cisco example, right? The founders of Cisco were the heads of the computer departments for computer science and the business school at Stanford. And they were on different networks. So they could send primitive electronic mail within departments, but not across campus. And the

• 24:21Speaker 01

  two of them were romantically involved and were getting tired of walking across campus to see each other. They wanted to, I'm not kidding you, this is the first internet love story.

• 24:29Tim Ferriss?

  I haven't heard this story. It's great. This is fantastic.

• 24:31Speaker 01

  And so the founding inspiration for Cisco was connecting the networks of the computer science and business schools at Stanford. And that's the founding story, right? Instead of just accepting the status quo. And so there's so many other companies we've backed where this is the example, right? Jack and Jim started Square because there was a lost sale. I mean, these personal frustrations are just incredibly powerful. So when you think about a person who wants to take on the world and doesn't just accept it, that tells you a lot about what the founder is like.

• 24:59Tim Ferriss?

  Right. And they're highly likely to push back on anything that I would imagine that they don't feel is fully aligned with the change that they want to leave in the world or impart to the world. So let's, if you want to continue, actually, I would love to hear you continue. So what are some other characteristics? That could be related to the exceptional, not so easy to get along with, or they could be separate, that you have identified within the data set of hits from Sequoia, where you've made money. And by you, I mean Sequoia.

• 25:36Speaker 01

  Well, first, it starts with an authentic identification with the problem, that founding inspiration. Because if you're trying to start a business for the sake of starting a business, it's so hard. There are so many challenges on the way to building a successful company. If you're doing it for the wrong reasons, you're going to wilt. You simply won't persevere. But if you're deeply motivated by what you're doing, you'll keep going and you'll overcome obstacle after obstacle. And so that, to me, is one of the key starting conditions is founder market fit, founder problem fit. You know, I love asking a founder and I meet them, like, how did you come up with this idea? What was the eureka moment where something snapped and you wanted to address this problem? And what is it about the current solutions that you must have evaluated that frustrated you

• 26:21Speaker 01

  that you didn't think was good enough? And then the next one is what's your unique and compelling value proposition? So having evaluated alternatives and deciding to build something, why do you think what you're building is so distinct that it has a chance of flourishing and becoming a real business? So I can tell you one specific story. There's a founder, Matt Trabinowitz. He and I met in high school in South Africa in 1987 at a nerd camp. It was actually called an academic vacation school, but I mean, that's just a very nice way of saying nerd camp. And he's absolutely brilliant. He was gold medalist in our National Science Olympiad. He came to Stanford. He studied physics, electrical engineering. And in 2002, his sister had a baby that died within a week of birth.

• 27:04Speaker 01

  And he was shocked at the state of prenatal testing. And he went back to Stanford and he learned everything he could about biology and genetics and started this company, Natera, where I'm still on the board 15 years later. We made a million dollar seed investment in him in 2006, just an idea. And today, they deliver millions of tests to help people have healthy families. But it started with an incredibly authentic inspiration for him, which is seeing what his sister had to deal with.

• 27:34Tim Ferriss?

  You know, I've never heard the elegance of this phrase you used before, the founder problem fit. But, and I am just a tourist in the startup world compared to your immersion as an entrepreneur, operator, and investor. But if I look back at all of the angel investments I've made, the founder problem fit is the defining feature of any of the hits. Not product market fit, which may also exist, but in terms of the hierarchy of weighted importance, it's this founder problem fit. That's a fantastic phrase. What else have you learned, or did you learn, rather, from Don Valentine? And it could

• 28:19Tim Ferriss?

  just be anything that you observed in him, attribute, behavior, habit, or otherwise. But what are some of the takeaways from having spent time with him?

• 28:30Speaker 01

  Incredibly good listener. You think about the stereotype, maybe, of an investor who's fast talking and needs to be heard. Don was very comfortable sitting for an hour and just listening and absorbing. And then he was very precise with his questions, precise with his notes. I remember receiving a note in my inbox from Don. I was confused initially because there was no to or from. So I didn't know who it was, you know, who'd written me this note. So I walked around the office saying, you know, who left this for me? And people looked at it and said, it's written in green ink. It's Don. So Don had exclusive

• 29:15Speaker 01

  use of green ink in the office. No one else was allowed to use a green pen. He loved the color of money. But he would take a full page, and there may be 10 words on the page. They were just so incredibly concise in describing the feedback that he wanted to give about a company or when he interviewed people. I saw some of his interview notes about people, you know, instead of writing two pages of notes about the interview, it was just so crisp and on the point. And so his ability to distill things very concisely is incredible.

• 29:46Tim Ferriss?

  You mentioned earlier the question of what happens if this goes right? And I'm paraphrasing, but like, what does this look like? Say, five, 10 years down the line, even more, if this goes right? Could you speak to the practice of pre-mortems and pre-parades? If I'm getting the term correct?

• 30:12Speaker 01

  Correct. It was actually a technique that I picked up from Larry Summers, former Treasury Secretary Summers is on the board with me at Square. And he actually joined pretty early. He's been on the board for almost a decade with me now. And he posed this as a challenge to the management team at Square about, imagine things go incredibly well over the next three or five years. Actually, write it down. Don't just think about it. Write down, what does that look like? What does success really look like? What does the company look like? What have you achieved? Which markets do we operate in? Which products have we shipped? Then go write a pre-mortem. Things didn't go the way you wanted to. What does that look like? And so we've taken that concept. We actually use it in our investment

• 30:57Speaker 01

  memos. So for every investment we contemplate, we write a pre-mortem and a pre-parade. And when we've had strategy offsites for ourselves, for the Sequoia Capital investment team, we did this too. We had a pre-mortem. Literally, it said 2030 autopsy of Sequoia Capital and what went wrong? What are all the things that are going to cause us to not be a great firm in the future? And the value of this exercise is, again, back to the insights from Don, it really crystallizes first order issues. Because you can spend all your time scouring around, doing all the busy work. If you're not focused on the things that will really compound and matter over the next five to 10 years, you're missing the boat. And it's the urgent, important trade off. And it's all those things woven into a very practical exercise.

• 31:41Tim Ferriss?

  How often would you do the pre-mortems at the Sequoia, I suppose, team offsites?

• 31:50Speaker 01

  Every two years.

• 31:51Tim Ferriss?

  Every two years?

• 31:52Speaker 01

  I think every year is too frequent because things just don't change that often. I mean, we may revisit something if there's something that's really changed. There's a why now? Why now is one of the questions we love to ask, obviously, like, why now? So, you know, we made an off-cycle decision to open up in Europe, for example, something we hadn't done for a decade. We kept on thinking about, should we open up an office in Europe? Should we be on the ground? Instead, we kept on flying into Europe and we made some great investments. We were early investors in Unity and Klarna and several other companies on the continent. And at some point, we realized, there's just so much company formation happening in Europe. And especially after the global financial crisis, there's a whole crop of young people in Europe that now aspire to building companies, when that wasn't the

• 32:36Speaker 01

  case before. So, we revisited our assumptions and changed, and that was an off-cycle decision.

• 32:41Tim Ferriss?

  Let's dig a little bit deeper on the pre-mortems specifically as applied to Sequoia. So, let's just say you're at an offsite, and let's, you can pull a real one to mind, and you're asking yourselves, you know, imagine the venture business in 10 years' time. Sequoia is gone. What happened?

• 33:04Tim Ferriss?

  Are there any answers that you can, brainstorms that you can share that prove to be very valuable in decision-making for the firm? Because I will say, for people who don't know the venture capital ecosystem, one thing of many that has impressed me forever, for as long as I've known about Sequoia, is the longevity of Sequoia. Are there any examples that you could give of pre-mortem answers that have proven very important in decision-making?

• 33:36Speaker 01

  For sure. By the way, the long-lived, you know that the Sequoia tree is the longest-lived tree in California.

• 33:40Tim Ferriss?

  I do.

• 33:42Speaker 01

  Right? And that's the reason that Don chose to name Sequoia Sequoia. It wasn't an accident. He wanted the partnership to outlive him with a lot of consequent behavior and actions. And he also wanted us to invest in companies that stand the test of time, which I think we've done disproportionately. So... You know, there are a couple of things from the off sides. I think one of the most important ones is hubris. The downfall of every Greek tragedy. And the extent to which we rest on yesterday's success. You know, one of my favorite quotes is, no wreath wilts as fast as one that's rested on. We cannot rest on the past. And it's part of what motivated me when I joined Sequoia, by the way. You know, the motto we have inside our building is you're only as good as your next investment.

• 34:27Speaker 01

  And I saw that hunger and determination from people like Mike Maritz and Doug Leoni, who clearly made it in life, and yet they were relentless in the pursuit. So very important for us as a team to think about hubris. We need to make sure that we continue to meet companies at the earliest stages of formation. So if you think about the history of Sequoia's investments, when we invested in Atari, or Apple, or Cisco, we were the first investors. There were often single-digit numbers of people around the company when we first invested. When we invested in YouTube, there were three people. LinkedIn, there were seven people. Palo Alto Networks, one founder in our office, Incubating. If we start losing grip of that early stage of being in touch with entrepreneurs right at inception, that's very dangerous for us.

• 35:11Speaker 01

  There's this temptation to then drift downstream and become a late-stage investor. And so that's probably one of the most important things we talked about in our venture, in the off sides is we've got to make sure that we stay at the fountainhead of company formation.

• 35:26Tim Ferriss?

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• 36:12Tim Ferriss?

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• 36:39Tim Ferriss?

  So let me ask a follow-up related to that last point. And this may be getting too into the weeds, but I'm curious. Early-stage investing has become so, I would say, competitive, or at least the field is flooded with players. Compared to, say, 2007, when I first started paying attention to startup investing world, it's almost nothing like it was today in terms of competition and the number of just sheer, the sheer number of people willing to write checks in different forms, in different fashions. I would imagine with a famous firm with multiple funds,

• 37:24Tim Ferriss?

  as you get to larger fund sizes, in order to invest at the earliest stages and have those offers be accepted without over-diluting the founders, it seems like you would have to amass an army of people to maybe handle that, to have sufficient capital outflows to make the entire operation work. How did you guys think about solving for still investing at the very early stages as the firm and the funds grew?

• 37:55Speaker 01

  We don't want to hire an army of people. Our investment team candidly is about unchanged over the last decade. We only have about two dozen or so investors in our US and Europe business. Because if you want to make good investment decisions, you need to have small decision-making groups. You know, committees don't make great decisions because then you have, you know, you average to the mean. And great investments depend on outlier instincts. And we are looking for the outlier founders, the founders who dare to build really exceptional companies, not just investable companies. So we've tried to keep the team small. We've also kept our funds separate. So we have a seed fund that's distinct from a venture fund that's distinct from our growth fund. And the teams are lined up against each of those because I think what you point out is a real risk that if you have,

• 38:40Speaker 01

  I'm just going to make it up. Let's just suppose you have one pool of capital, you have one $10 billion fund. Making a $500,000 seed investment in something promising seems kind of irrelevant. It's a rounding error. And then the whole team starts chasing what they think are bigger investments. And so that's one of the dangers that we've guarded against. So we have separate teams focused on different areas. And the key is to look at the multiples. It's not about the input, you know. Many of these small investments we've made have turned into very large gains. It's not about how much you invest, it's about the impact it can have. In terms of the competition, by the way, I actually think it's fantastic that there's this much competition.

