Sequoia Capital Part II (with Doug Leone)

The wait is over. Acquired returns with a very special Part II of the Sequoia Capital story, joined by the very best person in the world to help us tell it - Doug Leone. Since 1996, Doug has served as Sequoia’s Global Managing Partner, in charge of overseeing the firm’s incredible expansion from a single, $150m early-stage fund focused on Northern California to the multi-billion dollar global powerhouse it is today. Doug is incredibly candid and insightful about all that has gone into building the modern Sequoia: from winning Google and missing Facebook, to the enormous (and enormously successful) bet on decentralized expansion in China and India, to the firm’s “proudest moment” at the depth of the dot com bust. This episode is an absolute must-listen for anyone in the tech, startup and venture ecosystems today. Thank you to Doug and all of the Sequoia team for joining us to make it happen! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Note: You can listen to Part I of our Sequoia story, which dives deep into the history and background of the firm, here: https://www.acquired.fm/episodes/sequoia-capital-part-1Sources: https://www.brunswickgroup.com/sequoia-capital-doug-leone-silicon-valley-i11786/https://www.sequoiacap.com/people/doug-leone/https://www.sequoiacap.com/newsletter/2018-06-20-doug-leonehttps://www.youtube.com/watch?v=5Er4QcNdjVUhttps://www.linkedin.com/in/douglas-leone-a2714/https://www.youtube.com/watch?v=4cl8X02Xd1Ihttps://www.youtube.com/watch?v=KrJgwKiEpaI

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  Hey, Acquired listeners. Instead of a cold opener, we want to use this space to dedicate today's episode to the late Don Valentine, who passed last year.

• 0:08Ben Gilbert?

  We are excited to be working with Sequoia today to bring you something really special for part two. And with that, on to the show.

• 0:26Ben Gilbert?

  Welcome to Season Six, Episode Two of Acquired, the podcast about great technology companies and the stories behind them. I'm Ben Gilbert.

• 0:34David Rosenthal?

  I'm David Rosenthal.

• 0:36Ben Gilbert?

  And we are your hosts. Today, we tell part two of the Sequoia Capital story. We are going to pick up where we left off. In 1996, when Sequoia's legendary founder, Don Valentine, turned the firm over to Sir Michael Moritz and Doug Leoni. In this modern era of Sequoia since 1996, Sequoia has been the investing partner behind an absurd number of the industry-defining companies of the last 25 years, including Yahoo, Google, PayPal, LinkedIn, YouTube, Reddit, 23andMe, HubSpot, WhatsApp, Dropbox, Airbnb, Docker Stripe, Instacart, UiPath, DoorDash, and Robinhood.

• 1:13David Rosenthal?

  Woo!

• 1:14Ben Gilbert?

  No kidding. And while David and I belonged into part one of Sequoia's history on our own, we have the very best person in the world with us today to help us do part two right, Doug Leoni. Now, David, who is Doug?

• 1:28David Rosenthal?

  Doug is the Global Managing Partner of Sequoia Capital, in charge of overseeing the firm's many diverse businesses, which we will get into, from seed to global growth investing across the US, India, and China. Doug first joined Sequoia in 1988 after famously cold-calling Don Valentine, and was the champion of Sequoia's expansion from a single $150 million early-stage fund to the multibillion-dollar global powerhouse it is today. Welcome, Doug, and thanks for joining us. Thank you very much for having me. It's my honor to be here. It's great to have you.

• 2:00Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you prove that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:19David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 2:40Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:02David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:20Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you.

• 3:48David Rosenthal?

  And now, over to David to take us into Sequoia with Doug.

• 3:54David Rosenthal?

  We're going to talk a lot about Sequoia during your time and its evolution. But before we do, we want to ask you to tell your story a little bit. Your family immigrated from Italy to New York when you were 11 years old. What brought your family here?

• 4:08Speaker 02

  So we had a bit of a World War II heritage where my dad's sister got married to a lieutenant, ended up in America, had a child, call mom. And so now we had grandma for me and aunt in America. And we were the Italian family with the American Ben. My first name was Douglas, but in the church you cannot be called Douglas for the simple reason that you need to have a name from one of the 365 saints. So in Italy, I was Mauro Douglas Leoni, or Douglas, as my mom called me and my dad called me. And in school, I was Mauro. When I came here, I just flipped the two names.

• 4:53Speaker 02

  But a long story short, my dad saw an opportunity, maybe his career, it was not going so great in Italy, so an opportunity to come to America. He came here. It took me about two years and my mom to come here. I went two years without seeing my dad. And then we finally came here in August 1st, 1968.

• 5:14David Rosenthal?

  Wow. What did your dad do in New York?

• 5:18Speaker 02

  In New York, he was a service engineer for a marine equipment company. And the most he ever made, I remember, was $25,000.

• 5:27David Rosenthal?

  Wow, that's amazing. So when you arrive finally in 1968, in like America in 1968.

• 5:34Speaker 02

  By boat, by a Michelangelo, past the Statue of Liberty to the west side of Manhattan.

• 5:41Ben Gilbert?

  Do you remember the first time you saw the Statue of Liberty?

• 5:43Speaker 02

  Absolutely. I remember being outside. I remember crying day one and day two and just being in a fog for the next five days when we did the crossing.

• 5:51David Rosenthal?

  Wow, that's amazing. So America in 1968 must have been pretty different than the world you left in Italy, right? How was adjusting and, you know?

• 6:03David Rosenthal?

  High school.

• 6:04Speaker 02

  So it was really interesting because it is, what I am here today is really a product of those times. I was an only child with aunts and uncles with no children. So I was overloved, very warm, very warm upbringing, lots of trust, lots of love. And I came here and it was a shock to my system and it was abusive in high school. Imagine, you know, it's not like being in school where right now, where everybody preaches, you have to be good to your fellow kid and all these wonderful things. There you get the crap beaten out of you emotionally, physically and so on.

• 6:44David Rosenthal?

  We talked about this with Jan in WhatsApp. Same deal, immigrated in high school, had the same experience.

• 6:50Speaker 02

  And so that makes up the two sides of me, which is the very warm side, the very big heart and the super tough side where, where I just don't give an inch.

• 7:00David Rosenthal?

  So you've talked about in other talks you've given that we've listened to, that you do the Myers-Briggs test here at Sequoia. How did, how did those combine into what your Myers-Briggs type is?

