20VC: Sequoia's Pat Grady on What Sequoia Is Focused On Today, How Sequoia Think About Investment Decision-Making Processes & Why It Is Important To Trade A Few Points of Efficiency for Culture When It Comes To Attribution

Pat Grady is a Partner @ Sequoia, one of the world's leading and most renowned venture firms with a portfolio including WhatsApp, Zoom, Stripe, Airbnb, Github and many more incredible companies. As for Pat, at Sequoia he co-leads the firms growth investment team and has been involved with some of the true greats, Hubspot, Zoom, Okta, Qualtrics, the list goes on. Prior to Sequoia Pat spent three years with Summit Partners. In Today’s Episode You Will Learn: 1.) How Pat made his way from Summit Partners to co-leading Sequoia's growth investment team? Was it intimidating for Pat entering a partnership with Jim Goetz, Don Valentine, Roelof Botha? How did he manage those nerves? 2.) So many different funds and activities, so what is Sequoia focused on today? Where does Sequoia think about their ideal insertion point today? How do they see the deployment of their blended capital across rounds? Does Pat believe in ownership on first check or building ownership over time? How does Pat think about the extended window of privatisation with IPOs being continuously delayed? 3.) Does Pat believe that VC really is a team sport today? Does Pat agree with Josh Kopelman's statement, "I would rather be a better picker of partners than investments"? What are the core requirements, skills and traits that Sequoia looks for when adding to their partnership? 4.) What is the investment decision-making process at Sequoia? How do they feel about unanimity vs conviction based investment decisions? What are the pros and cons of each? What does Pat believe is the most non-obvious investment decision that Sequoia have made? Sequoia run an incredibly rigorous process when investing, how does Pat balance between that level of rigour with the speed to win the deal? 5.) What advice would Pat give to someone that has just gained their first institutional board? What does Pat know now that he wishes he had known when he started in VC? How does Pat think about time allocation across the portfolio? Concentrate on winners or the strugglers are where your reputation is built? Leading Sequoia Growth and with a beautiful family, how does Pat approach work/life balance? Items Mentioned In Today’s Show: Pat’s Fave Book: God Friended Me Pat’s Most Recent Investment: Embark: Revolutionizing Commercial Transport As always you can follow Harry, The Twenty Minute VC and Pat on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

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

• 0:00Harry Stebbings?

  You are listening to the 20 Minute VC with me, Harry Stebbings at H Stebbings 1996 with two Vs on Instagram. And I have said it time and time again, but for me, the biggest joy of doing the 20 Minute VC is building relationships and friendships with people I respect and who inspire me. Today's guest I had on the show over two and a half years ago, since he's been hugely supportive and kind to me, and I'm forever grateful for that. And so to this mystery guest today, and I'm thrilled to welcome back to the hot seat, Pat Grady, partner at Sequoia, one of the world's leading and most renowned venture firms with a portfolio, including the likes of WhatsApp, Zoom, Stripe, Airbnb, GitHub, and many more incredible companies. As for Pat, at Sequoia, he co-leads the firm's growth investment team, and has been involved with some of the true greats, including HubSpot, Zoom, Okta, Qualtrics, the list really goes on.

• 0:44Harry Stebbings?

  Prior to Sequoia, Pat spent three years at Summit Partners, and I do also want to say a huge thank you both to Frederick at Okta and to Dan Shinneman for some fantastic question suggestions today. I really do so appreciate that. But before we get into the episode today, I'd like to give a big shout out to my friends over at Multiple, widely regarded as the go-to firm for game-changing companies when it comes to building your brand, crafting your culture, and gearing up your growth. They've worked with breakthrough companies such as WeTransfer, PipeDrive, Mixcloud, Unbabble, Signal, and Kalo. And when we set up stride.vc, they were the first call we made to help us get our story straight. And what makes Multiple really special is their empathy for and experience of the entrepreneurial journey.

• 1:22Harry Stebbings?

  That's because they've actually been on the frontline themselves, backing, building, and growing, and even selling businesses as founders, operators, and investors. So drop them a line at [email protected] with the subject line 20 Minute VC, or head over to wearmultiple.com and find out more. So if that's the external-facing element covered, what about the internal? Well, then there is Brex, who built the corporate card for startups and who is the fastest company to reach unicorn status in history. Brex founders Enrique and Pedro built a payments business in Brazil, but kept getting rejected for a corporate card in the States. So they built Brex with no personal liability, up to 20 times higher card limits, and huge rewards like 7X points on Uber, Lyft,

• 2:01Harry Stebbings?