• 39:16Speaker 01

  Because what used to be a cottage industry in the 1980s and 90s, because that's just, it wasn't a big market, I'm not saying that dismissively, it was just, it was a smallish industry. The industry has had to professionalize. The beneficiary of that ultimately are the founders. And we've had to up our game. Yes, we had a talent team when I was still at PayPal. Sequoia had a talent team, but you know, it was one or two people. Now we have 15. And we're just delivering many more services to startups to help these companies succeed, to give them an unfair edge and a chance of outside success. So, so I think it's really in service of founders. It's fantastic that the business is like this. It makes it more competitive, but it's all right.

• 39:58Tim Ferriss?

  Yeah, I think you guys are going to be fine.

• 40:01Tim Ferriss?

  I mean, it's also, I think, incredibly advantageous to build a winning streak and to have the track record that, say, a firm such as Sequoia has, because you also have a selection bias with inbound with respect to very good deals. So I suppose that helps in part with maintaining a smaller team as opposed to a larger scouting team that's going out and canvassing sort of every corner of the landscape. Is that a fair comment? Or do you think that's, is there more to the story that you'd like to flesh out?

• 40:35Speaker 01

  I think it's true. We're blessed by having the history we do. So the companies that we backed when they were private today account for over 25% of the total value of the NASDAQ.

• 40:45Tim Ferriss?

  That's wild.

• 40:48Speaker 01

  Over a quarter of the NASDAQ were companies that we backed when they were private. No other venture firm comes close. So that is an incredible achievement, and it means that we're a magnet for other opportunities, often because of sector expertise or experience. So because I'm the board of Unity, I might disproportionately get people who work in VR and AR because they're developing on the Unity ecosystem. And so that gives us access to this. So there is a way in which the industry, success begets success for sure. But it can also be a curse, because if you have a lot of inbound, are you spending enough time thinking critically about where you want to spend time, where the opportunities for tomorrow might lie? And so there's a danger there that you may spend all your time just taking inbound opportunities instead of pursuing the best founders and the best companies. So there's a balance there.

• 41:34Tim Ferriss?

  Roelof, what books, if any, come to mind as books that you have recommended or gifted the most to other people?

• 41:48Speaker 01

  The two different ones, there's Man's Search for Meaning by Viktor Frankl,

• 41:53Speaker 01

  which invariably shows up on these lists of, you know, 100 books you should read before you die, which really had a big impact on me. So I've spoken about it at Sequoia founder events. I've given it to many people. I just think the book is amazing in terms of helping clarify what it is that motivates you and what drives you. Like, what is your purpose? Because we're not really driven by monetary rewards or pleasure by itself. So that to me is a fantastic book. The other one is an annual series called America's Best Science and Nature Writing. And it's this collection of about two dozen articles from American publications, written for a lay audience across a range of topics. You know, it could be what's the latest insights from physics and astronomy to what's happening in genetics?

• 42:38Speaker 01

  What's happening with anthropology or things like that? It was absolutely fascinating.

• 42:42Tim Ferriss?

  Could you give us, and it doesn't have to be short certainly, but I wouldn't expect you to to redeliver any of your presentations. Why has Viktor Frankl's book had such an impact on you? And it is an exceptional book, to be clear, but I'd just love to hear how it resonated with you or impacted you.

• 43:04Speaker 01

  I think it reduced very clearly the need to think about what motivates you. I mean, the fact that he was in a concentration camp, you've obviously read the book, and it's not a story about the life in a concentration camp, which is horrific, but the fact that he wanted to live, he wanted to survive because he wanted to recreate his work. His manuscript was taken from him when he was sent to Auschwitz in the first place. And part of what he learned when he was in the concentration camp was that some people gave up. And that even though the population in the prison was Jewish, the mortality rate actually increased around Christmas and New Year. Because it was a marking of time and a reminder for people that they maybe had no more hope. Or if they knew that their family members had died, they gave up.

• 43:48Speaker 01

  So this idea that whatever it is that motivates you, your purpose might be your company, it might be your family, you know, it might be your hobby, whatever it is. But identifying what it is that really motivates you and leaning into that and not pretending that you're actually motivated by fame or fortune or some other superficial motivator, I think it's just incredibly clarifying.

• 44:07Tim Ferriss?

  I'd like to ask you about a term you used earlier with reference to some of the other general partners at Sequoia, the relentless in pursuit piece. And I'd like to ask about this because one thing I've observed in some of my friends who are serial entrepreneurs who have had massive exits. I mean, they they have become wealthy beyond their wildest dreams.

• 44:35Tim Ferriss?

  Is that this relentless pursuit or relentless pursuit can produce incredibly good outputs in terms of objective wealth creation, job creation, solving problems in the world, but it doesn't always translate. And in fact, it seems sometimes to be inversely correlated to contentedness or a feeling of peace or happiness. How do you think about, if you do, and maybe the question is just the wrong question, but balancing the relentless pursuit or counterbalancing it so that you don't always feel discontent?

• 45:12Speaker 01

  That's difficult because if you're not a little discontent, I don't think you're alive.

• 45:18Tim Ferriss?

  Probably true.

• 45:20Speaker 01

  I mean, it's why people say Silicon Valley is dead, innovation is dead. Really, there's so many problems to be solved. As long as they're problems, they're opportunity.

• 45:30Tim Ferriss?

  Yeah, I don't think Silicon Valley is dead or tech is dead.

• 45:33Speaker 01

  No, absolutely. I think the people that I found who ended up getting unhappy wasn't because they were still in pursuit of something. It's actually that the pursuit was over. It's the getting, not the having, that makes you happy. And so unfortunately, I've seen founders where they've had a big exit and maybe the company was acquired. And what do you do then? And maybe you can borrow from analogies of athletes, often right the peak of their careers when they're 28 or 32, whatever the case is, but they peak relatively early in their life. And then, oh, you're the person who once was that as opposed to what you are now. And I think that's very hard to deal with. But I've seen like the Instagram

• 46:15Speaker 01

  founders who I worked with got involved with them very early and they're just incredibly well adjusted. Company was acquired. It's been a huge success, massive impact in the world. And the two of them are just building and having fun. And they found all sorts of other pursuits to keep them engaged. And they clearly haven't suffered from what I described because they found another outlet for meaning for themselves.

• 46:36Tim Ferriss?

  Do you remember when you hit your 10 to the ninth? If you do, could you tell us about that experience?

• 46:45Speaker 01

  I probably can't get you the precise year, but it was probably about five, six years ago.

• 46:51Speaker 01

  When I'd reached that, I think it was after the IPOs of MongoDB and Square and I'll call Block. I think after those two IPOs and Atera's IPO, I'd achieved that milestone. And sorry, what was that the question?

• 47:03Tim Ferriss?

  Well, what, what did you do? How did, how did it feel? Did you pause to celebrate? Or were you just like, all right, now it's 10 to the 12, let's keep moving, folks?

• 47:14Speaker 01

  I definitely celebrated a little bit, but it's not over. Cause there are other interesting companies to be built. And even more importantly, for those companies, I'm still on the boards of those companies.

• 47:24Tim Ferriss?

  Yeah.

• 47:24Speaker 01

  Because they're still so early in their own innings. That there's so much more to be done at these companies. I think it's one of the, and it, you know, I don't know if we have time to talk about the Sequoia Capital Fund, but this is part of the thing I've

• 47:34Tim Ferriss?

  Sure, we have all the time in the world.

• 47:38Tim Ferriss?

  Go for it. Yeah.

• 47:40Speaker 01

  Last year, we conceived of and launched this thing called the Sequoia Capital Fund. And for a long time, I'd been frustrated that the venture capital model was built on this idea of a 10 year closed end fund cycle. And it was first invented in the late 60s, early 70s, and no one had questioned it. And there's this presumption that because you have such a short-lived fund life, that when a company goes public, you should distribute and move on to the next thing. But the truth is that many of the great companies endure and they keep compounding. And so with most of our companies that have gone public, the majority of them market cap accrued after the IPO, not before the IPO. Square today is worth 10 times what it was worth at the IPO.

• 48:24Speaker 01

  So almost definitionally, 90% of its market cap was created after the IPO. So why, why sell after the IPO? Why leave the board? What about all the other fun company building to be done? I mean, that's the thing that really floats my boat is working with entrepreneurs to help them build businesses. And for me to have the founder call me and say, listen, I'm resting with this issue. Can you please help me? That's one of the most gratifying things that I have in my job. Is being able to help on that journey.

• 48:50Tim Ferriss?

  So what is the structure of the Sequoia Capital Fund?

• 48:53Speaker 01

  So the structure we created is essentially an open-ended fund that will become the sole investor in all our future private funds. So we'll keep organizing private funds and part of the reason is what we described earlier. If we have a single pool of capital, it dilutes attention and focus. So we'll still organize a seed fund, a venture fund, and a growth fund, and those will be time-bound, have dedicated teams, a certain amount of money, and it's accountable for the returns that it generates in a given vintage. But all the capital comes from a main Sequoia Capital Fund where we have cash, but we also have some of the longstanding positions of our enduring businesses, where we believe the companies have an ability to compound for many years after the IPO. So that's the

• 49:37Speaker 01

  spirit of the investment structure.

• 49:40Tim Ferriss?

  Okay, I'd love to ask some probably naive questions and feel free to give me a wrist slap if they're stupid questions, but this is deeply interesting to me. So the first question, actually, I'll just give you two questions and you can tackle them in whichever order you'd like. The first is, understanding, and I have seen, it might have been published by Sequoia, it may have been Benchmark or someone else, but looking at the financial outcomes, if you had held their private investments and sold as soon as lockup expired, when these companies went public, or if you had invested, the first day you could invest in those companies and held for X number of years and you would have made more, or just as much by investing as a public market investor, which blew my

• 50:23Tim Ferriss?

  mind. I can't recall the source, but my question, I guess, is with the assumption that a lot of this value will accrue post-IPO, why not just distribute in kind and then let other people, the LPs, decide if they want to hold or sell? And then the second question is, the Sequoia Capital Fund, and presumably there are limited partners, entities, institutions, and maybe individuals who invest in the Sequoia Capital Fund, how do you pitch an open-ended fund to a pension fund or an endowment?

• 50:57Speaker 01

  Yeah, maybe you should spend a second just on who our clients are. So

• 51:00Tim Ferriss?

  Yeah.

• 51:00Speaker 01

  It's a way we work for what we call great causes.

• 51:04Speaker 01

  So if you come to visit our office, our conference rooms are actually named after our longstanding limited partners. So the Ford Foundation, the Wellcome Trust, Stanford University, MIT, Harvard, Dana Farber Cancer Institute, Boston Children's Hospital, these are the people we work for.

• 51:23Tim Ferriss?

  Got it.

• 51:24Speaker 01

  We put their names on the door as a constant reminder that when we generate returns, they're the ones who benefit. You know, and there was a period, actually, as a short digression, a couple of years ago, we thought about whether we had the right fee structure for our business. Because, you know, we're capitalists, we teach our companies that they should figure out the right price for their product, and we have excess demand for people wanting to invest in our funds. So why don't we raise the prices? Why don't we charge even more?

• 51:50Tim Ferriss?

  Could you just explain for people who are not familiar with venture capital, just the typical fee structure or your fee structure at the time, so they understand how venture capital firms make money?