• 7:10Speaker 02

  I'm not sure those affect a Myers-Briggs, but this is how I tested early on and how I changed. People think of me as an extrovert for the simple reason that if I have to turn it on, I can, especially as I get older, I went from insufferable to charming. It's amazing how it happens. But what I really am, I'm halfway between an introvert and extrovert, exactly halfway in between. And, and early on, I was tested as a process-driven person, meaning my whole mind is a tree structure, there's a lot of logic to it and so on. And in 2012, when Mike Moritz stepped down and the relationship I had with Mike, he was the intuitive one. He was really the leader

• 7:54Speaker 02

  of Sequoia. I was 1A. I was the COO, if it helps. I understood that would not be a winning formula. I always thought that great COOs would make lousy CEOs. Now, I'm not the CEO here, but you get the point. And so I took myself completely out of the comfort zone and understood I had to rely on intuition. And when I was tested in Maysbrig by a lady that tested me. She was shocked by the transformation. And she said, you and Michael Dell are the only two people I've ever tested that have made that change. And when I hear people can't change, I chuckle a little bit because I felt like I changed. I felt like I had to rely on my gut.

• 8:38Speaker 02

  And I can't have all the answers in tree structure. Prior to, you know, letting people create. I can't manage every inch. I just left. I have to let terrific people do their thing.

• 8:50David Rosenthal?

  Yeah, well, I can totally imagine, you know, the things that we're going to talk about that you championed here at Sequoia. Doing that is, I think, what led to a large part of your success. So you finished high school. You must have been a pretty good student. You go to Cornell and then Columbia to study engineering, right?

• 9:06Speaker 02

  So I was a great student. Until I grew up, I went to Cornell. I got thrown out of Cornell after my first year. My, my, my first two.

• 9:16David Rosenthal?

  That's not in your bio.

• 9:17Speaker 02

  My first two semester grades were one, three, four, and one, two, two. Which is not easy to do. I, I, I did not see half of my professors because I just never went to class.

• 9:30David Rosenthal?

  And what was behind that?

• 9:31Speaker 02

  Uh, and I'll mention in a second. What was behind that after being abused in high school, I was never abused when I was in Italy. I was a smart kid who was athletic in high school. Oh, my God, that was rough. At Cornell, I became normal again because when I went to Cornell, I could speak English. And all of a sudden I was one of the very accepted kids. And I kind of lost my mind. In some ways, I lost the opportunity to learn, but I became normal again. Now, for a fall term, I went to a two-year school to make up a couple of classes where I got Fs. Mainly math and physics, which are my strongest classes. I mean, I love math and physics.

• 10:11Speaker 02

  And I also was working part-time, doing the deliveries, talking to truck drivers. And it just showed me a range of life of what life could become. Nothing wrong with truck drivers. Don't get me wrong. Was it right for me? Probably not. So a little bit of the carrot and the stick. I, I went back to Cornell. I did fine. I graduated and I went to work and I decided that I needed to do something.

• 10:37David Rosenthal?

  And that's something you end up in sales. Was Prime Computer your first?

• 10:40Speaker 02

  No, the first job was selling computers for Hewlett Packard. I remember there were three people, there were two people in a room aged forty five to fifty, and they said, quote, kid, don't worry, we'll split Manhattan into thirds. And I didn't know anything, so I trusted them.

• 10:57David Rosenthal?

  Seriously?

• 10:57Speaker 02

  One got all of Wall Street, one got from Wall Street to Ninety Sixth Street.

• 11:01David Rosenthal?

  Midtown.

• 11:02Speaker 02

  And I got, and by the way, thi- this is nineteen seventy nine, where it wasn't safe to walk north of Seventy Ninth Street.

• 11:09Ben Gilbert?

  And that's your territory?

• 11:10Speaker 02

  Mine was north of Ninety Six. I didn't even get Seventy Ninth Street.

• 11:14David Rosenthal?

  This is pre Giuliani and Bloomberg.

• 11:16Speaker 02

  Oh, yeah, pre Giuliani and, well, pre the fact that we became urban and so on, burned out buildings and so on. But that was a lucky break, because one thing that's up there is Columbia. And I remember there was a dean of the School of Engineering, Dr. Traub, I still remember his name, that came from CMU. And he explained to me what the ARPANET was. And he explained to me what open systems were. And yes, I went to Prime for a year and a half because I wanted to sell computers on Wall Street, because I knew that's what the money was. But that was where the short term money was.

• 11:51Ben Gilbert?

  Was there prestige associated with that, or was it just?

• 11:54Speaker 02

  Selling money on Wall Street was, was money. It wasn't prestige, it was money. And Prime was the second youngest company to be invited on New York Stock Exchange. It was a go-go company. I'd chosen well. But I realized that was only a sales career. And I was beginning to crave for something more. I wanted to, quote, make it. What does that mean? I remember walking on Sixth Avenue and, and seeing all these buildings. I said, how do people become successful? Clearly, there must be more. And so I said, probably I want more risk. So I cold called Vinod Khosla, well, actually, it was Owen Brown, which was the, the CEO at Sun at that time. I got a job.

• 12:36David Rosenthal?

  And had you heard about Sun because of?

• 12:38Speaker 02

  Because of open systems. I went back to Columbia, open system, call Sun Microsystem, employee number, I don't know, fifty, sixty, I can't remember. First people. The first person in five states. And I started doing volumes of business, so much so that the board. Wanted to know who this kid was. Vinod Khosla wanted to know, Scott McNeely wanted to know.

• 13:00David Rosenthal?

  It's always a good sign.

• 13:01Speaker 02

  And I had an idea. To open Wall Street and the reason I did that, I learned of a machine called Convex, which back then was a high processing math. Processing type of machine and I read in Business Week that P H Es were dropping out of Yale. Going to Bear Stearns on Wall Street. What does that mean? And and I don't know if you want to hear the story, but the story was, I got a call from Bear Stearns. They said, can we get a budgetary quota? Budgetary quote is somebody you haven't met, just wants to know how much. I gave someone and my quota was two million. I gave someone a budgetary quota I hadn't met for two point eight million. I went on vacation for two weeks. I came back and there was a purchase order on my desk for two point eight million. I said, truly, holy, holy cow.

• 13:47David Rosenthal?

  I think that is the definition of product market fit right there.

• 13:49Speaker 02

  Exactly. And so what I did is I poured all my time on Wall Street, so much that my office was a depot. Because Sun could not support these systems. So my office, my desk was a print stand that had a hole in it for the paper with messages all around it. I had computer systems that were missing out of sun all around me because if you were down. I brought you back up in an hour and a half. I just drove to Wall Street with a machine and Scott McNeely.

• 14:18David Rosenthal?

  So you're a support engineer.

• 14:19Speaker 02

  Oh, yeah. I was doing all this volume. I go, what's going on? And Scott came to see my office. He was impressed and horrified at the same time. And this is the CEO of Sun Microsystems and we just did lots of business. And long story short, I met Vinod Khosla, venture capitalist. What the heck is that? And I want to be one of those. Uh, boy, one, three, four, one, two, two. How do you get into business school? So I went to get a masters at Columbia. I got in luckily and I did extremely well, which padded the resume a little bit so I can get into business school. And I went to business school and then I cold call my way. Uh, into the venture industry.

• 14:57Ben Gilbert?