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• 2:40Harry Stebbings?

  With Pilot, you can say goodbye to exporting CSV files and emailing attachments to a bookkeeper you can never get a hold of. Get your company's books in order and get your time back today. Check them out at pilot.com/20vc. That's pilot.com/20vc. But without further ado, you've heard quite enough from me, so I'm delighted to hand over to Pat Grady, partner at Sequoia.

• 3:07Speaker 01

  You have now arrived at your destination.

• 3:10Harry Stebbings?

  Pat, my friend, it's been over two years since our last episode, if you can believe it. But I want to say huge thank you for joining my dulcet British tones once again today, Pat.

• 3:19Speaker 02

  It is truly an honour to be back.

• 3:21Harry Stebbings?

  Well, you are very, very kind, but I want to get the ball rolling. And for those that made the crime of missing our special round one, how did you make your way into what I know to be the wonderful world of venture? And come to be a partner at the world renowned Sequoia?

• 3:33Speaker 02

  I suppose there were a lot of fortuitous circumstances along the way, maybe starting with, I was born into a wonderful family with mom and dad, who I think were very focused on turning me into a good person, more so than anything else. And a brother who was 15 months older than me, which always gave me something to try to stretch for and keep up with. We were in Wyoming, which was a coal mining town, which is an unconventional place to spawn a budding venture capitalist. But I went from there to Boston College, where I studied initially physics and finance. And from there to Summit Partners in Boston, which was my first taste of the investing world. I was at Summit for about two and a half years and picked up a lot of the basic tools of investing.

• 4:15Speaker 02

  But then wanted to feel like I was closer to founders and Wanted to feel like I had a little bit more of a role in helping folks to build durable businesses. And that was what drew me out to Sequoia. So I was lucky enough to come out here at the age of 24 back in 2007 and spent my first four or five years as an apprentice. I got to work with everybody else at Sequoia. Mostly Doug Leoni and Jim Getz were kind of the two folks that I was lucky enough to work the most with. And four or five years as an apprentice and then started meeting some investments and more recently and just focused on building the highest performing team we can possibly have here.

• 4:52Harry Stebbings?

  Now, we are gonna discuss the team and Sequoia itself. I'm just too intrigued having heard that. Listen, you know me, I'm the biggest venture nerd there is and Jim Getz and Doug Leoni are two of the greats of our industry. For you as a 24 year old, was that quite intimidating coming into such incredible talent and working alongside it at such a young age?

• 5:10Speaker 02

  It was. So the answer is yes. It was so intimidating that when I was about a year and a half into my time at Sequoia, my partner Ruloff took me aside and with the best possible intentions in mind, recommended that I get a voice coach. And the reason he recommended that is because when I went into the partner meeting and looked around and Don Valentine was still in the partner meeting at that time. It was Don Valentine and Michael Moritz and Doug Leoni and Jim Getz and Ruloff Bota and all these legends of the business. I was so nervous, I literally couldn't speak. And Ruloff thought that I might have a speech impediment. It wasn't a speech impediment, it's just that I was so nervous. And it's nothing they had done. They're all wonderful people and I was totally fine talking with all of them one on one and they were super supportive.

• 5:54Speaker 02

  I had just put so much pressure on myself to quote unquote, "live up to the expectations conferred by that setting" that I had a hard time expressing myself.

• 6:01Harry Stebbings?

  That is absolutely hilarious. I love the speech therapist there. I do wanna start though, Steve Pat, on the firm itself. When you read the news, it's easy to see the bigger and bigger funds. You see Neil Shen being number one on the Midas list, the allocated seed program even. So I hope it's not rude of me to ask Pat, but I love some clarity. What is Sequoia focused on today?

• 6:20Speaker 02

  I am so glad you asked. I think it's easy for people to have no idea what we're focused on, given all the different activities we appear to be engaged in. It's actually pretty simple. And there is a very straightforward unifying theme. That unifying theme is our mission, which has been approximately the same since nineteen seventy two. And we articulate that mission as we help the daring build legendary companies from idea to IPO and beyond. And so everything we do ties back to that theme. Those founders are no longer just on Sand Hill Road. They're all across the Americas, they're in China, they're in India, they're in Southeast Asia. That's why in two thousand and five, we went into China and India and more recently Southeast Asia. Those founders are choosing to stay private longer.