• 52:01Speaker 01

  Sure. The typical structure is to charge a management fee as a function of the fund size. So typically, it's two to two and a half percent of whatever the fund size is that you charge to pay for salaries and rent and, you know, research, all that sort of stuff. And then there's carried interest, which is a share of the profits, if any, that we generate. And the carried interest varies between 20 and 30% based on a firm's history and their performance history. So let's just say that if you, if you invested 100 million and you turn it into 200, and let's just say your carry was 20%, there's 20 million. So only 100 million of gain, obviously, 20 million would go to the partners and the limited partners would get 180 million in that scenario, in that example. So that's

• 52:45Speaker 01

  how fee structure works. So we, we actually talked about whether we should raise our fee structure. Because people were still going to invest in us. And we actually made an affirmative decision to not do that because we are very happy with what we earn and we appreciate that the majority of what we generate goes to great causes. It goes to education. It goes to medical research, poverty alleviation. The Ford Foundation was helping to fight apartheid in South Africa in the 1960s before I was even born. So we're proud that these are the people we work for. Because we've had such a long history with them, we invited them to roll into the Sequoia Capital Fund. And 95% of the dollars that were eligible to roll into the Sequoia Capital Fund did.

• 53:26Speaker 01

  So they are the same investors that have rolled into the structure and we've had decades of experience with them. We have clients that have been clients of ours longer than I've been alive. And they'll be clients long after I've gone. And that's the way we want it. We want our LPs to outlive our GPs. GP is the general partner, the people who work at the partnership. And we really care about that. That's part of this long-term orientation we have at Sequoia. So to answer your, do you want to go to the other question? Yes, please. Sure. So the reason we ended up with the structure, because it's a fair question, we talked about it. Let other people decide, why should we hold the shares? Here, XYZ LP, you can take the shares and decide. If you're an endowment or a foundation somewhere, you're managing a couple of billion.

• 54:09Speaker 01

  Maybe if you're a big university endowment, you have 20 billion or something like that. You don't know this latest company that we've just distributed. And so what we found is that our LPs almost exclusively sell as soon as we distribute. And part of what we observed, we did other analysis, which is if we'd waited 12 months longer than we actually did to distribute, what additional return would we have generated for our LPs? And that was a lot of what informed the decision to form this fund. I'll give you a concrete example. At the point that Square went public, the gain for our limited partners was about 140, 150 million dollars.

• 54:47Speaker 01

  At IPO and we waited, we waited several years in that case to distribute. And we ended up generating well north of a billion dollars for LPs in that case by being patient because I was on the board, I'm still on the board, I'm involved with the company, I understand their prospects and I just had a different view that the company's share price eventually was going to catch up with its performance.

• 55:07Tim Ferriss?

  So a question on the research, if you look at the data and you have each of your portfolio companies' value at time of IPO and then there's lockup or whatever it might be, and let's just say, even if it's hypothetical, that you do the math on what the value would be at that point and then 12 months later and you've made the decision to hold, what percentage of the time with your portfolio companies to date roughly would you say the value is higher versus lower after an additional, say, 12-month hold period?

• 55:46Speaker 01

  I don't have the precise number at my fingertips, but it's the majority.

• 55:51Tim Ferriss?

  Yeah, that's good enough. Yeah, I was just wondering.

• 55:56Speaker 01

  The overwhelming majority, I should say.

• 55:58Tim Ferriss?

  Yeah.

• 55:59Speaker 01

  If that's the case, obviously, you know, past is no guarantee of the future, you know, disclaimer, disclaimer, but the thing that's even more important, and I don't know if you've run across this book by Sebastian Malaby called Power Law, of course, it was recently published.

• 56:13Tim Ferriss?

  It has been recommended to me, I'm sure it's amazing, his book More Money Than God on the hedge fund industry, I thought was exceptional. So I haven't yet read The Power Law, but it's been recommended, but please continue.

• 56:24Speaker 01

  I'll second the recommendation. The reason he chose the title for the book is that our industry follows a power law curve. You know, Sequoia funds, I can just cite some of the parameters roughly, in a typical venture fund that has, let's just say, 35 to 45 companies in a given vintage, in a given fund, we probably have a third of the companies that fail to recover capital, which may mean there's a complete write-off or it may mean we only realized 50 cents on every dollar we invested, but you know, it's not a success. Then there is a whole group of companies that have modest success, maybe you get your money back, maybe it's a 2X or a 3X, but what really drives the performance of the fund is the typically five to eight companies that end up being 10X companies, 10X returns.

• 57:11Speaker 01

  And the key is that the ones that get to 10x sometimes run and they become 55x, they become 100x, they become 200x returns. And so, you know, when you have a YouTube, an Airbnb, a Unity, a Snowflake, Palo Alto Networks, WhatsApp, Stripe, Square, you have these companies, they're just, they're completely bowed out on the, on the right-hand side. And so you get a power law curve, if you know, look at it mathematically, it's just a very steep curve where a small number of investments really account for the majority of the returns. In our history, between 5% and 15% of the investments we make account for over 80% of the returns.

• 57:49Tim Ferriss?

  Sounds about right.

• 57:51Speaker 01

  And so to your question about holding off to the IPO window, it's not just that, even if it's 50/50, whether it goes up or down, it's what's the asymmetry? The ones that keep compounding, look at the scale that has been achieved by a company like Google over time, right? Like, that's the kind of compounding potential that exists, not with all businesses, clearly. There aren't too many trillion-dollar companies out there, but you know, when you get them right, they can make a big difference.

• 58:16Tim Ferriss?

  The biggest takeaway for me and my, as I mentioned, sort of amateur tinkering in startup investing is Tim Ferriss, you don't know what the hell you're doing with public investing, do not sell after lockup because you have clearly no idea which companies are gonna end up compounding incredibly. All of my worst mistakes have been panicking, I shouldn't say panicking. Well, actually, this is a perfect frame for a question I wanted to ask you. So on one hand, I can look at, for instance, selling Shopify right after lockup. In retrospect, from my financial position now and say, that was a stupid mistake. It cost me 100 million-plus dollars.

• 59:00Tim Ferriss?

  I should have made a different decision. However, I can also take the counter position and make a very compelling argument for why, even though now it seems like I made the wrong decision, that the absolute dollars at the time were a life-changing amount for me then. And so it was a logical decision. And I use that as a segue because, please correct me if this is is wrong, but I found a supposed quote from you, which was PayPal was a 1.5 billion acquisition. And today, it's a company worth over 300 billion. I'm not sure of the timing of this article.

• 59:42Tim Ferriss?

  And Mike Moritz was on our board and Mike, I think, saw the potential and pushed us and challenged us to think longer term. And what did we know? What did I know? And I made the wrong decision and didn't quite fathom how much potential PayPal had as a business. But I imagine that it had a significant impact on your life. So I'd love to know if you still feel that was the wrong decision? And also, how you talk to founders about this? Because not every slamming of the briefcase Zuckerberg style, walking out on Yahoo after a multi-billion dollar offer works out. Sometimes it backfires. Do you still think that was a wrong decision for you?

• 1:00:27Tim Ferriss?

  And if this quote is even accurate? And how do you talk to founders about this kind of thing?

• 1:00:34Speaker 01

  So the question I ask founders is my partners tease me because they know that this is my question. And it's what's the scale of your ambition? What are you aiming to achieve? Are you interested in a company that gets to 100 million in revenue? And that's the end of your ambition? Or do you want to get, you're going to blow past 100 million in revenue on your way to a billion in revenue?

• 1:00:52Tim Ferriss?

  Quick question. Sorry to interrupt. At what point do you ask them this question? Because I imagine if it's in a pitch meeting, they know the right answer. But when are you asking them?

• 1:01:02Speaker 01

  No, in a pitch meeting often. And they may not have thought about it. And it's not to be critical. I mean, often when you're a founder, you just found a problem that you're passionate to solve. But I'm still interested to understand, like, where do you want to take it? Are you trying to build a small company? Which is, and again, that's fine if you want to do that. But you know, we're looking for outliers who want to build really, really big businesses. That's what the business we're in. And I want to make sure that there's an alignment and that we're on the same page. Know that your ambition matches what we're looking for.

• 1:01:34Tim Ferriss?

  Yeah.

• 1:01:35Speaker 01

  So that is the scale of ambition question.

• 1:01:37Tim Ferriss?

  Critically important question to try to ensure to the extent possible that you're on the same page. Let me throw out, just as a thought exercise, a hypothetical, right? Because I've seen it happen with founders I know.

• 1:01:51Tim Ferriss?

  They start off, they have incredible founder problem fit. And in the beginning, their scope of ambition actually is quite modest, right? They just want to be able to buy snowboards online or whatever the hell it is, right? It's not to build an enormous company. And then, partially through competency, partially through timing, partially through luck, they end up having tremendous traction. And then, let's say they end up in a pitch meeting with you, you end up investing. And then, years later, fortunately, the company's doing really well and they get an acquisition offer. And let's further say that these two founders come from middle-class families. Maybe their parents made 50 grand a year.

• 1:02:37Tim Ferriss?

  And one founder wants to swing for the fences and say, YOLO, it's all or nothing. Although in this day and age, I mean, they've probably taken some money off with secondary and so on. But let's say the other really wants to cash out because they're looking at how their life would change. And they're just saying, you know what? This is a bird in the hand. I don't know what the future holds. I want out. How do you navigate a situation like that? And maybe the fast answer is if we can, we just buy out founder B.

• 1:03:11Speaker 01

  Well, that is nothing.

• 1:03:14Tim Ferriss?

  Well, no, I don't. But like, but like, how do you, how do you handle a situation like that?

• 1:03:18Speaker 01

  This, and you alluded to it, secondaries are so important. At PayPal, we did a small secondary in 2001. You know, people talk about it as though it's a recent invention. It was around 20 years ago. And I remember going from having been a student, still paying off student debt. My net worth was negative in 2001. And we did a secondary and I think I got $50,000.

• 1:03:44Speaker 01

  I felt rich. I mean, it was transformative. I could actually travel and I could stay in a hotel and it was really amazing to have this experience. But the reason I mention this is in the summer of 2001, eBay made a run at us in August. And I think part of what stiffened our backbone was that we'd all taken a little bit of money off the table. We were such a young team and none of us worried about making rent next month. And it was a really important, I think, ingredient to us pursuing the IPO and getting a far better price. We got triple the price that they offered that summer 12 months later. So it was a wise decision to have done that. So I love being able to provide secondaries for people. And then, then there's a conversation with people about

• 1:04:25Speaker 01

  the meaning, going back to Viktor Frankl, you know, just what is it that you want to do? Do you really think having the money and having the beach house is going to make you happy? Or buying this, you know, fancy car? Because then what we often do is we'll put them in touch with founders who've been in that predicament and have them speak to them and talk about the regrets about maybe having sold too early.

• 1:04:46Tim Ferriss?

  Do they ever run into someone who says, you know what, given your specifics, I think now is the right time?

• 1:04:53Speaker 01

  Yes. That does happen. I mean, and it's, it's part of what, sorry to interrupt you. I mean, that's part of what we try to do, just given our experience, is try to shepherd the conversation and to let people know, look, we have this front row seat to hundreds of portfolio companies. I've got the unfair advantage that I've seen many, many more companies unfold than you have, the founder. You've obviously personally seen many companies. And so I can't give you a perfect prediction, but I got to tell you, you're in this outlier category. You're in this one in 10 companies that we see that really just has outsized potential. And I think you're going to regret letting go. And sometimes it's not the case. We're valiant. We made an effort. We thought the company had a shot and sort of it's ended up where it's ended up. And I think this is a good acquisition offer. It'd be a good home for your team and your technology will end up

• 1:05:38Speaker 01

  flourishing with somebody else at the helm. And that's happened sometimes where the companies have very flourished being acquired because that company has the right distribution, maybe for their technology. Or and that also is gratifying for the entrepreneur because their creation sees life and flourishes, not just because it's an independent business.