  Yeah, from what I could read, you you sent and called eighty different firms.

• 15:03Speaker 02

  So there was back then, there was a big green book called Pratt's Guide to Venture Capital Sources. Somebody should publish that again today. And I took all the venture firms in three states, Connecticut, no, no, four, Connecticut, New York, Massachusetts, California. And I just actually wrote letters because you wrote letters during those days. And in California, I would say things like, I'm going to be in California. Of course, I wasn't going to be in California. Follow up as if, as if, you know, God knows it was coming to California.

• 15:37Ben Gilbert?

  How many entrepreneurs do that to Sequoia now too? Well, I'll be down in the Bay Area in case it happens to work.

• 15:42Speaker 02

  Well, I pushed a little and in the case of Sequoia, there was an assistant, a spicy New York person called Barbara Russell that worked for Don, did the distribution, may have been a reception. And, you know, it was at a time where somebody did it all. And so I sweet talked my way with Barbara. And she tells me, she's become a very good friend. She's no longer here. She's retired up in Seattle. She said, she went into Don's office and she said, this kid may have something. You may want to spend some time with him. And so on a five o'clock on a Monday, I was interviewed by Don. What did he ask you? One question, what's important? And I talked for three minutes.

• 16:27Speaker 02

  And silence didn't bother Don. He could just be, we could be quiet for an hour. It'd be okay with him. And he waited twenty, thirty seconds, which seemed like an eternity to me.

• 16:38Ben Gilbert?

  Terrifying.

• 16:39Speaker 02

  And then he said, what else? And I laughed. I said, Don, what do you mean, what else? I just told you everything. But, you know, he liked my, how genuine I was, I think. He loved the sales approach because a great company has product from the inside out and sales from, and the customer from the outside in. And he read correctly that I'd be a hustler, but not in the word hustler, that I would hustle, that I was smart, I was human. And he knew the question was, can we reprogram him? Can we break him down to pieces and will he build himself up?

• 17:19Ben Gilbert?

  Doug, what do you think in retrospect are the differences between what has made you an amazing technology investor versus what you thought would make an amazing technology investor at that point in time?

• 17:31Speaker 02

  It's a difficult question for me to answer because I don't think I thought. I didn't know anything about what would make a technology investor. What has led to my success is I hustled a lot. There's people like Jim Getz who can product manage with a founder of product. There are people like Mike Moritz who have incredible intuition. Guess what I did? I bet you can guess. I made thousands of cold calls. I get in front of everybody. I am not kidding when I said I went from being insufferable to sufferable over time. Charming was maybe the last five years. It's a journey.

• 18:15Speaker 02

  And so, exactly, it was a complete journey. And so, I just worked and build knowledge and I developed a network and some luck, there's always some luck, lots of hustle, some brain, some skill. I was able to generate some of the right deal flow and had a very lucky good start. My first three investments were IPOs, which was good, but it also built a false sense of confidence because after that, I thought I knew something and I woke up one day in 2001, I looked at my 10 boards and I said, oh my God, there's not a winner there. And so, it was an early success. Go through the abyss and I see investors here go through the abyss.

• 18:59Speaker 02

  And when someone goes through the abyss, you gotta let them pull themselves out. If they come out the other side, they're terrific. And so, I went through the abyss and then I went.

• 19:08Ben Gilbert?

  What were those first three that were IPOs?

• 19:10Speaker 02

  There was Arbor Software, which is a darling software company that went public and then merged with Iperion. When it went public, it was the largest win Sequoia had ever had. A company called INS, which was a services company built on the notion that companies cannot Swallow routers as fast as they'd like to swallow routers and therefore we could have a services company. A company we took public and sold for seven billion dollars to to Lucent. Seven billion in nineteen ninety eight was a lot of money. Yeah. And a company called Renaissance Software, which was a Wall Street trading system. Oh, yeah.

• 19:51David Rosenthal?

  Yeah.

• 19:51Speaker 02

  Which was, which was really my strong point. I I understood what I was looking there. Huh. Uh. I did not know that was a Sequoia investment. And a funny story in the case of Arbor Software, if you want to know the real story, I was here for three years. I almost got thrown out. People wanted me out. Don is the one that saved me. Give, quote, give the kid more time kind of attitude. And I needed to get something done. The founders of Arbor were two weeks from bankruptcy, personal bankruptcy. That night they came to my house. I said, you got to get a deal done. I got to get a deal done. I think you're investable. We created a presentation. Wow. That that got presented the next day to Sequoia and the insight I had and Don Valentine helped with that, they understood

• 20:36Speaker 02

  the problem. They end as consultant, they understood the domain of the pain. And they just didn't know how to articulate it in a fundraising pitch. And so we created a pitch and we got the company. I say we because even though it was Sequoia, we got the company funded. The partners trusted me so much that one partner, and I won't tell you who, the only reason why I did it is because there was a credible co-investor in his mind, nothing to do with what I knew or said. But we got the deal done and we we got the investment made. Just starting with two people, not a line of code. Yeah. A seed, if you will, back then, although it was a series eight, two million, and we made it.

• 21:17Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 21:31David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern, like the risks are real.

• 21:45Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 21:55David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 22:13Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 22:29David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 22:45Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 22:55David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. So we ended part one of our Sequoia history with Don in 1996 calling you and Michael into a conference room and passing the firm over to you. What was that day like for you? I assume these three companies had become winners and...

• 23:22Speaker 02

  I could imagine the conversation to we should make Doug a partner. I'm sure it wasn't an easy one. In one case, I had a track right. In the other case, remember the insufferable part. And the conversation must have gone around, what is he going to be like if he's a partner? Is he going to turn into a monster? Kind of conversation, which I didn't, obviously. It's not as black and white as Don turned it over to Mike Moritz and me. I actually went back and looked at carrier allocation, not because I wanted to see how much carry I got. I wanted to see if my memory served me right. It turned out that Mike and I had more carry than the other folks. It wasn't the black and white. It's yours. We were...

• 24:01David Rosenthal?

  You moved from associate to...

• 24:02Speaker 02

  We were the ones with the track right. Well, I got promoted to GP. I had one, you know, one tenth of the carrier down Valentine in Sequoia 6. And a year into the fund, Don said, we ought to change all the carrier, make us all equal. He understood that he needed to make sure that young people were not going to act like...

• 24:23Speaker 02

  Like associates, even though they were partners. And so he flattened the partnership. And in Sequoia six, and now it's Sequoia seven. It was more Mike and I were the, the more aggressive ones, the, the ones that had a bit of a track record. I remember Don sat with Mike and I, and he didn't say, you're the leaders. He did not anoint us, but he had the conversation just with two of us. And Don had a green sheet of paper with all the things an investor does. And checkmarks next to what he's willing to do. And he pushed a paper as he always would and said, you figure out if you want me around. And this is what I'm willing to do. He wanted, oh, we offered carry in that fund. We gave carry Don the next fund, which turned out to be the Google fund. We actually took good care of Don.