• 7:04Speaker 02

  And so it's not enough to be seed and series A investors. We've also expanded into series Bs and Cs and kind of the whole way through, all the way up to IPO. People see the news about the large funds to which we now have access and think that we want to be in the big check writing business. That is absolutely not the case. So three quarters of the investments that we've made in the last twelve months were seeds or series As. And if you look at the heritage of Sequoia, Palo Alto Networks, YouTube, AdMob, these companies are actually incubated inside the four walls of Sequoia Capital. Or more recently Stripe, Airbnb, Dropbox, these were seed investments for Sequoia Capital. And so we want to be able to serve founders, no matter what stage they happen to be at

• 7:49Speaker 02

  or what GO they happen to be located in. But our focus is very much on partnering as early as possible and trying to build deep relationships where we can actually be useful to them over time.

• 7:59Harry Stebbings?

  Now, this is so unfair of me to go off schedule so early, but I am intrigued. In Europe, we have real cases of signaling where when later stage or kind of larger sized funds come in at the seed or the A, there's a case of signaling risk. Can I ask, is that so prominent in the valley, given the depth of investors and depth of capital? And how do you think about signaling risk today?

• 8:18Speaker 02

  Signaling risk is this funny thing because most founders are worried about it, but we have never actually seen a situation in which it hurt. The context in which most people worry about it is they say, well, if I receive this round from Sequoia, but then for whatever reason, Sequoia doesn't lead the next round, won't that hurt me? And that's a totally rational concern, but the truth matter is we've never actually seen. That hurt a company. And so I think signaling risk is a little bit of an overblown topic.

• 8:43Harry Stebbings?

  No, I do agree with you. And actually Dana at NEA said the same. I do have to ask you, kind of speaking about where the capital is deployed and ownership obviously being primary in venture returns today. I'm a big believer that ownership is built on first check. Having said that, it's more important for me to say that, given the size of my fund versus the ability of Sequoia to build ownership over time. How do you think about where ownership is best built and where you really like to gain ownership on first check or over time?

• 9:09Speaker 02

  You know, it's all pretty founder driven. I think one of the mistakes we made historically was to be a little bit too greedy, quite frankly, on ownership. And I think recently we have tried to be much more sort of founder focused and founder driven. And there seems to be a somewhat durable trend of founders wanting to consume capital the way that everybody consumes everything else, which is a little bit at a time. And so there are situations like Zoom as I guess a recent example, where we got a nice chunk of ownership in one initial investment where we and the founder both felt great about how that went. And then there are situations like Okta where we never bought a large chunk of ownership, but we had a chance to lead the Series C, the Series D, the Series E, the Series F.

• 9:54Speaker 02

  And after leading four rounds in a row, we ended up being the largest outside shareholder. And so I don't know if there's a right answer, so to speak. It's more what the founders want.

• 10:02Harry Stebbings?

  No, I do get you. Can I ask again, very unfair of me in terms of off schedule. You mentioned the extended period of privatization. How do you think about that today at Sequoia? And does that actually naturally play into your strategy with the larger funds?

• 10:14Speaker 02

  Everything that we do here is reverse engineered off of that mission. And so again, we want to help the daring build legendary companies from idea to IPO and beyond. If founders want to stay private longer, then we'll end up raising vehicles that can support them when they're at pretty decent scale. So it all comes from what the founders want to do. A related question, people ask, how do you advise your companies around IPOs? Different founders have different reasons to go public or not go public. I think at the end of the day, to steal a line from Frank Slootman, who was the CEO of ServiceNow and recently became CEO of Snowflake, accountability brings out the best in people. And I think that at some point, it's good for most companies to be public companies because that does have a higher level of accountability and transparency.

• 10:59Speaker 02

  And I do think that that helps to bring out the best in people.

• 11:01Harry Stebbings?

  Yeah, no, I totally agree in terms of bringing out the best in people. Speaking of kind of the people within Sequoia, you mentioned some of the legendary names that you've worked with. And I do want to discuss the team itself. People have different approaches. Some firms have all stars, some kind of very team driven. I guess the question I have for you is, in yours and Sequoia's mind, is VC really a team sport today? And how do you think about that?