• 1:05:58Tim Ferriss?

  For people who don't know what secondary transactions are, would you mind just defining that quickly? I brought it up, so I should have defined it. But if you wouldn't, if you, you're far more qualified to do this. So if you wouldn't mind.

• 1:06:09Speaker 01

  A primary issuance of shares is when a company sells equity in the business as part of raising capital. So the company sells a million shares at $10 a share, and they actually raised $10 million that goes into the coffers of the company to help the company pay for payroll and for helping to grow the business. A secondary transaction is where the money doesn't end up in the company's balance sheet, but instead it's just a secondary transaction between two individuals that are unrelated. So an employee of the company, a founder of the company, sells shares to somebody outside who's interested in owning shares in that company. And so the company doesn't raise money. It's just the founder sells, you know, $100,000 worth of shares to an investor. That might be an example.

• 1:06:49Tim Ferriss?

  Perfect. Thank you for that. So we've talked about the counsel you might provide founders. I'd like to turn that around and ask if any founders come to mind who have had a large impact on you in any capacity. And that doesn't need to mean, of course, through financial magnitude of their outcomes.

• 1:07:18Speaker 01

  Several, I think it's interesting. One of my partners actually pointed this out that when he first got into the business, he had this impression that you should always maintain a delineation between your professional and your personal life, and that you shouldn't mix the two. And that he found it interesting that I seemed to be doing something different because I was very close to the founders I work with. And I'd help them with a pediatrician recommendation or have dinners with them on weekends or sometimes travel with them for family vacations and things like that. And so maybe it's just my style. I've, I've ended up really enjoying the long-term relationships I formed with founders. So we spoke about Matter Benefits earlier, the person I'd met in high school. He's become a very dear friend. Given his background in genetics and what he's exposed to in the healthcare system,

• 1:08:02Speaker 01

  he's actually volunteered hours and hours over the last 12 months helping me with a close family member who has a medical situation.

• 1:08:14Speaker 01

  Just warps my heart to see somebody who's so busy running a company make that kind of a sacrifice. I didn't even ask. He just volunteered. So, you know, it's through loyalty and being involved with people for a long time that you can build those sort of relationships. To me, it's deeply meaningful. The Hartz's who run Eventbrite and Kevin was the founder of a company called Zoom with an X, not with a Z, that we'd invested in as well. They've become close personal friends and, I don't know, just it makes life so rich when you can have these sort of relationships with your founders. And that to me has been a big part of the job, honestly, that I've enjoyed.

• 1:08:53Tim Ferriss?

  Is that something that comes from your own family experience, your cultural upbringing? Is that something you made a point of doing in terms of fostering these types of relationships after arriving in the US? Where does that come from?

• 1:09:07Speaker 01

  Like I said, a talk I listened to from Esther Perel. I don't know if you know her?

• 1:09:10Tim Ferriss?

  I do.

• 1:09:11Speaker 01

  I met her a couple of years ago and she talks about how you sometimes grow up in a society or in a family where this is the balance around relationships or transactions. You can imagine some cultures are very transactional and you're fearful and it's, you know, you're out on your own or you're in a society or in a family or a culture that is more nurturing and it's more about relationships. And I think I grew up with relationships. And so I think it's part of the way I grew up, that I value those. So I think it's informed the way that I behave in business too.

• 1:09:39Tim Ferriss?

  Let's zoom back for a minute, as this is as opportune a time as any. Am I correct that you did not grow up speaking English at home?

• 1:09:48Speaker 01

  Correct.

• 1:09:49Tim Ferriss?

  Okay. So for most people listening, I would imagine they don't have much context on your home culture. Could you perhaps describe some of the defining characteristics of the culture within which you grew up? In the same way that if someone said, hey, you lived in Japan for a year, what are some of the defining characteristics? I could pull out a few things that I think really characterize and set it apart in a sense. How would you do that for the culture in which you grew up?

• 1:10:21Speaker 01

  The African culture?

• 1:10:22Tim Ferriss?

  That's right. Yeah.

• 1:10:25Speaker 01

  Uh, so at a family level, it I guess started off with a bump. My mom was sixteen when I was born. My dad was eighteen, so I doubt I was planned. She finished high school with me and needless to say, they were young and in love, but probably not compatible. So a couple of years later, they got divorced and my mom moved back with her parents, who by then were in their early forty. So, you know, they were in some sense also an extra set of parents for me. And they had a huge influence in in raising me. And my grandmother in particular was just an incredibly warm, gregarious person. You know, everybody knew who she was and maybe some of the the loyalty that I exhibited in the way that I operate came from her, either genetically or through living with her. So it was a very warm family.

• 1:11:10Speaker 01

  It was the sort of family where if a friend or a distant relative showed up on a random Thursday night, you just assumed that you had enough food to cook for them and that you were gonna have a dinner together. It was that kind of an environment. There were always people around, always people visiting. But then my mom remarried and we moved to another town that was about a thousand miles away from Pretoria where I had been born. Hence, I needed to start to speak English because I moved to a city that was predominantly English, um, not having spoken it before. But it meant that I grew up in a different place and I was a bit of an outsider. I was prejudged, especially in the community that viewed itself as more liberal. There was a sense in which my grandfather was viewed as being very conservative because he served the national government.

• 1:11:52Speaker 01

  And so I faced an enormous amount of prejudice where I always felt as though people judged me before taking the time to get to know me. And that I had to earn their trust and and sort of show who I was over and over. And that was daunting in some respect, but I definitely felt like a bit of an outsider when I moved to a new city. I went to an Afrikaans high school. And then I realized that if I wanted to live abroad eventually, I needed to improve my English. So I chose to go to an English university, the University of Cape Town, purposefully. And just to give you a sense of the challenge, I got a, I remember in first year math, I got a problem wrong because I literally didn't know what the word isosceles meant because I had done math in Afrikaans in high school. And we had a completely different word to describe an isosceles triangle. And I lit, I mean, I could solve the problem, but I didn't know what the word meant.

• 1:12:38Speaker 01

  And these are the sort of little things that you trip over when you try to switch your principal language.

• 1:12:43Tim Ferriss?

  Now, I remember you mentioning, and I'm not gonna get this perhaps exactly right, but you wanted to be top ten.

• 1:12:53Tim Ferriss?

  In the state or the province or the region and then you wanted to be number one in college or university. Why did you go from top 10 to number one, not number one to number one? Did you start raising your sights or was it easier because the pool was smaller? I'm just, I'm curious because you seem like a, you know, second place is first loser kind of guy, not to, not to project, you know, but I'm just curious how you went from top 10 to number one.

• 1:13:25Speaker 01

  So the end of high school, you're unlike the US where you write standard SATs and ACTs. I'm now learning because I have kids that are eventually needing to go to college. So all these new things I have to learn about. But in South Africa, you write standardized exams at the end of high school. So if you're doing math, everybody writes the same math paper and it gets graded by people that are not affiliated with your school for neutrality. And so that was difficult because you, I was doing English as a first language, even though I was an Afrikaans speaker. And, you know, so you've got languages, you've got, I knew I could do well in math and science and things like that, but it was a bit of a crapshoot to know if you'd get number one. And they only published the top 20, but I thought I could make the top 10. So that I thought was realistic, honestly. When you

• 1:14:08Speaker 01

  get to university, you know, you could choose your subjects a little more purposely. And I knew that, you know, within that cadre of studying actual science, maybe I knew who the individuals were and I became, maybe I became too cocky, maybe it was dangerous, but I thought I could be number one. So that was my goal.

• 1:14:24Tim Ferriss?

  This is going to seem like a bizarre question, but since you brought up your kids, I read that at some point they were raising South African silkworms. Now, I wasn't even aware that silkworms were a thing in South Africa. How did your kids end up raising South African silkworms? It's just not the first thing that comes to mind when I think of pet, not to malign. Uh, South African silkworms as pets.

• 1:14:47Speaker 01

  They, they went to the African silkworms. I mean, I bought them here in the US.

• 1:14:51Tim Ferriss?

  Okay, this is hilarious. And then I read whatever source I had had them done as South African silkworms. I'm like, wow, I had no idea. Okay, that makes more sense.

• 1:14:59Speaker 01

  Yeah, well, last time I checked, they came from Asia anyway. So.

• 1:15:02Tim Ferriss?

  Yeah, right.

• 1:15:02Speaker 01

  I don't know who, you know, I mean, there was this secret in China, right? They had all these, all these walled of gardens because they didn't want, uh, Western traders to understand where silk actually came from. So it was a hidden secret from the West for a long time. So I guess when I was a kid, we had, it's just one of the things you do is you learn about silkworms and you buy a couple of eggs from somebody in primary school. And there are enough mulberry trees around so you can feed them and you actually observe the, the full life cycle. And eventually they become moths and mate and lay their eggs and die. And so anyways, I thought it'd be fun to do with them. Except we, um, in my, my typical, uh, eyes bigger than my mouth fashion, we ended up with a complete mess.

• 1:15:43Speaker 01

  Cause we had thousands of silkworms to the point that the, the little, uh, the little mulberry tree we had in our garden couldn't provide enough trees. So I was driving around the neighborhood in Los Altos and I would try to find mulberry trees that had overreached the, the boundaries. Or, you know, people, maybe fences and I would go there with bags, cause still leaves.

• 1:16:07Tim Ferriss?

  Mommy, mommy, what's that strange man doing by the fence?

• 1:16:11Speaker 01

  I'm gonna say it's like venture capitalists caught stealing mulberry leaves.

• 1:16:18Tim Ferriss?

  That is really funny. Oh, man.

• 1:16:20Speaker 01

  But, but it was actually fun. By the way, my daughter ended up running experiments with them. So, you know, you get white ones and you get zebra ones. We call them zebra ones. They're, they're white with little black stripes. And my daughter ended up running experiments where she segregated them to see how the, the genetics would line up. So she was doing a little controlled experiment, which was probably a clue that she wanted to be in biology eventually.

• 1:16:40Tim Ferriss?

  Well, you know, if dad's reading the America's Best Nature in Science writing on an annual basis. Well, this leads me to want to ask about questions about interests outside of, say, venture capital or investing. If you were invited to give a TED talk on the main stage, but you could not talk about investing.

• 1:17:06Tim Ferriss?

  What topic might you choose?

• 1:17:09Speaker 01

  Probably genetics. I'm really fascinated by what's happening in the field of genetic engineering.

• 1:17:16Tim Ferriss?

  Please elaborate.

• 1:17:17Speaker 01

  I mean, we happen to have a company in this space that's helping with delivery of CRISPR. But I mean, that's the point is not about investing, it's about programmability of biology. And it's the reason I got interested in having us invest in Atera a long time ago is I was starting to read about genetics, not having studied biology at college, because I went in a different direction. But when the Human Genome Project concluded, it really opened my eyes to what was possible with the information that we have in genetics. And so whether that's for diagnostic purposes, but now the ability to engineer, to treat disease, and there was just a drug approved today, actually, for treating bloodborne cancer disease that is reliant on genetic engineering. So this idea that we can treat human disease with precision

• 1:17:59Speaker 01

  genetic engineering absolutely blows my mind. So that's a field that I'd want to study if I had infinite time.