• 25:09Speaker 02

  We gave carry, some carry, not GP carry of a couple more funds. Never aggressively asked for it. I remember when I had to walk into Don's office and tell him, no more carry three funds later. And he chuckled, he said, what took you so long?

• 25:25Speaker 02

  And, and, but Mike and I were, were, were the two, if you will, more senior. We rotated the partners meeting, who would write down the company, who's, who was the leader of the partners meeting for a year or two? Until Mike stepped up and said, this is not going to work. He offered to be the one doing it. We all agreed. He did it. And so it became that Mike was really one and I was one A, just to, I don't want to rewrite history.

• 25:54Ben Gilbert?

  Yeah.

• 25:54Speaker 02

  One A, we, we, you know, we had similar, we had exact comp. Mike was a CEO, if you will, I was a CEO, we're a partnership. And that's how we ran Sequoia, uh, until 2012.

• 26:06Ben Gilbert?

  Wow.

• 26:06Speaker 02

  Uh, when Mike stepped down for health reasons.

• 26:09Ben Gilbert?

  And Doug, as a point of clarification, when you say Sequoia six, Sequoia seven, can you explain a little?

• 26:14Speaker 02

  Sorry, they're the funds, the successive funds. Sequoia six was a six fund.

• 26:18Ben Gilbert?

  I see.

• 26:19Speaker 02

  Where I became a general partner was the last really true partnership where Don was full, full time. Sequoia seven, Don was a general partner. He had less, uh, you know, and, and the partnership was run by five or six other partners.

• 26:35Ben Gilbert?

  Yep.

• 26:35Speaker 02

  And then Mike Moritz. Took the lead and I became 1A.

• 26:39Ben Gilbert?

  And, and give us a sense of what early-stage fund number are we on now?

• 26:44Speaker 02

  We are in 17.

• 26:45Ben Gilbert?

  Got it.

• 26:45David Rosenthal?

  Okay. So, right, right when this happens, in the transition to Sequoia Fund VII, the whole world is changing, right? Like, because Sequoia, originally, and Don came from the semiconductor industry, and then there was the PC, software wave, but now the internet is here.

• 27:02Speaker 02

  Yeah, well, not yet. There's actually a few parts. And part was, first of all, Sequoia 5 was 67 million because of truly lack of ability to raise more money. We had raised a growth fund for 165 million that we didn't know what to do with. In fact, we invested the growth fund, and the average check size in that fund was $2 million. That turned out to be a 4.5x net funds, which is a terrific performance, because we invested like a venture fund. When we raised Sequoia 6, which turned out to be the Yahoo Fund, the returns from 5 were not yet visible. When Mike and I went out fundraising Sequoia 7, the limited partners said, "Who the heck are you guys?"

• 27:46Speaker 02

  And we lost some big clients. And we lost some big clients.

• 27:50David Rosenthal?

  Wow, wow.

• 27:50Speaker 02

  And Sequoia 5 turned out to be a fabulous fund. Sequoia 6, an incredible fund. Sequoia 7, a spectacular fund. Sequoia 8, the Google Fund, an amazing fund. So, Mike and I, and the other partners, got an incredible start. And then 1999, 2000 happened. We did not know the meaning of the word clawback. For your listeners, what clawback means is when your funds are doing so poorly that now you owe a lot of money back to your limited partners.

• 28:21David Rosenthal?

  Yeah.

• 28:21Speaker 02

  And we had war room meetings here at Sequoia in 2000 where we owed more than our net worth. And how do we get ourselves out of that?

• 28:30Ben Gilbert?

  And is that of the fees that you've already taken as compensation?

• 28:32Speaker 02

  Fees and carry, maybe we had an early win and we took carry and the rest of the fund is a turkey and we owe not only.

• 28:38David Rosenthal?

  Because you assume when, when you have early wins, you assume that the fund is going to be in the carry, but if it's not.

• 28:43Speaker 02

  And let me make things more difficult. And that early win, you're given shares that you hold and they go to zero. So you didn't even have that. So you hold the shares in your account because it's nineteen ninety nine, those are not real companies, the shares go to zero. So we had warm conversations and we had a choice to make. And the choice to make is to borrow a line from golf and I don't play golf called Mulligan. Most of the venture industry considers the funds of that period called the Mulligan funds. They're, they're crappy, they lost money, but you know what? It's a do-over. We took the opposite approach. No one was going to lose money. At Sequoia Capital. So we took funds that were point three X, meaning if it was a hundred million dollars, that fund was worth thirty.

• 29:25Speaker 02

  Or in that case, it was three hundred or five hundred is worth thirty percent of that. And we brought them up to close to two X just by giving up fees. Not collecting them and reinvesting money. Every time we had a game, we reinvested it, reinvested it because we wanted to have the pride of never losing money. And so those were formative time for the culture.

• 29:46David Rosenthal?

  It would have been so easy for you guys and most other venture firms did say, call Muggin, we're going to take the loss on this. We'll start a new fund that we get fees on.

• 29:52Speaker 02

  You got it. Well, think about it. Sequoia four is the Cisco fund, Don Valentine. Sequoia five, younger team, older team, terrific fund. Sequoia six, Yahoo and many others, Nvidia and many other. Sequoia seven, many companies. Sequoia eight, Google. It would have been so easy for us to call it and we just refused to. And we just refused to.

• 30:15Ben Gilbert?

  Doug, it reminds me a lot of the two thousand eight story where Ford refused to take the federal government bailout and say, yeah, yeah, it would be easy for us to do this. But reputationally, it's important to us and all of our customers or your clients for the next decades to come that we don't do this.

• 30:29Speaker 02

  Absolutely. And while I tell clients, those times won't be chapter one in the Sequoia book. There'll be a chapter, there should be a big chapter that's devoted. It is maybe our proudest moment at Sequoia Capital. It is not when we've had, you know, we have had funds close to twenty X. It is not those twenty X fund. The most proud time is when we decided no one's gonna lose money at Sequoia Capital and we're gonna go to work. And we went to work for 10 years to make sure those funds were in good shape.

• 31:01David Rosenthal?

  Yeah, the other aspect, you know, let's listeners think this is just about reallocating fees or whatnot. It's that you you had a lot of work to do with those companies because you still had those investments. It would have been easy to say, yeah, these are zeros, we're just gonna, you know, do whatever. But you roll up your sleeves and say, no, we're gonna turn these into returning capital at a minimum.

• 31:21Speaker 02

  So Mike Moritz is a Brit, strategic, meant a few words, thinks 14 step ahead. I'm a gregarious Italian. And I'll tell you, it hasn't always been easy. Mike would say the same thing. But we made it work for 20 years. And I'll tell you, during those times, we thought exactly alike. You can burn us cigarettes in our arm and we're not gonna flinch. We're gonna bring these funds home. And it was amazing how two different cats with two different backgrounds, with two different styles, who got along a lot and and really argued some, as you would imagine, which is terrific because that means we pour two different views on issues. That is a strength.