• 11:22Speaker 02

  That's a really good question because I do think there are philosophical divides from one partnership to the next. It is appealing to think that VC is an individual sport because individuals build such deep relationships with the founders. And so I think there's credibility in that argument. We have found it to absolutely be a team sport. And in some ways, I would say that that is the secret to our longevity over time. The near term benefit of being a team sport shows up in investment decisions and shows up in company building. With the decisions, I might have a particular point of view on the market. But then if I can talk with my partner, Bill Korn, who ran most of engineering at Google for many years before joining us here at Sequoia. He probably has a point of view on the technologies specifically, and that's additive to the decision.

• 12:07Speaker 02

  Or our partner, Mike Farnall, who is a direct report to Zuckerberg at Facebook and ran a big engineering team there. He probably has a Facebook-y point of view on a company. And so if you get people who come from different backgrounds and have different functional expertise, it leads to better decisions. So I think the team approach allows you to assemble a diverse set of skills and then bring them to bear on behalf of the portfolio. And then long term, the natural way of things for venture capital firms is for one or two people to have a couple of nice investments. And that makes them relatively more attractive to the next set of founders. And those benefits start to compound into the point where they allow their ego to get the best of them

• 12:48Speaker 02

  and start to want disproportionate share of the economics and that sort of thing. And that's what tears apart most partnerships. And so we have a very flat structure and very powerful incentives to make us. Work as a team, we would tell you that the number one reason we've managed to withstand multiple economic cycles, multiple technology platform shifts, multiple generational transitions is because we work as a team. And so any one of us could disappear tomorrow and Sequoia would go right on and be fine.

• 13:16Harry Stebbings?

  Can I ask, with such a team-based approach, do you embrace attribution? Or do you actually take the first round approach, which is we don't need attribution in our fund?

• 13:24Speaker 02

  You know, attribution is an interesting thing because the argument for attribution largely comes back to efficiency. You know, if you're not clear on who did what and what caused the returns to be generated, then it's hard to lean into what works and stay away from what doesn't work. We have made a very deliberate decision to trade a few points of efficiency in exchange for our culture. And so one example of that would be, once upon a time, we had this CRM system where each of the prospects that we were talking to had an individual's name associated with them, which is a very logical thing to do because you want one individual to be responsible and make sure that no balls are dropped. What we found was that that started to create some behavior that we didn't want. And so

• 14:09Speaker 02

  in one fell swoop, we actually changed all of the names in the database from individuals to the singular name Team Sequoia. And the point is that every prospect we're talking with, every company with whom we're in business today, they don't belong to an individual. They are associated with Team Sequoia and it should always be a team effort in pursuing those things. And so we try very hard not to be formulaic around attribution. Over a long period of time, it becomes quite obvious who's contributing and who isn't contributing. And so we're willing to lose a few points of efficiency in exchange for a few points of culture.

• 14:45Harry Stebbings?

  Listen, I totally agree. And I think you can easily lose a real kind of human engagement and foundational relationships through focusing too much on efficiency. So thrilled to hear that. We did mention first round though, that. And I actually had Josh Koppelman on the show and he said something that was so striking when it came to how he thinks about the first round team. He said, I'd rather be a better picker of partners than investments. Interesting statement. How do you think about the partners you look to add to Sequoia and what you really like to see?

• 15:10Speaker 02

  First, let me just say I completely agree, and I think First Round is an amazing partnership, and they've done a lot of things right. When we look for new partners, there are three basic things that we look for. One, some sort of outlier characteristic or something that makes that person special. Two, whatever it is that makes that person special should be additive to what we already have here at Sequoia. And then three, values. And so, to give you a couple of examples, when Jess Lee joined us three or four years ago, she had this incredible user empathy that translated into very warm relationships with founders, and also very good insights around products that are being built for people, which is all products. Jess also had a different set of methods than what we had historically used here,

• 15:52Speaker 02

  and threw herself into all raise and female founder office hours, and basically has taken a community-centric approach to venture capital, which has worked wonders. And so Jess was a terrific addition to our team because she had those outlier characteristics. They were very additive to what we already had, and she had wonderful values. And when we talk about values, there's values in an absolute sense, which means everybody has to be just deep down a good person, and that's non-negotiable. We will happily dismiss the high performer if that turns out to not be the case. But it also means value in kind of values in sort of a relative sense, or in a Sequoia-specific sense, which just means, do you believe the same things we believe? And there's a piece of that that relates to founders.