• 1:18:06Tim Ferriss?

  What would the runner up be? Do you have any other pet obsessions? Former potential career tracks that you gave up on or put aside, if you want to put it that way? Anything else that would be runner up for?

• 1:18:24Speaker 01

  I love rugby.

• 1:18:26Tim Ferriss?

  Rugby?

• 1:18:27Speaker 01

  I really love rugby. I think it's one of those, because I grew up in South Africa, it's the Afrikaans sport of choice at some level. And I think when I moved to the United States, it was one of those anchors back to the country for me. It was something for me to talk about with my brothers and my dad and my grandfathers, gave me an excuse to keep in touch with the country. And so it's an unnatural and unhealthy obsession, I realize, but I do love the sport. And I used to play until I got a pretty bad concussion. If you could see this little gray patch over here?

• 1:18:55Tim Ferriss?

  Yeah. Is that really from the impact? No, really?

• 1:18:58Speaker 01

  Yeah. I was playing for Stanford and I got a spear tackle right on the spot and I was knocked unconscious. 911 ambulance showed up. I woke up two hours later and I was inside a CT scanner and I had no idea where I was. And after three, four months of persistent headaches, I realized that was the end of my non-money making rugby playing days, but I'm certainly an enthusiast as a spectator.

• 1:19:21Tim Ferriss?

  You know, I will say I, for most of my life, knew nothing about rugby. And then in the process of doing research for The Four Hour Body, my second book, spent time in South Africa at the sports, at the South African Sports Science Institute with a professor, I think he was a professor, at least a PhD named Tim Nokes.

• 1:19:42Speaker 01

  Yeah, Nokes, yeah, he's well known.

• 1:19:44Tim Ferriss?

  Yeah, with Tim Nokes and did all sorts of tests and proved through muscle biopsy that effectively my enzyme levels are worse than Homer Simpson, it turns out. But in the process, I was able to watch the Springbok Sevens team warm up and train. And I have to say, easily some of the most impressive athletes I've ever witnessed in my life, just in terms of combination of strength, agility, speed, endurance. Absolutely mind blowing. And still couldn't tell you how the game is played, other than throwing the ball under hand. But beyond that.

• 1:20:28Speaker 01

  Maybe just to digress for a second, that when I was a kid in primary school, I was starting to do well academically and playing chess and doing all these sort of things. And I had a teacher who pulled me aside and really encouraged me to play rugby. He was worried that I was going down a path of doing things that were very academic and individualistic. And he encouraged me to play rugby. And, you know, I played all the way through high school and grew to love the sport. But part of it was, it was a way to bond with people from every demographic in my school. I didn't go to an academic school. I went to a public school in South Africa, and so we had people who were not academically gifted. But I played with them, they'd be my teammates. And I had very little in common with them if we weren't playing rugby, but it enabled me to form relationships and bonds with people.

• 1:21:10Speaker 01

  And the sport itself is not about individual attribution, it's all about the team winning. No one cares who scored the try, everybody cares that the team won. And so it had a lot to do with my approach to business and the way that we think about managing our team at Sequoia as well.

• 1:21:26Tim Ferriss?

  What are your current exercise or movement routines? If any, I don't have much to report, so I shouldn't say with full disclosure.

• 1:21:38Speaker 01

  I feel intimidated.

• 1:21:40Tim Ferriss?

  No, I'm not fully sedentary, but I mean, I wouldn't say I'm exactly winning any Ironmans anytime soon. So I'm just curious, as part of self-care, what types of physical routines are important to you or consistent for you?

• 1:21:56Speaker 01

  I exercise at least four or five times a week, an hour or more each time. If I can on a weekend, especially if I'm watching a rugby match, I'll burn a thousand calories, doing all sorts of different things, which is very helpful, by the way, because if your team loses, you're too exhausted to be angry at the end of the workout.

• 1:22:14Tim Ferriss?

  So wait, are you doing like jumping jacks and pushups while you're watching rugby? What does this look like?

• 1:22:19Speaker 01

  Now, if I'm watching a game, I'll alternate between a treadmill, a rowing machine, and an assault bike, one of those air bikes.

• 1:22:25Tim Ferriss?

  Yeah.

• 1:22:26Speaker 01

  And I'll spend 20 minutes on each and I'll just keep rotating. But you know, you're, you know, you sort of sustain the heart rate at like 140, 145, and you're just spent at the end of that and drenched. No more energy to be angry. And then I work, you know, part of the beauties, honestly, of what's happened with COVID, and you know, obviously terrible humanitarian disaster, but the side effect has been that there are all these trainers that are available on Zoom now. And so, you know, I'll pop up an iPad in the gym and train with a trainer who just changes the workout routine and a lot of functional training as well, because I think especially as one gets a little older, you know, things like balance and making sure you have good core strength. And I love exercise, absolutely love exercise, and I love snowboarding, by the way, which

• 1:23:11Speaker 01

  is something I didn't know, I had not touched snow until I was 24, when I first came to the US. And a friend of mine at business school convinced me to go up to Tahoe for a weekend. I went for five days, thinking I would figure it out in five days, but I was so sore that I couldn't go in days two and four. I could only go every other day, I was in pain. But now I can get up to about 60 miles an hour on a snowboard, which is fun and dangerous.

• 1:23:34Tim Ferriss?

  Braver man than I, that's for sure.

• 1:23:38Speaker 01

  And it's the only sport I dream about. It's fascinating.

• 1:23:44Tim Ferriss?

  It just, and I have to just point out that you stopped playing rugby because you had a concussion, but you're going 60 miles an hour snowboarding. I hope you're wearing a helmet.

• 1:23:55Speaker 01

  Oh, yes.

• 1:23:58Tim Ferriss?

  Yeah, and I love moving quickly on snow. I just have taken a little pause because I actually tore my right labrum snowboarding last winter. So it's feeling good. I'm going to get back on the snow, but I'm going to stick to the two sticks and probably keep on the skis for a bit before trying any, any snowboarding again. I'd love to ask you a question that I think you ask, I want to say founders reasonably frequently, and I'm sure I'm going to get the phrasing wrong, but the question relates to key career decisions. And maybe you can tell me first how you actually ask it, but I would just love to know how

• 1:24:37Tim Ferriss?

  you would answer the question of absolute key watershed decisions in your career, if one or two float to the top of the list.

• 1:24:49Speaker 01

  We call them crucible moments at Sequoia.

• 1:24:52Tim Ferriss?

  Crucible moments. Perfect.

• 1:24:53Speaker 01

  And my partner, Jim Gates, actually is the one who came up with that. I'm not going to claim credit. He deserves credit for the, the phrase. And we apply it to business context, by the way. So I'll answer your question, but I think it's, it's really important for companies to think about crucible moments because often they don't even identify them. Then they don't realize that they face a crucible decision, whether it's geographic expansion, product expansion, a key shift that the business must make. And I'm not talking about pivots where, you know, what you try doesn't work. It's, it's something really different. At MongoDB, the decision to go become a cloud business was a crucible decision. At Square, the decision to build Cash App as a personal, individual product rather than an SMB product, that was a crucible decision, very difficult to pull off within

• 1:25:35Speaker 01

  the company. But these decisions end up having a huge bearing on the ultimate outcome of a company, and so do they with careers. And so when I interview somebody, for example, I don't focus on, tell me everything that happened while you were at this job. Tell me why you chose this job. How did you find this opportunity? What else were you thinking about? And what is it about this particular opportunity that attracted you? Or what did you go to this school? And why did you not go to that school? Those are the more interesting questions. They're also indisputable because it's what you actually did. You know, you can't tell me that. What am I good at? Oh, I'm a perfectionist. Okay, great. You know, such a glib answer to the question. So for me, the critical decisions, one of them was to join McKinsey.

• 1:26:15Speaker 01

  When I qualified as an actuary, I took a 50% pay cut relative to what I would have been earning as an actuary to join McKinsey. And I had to pay back the bursary that I'd gotten from the insurance company. So it was a double whammy financially.

• 1:26:29Tim Ferriss?

  And the bursary is effectively a scholarship?

• 1:26:31Speaker 01

  College. Yeah, but you have to pay it back if you don't go work for them. So the, the deal was that they would pay for my tuition and I had to work for them for the same number of years that I studied to pay off the debt. And if I didn't work for them, I literally had to pay them back every penny. So I earned less and had the debt to pay off. I made the same decision when I joined PayPal. So I had a, McKinsey was paying for some of my tuition at Stanford and I had to pay them back. I still have my offer letter. Elon recruited me to PayPal slash X.com and I have the signed offer letter still on my drawer. And I got $80,000. That was my salary when I finished my MBA in 2000 and it was less than McKinsey was going to pay me and I had to pay McKinsey back. And then the third one was joining Sequoia.

• 1:27:14Speaker 01

  And those are the three key career decisions. That was it.

• 1:27:18Tim Ferriss?

  How did you end up in Silicon Valley?

• 1:27:20Speaker 01

  It was a funny story. There was an American who'd come to University of Cape Town when I was an undergrad and he was a guest lecturer in economics. His name is Peter Baird. And it was fascinating to meet him. He had a wonderfully bubbly personality and he was just one of these larger than life people. I loved working for him. Well, I ended up working for him later, as I'll explain. He ended up working in McKinsey, coming to South Africa, and I was staffed in a project with him where he was my engagement manager. And he convinced me that I should apply to business school because I'd done a business undergraduate.

• 1:27:51Tim Ferriss?

  What is an engagement manager? Just before we jump over that, what does that mean?

• 1:27:56Speaker 01

  An engagement in McKinsey language was a project, basically. So he was the project manager. They just needed to come up with fancy words to merit the exorbitant fees they were charging.

• 1:28:09Speaker 01

  So.

• 1:28:10Tim Ferriss?

  Got it. So sorry to interrupt.

• 1:28:11Speaker 01

  No problem. So he was the project manager. He convinced me I should apply to business school, which I didn't think was necessary because I'd done a business undergraduate as part of my actual science training. And he wrote on my recommendation letters and strongly encouraged me to to think about coming to Stanford. And at that point, this was in the late 90s, obviously, Stanford or Silicon Valley in general looked like an interesting place. This was the the well of opportunity. So many companies were being formed. Instinctively, it seemed like the place to be. And so that's how I got to Stanford in 1998.

• 1:28:42Tim Ferriss?

  1998, you know, it's easy for me to forget how young you are. I mean, for for me, right? It's looking at your bio and resume. It's crazy to think you got there in 98. I got there in 2000. I mean, the end of 99, 2000, it would have been in 2000. So not that long afterwards. And how old are you now? If I may ask?

• 1:29:09Speaker 01

  Forty eight.

• 1:29:10Tim Ferriss?

  Forty eight, man. Overachiever. Okay, so you get to Silicon Valley. Now, up to that point, your decisions seem to be very methodical. You're thinking about preserving optionality and mitigating certain risks, as you explained earlier, with the political climate changes taking place, choice of McKinsey. Was the intention from the get go to go to business school and join a startup before you even got to the West Coast?

• 1:29:43Speaker 01

  Nope.

• 1:29:44Tim Ferriss?

  Okay. How do we go from that to speculative, of course, because they all are speculative startup?

• 1:29:54Speaker 01

  You need to change your mind. If we talk about mentors, by the way, I have a specific anecdote about one of them that really hammered this into me. But so right before I came to business school, I was doing a master's degree, which I didn't complete at the University of Ketchikan on long term option pricing using stochastic simulation techniques.