• 32:05Speaker 02

  During those times, there was no question what we were gonna do.

• 32:09David Rosenthal?

  Yeah.

• 32:10Speaker 02

  I don't think we ever had the conversation. I don't think we even said, should we do this? I just think we had to.

• 32:15David Rosenthal?

  Yeah.

• 32:16Ben Gilbert?

  That's a special thing to be able to to get in that lockstep with another person. Do you feel like that's sort of that rare thing that happens once or twice in a person's life? And and how do you attribute Sequoia's success to you two being in lockstep like that?

• 32:32Speaker 02

  On that issue?

• 32:33Ben Gilbert?

  Yeah.

• 32:34Speaker 02

  Look, it it it happens in sports teams. It happens when people go to war. They never again feel, why do people keep on going to Afghanistan? The reason they do that, they miss that sense of camaraderie. I don't know if you study situations like that. That was wartime, make no mistake. Mike, we weren't, it wasn't our lives. I I don't for a second, I I love and respect the people that serve our country. The things they do are far more important, far more courageous than what Mike and I did. I want to make that crystal clear. We should be grateful to them. But it was a similar sense of camaraderie.

• 33:11David Rosenthal?

  It was your business lives.

• 33:12Speaker 02

  It it was. No, nothing to do with business lives. It was. It was the fact each one of ourselves in our body could not do that. Nothing to do. We got to save our career, our money, none of that. It had to do with being a badass and doing what nobody else would do. That's what it has to do with. Do the right thing when it's inconvenient to you.

• 33:35David Rosenthal?

  Yeah. Yeah, that's because, yeah, it would have been so many other firms did. Throw in the towel, get them all again. Their business lives were fine.

• 33:44Ben Gilbert?

  We're talking about this era right around Google's founding and we're talking about your partner, Michael. There's a quote that I've heard you mention in the past where it's something along the lines of Michael telling you a few months after making the Google investment, we've we've never paid so much for so little.

• 33:59Speaker 02

  I think that quote is what John Doerr told Mike Moritz.

• 34:03Ben Gilbert?

  Ah.

• 34:05Speaker 02

  We didn't know what Google did for a long time. We knew we had smart founders.

• 34:10Ben Gilbert?

  Yep.

• 34:11Speaker 02

  We knew we're aimed at the internet and we just knew we had to be patient. Sometime patience sit on your hands. You know, I had a similar but a smaller story in Morocco. Smart founders couldn't figure out which way to go. And if you talk to them, what did Sequoia do most? They left us alone and let us figure it out.

• 34:31David Rosenthal?

  We hear that from so many founders on this show that have partnered with you guys. That that's one of the biggest differentiating factors is let us, you know, we're in the driver's seat. Let us figure it out.

• 34:42Speaker 02

  If it's creation time, the founders create. Now, there could be execution time where they don't execute as well, in which case you help them. But in it, the thing I tell founders, you get to do product market, you should do product market fit. We can't help you there. If you got product market fit, we can help you with everything else. And so when founders are meandering their way early on and focusing on something that's going to work later on, you just let them create. They're the creators.

• 35:16Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 35:29David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 35:45Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 36:00David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 36:24Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 36:43David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 37:13Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you.

• 37:38David Rosenthal?

  I want to make sure we dive deep into what you, and presumably you and Michael, created here at Sequoia in your time in storage ship here, which is, you know, Sequoia was, I think the phrase that Don at least used to use was you invested in companies that were a bicycle ride away from headquarters here. The decision to expand, not just geographically, but also product-wise in terms of investment products you offer, how did that initiative happen?

• 38:08Speaker 02

  So, the first thing, I don't like the notion of you and Michael, it is, we're all standing on each other's shoulders. Michael stood on Don's shoulders, I'm standing on Mike's shoulders, and Jim gets a shoulder and rule of shoulders. So, it is really we. It is really a we effort. And the other thing, when confused, there's only one curve I look at for the decisions I have to make. It's the exponential curve of accelerated change. It's not linear. It increases through time. Which means, if you believe in that, which means that doing nothing

• 38:50Speaker 02

  is the worst thing you can do. It's the riskiest thing you can do. And then, we also know that in the early days of the curve, you over-forecast because you're a linear thinker. In the later days of the curve, when the curve is steep, you under-forecast. So, I'm not that smart a person, but I know these simple principles. And I know that doing, you know, do stuff. Take the shot, and we'll talk more about what that means. But turn the clock back to 2003, 2004's. Mike and I are both immigrants. There's other immigrants here. Founders, we look at, are immigrants. More and more founders. And so, I started wondering, what happens if

• 39:30Speaker 02

  the world becomes globalized? They're gonna go home, and I thought of NEA's offices with posters from India companies in India, and the US-India founder coming here, and we don't have those posters. I thought, oh my God, defense. But defense alone should make you do things. And then you think of the world that's more globalized, the world is flat, blah, blah, blah. And I thought maybe we should go there. I learned that other firms were doing flyover, going there and flying and flying and making Dropping the brand and saying yeah. Yeah, or making investment dual brand. And so, you know, a few brain cells said, if we're going to do something, where are the large and growing economies?

• 40:12Speaker 02

  That brought us to India, sorry, China and India. It didn't, as I say, didn't bring us to Vietnam because it grows, but it's small. It didn't bring us to Europe because it's big, but not growing. So those were the two Gs. So we started making trips and trying to meet teams, trying to figure out how to get there. Investing teams or founding teams? Investing, founding investing team. And I'm very mindful of a line from an old sitcom, from a scene. The sitcom is Hogan's Heroes. Oh, yeah. Do you know Hogan's Heroes? Yeah. So Colonel Klink is the commander of a P O W camp. And, you know, he's a putz, obviously, in the show. And Colonel Hogan is the American who's very smart. And Hogan and Klink have a safe.

• 40:55Speaker 02

  And if you turn the handle one way, you open a safe and there's money. If you turn the handle the other way, it blows, it blows out. And Hogan looks at Klink and says, Klink, which way? And Klink goes left and Hogan pulls it right and it opens. And Klink goes, how did you know? And Hogan says, I wasn't sure whether I'd get it right, but I was sure that you would get it wrong. And believe it or not, that scene is the scene that caused me to say, I know for sure, Mike Moritz and I, if we make investments in China, we'll get it wrong. Yeah. We didn't know if the team we found would get it right, but we thought that was the least riskiest thing to do.