• 16:32Speaker 02

  And in our view, entrepreneurship is the greatest mechanism the world has ever invented for turning promising ideas into positive impact. And so, the mission of serving founders has to be important to somebody, and they have to be inspired to get out of bed to do that. And then the second piece of what we value here is our limited partners. And back in the eighties, we had enough of a track record to be able to choose who we work with. And so, we chose to work with what we collectively call great causes. So the money that we invest, of course, some of it is our own money. We have to have skin in the game, but the vast majority of it comes from nonprofits, universities, and foundations who are doing things that we very much support. One example would be the Ford Foundation.

• 17:16Speaker 02

  Our main conference room here is called Ford, after the Ford Foundation. We are the longest standing and largest relationship for the Ford Foundation in terms of where their money comes from with the returns that we generate for them. And that allows them to do pretty amazing things. Like, for example, they have an international fellowship program, which has allowed 4,300 people from emerging markets to go to grad school over the last decade or so. They have something called a self-help initiative, which has allowed more than 35,000 families who are minorities or low-income folks to own houses that they otherwise would not have been able to own. And so knowing that the work we do and that the returns that founders generate for Sequoia go to causes like that, that's very, very important to us.

• 17:58Speaker 02

  And if that doesn't matter to somebody that we're talking about a role, then that person's probably not well enough aligned to be part of the team here.

• 18:05Harry Stebbings?

  No, I do agree, and that's a pretty special reason to get up and go hunt for some pretty incredible deals, for sure. I do want to dig in a little bit deeper on a specific element of the team, being the decisions that they make. I'm probably the biggest nerve when it comes to decision-making processes. One of many reasons I'm still single, Pat. But I do want to ask, in terms of the decision-making process for you, I've had many takes on the show, from felicitations who favor unanimity to others who can very much favor conviction-driven, partner-led deals. Where do you stand on the need consensus? Let's start with that before we dive into reserve allocation.

• 18:36Speaker 02

  That's a really good question. So consensus and conviction are two things that have pros and cons associated with them. So the positive of consensus is once you're in business with a founder, it's all hands on deck and the whole team is supportive and nobody who was negative at the time of the decision is secretly rooting for failure. The downside of consensus is that you could end up in a lowest common denominator situation. The positive of conviction is that investments are never obvious and you really need somebody who sees something special to step up and have conviction to make an investment. The downside of conviction is that if you put it on a pedestal and make it a requirement for making a new investment, then you can unintentionally end up with a lot of false bravado, where people are acting as if they have conviction even though they haven't necessarily

• 19:21Speaker 02

  done their homework. And so the thing that solves this or resolves that tension for us is if you truly have conviction in an investment. You should be able to explain it in simple enough terms so that everybody else in the partnership understands what you see and they may not agree with you, but as long as you've heard their arguments against the company and you still have that conviction and people understand what it is you see that is super special and that we're playing for, then it's quite easy to end up with consensus and end up with everybody saying, hey, I wouldn't have seen this if you hadn't shown it to me, but I understand what you see, I trust your judgment and I am excited to help you support this company for the next five or 10 or 15 years or however long it takes.

• 20:04Speaker 02

  And so at Sequoia, rarely do investment decisions begin with consensus. It's usually a couple of people who see something special, but they always end with consensus because by the time we invest, we want it to be a team Sequoia investment, not an individual's investment.

• 20:20Harry Stebbings?

  And I do agree with you in terms of getting unanimity throughout that discovery process. Speaking of that discovery process, I spoke to one of your founders in the form of Frederick at Okta before the show and he mentioned the insane amount of diligence that you and Sequoia put into the memos for A, B and C. I mean, first I could clearly learn a lot from you with regard to that. I'm better at podcasting than my own memos, that's for sure. But I would love to learn from you in terms of how do you run such a rigorous process? And what does it entail, Pat?

• 20:45Speaker 02

  So I think it's pretty funny that that came from Freddie because when we were getting into business with Okta, I got an email from Freddie every day at 5pm on the dot that said, here are the things you asked for us to give you, here are the things we have given you and the things that we have yet to give you. And so Freddie ran about the most rigorous process from the company side that I've ever seen. Freddie's also a guy who issued RFPs to all of his wedding vendors, which tells you a little bit about how process oriented he is. Anyway, it's been an absolute delight being in business with Freddie and Todd over the years. To answer the question, the theory of our process is as simple as crystallize an investment thesis and then stress test it. Now, when we say investment thesis, it's just the single declarative statement, we should invest because. The way we go about stress testing that kind of has three legs to the stool.