• 1:30:14Speaker 01

  You too?

• 1:30:15Tim Ferriss?

  No, kidding, just kidding.

• 1:30:20Tim Ferriss?

  Sorry, I screwed up the flow.

• 1:30:24Speaker 01

  It's what one does on a weekend. You know, you run these Monte Carlo simulations on your little compact laptop. I was fascinated by finance, serious finance, and I thought I'd end up in Wall Street and work in the derivatives group somewhere. And when I was a first year of business school, actually, I was doing advanced topics in derivatives and ended up taking all the finance classes. And I thought that would be where I could shine because, you know, mathematical skills, I thought it was interesting. It was fascinating. I actually spent my summer working in London at Goldman Sachs. When I was in business school, I thought, you know, is Europe interesting? I didn't know. Is banking interesting? I didn't know. And I got a no on both of those, by the way, so try to realize that.

• 1:31:07Tim Ferriss?

  You got a no, meaning you gave it a shot and got rejected? Is that what you mean by a no?

• 1:31:12Speaker 01

  No, no, I got, I realized that that was not the right calling. Going back to Europe at that point, to me, felt like going back to the past as opposed to the future. And the West Coast was the future.

• 1:31:21Tim Ferriss?

  Okay, because the figuring out those were not the right paths is very critical, right? I don't want to gloss over that. So could you expand on that? Was Europe, as you said, felt like going to the past instead of the future? And that's how you arrived at a no for that option?

• 1:31:35Speaker 01

  Yep.

• 1:31:35Tim Ferriss?

  Okay.

• 1:31:36Speaker 01

  And for me, as a South African, it was more, there are many South Africans that live in the UK. It's same time zone essentially as South Africa, and so it was closer to home. I mean, California is about as far as you can get from where I grew up in my family. And I was very close to my family. And so I was wondering if that made sense. And so I tried it, got enough information to realize that was not my destiny. And so I came back for second year. One of my classmates met Elon before he came to business school, when Elon ran Zip2. And this friend of mine was at CitySearch and introduced me to Elon. And I thought the intersection of financial services and technology was interesting. And he made me a job offer. And I couldn't quit because I didn't ever work for him. I was here on a student visa.

• 1:32:21Speaker 01

  And so, you know, we kept in touch and I started to learn more about PayPal. I was really intrigued when PayPal and X.com came together because I loved the business model that that had. And at that point, when he made me another offer and the opportunity was actually to report to Peter, Peter Thiel, that seemed like something I shouldn't turn down. So I accepted the offer and I was so delighted they took a chance on me.

• 1:32:43Tim Ferriss?

  Why did it seem like something you shouldn't turn down? Because Elon and Peter were not the Elon and Peter in all marquee lights of today.

• 1:32:52Speaker 01

  No, no, no, just earlier, obviously. I loved the business model and let me be clear, I still vacillated because, you know, I had to pay back an enormous amount of student debt. I didn't have any money. I'd run out of money, actually, in second year of business school and was living off borrowed funds from friends of mine and was struggling to make rent.

• 1:33:10Tim Ferriss?

  Did your family know this?

• 1:33:13Speaker 01

  They did. They didn't have money. I didn't grow up with wealth.

• 1:33:15Tim Ferriss?

  Understood, which I'm wondering what your family, assuming you were in contact with them, what did they say about this? How did, how did those conversations go? Were they worried about you?

• 1:33:25Speaker 01

  Yeah, they were. Of course they were worried, but they, I mean, they didn't have the means to be able to support me. So, you know, Peter, the person who was my, Peter Baird, the person who I worked for at McKinsey, he lent me some money. My best friend, who was working in London at that point, was my best man when I got married. He lent me some money. My now wife, who was a classmate, we were dating already. She lent me some money. It was embarrassing at some level, but I, you know, I had to get through. And so I was struggling with the decision because it was an expensive decision to walk away from going back to McKinsey or maybe joining Goldman. And so I struggled with those two choices and the choice to go to a startup. And my wife, actually, who studied computer engineering at Carnegie Mellon, who's also an immigrant from Singapore, she and I had

• 1:34:07Speaker 01

  long conversations and she really encouraged me to take the startup route. And she'd worked at startups before she came to business school. We were classmates. We'd met there. And so she was a huge influence. I made that decision. I liked the business that they were building. It was clear that the payments piece was a way to make a very, well, there was a clear path to turning it into a revenue business. I thought that the combination of X and PayPal would really dominate the P2P payment space. And I fell in love with the business and the people.

• 1:34:36Tim Ferriss?

  Was there ever a moment in the first handful of years where you second guessed that decision? Do any particular moments?

• 1:34:48Speaker 01

  Two weeks later. My offer letter was signed on March 30th, 2000. April 12th, the NASDAQ has a massive correction. I mean, literally two weeks later. Then I go to a class where Meg Whitman was a guest lecturer. She was a guest speaker in one of the classes I was taking at Stanford. I'd already accepted my offer to join. And she came into this class and she says, well, we own this payment service called Billpoint, and we're going to crush this annoying little startup in Palo Alto called PayPal. Like, don't say that. It's like, I'm going to go work there. I thought we played nice in Silicon Valley. What's going on here? So then we had the fraud challenges.

• 1:35:29Speaker 01

  Then our burn rate was $14 million in June 2000, before we started to charge for payments, and our burn rate was accelerating.

• 1:35:38Tim Ferriss?

  Could you explain the fraud challenges, just so people don't misinterpret what that means?

• 1:35:44Speaker 01

  So firstly, PayPal wasn't generating revenue yet. So whenever somebody accepted a transaction on PayPal, let's just say it's a $100 transaction. Roughly speaking, 2.5% was the fee that goes back to the credit card associations and the issuer of the credit card. So we were paying that $2.50 for every single transaction that was happening on PayPal and never charging the recipient, the merchant, for the transaction. So our losses were growing very, very quickly. And then we were dealing with two types of fraud. The first is unauthorized fraud. This is where somebody stole your credit card number, enters it onto the PayPal website at that time, charges $100 and withdraws the money and runs away. And then you get your credit card statement at the end of the month and go, I didn't authorize this transaction. You file a chargeback. PayPal wasn't the hook to pay you back your $100.

• 1:36:29Speaker 01

  So we had to protect against this unauthorized fraud use case. And then there's merchant fraud, which is, you know, the person said they'd ship you something. It never arrived. It arrived damaged. It didn't look the way it did on the, you know, on the website, things like that.

• 1:36:43Tim Ferriss?

  So you have, was it a crisis of faith or were you like, hmm, not sure about this? Like, how severe was the second guessing?

• 1:36:54Speaker 01

  Well, I never thought about quitting, by the way. It was more just, I'm not sure we're gonna make it. I might have to row a boat back to South Africa.

• 1:37:03Tim Ferriss?

  Okay, so why never consider quitting? This is interesting to me. Not saying you should have quit, clearly it worked out. But why the stick-to-it-iveness despite all of the challenges? The massive NASDAQ correction? Why never thought of quitting?

• 1:37:25Speaker 01

  I don't know. We were, I felt like we were in it together as a team. We had incredible spirit and camaraderie within the building. I felt like we had each other's backs. We became good friends. I mean, it's part of the reason I think the PayPal mafia was as successful as it was is we formed incredibly strong bonds. Then, I don't know, we just rallied as a team and we've sort of felt we're gonna build this and if we don't build it, we're gonna, you know, we'll go down with the ship rather than abandon ship. It was just the sentiment. So we just kept trying, you know, problem after problem, whether it was fraud, whether it was eBay trying to kill us, whether it was regulators, whether it was Visa, we just kept fighting. I don't know, maybe we're too naive to understand that it was foolish.

• 1:38:05Tim Ferriss?

  Well, I mean, I think that goes for a lot of founders who end up doing very well. There are people with creative projects. I mean, you hear it all the time. It's kind of cliched at this point, I guess, but if they, if they had known what was involved at the outset, they never would have done it, right? But they did it also. So we're talking about PayPal. Clearly, all's well that ends well. And I'd like to try to flesh you out a little bit as a human, as opposed to someone who steps up and hits home runs nonstop, which you've had a lot of home runs, to be clear. But do you have, or could you describe a meaningful or favorite failure?

• 1:38:49Tim Ferriss?

  And by that, I mean, anything that seemed like a failure at the time or was a failure that was particularly valuable for you, looking back, or that set you up in some fashion for later success? Does anything come to mind?

• 1:39:06Speaker 01

  Did you say favorite failure?

• 1:39:10Speaker 01

  Did you say that?

• 1:39:11Tim Ferriss?

  Those are the words I used, yes.

• 1:39:14Speaker 01

  Failing sucks.

• 1:39:17Speaker 01

  It's painful. I mean, I don't know if I'd use the word favorite.

• 1:39:21Tim Ferriss?

  Yeah, yeah.

• 1:39:22Speaker 01

  Most insightful.

• 1:39:24Tim Ferriss?

  Insightful, yes.

• 1:39:25Speaker 01

  Okay.

• 1:39:26Tim Ferriss?

  Yes, we can, we can definitely, we can definitely re-label it however you like, but.

• 1:39:31Speaker 01

  Yeah. I say that whimsically, Potter, because I really hate losing.

• 1:39:39Tim Ferriss?

  Also, something common for quite a few members of the PayPal mafia.

• 1:39:45Speaker 01

  Yeah, which, you know, has its downsides, obviously. So, one of the things we talk about in our partnership is the sins of commission and the sins of omission. And the sins of commission is we made an investment we shouldn't have. And the sins of omission are the ones you didn't but should have. And I've probably made six, seven investments in my career already that literally went to zero.

• 1:40:12Speaker 01

  And I don't think I should really highlight any of them because we made a good try, the founders were great, didn't quite work out, and it was valiant. We did what we, we could. I will tell you that the first time I had an investment that went to zero was a $10 million complete write-off. I literally cried in our partner meeting because I had such an immense sense of shame and guilt for having failed. And for having lost money for our limited partners. And it was an important moment partly because my, the senior partners at Sequoia, I think part of what we do well as a team, part of our longevity is the way that we help each other. And so senior partners who had gone through this themselves were there to support me and to, you know, guide me through this. Because the danger in the business is if you've had an experience like that is you recoil.

• 1:40:58Speaker 01

  And you become very careful and you'll never get back to the glory days. Maybe like an athlete who has a severe injury and they never want to test that knee again. You know, because they had a bad knee injury or something, they'll never attain what they had in the past. So, so that to me was a very painful experience. But the ones that really sting are the ones we should have made. And I think back to meeting Jack when he was at Twitter. I met him and Ev, and we had an opportunity to invest in the series at Twitter. This is in 2007. So this is before the iPhone was released, there was no Twitter app. This was text messaging, different business. And I just didn't dream enough. I failed to imagine what might happen with a service like this. And that was incredibly painful for me.

• 1:41:43Speaker 01

  And we missed the A, and we missed the B, and we missed the C. And that was a huge lesson for me. And I, you know, sometimes you can explain away an investment you didn't make by saying, well, ex ante with those same facts, would you make the same decision today or not? Because obviously ex post, you should have made the investment. But ex ante, you know, sometimes things just, you know, there were twists and turns on the, on the road to company building. And so maybe you could justify that the Series A was a bit more random because it took a lot from there to where they were in, say, 2010. But by 2010, we should have looked at it and reevaluated our decision. And that I feel really guilty for. That was terrible. I really, really messed up for not revisiting assumptions.

• 1:42:26Tim Ferriss?