• 41:37Speaker 02

  And so we're shopping for teams and we came across, it's funny, I made 20 trips to China. And then the team we're introduced, what was introduced to us by a founder of Billpoint, which was a predecessor to PayPal, sold to eBay. Uh, she introduces to two Chinese national That grew up in China, had gone to school here, which is exactly what I want to have moved back to China. Had served on the on the board of the same company Focus Media. One was an investor at DFJ, one was a founder, a co-founder of a company called Ctrip. Yep, yep. We met him on a Tuesday, we met again on a Thursday. And on a Friday morning in a conference in Sequoia, we did a handshake deal. No contract, no anything.

• 42:22Speaker 02

  They were going to another venture firm in the afternoon, they canceled that meeting. By Monday morning, Mike Moritz, God bless him, had a PPM, private placement for Sequoia China One and gave it to them. With a notion that you want to delight your partners. When people do a deal, after the deal is done, you always find out it wasn't as good as you thought. We love doing the opposite, we want people to be blown away, holy cow. Wow. Sequoia culture. And. Of course, the second person there was Neil Shen. It was Neil Shen, there were two founders, one of them was Neil Shen. And so we went fundraising, we still didn't have a signed contract and we raised a hundred and sixty million dollar fund. We were ridiculed by limited partners, we held the annual meeting in Beijing in a brand new hotel where the heat broke.

• 43:06Speaker 02

  Everybody was freezing, we were slightly abused. That that has turned out to be a spectacular fun and the rest is history.

• 43:14Ben Gilbert?

  Yeah, what are some of the companies that Sequoia China has invested in?

• 43:17Speaker 02

  Pinduoduo, Alibaba, Meituan, ByteDance. ByteDance, yeah. Uh, dot, dot, dot, we've had somewhere near fifty, sixty IPOs. And so I had the idea on a one-page sheet, but if I tell you that, that would leave you with a wrong impression. At critical times where we needed, this is kind of funny, when we needed operational's move. It was Mike that had the insight that we needed to make those move, it was Mike that made the move. So I I've never told Mike this, I was incredibly grateful that Mr. Intuitive, as I had him slotted in my brain,

• 43:58Speaker 02

  became operational at key times, even better than I was, if truth be told. And so it wasn't me, it wasn't Mike, it was all Sequoia because as we're doing this, other people were carrying the load in America. You know, and so it was a team, it was truly a team effort.

• 44:17Ben Gilbert?

  So while you were, and you and Mike were sort of championing, hey, hey, we should be doing this because we think that the rest of the world is going to hit this inflection point, or at least these areas. Did you have, this, this is sort of a Bezos-ism that's more recent, but was there this sort of disagree and commit mentality for anybody who was here that knew that they had to hold down the fort, even if they weren't pounding the table like you were? How did that go?

• 44:38Speaker 02

  Look, for many years, there was sniping in the troops. Why are we doing this? Why are we wasting time? Because keep in mind that this is not about money. No one's making any more money because we all contribute the same amount. China contributes, we contribute. You know, it is not incremental money.

• 44:57David Rosenthal?

  We're talking about the mid 2000s when, you know, Tencent and Alibaba exist, but like, it's not clear that they're going to be, that China's going to be what it is.

• 45:03Speaker 02

  It, it, it's about building a dominant, world-class, global powerhouse that at the same time can act very local because the foundation of our business is seeds. If you lose seed and venture, you become, as I say, private equity firm because later on, all you have to compete is on price. And so how do you at the same time go global while not losing an inch on the local side? And some of the best seeds were made during those days. And so we somehow managed to pull that off.

• 45:37David Rosenthal?

  Dropbox, Airbnb, Stripe.

• 45:39Speaker 02

  Well, the thing, I, I initially became the global person. Nobody else had to do that. Somewhere along the line, Mike and I reverse roles where he was Mr. International. I spent more time in the US. And in 2012, when Mike stepped down due to health reasons, we, we thought about, should three of us run it, you know, and we made the decision that I should run it, but we should have second in command. And the logical one was someone from the US, Jim Getz at that time, and Neil Shen.

• 46:11David Rosenthal?

  That makes incredible story. Thank you for sharing all this. At the same time that you're expanding geographically, you're also expanding the suite of funds in each geography, right? In terms of adding the growth funds, then ultimately the global growth fund. How did you, how did you think about that decision and doing that as separate funds versus one fund together? And obviously, the company needs were evolving with state private longer and everything.

• 46:42Speaker 02

  So the most important thing, as I said, is to be the first $100,000 to help that founder. So whatever we did, we understood that is the strategic part of the house. We've always done seeds, but we thought both for clarity of thought, marketing, we should do a C fund because we're starting to have a lot of C programs, such as a scout fund and a whole bunch of others we don't really talk about. Then the world continued to change. And while it's never been cheaper to start a company. And by the way, I think the world changed with Netscape, or at least it had a major change, which meant that we went from being deep technology investors, where we were only invested in technology pre Netscape,

• 47:26Speaker 02

  to being application layer investing across many market segments, travel, shopping, iPhone, internet being part of the reasons. So things started to happen. It's never been cheaper to start a company, i.e. seed investing. When, when you're doing deep tech investing, there's no need for seeds. It takes you two years to build a product.

• 47:45David Rosenthal?

  Airbnb seed was 600,000, I think. The Dropbox was 1.2 million.

• 47:49Speaker 02

  But that's because an app can be built in a month. At the same time, though, it's never been more expensive to launch a company. Why? You've got businesses that have the words you in that economics, the O2O online to offline, Uber, DoorDash, Instacart, and so on. And then if you don't have those businesses, turn the clock back 20 years ago, we used to launch the US, let's say in B2B. We used to be profitable. Five years later, we used to go to Europe. You can't do that anymore. Because if you wait, you have to, but you can't do that. We'll launch the US, six months later you launch Europe because if you wait, by the time we get to Europe, there'll be twenty competitors, half of which want to come to the US. So you've got to run fast, which means you have to spend a lot of money, which means it's bigger and bigger rounds.

• 48:33Speaker 02

  So we were seed and venture when we understood the companies needed more money. And keep in mind, we're the folks carrying the suitcases. We're there from day one. We're carrying the luggage. And we thought to ourselves, yes, we want partners, but why are we letting other people come in and dictate terms to our companies? We were vulnerable and weak, so we got deeper into the growth business. We vertically integrated. And then when rounds became even larger and we have this incredible portfolio today of maybe five, six, seven hundred companies. We launched a global growth. The global growth is a global vehicle to double and triple down in the best company in the Sequoia portfolio. And yes, we partnered with other firms and so on, but we're able to enjoy the full ride.

• 49:19Speaker 02

  I view those as being more tactical product versus C being more strategic. That's the most important one. And then we also had a hedge fund because we realized that it's way tougher to go from zero to a hundred million in revenues from zero to five billion in market cap than from five to twenty five.

• 49:35David Rosenthal?

  And this is something, we talked about this a lot in part one of this, our Sequoia history. The vast majority of the magnitude of gains of returns happen late post, post IPO.