• 21:30Speaker 02

  One is what we call inside the building, two is what we call outside the building and three is what we call the evidence. The inside the building stuff is getting to know the team. And really understanding how decisions are made and how all of the talent in the building comes together in support of a mission. The outside the building stuff is largely around customers, competitors, ecosystem, just having a full understanding of the market dynamics. And then the evidence is kind of the numbers. At the end of the day, we could love the story, but if the numbers are not supporting the story, and it doesn't necessarily mean the financials, it just means whatever leading indicators might be present. If the evidence doesn't support the story, then we're probably missing something.

• 22:10Harry Stebbings?

  Can I ask, me and Fred, my partner, always talk about kind of acceptable versus unacceptable risk. The unacceptable risk is unwavering belief in the founder. The acceptable risk may be depth of market, it may be whatever that may be. How do you think about acceptable versus unacceptable when you think about those three-legged stool analysis?

• 22:27Speaker 02

  You know, I think everything comes back to the founder. So just to give you a couple of examples. So when we did invest in Okta, it was the Series C, and Ben Horowitz and Neil Bushery were already on the board, so we were a little bit late to the party. But even at the Series C, they had three million of ARR versus consensus for this year says 500 plus. So even at the Series C, Okta was very non-obvious. We had a point of view that identity was going to be very important, and then Todd and Freddie just kind of blew us away with the clarity of their thinking and how complimentary those two were to one another. And so it was a little bit of market and a little bit of team, but then a lot of the other components didn't quite tie, so it was really a bet on Todd and Freddie and the market.

• 23:09Speaker 02

  If you look at HubSpot, which we partnered with back in 2011, when they had about 20 million of revenue, and consensus thinks they'll do 600 plus this year, HubSpot was similar. Inbound marketing was clearly a thing. Nobody had articulated that as well as Brian and Dharmesh, and we just kind of wanted to be in business with the founders. Similar but different in some ways was Qualtrics back in 2012, when they had about 20 million of revenue. In that case, the market was not at all obvious. So it wasn't like identity or inbound marketing, where we had a point of view on the market. At the time, it wasn't really clear what the market was going to be. It was just clear that the business was working, and at the end of the day, Ryan Smith and Jared Smith were super special characters.

• 23:50Speaker 02

  That was a scary investment for us because at the time it was the most expensive price we had ever paid for a software company. And I remember my partner, Brian Shire, who was point on the investment, Brian was like a rock throughout that process. And anytime questions about, geez, isn't this expensive came up, Brian basically said, sure, but Ryan and Jared will figure it out. And so his faith in the founders was just off the charts. And so anyway, I think almost every risk is an acceptable risk. Founder risk is not. Great founders will figure it out. And if we wanted to simplify our business, it would be nothing more than invest in great founders at the market price and do everything you can to help make them successful. That's it.

• 24:30Harry Stebbings?

  Again, very unfair of me to go off schedule. I totally agree with you on that kind of centrality around the founder. What concerns me, Pat, honestly, is that when you look at the fundraising landscape today, it's so compressed in terms of fundraising timelines, where you literally have founders who are saying, I need an answer by the end of the week. We're getting term sheets now and it's a super compressed timeline. And in terms of really getting to know the founder, it's very limited time. And on the founder's side, it's a super limited time to get to know the investor. How do you feel about the compressed timelines we're seeing in fundraising today?

• 24:59Speaker 02

  You know, it really depends on whether you have a fundamentally reactive stance or a fundamentally proactive stance. And I focus mostly on growth stage investment. And so this may not be true for seed stage investing, where the companies have just gotten going. But for growth stage investing, we spent more than two years getting to know Eric Yuan at Zoom before we finally had a chance to get into business with him. And for the bulk of that two years, it was little more than building trust between him and us to figure out if we might want to someday be in business together. And so by the time that investment came together, the investment itself happened quite quickly, but it was on the back of two plus years' worth of getting to know one another.