  What did you learn from that in terms of things that you discounted that you shouldn't have, things that were invisible that you should have made visible? I'm wondering what you carry forward from that.

• 1:42:39Speaker 01

  The two things are imagination, dreaming, sitting back for a second and saying, and my partner, Mike Moritz, often hammers this home for us in our partner meetings, when he was part of the team full time, was, what if it goes right? You know, we're in the business of investing, we're in the business of not investing. So assume for a second it goes right. What could you imagine this being? Just imagine for a second, instead of, you know, it's the pre-parade exercise in some sense, just put on your thinking caps. I remember being in a meeting with Mike and Max Levchin and Jeremy Stoppelman when Yelp was an idea, an idea in 2005. And Mike in a meeting said, I imagine a future where there are Yelp stickers outside restaurants.

• 1:43:24Speaker 01

  I mean, that was an amazing insight, an amazing vision for the future, which came to be true. And so I'm always reminded about the need for imagination in our business, the need to be naive at some level. If you become a curmudgeon in the venture business, you're done. You need to be naive, you need to dream. So that's the one. The second one is learning a little bit from behavioral economics of the need to revisit your assumptions. So I was really stuck in a sunk cost fallacy where I'd made a decision to, you know, my recommendation was for us to not invest. Wrong decision. So let's dig my head into the ground and hide and just keep saying, we shouldn't invest, we shouldn't invest. Because why admit that I was wrong? And so you need to be able to revisit your decision and admit you were wrong. So we got the Series A at Square wrong.

• 1:44:11Speaker 01

  And we corrected it. And we paid up for the Series B and I helped lead the investment and I had to swallow my pride. I'm sorry, team, I should have recommended it nine months ago. My bad. Now we're paying a high price for the investment, but I still believe in it and I think that you job sign. And psychologically, that's a very difficult thing for people to do. And so we want to create that kind of safety for us in our investment team.

• 1:44:32Tim Ferriss?

  We're going to come back to changing your mind. And before we get to that, though, I just want to read something that I think is profound, which I'd never really thought of before. This is from Don Valentine. And I am paraphrasing here, but I understand that he said to you at some point, maybe in the interview process, that successful people join venture capital only to have to face the fact that good investing means taking risks and startups that are more likely than not to fail. You know, coming to grips with being wrong, not 5% of the time, but 30% of the time, 40% of the time, really eats at your self-confidence. I think that's a quote from you, actually. So you had this experience of crying in the partner meeting.

• 1:45:16Tim Ferriss?

  Did it continue to be difficult? I suppose I'm wondering if there was a moment, a particular company, when you can identify that you became more comfortable with some of your portfolio companies going to zero. Is there anything that helped with that, aside from the support of the partners, say, in that particular meeting?

• 1:45:39Speaker 01

  It wasn't the support of the partners, just in that meeting. In general, I think we started to have conversations about not doing postmortems. Because at one point, we had an exercise of doing postmortems on investments. You know, we got this one wrong. Let's hammer into each other why we got it wrong. And what does that breed? That breeds a culture where people are going to be scared. Scared to take chances. And if you're dealing in a powerful business with asymmetric upside, why cry over the yet another one that failed? You need to focus on the ones that really succeed. That's where the business is won. Now, obviously, if all you do is you make a dozen investments that don't work out, then you probably need to go do something else with your time. So you need to get enough ones that are good, obviously, to survive. So that was part of it. We stopped doing postmortems and we supported each other.

• 1:46:23Speaker 01

  It was clear to me that my partners weren't judging me and that my head wasn't on the block for the next failure. I felt secure enough that I could make decisions and knew that I was part of the team. It wasn't as though, maybe you want to use a sports analogy. If you go for a crazy shot, are you going to be cut from the starting team next game? No, because you took a rational shot. It maybe didn't drop that time. And there are probably a million Michael Jordan quotes you can use that make that point. So that was one piece. The other one was, at some point, you have enough success where you realize, well, I made an investment that made us $500 million. That excuses three of those failed $5 million investments many times over. You have to get over it. You just psychologically have to accept that you just have to move on from that failure and not have it encumber you. Learn from it. Don't dismiss it.

• 1:47:08Speaker 01

  But you just rationally have to look at the math and go, okay, next. And so part of it helped me, by the way. I was in the doldrums in 2009. I actually thought about quitting the business. You know, YouTube was a great success early on in my career. It was incredibly fortunate to have had such a big success within my first three years as a venture investor. And then I had a pretty lean backlog. And I wasn't sure I was cut out for it. You know, one-hit wonders, is this going to be one and done? And then, you know, I kept at it and I realized that there's always another red bat in our industry. So in 2009, after I thought about it, after my partner Doug and Mike and Jim really pulled me out of my doldrums,

• 1:47:49Speaker 01

  we ended up investing in Unity and Eventbrite and Square and MongoDB and a list of companies. And it was just this purple patch of investing. And so it just reminded me, you don't give up. Keep going.

• 1:48:02Tim Ferriss?

  How did they pull you out of your doldrums? What did they say? Do you remember anything specific, even if it's paraphrased or a rough guesstimate? What did they actually say to you?

• 1:48:12Speaker 01

  Well, there's a balance that we have of, I've not learned since I've been there long enough to recognize when other people go through this as well. And, you know, you can't coddle, you can't be there with making it too safe, too many boundaries, too many guardrails. People actually have to walk through a little bit of the valley of despair on their own and wrestle with it. But at one point, Jim realized that I was going too far and he would take me for walks around the office. I don't remember the specifics of what he talked about, but I remember him spending a lot of time and investing in trying to get me into the right space. And then Doug Leoni showed up at my house one day with homemade pesto. And he was knocking on the door on a Saturday. I honestly didn't feel like opening the door. I was like, leave me. I want to be miserable by myself.

• 1:48:57Speaker 01

  And, you know, Doug knocked and he had literally from basil that he grew in his own garden, he brought this little jar of pesto for me, which was delicious, but it was the sign that he was there for me and knew what I was going through. And that was memorable and had a big impact.

• 1:49:15Tim Ferriss?

  So mentors, you mentioned changing your mind is important and you said, let's come back, if you like, to mentors because you have one in mind.

• 1:49:26Tim Ferriss?

  Do you still have that thread? If so, would you like to pick up on that?

• 1:49:30Speaker 01

  Peter Thiel. Peter came back as our CEO. If you've read any of the PayPal books, I know the story, you know, we as a team rallied to get him back as CEO. It was difficult because the board wasn't fully supportive and we had to keep, as a team, we had to keep interviewing other candidates and we kept feeling, no, but Peter, we're a team and Peter's, Peter's our man and we want Peter to be our leader and our CEO. And so Peter had an incredible ability to change his mind. Peter would say, we're turning left, we're turning left. And then, you know, we weren't sure, we'd go analyze, bring him data, we'd show him the results and he'd say, yep, I've just looked at it, we're turning right. And he would just turn like that on a dime and he had no qualms about this. And I think most people get so stuck in escalation of commitment where I need to

• 1:50:12Speaker 01

  remain consistent with the person you thought I was yesterday, otherwise I'm going to be viewed as irrational. And there's a whole branch of psychology that talks about this, right? And to some extent, people view flip floppers negatively, especially in politics and things like that. But in business, it's incredibly valuable if you're just rational. And Peter did that to a T and made him an incredible CEO.

• 1:50:32Tim Ferriss?

  Do you think that's just Peter out of the box, different motherboard, different programming, or is that something that he cultivated? And if you think there's a component of it that is cultivated, how do you think he did that? Or how would you help someone to develop that ability?

• 1:50:51Speaker 01

  So I don't know if, because I obviously didn't know him growing up. I met him in the PayPal context. So I mean, Peter is just so supremely smart and rational that I, my guess is it's innate in him and he just, he doesn't suffer that kind of baggage, if you will. And he thinks for himself. I think, you know, there are a lot of people that are so worried about what others think of them. And Peter just doesn't seem encumbered by that. Not that he's indifferent to it, but I just don't think he spends his whole life worrying about what others think about him. He just does what he thinks is right. And interesting.

• 1:51:27Tim Ferriss?

  Seems that way.

• 1:51:28Speaker 01

  Yeah. So I think it's innate. I think in terms of cultivating it, just calling it for what it is. In an organization, creating a culture where you're willing to stand up to new information and change your mind, and then praising people for changing their mind on things. I said no to this decision. I've reevaluated. Well, I walked into the partner meeting thinking we shouldn't make this investment. And I've been swayed by your arguments. Or recognizing that somebody else changed their mind and praising them for doing that. I think you need to cultivate that kind of culture.

• 1:51:57Tim Ferriss?

  I find it so fascinating. I'm going to sit with this because it makes perfect sense, although I have some misgivings. So let's come back to it. The not doing postmortems. Psychologically, it makes a lot of sense to me that if you over emphasize postmortems, you could breed fear in those who you want to take risks and therefore it's self defeating.

• 1:52:29Tim Ferriss?

  But I suppose there's some postmortem required to then, at least on an individual level, to change your mind about a company that you said no to, or there's a revision of your thinking that needs to take place. How did you, if any companies come to mind, or it doesn't need to be a specific company, but what is the process that you have gone through to change your mind, to revisit assumptions for any of those investments where you turned down seed to the Series A and then you end up paying up on a Series B or Series C?

• 1:53:02Speaker 01

  It takes work, by the way. I don't pretend that it's easy and that it just comes naturally. I think we've evolved with all these heuristics, and they may be served us well 200,000 years ago when we first evolved as a species, but it hampers us today. So I have to fight it the whole time. We'll start discussing a company that I remember meeting nine months prior, and I can just feel my instincts, like, no, I didn't like it then. Why should I like it now? Why do I have to work and think about it again? I mean, the lazy part of me just wanted to say, no, like, I really made the decision, move on, right? And so it takes effort. It really takes effort. But that's part of why heuristics are valuable, right? There's shortcuts. And for many things in life, shortcuts are great, but if you want

• 1:53:46Speaker 01

  to make important decisions, maybe shortcuts are a curse. And so, anyway, so I don't make it sound like I'm, it just comes naturally. By the way, we do do lightweight postmortems on the things that failed where we made an investment. It was just that we used to have this exercise, which is the sponsor has to go write a memo and, you know, may a culpa.

• 1:54:02Tim Ferriss?

  Right, there was a punishment. Or maybe not punishment, that might be too dramatic, but there was a dire consequence.

• 1:54:10Speaker 01

  It was just too much. We have to learn from them, you know? So we got the space right, but we picked the wrong team. Why did we pick the wrong team? Oh, they had better technology, but they didn't have the right go-to-market capabilities, or they aimed at the wrong part of the value chain. Like, you know, we try to learn from those because it informs future decisions. So I don't make it sound like we're oblivious to the mistakes of the past. But it's then relooking at a company. It's one of the things we analyzed recently, that many of the best investments that had happened in a particular, I can't remember when we did this particular analysis, but many of the best investments that happened in a particular window of time were companies that we had previously met. We'd already met them before. We should have been prepared. We should have had a, we should be even better prepared to make a good decision now. Why do we not do that? And so we've tried to think about,

• 1:54:55Speaker 01

  do we ensure that the people who were there before meet them again because they have a sense of continuity and how far they've progressed, but do we also inject some fresh pair of eyes to help guard against the individual who maybe is jaded by their past experience? Sometimes we have to switch who the point person is because some of the chemistry is just between a founder and an investor. That's a personal relationship. You're joining somebody's board. And so sometimes the person who made the company, and Google is a case in point, where the person who found Google for Sequoia was Doug Leoni. The person who became the board member was Mike Moritz. Mike had the right chemistry with the founders, the right experience because of Yahoo, and that made sense for us. And so we always try to think about what's the right match. Do we have the right group of people in the room? And

• 1:55:37Speaker 01

  at the end of the day, back to the rugby analogy, we have to win as a team. We have to win as a team, which is why things like the Midas list are a little bit insidious from our point of view culturally, because it tries to create individual attribution. When we have a success at Sequoia, when there's a company that goes public or gets acquired, we actually write an email internally and we enumerate all the people that contributed to the success of the company, not just the person whose name is nominally attached to it as the board member.