• 49:46Speaker 02

  And so we, you know, we learned to distribute shares to our clients carefully, not the week after the IPO or the week after the lockup. We learned that a public investment vehicle would help us many ways, including how to look at these companies retrospectively. If you're in a hedge fund, you look back to youth and you explain how youth can grow up. Most of us that invest in seed and venture look up, you know, we look from zero to something. The hedge fund guys look from a lot to something. So we were able to have deeper conversations about companies and what companies could become.

• 50:26Speaker 02

  Dare to dream of what companies could become. And so we found that to be quite useful. And then we launched the heritage business, which is to make it easy. It's a family office endowment style. And the reason for that, we have founders and friends at Sequoia who had done quite well. And wouldn't that be a terrific way to maintain a relationship for another 30 years? And so that's why we did it. These were just to try to build a global powerhouse, which is what we want, where we can serve founders from idea to IPO and beyond to personal needs. I'll go, it'll go so far beyond when they have the personal needs. So we can have these relationships that will last a lifetime.

• 51:08Speaker 02

  We all take a equal percentage of our profits. The venture group is, is, is walnuts. China is peanuts. The Heritage Fund is cashews. We blend them and then we redistribute them so that we all get a share of mixed nuts. But no one, but no one gets more nuts. It's just different kind of nuts that financially intertwine us.

• 51:34Ben Gilbert?

  I see.

• 51:34Speaker 02

  But nobody makes more money. But we all have bought in that we're part of this team, this global team where we help one another while doing the very right things for the founders. Cause it is all about the founders. Founders come first by far. Limited partners, most of ours are nonprofits, come second and we come third. And it's not because we're altruistic, because that's, if we achieve that, then it's the way to run the business for the next 100 years.

• 52:02Ben Gilbert?

  An interesting takeaway here is as it became more and more expensive to get to your IPO or to get to be a scale global company, because you have to do things exactly like you're talking about. Launch new GOs faster, grow more quickly to get ahead of your competition in these winner take all markets. You know, a major takeaway is a lot of firms took the specialization route where they say, we're purely series A and they stay smaller. Or we're dedicated seed, where this new asset class, we're pre-seed, we're growth, or you know, these, these large public equity institutions come private and just stay growth capital. But what Sequoia said was, look, We're just going to grow with the company the entire life cycle and take a very different approach. Rather than specialization, exactly what you're saying, to follow them and have the right products for them along their entire growth curve.

• 52:46Ben Gilbert?

  It's just a very different approach than than a lot of people took. And and certainly, there are other people doing something similar today, but it feels five, 10 years later than than when you did it at Sequoia.

• 52:57Speaker 02

  I'll make two points. The first thing is I will add, I agree with everything you said and to get there as early as possible, to be the first dollar. Second, if we said we're only an A firm, what happens when? And no company has a linear trajectory. Remember your Google question. They all have a little bump. What happens when that company has a little bump and you have to invest in that questionable round? If you're an only quote A firm or only C firm and you own 20%, where's your capital to show to the new investor that you believe? And so because it's never linear, because it's never slam dunk from day one, by being there,

• 53:42Speaker 02

  you can support the the companies at times where there are darker clouds in the sky, which helps attracts other investors to then get to the sunny skies.

• 53:54David Rosenthal?

  This is the perfect time, since I know we're running out of time, to switch over to playbook. I think there are two questions I really want to ask you in playbook for listeners and for you, Doug. Playbook is, we talk about, let's abstract out some of the themes from this conversation to what's applicable to entrepreneurs running their businesses, to us as we think about partnering with companies. The first one is, it's just struck us in doing part one of the Sequoia history. What actually like at the core makes Sequoia successful is some pretty simple things. It's focus on the market, founders come first, listen to what entrepreneurs tell you, you know, don't run your mouth, be a business partner, not an investor.

• 54:36David Rosenthal?

  How have you guys and you thought about staying disciplined on those core things as you've grown so much? I imagine that takes a lot of active focus and effort.

• 54:47Speaker 02

  Yes, there are many answers. I think our little secret is our culture. And when I was young in business, I used to hear CEOs talk about culture. I used to thought it was a talking point handed to the CEO by marketing. Nothing could be more incorrect. And the culture at Sequoia, if I can spend 10 seconds on it.

• 55:07Ben Gilbert?

  Please.

• 55:08Speaker 02

  Is finding these quirky individuals who've had shock to their systems. Who have something to prove, who as I say, were not the quarterback of the football team in high school. And you know what I mean by that. They were the shunned ones, if anything, maybe a couple IQ points high or something to prove. So maybe something happened in the family. Put them in an environment of teamwork and trust. We're relatively flat at Sequoia, so we've taken comp off the table. Letting them know it's okay to make mistakes. And instilling a culture that we're looking for the truth. Not your truth, not my truth, the truth in the middle of the table that helps the founder. A number of times I've sat in a partners meeting after proclaiming a point. I hear one of our young partners making a point, I say, hold on a second. I didn't think of that.

• 55:52Speaker 02

  His point is better than my point. I changed my mind. And so, and applying that to everything that we do. And realizing that we've done nothing, realizing our worst enemy is the success we had. Realizing that by virtue of our market position, not because people hate us, because who else are you going to attack? Not the number 14 firm, not the number three firm. It's just more fun to attack the number one firm. It's what I would do, you know, it's just more of a sport.

• 56:18Ben Gilbert?

  Nolan Bushnell told us sometimes, or no, it was Trip Hawkins. Sometimes you don't want to be number one because then there's people sniping at you from behind. I'm perfectly happy being two.

• 56:26Speaker 02

  I actually argue that Don used to say that. Don Valentino say, let's let somebody else be one. Uh, it's better to be two. And so how, how we do that is making sure we have a mindset that we've done nothing. We have a mindset that we are here from going out of business. If you're Amazon, you've got customers, you've got billions, you've got a relationship. If you're Sequoia, you have 20 chickens walking in the back. That's all you have.

• 56:52Speaker 02

  Twenty chickens and our reputation. So I tell people, take the darn shot. Everybody at Sequoia would know, we'd rather go out of business in a week than in five years, for sure. And so it's just have the mindset of take no prisoner, do the right thing when it's painful to do so. Help the founders, recognize when there's no product market, you know, it's not always helped. It sounds so wonderful. At some point, there's no product market fit, then the market has spoken 19 times. Then you've got to have a different conversation with the founders. Or five VPs come see you and they say it's either him or her, all of us. Those are tough times, but that happens once out of 20 times. Some firms do the calculus that says, oh, we don't want to ruin our reputation, let bygones be bygones.

• 57:36Speaker 02

  We can't do that. It just goes against, remember the 1999 thing? It goes against every bone, everybody. You have to help as much as you can.

• 57:43Ben Gilbert?

  It's interesting that you, you talk about how it's a negative, all, all the previous success. And I've heard you talk before about how you pulled down all the posters on the walls here of all these IPOs that you've had. Baron.

• 57:54Speaker 02

  No posters in this room.

• 57:56Ben Gilbert?

  It's very true.

• 57:56Speaker 02

  It's still very lovely.

• 57:57Ben Gilbert?

  It is lovely. Some would argue that the way that the venture model works, a firm like Sequoia has massive benefit from this momentum of you've made great investments, which then in hindsight make you sort of look like a kingmaker. And so then you get all the best deal flow now because everybody wants to be a part of this aura that you've created. Do you think there's truth to that? Or you think that's total?

• 58:19Speaker 02

  There's a modicum truth to that, but success is a drug. You know, and you can't fall prey to that. You know, we've had investors here that have been successful, made some money and didn't work as hard, you know? We have 10 tenants at Sequoia. Number one is performance. The other nine are important, but you're missing one. The other nine don't matter. You could have clarity of thought, you could have teamwork, but you're not performing, you're not here. And I tell people, we are not a family. Make no mistake. We're a team. If you don't like teams, we are a show, a production. Maybe the investors are the actors, but you know, the actors don't look so good without a script, without the lighting person, without a director.

• 58:59Speaker 02

  And so everybody matters at the team, especially the people that make us lunch and, and breakfast. They're the ones we have to treat with the most kind of dignity. They are our team members. They are the ones that make this place run. And that's how Sequoia works internally.

• 59:15David Rosenthal?

  Michael wrote one of my favorite books of the last 10 years called Leading with Sir Alex Ferguson about his career. Obviously, all of that applies to Sequoia as well, but yeah, it's an organization that you're building. It's not a family. That's fantastic. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 59:38Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 59:49David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:00:09Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system, so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:00:21David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:00:32Ben Gilbert?

  On to grading. All right. So Doug, on this show, when we grade an acquisition, that you know, we big company buys little company, Facebook buys Instagram, and then we grade how good of a use of capital that was. And that instance, as you're well aware, is one of our far and away A+ of A+ s. And we thought about how do we do grading on an episode like this? And the way that we wanted to pose it to you are, what are some of the things as you reflect back, you know, in your stewardship and all your time at the firm, where you would say, that was an A+, and some things where you swung and missed? Or you watched one go by and you say, actually, you know, that's a C, D, or F. And, you know, we made up for it in this way, but this is a way to be critical of a previous decision?

• 1:01:16Speaker 02

  First of all, I'll tell you the overall grade I'd give us, and then I'll drill down.

• 1:01:20Ben Gilbert?

  Great.

• 1:01:20Speaker 02

  Somewhere between B and a B+. That is what I would give us. I'd give ourselves an A for the war room times of 1999. Those were our best days.

• 1:01:34Speaker 02

  I'd give a self an A for the times when we had those 51 49 conversation where we leaned the right way. And then I give ourselves a lot of Fs in things that came through this conference room. And we just got them wrong. And we tend to get them wrong for the most often reason is that we overthink things. Sometimes we see revenue growth even early on, and we overthink, well, what can this company be? Well, you know, and we are and at some point, revenue growth speaks for itself. I'd give a self fairly high grade on how we treat people, how we wrap everybody in Sequoia. I give us high grades that we

• 1:02:17Speaker 02

  bring everybody in, in this teamwork approach. When we have an IPO, a big one, we'll send an internal note about how many people touch a company. You would be shocked to see how many names are attached to success. I'd give us grades on how we embrace failure, our failure. It's always us. I'd give us a much lesser grade on a misses. I'd give us Fs. Because a lot of them came through here. So my blended grade, if I'm in a Mike Moritz mood, I'll give ourselves a B. In a Doug Leone mood, I'll give myself, I give ourselves a B plus.

• 1:02:54Ben Gilbert?

  Well, thank you for that. I mean, it truly is hard to imagine, you know, a company at some point not coming through the halls here. I'd be remiss not to ask you, can you tell us the Facebook story? This has been in a freaking Hollywood film at this point. How'd that actually go down?

• 1:03:10Speaker 02

  So my daughter from Cornell told us about Facebook very, very early on. Kristin George, who's now product manager at Instagram. And I told it to Rulaf. And for a number of reasons. Some good, some bad, some justified, some not. We were never able to get in and we knew about Facebook for a very long time, which culminated in that presentation at Sequoia where Zuck mistakenly, and he's since said that, obviously, you know, we've all grown up, we don't hold it against Zuck. Came to Sequoia, I wasn't in that meeting because I was in China looking for teams. But then we had another shot of Facebook.

• 1:03:54Speaker 02

  We had a shot of Facebook early on at a very high price. And then we were asleep at the switch when all those eight, nine, 10 billion dollar rounds were done, completely asleep at the switch.

• 1:04:06David Rosenthal?

  Hmm.

• 1:04:06Speaker 02

  I'd give us lower than an F. I don't know what's lower than that. I'd give us a G.

• 1:04:11David Rosenthal?

  Well, you did have WhatsApp, so.

• 1:04:13Speaker 02

  Yeah, it's, let's say that we got some Facebook shares.

• 1:04:16David Rosenthal?

  You got some extra credit, yeah. Oh, fantastic. Thank you so much, Doug, for joining us. This has been really special. Last question, how can people, and especially entrepreneurs, get in touch with you and get in touch with Sequoia?

• 1:04:31Speaker 02

  Send us an email. I remember I was on a panel once and about 10 years ago, and that same question they asked to three venture person. And the venture person next to me said, well, we like to go through law firms intermediaries to screen. It was my turn, I said 8543927, uh, which was our phone number.

• 1:04:54David Rosenthal?

  Does that still work?

• 1:04:55Speaker 02

  It still works.

• 1:04:56David Rosenthal?

  That was, I had that written down in the notes.

• 1:04:57Speaker 02

  We don't get a lot of calls, but it's an email list. And make it a thoughtful email. If you send an email to 14 of us, no one's gonna answer. Send us an email, that's, I don't say spend a month on it, but well thought out, you know, I'm, I was this, I want to start a company, would you be interested in meeting? Something like that. There are some emails that just don't respond. There's no chance that, you know, there's no chance we're gonna do that. And there's just too many. But if you send an email anywhere near the viability that somebody may, 1 in 10,000 chances, ever make an investment, you'll get a response. Love it. Love that. Be aggressive. Fantastic.

• 1:05:38Ben Gilbert?

  All right, well Doug, thank you so much. Listeners, feel free to email Doug. And with that, listeners, if you aren't subscribed and you like what you hear, you should. We're available in any podcast player of your choice. If you want to become a limited partner, subscribing gets you access to our bonus show, where we go deeper into the nitty gritty of building companies in real time. To listen, you can click the link in the show notes or go to glow.fm/acquired and all new listeners get a seven day free trial. With that, we will see you next time.