• 1:56:01Tim Ferriss?

  I love that. Sebastian Malaby, Power Law or The Power Law, I don't know if there's a definite article on the book title. What did he leave out? What did he not cover? Right? What if, if he said, you know what, Roelof, I'd love for you to write an appendix or an afterword or a sidebar, anything at all, just to make this more complete or more compelling? What would you do?

• 1:56:29Speaker 01

  Maybe because of the time period that he covers, I think the professionalization of the industry that's happening right now is something that's not fully captured in the book.

• 1:56:40Tim Ferriss?

  Could you, just for people who don't have a familiarity with the venture capital world, what would be some of the components of that professionalization?

• 1:56:47Speaker 01

  So if you go back 25 years, the typical venture firm had

• 1:56:54Speaker 01

  Eight to 12 investors, just factually, they were probably white men at the time. That obviously is changing very quickly in our industry appropriately. You had a handful of people sitting around a table making investments. The total organization size was maybe 25. You know, they had some assistants, some receptionists, maybe a finance person, maybe they were outsourcing everything. And there was very little offered in the way of services to portfolio companies to help them. It was just small professional services organizations at some level that were investors. And today, our team at Sequoia US and Europe is about 180. And like I mentioned earlier, the investment team is still pretty small.

• 1:57:34Speaker 01

  We have 25-ish investors in our business, but we have marketing capabilities. We have data science, we have engineering, we have products. We obviously offer talent services to our portfolio companies. We have a big finance organization now that manages the complexity of all of this. And so we've just changed as a business to be able to serve founders. You know, the business has gotten more competitive. And so you can't just be money. As you pointed out earlier, there's just so many people who are willing to write checks. You know, that is not a differentiator. What is it that I'm offering an entrepreneur that makes him or her choose to work with me? Because they think that I have a disproportionate impact on their chance of success. Right. And that's partly me, my experience, my partners and what we bring as a team.

• 1:58:20Speaker 01

  And what are the other services around our partnership that we can deliver to help you succeed?

• 1:58:26Tim Ferriss?

  So completely agree, just having watched from the cheap seats where I can, you know, keyboard quarterback, just having observed, I think that would be a really important addition in your appendix epilogue to Sebastian Malaby's book. Now let's say the editor comes back and says, okay, this is great. However, we'd love one example of the professionalization really working. If there's kind of a specific example. And then we'd love for you to include a counter example, if such exists. And the reason I ask, I've been kind of out of this world for a while.

• 1:59:09Tim Ferriss?

  But I do remember back in the day, this was probably, let's call it 2008, 2009.

• 1:59:17Tim Ferriss?

  Which was a great time. I mean, I really lucked lucked out with that time period. So if I'd started this 10 years later, things would look very different. But I remember Steve Anderson of Baseline Ventures always impressing me just because he seemed to do so much with so little, just in terms of actual boots on the ground. So if there was sort of a specific example that you could give of the professionalization really working, I'd love to see. And by the way, just one or two more questions. I know we've gone pretty long, so I appreciate your time. But one example of it really working, and then if there are any counterexamples, kind

• 1:59:56Tim Ferriss?

  of throwbacks or kind of lean and mean operations that you admire and think do a good job.

• 2:00:05Speaker 01

  So when I say what I did, it doesn't mean that other models don't work. I think for us, it's what works repeatedly.

• 2:00:13Tim Ferriss?

  You're right, right.

• 2:00:14Speaker 01

  And even in our own business, there are examples where an individual partner has an idea, forms a connection with a particular team, and can bring that entire opportunity home. And then that partner probably is most of the interface for that company in terms of company building, board building, and things like that. So I mean, and we want to encourage that. And actually, at Sequoia, one of our cultural frameworks is maintaining tension between individualism and teamwork. It's not either or, it's and. We want both. You need to stick your neck out, you need to do exceptional work, you need to be accountable for what you do, but you also need to be supportive as a team member because that's part of what we've been able to endure as a partnership. It's both. So can you do incredibly well as an individual or a collection of individuals? Absolutely.

• 2:00:57Speaker 01

  But it's the cultural consistency for us inside our organization is we need that for us to consistently do well. So to give you an example, I mean, we built internal systems now for us to track companies. So we have, if you give me a company name, I could look it up and I could tell you, have we made it? Who made it? What are the notes? What did they think of the company? I have data science signals that tell me, you know, how this company is doing, the proprietary, to give me a sense of whether or not it's worth pursuing. So these are things that didn't exist in our industry 15 years ago. And Jim, actually, Jim Gates was one of the first ones to help us pioneer with this. He built a system called Early Bird, which is part of how we identified WhatsApp.

• 2:01:37Tim Ferriss?

  Oh, wow.

• 2:01:38Speaker 01

  Because WhatsApp was growing outside America because of the way that cellphone carriers outside America were charging people on a per SMS basis. And in the US, we had all-you-can-eat plans. And so WhatsApp is growing. Our data science effort showed it. And no one in America is paying attention to it because no one in Silicon Valley or the US was using WhatsApp. And so we connected with Jan. He'd worked at Yahoo. And so we were able to use our historical Yahoo connection to make sure we can get to him. But that is a glimmer into the sort of data science capabilities that we've now honed a decade later that give us an unfair advantage. So that to me is a concrete example of how business is better for. It doesn't substitute for the insight, the grit, the salesmanship that an individual partner has

• 2:02:22Speaker 01

  in actually landing an entrepreneur.

• 2:02:25Tim Ferriss?

  I have two more questions. Second to last question is the billboard question, which I ask a fair amount. And if it's a dead end, it's a dead end. Sometimes it is, and I take the blame for that. But if you could put a message, something on a billboard that would reach billions or millions, you pick, of people, could be a quote, could be a question, could be an image, could be anything non-commercial. And this is a metaphor question, of course. Could be a push message on a phone. What might you put on that billboard?

• 2:03:01Speaker 01

  Since I was aware that this was a potential question, I had some time to think about it beforehand.

• 2:03:06Tim Ferriss?

  Perfect.

• 2:03:08Speaker 01

  So my answer would be dare to dream. And the reason I say that is, actually, when I interviewed at PayPal and Peter interviewed me, part of what he talked about is the people's failure to understand repeat games. So if I told you to take a chance on your career with one roll of the dice proverbially, pretty dicey to do that, pun intended. But if instead I told you, look, you have one shot, and if it doesn't work out, there's another one, and another one, another one. By the way, you know, you have many at-bats, so to speak. You have many different opportunities for different companies and over your career. Would you take a chance on something that has a low probability of success and that's fun along the way? Yeah, sure, you would. And so I saw so many of my classmates, I've seen so many people over the years make

• 2:03:53Speaker 01

  safe decisions, played safe. They make these conservative decisions. Oh, I can't take a chance on this thing. What if this company fails? And so, and they just end up getting in a rut. And then, you know, before you know it, they're in their 40s. They have a midlife crisis. They feel that they've wasted their lives. And so, dare to dream, take a chance. Just do something interesting and just think if it doesn't work out, then there's something else. There's something else. Just keep taking more chances.

• 2:04:17Tim Ferriss?

  I love that. And it's good advice for me right now. I have something very absurd cooking with a very low probability of success. So I'm gonna take that as an endorsement of my path.

• 2:04:28Speaker 01

  Absolutely. I mean, the most boring thing is a life left unexamined, right? I mean, it's fun. Who cares?

• 2:04:37Tim Ferriss?

  Yeah, there are.

• 2:04:38Speaker 01

  You've had so much success. I mean, and no one remembers you for your failures, by the way. Can you enumerate the six companies, seven companies that I invested in that were complete write offs? Probably not, but you remember the ones that made it, right?

• 2:04:50Tim Ferriss?

  Yeah. Good point.

• 2:04:52Speaker 01

  Get over it. Go do it.

• 2:04:56Tim Ferriss?

  Get over it and go do it. Well, Roelof, this has been a lot of fun. I've really enjoyed this conversation. Is there anything else that you would like to mention? Anything you'd like to draw attention to, closing comments, or requests of my audience in any capacity? Is there anything else you would like to say? And of course, people can find you online on Twitter and Instagram at Roelof Botha on LinkedIn. The same, we'll include all of these links in the show notes for people who want to find those directly in the show notes. But is there anything else that you would like to add before we come to a close?

• 2:05:32Speaker 01

  I'll just reiterate the dare to dream. Carpe diem, seize the day. Make the most of the opportunities in front of you.

• 2:05:39Tim Ferriss?

  All right, well, that's a perfect place to end. And thank you once again for the time. This was really fun, really enjoyed it, took a ton of notes. You certainly saw me scribbling. People who watch the video will see me scribbling lots and lots of notes. And it's given me a lot to think about, which is great. I'm really excited to pursue this absurd idea that I have. And if it fails, nobody will remember in three years anyway, so it's fine. And for everybody who is interested in resources, everything we've talked about will be in the show notes. Links to everything you can imagine, including all the books and people and so on, at tim.blog/podcast. And until next time, be just a little kinder than necessary and follow the advice.

• 2:06:23Tim Ferriss?

  Dare to dream, get after it, get it done. Thanks, folks.

• 2:06:29Tim Ferriss?

  Hey, guys, this is Tim again. Just one more thing before you take off, and that is Five Bullet Friday. Would you enjoy getting a short email from me every Friday that provides a little fun before the weekend? Between one and a half and two million people subscribe to my free newsletter, my super short newsletter called Five Bullet Friday. Easy to sign up, easy to cancel. It is basically a half page that I send out every Friday to share the coolest things I've found or discovered or have started exploring over that week. It's kind of like my diary of cool things. It often includes articles I'm reading, books I'm reading, albums perhaps, gadgets, gizmos, all sorts of tech tricks and so on that get sent to me by my friends, including a lot of podcast guests.

• 2:07:11Tim Ferriss?

  And these strange esoteric things end up in my field and then I test them and then I share them with you. So if that sounds fun, again, it's very short, a little tiny bite of goodness before you head off for the weekend, something to think about. If you'd like to try it out, just go to tim.blog/friday, type that into your browser, tim.blog/friday, drop in your email and you'll get the very next one. Thanks for listening. This episode is brought to you by Shopify. Shopify is one of my favorite companies out there, one of my favorite platforms ever. And let's get into it. Shopify is a platform, as I mentioned, designed for anyone to sell anything, anywhere, giving entrepreneurs the resources once reserved for big business. So what does that mean?

• 2:07:55Tim Ferriss?

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• 2:08:39Tim Ferriss?

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• 2:09:20Tim Ferriss?

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• 2:10:02Tim Ferriss?

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• 2:10:20Tim Ferriss?

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• 2:11:00Tim Ferriss?

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• 2:11:44Tim Ferriss?

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• 2:12:26Tim Ferriss?

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