• 25:39Speaker 02

  I do think that when companies and investors meet for the first time in the context of an imminent fundraising, it's very tricky for the founder to make a good decision because it's quite easy to compare one term sheet to the next. It's quite hard to compare one person or one partnership to the next. And so I think within our portfolio, founders Tend to spend a decent amount of time getting to know folks outside the context of a fundraising to make sure that they're getting the partner they really want as opposed to the term sheet they really want. And often you get both, but the partner is who you're stuck with for five or 10 years, the term sheet is a moment in time.

• 26:16Harry Stebbings?

  Yeah, no, I love that as a saying. I think that should be the caption for the episode itself. Listen, Pat, you know my respect for you. And so I do want to take the chance while I have it to do a Pat AMA. Essentially, I'm going to ruthlessly use the show to learn from you. So my first question is, I've just gained my first institutional board seat. You've sat on some incredible boards. What would your advice be to me?

• 26:36Speaker 02

  First, congratulations. That's awesome. You have a very bright future ahead. So this is the first of many, I'm sure. As far as advice goes, I would kind of start with the basics. And I think the basics are your job as a board member, first and foremost, is to build trust and to listen. And if you do not have the trust of the team or the other board members, and if you have not listened to what's really happening inside of the business, then there's no foundation on top of which you can build a relationship or hope to be useful to the company. And so I would almost go no further than build trust and listen. And once you've nailed that, then maybe we can move on to the rest of it.

• 27:15Harry Stebbings?

  Well, I look forward to learning step two. The next question actually is, to be fair, from Frederick from Otter, so I can't actually take credit for it. But he said, life and work, Pat, how have you managed it, leading Sequoia Growth before the age of 40 and an incredible family also? What is the secret to this incredible blend?

• 27:31Speaker 02

  That's very kind of him to say. But he's done a pretty amazing job for himself, too. So I mentioned earlier, I was lucky to be born into a family where my parents really valued doing the right thing. And it turns out that if that's the thing you care about most, life ends up being relatively simple, and you end up being surrounded by wonderful people, and you kind of end up getting nudged in good directions. And so I think trying to do the right thing has obviously been very important. As far as some of the wonderful people I'm surrounded by, my wife, Sarah, is amazing. Objectively, she is 10 to 100x more talented than I am, and I am so lucky to be her lesser half. My best friend, Sangeen Zeb, who's a part of Over at Founder Circle, Sangeen actually introduced me to my wife and then Sangeen also

• 28:15Speaker 02

  introduced me to Eric Yuan at Zoom. And so when you have friends like that, you end up looking pretty good just because you have these amazing friends. And then here at Sequoia, my partner, Michael Abramson, he and I are sort of the team leads for our growth business here. And Michael and I are very different people, but he's great at all the things that I'm not. Hopefully, the things that I'm reasonably decent at are blind spots of his. And so I think the complementarity between the two of us has turned out to be a very powerful thing.

• 28:42Harry Stebbings?

  Well, I mean, my takeaway from hearing that is that everyone needs a Sangeen in their life. I mean, my word, that is a friend.

• 28:49Speaker 02

  That's right.

• 28:50Harry Stebbings?

  I would love to finish it, Pat, on a quick fire round. You know the drill here. I say a short statement, you hit me with your immediate thoughts. Ready to roll?

• 28:57Speaker 02

  Let's do it.

• 28:57Harry Stebbings?

  Okay, so I'm flying over to the West Coast. I need a book for the flight. What is the must read today and why?

• 29:03Speaker 02

  Yeah, it changes over time. In high school, I would have said something by Anne Rand. In college, I would have said something by Dostoevsky or Kurt Vonnegut. A few years ago, I would have said Boys in the Boat, which I would still recommend if you haven't read it yet, just because it's such a wonderful story of underdogs coming together to work as a team and achieve something spectacular. I'm actually going to take you in a different direction on this one. There are only three television shows that I ever watch. I don't watch a lot of TV, but one of them, I'm pretty sure I'm the only person who watches it. It's called God Friended Me, and it is basically about a couple of people who go out of their way to help others. And each episode is about them solving a problem in somebody else's life. And it's just such a wonderfully refreshing thing that reminds you how powerful it is

• 29:47Speaker 02

  to be nice to other people. And that's not something that you ever see in the headlines. And it's very different than a lot of the cynicism that shows up in a lot of other places. And so if you just want 42 minutes of feel good, I would watch an episode of God Friended Me.

• 30:03Harry Stebbings?

  Totally. Or listen to two episodes of the 20 Minute VC. God, I'm so good at plugging myself. Tell me, what would you most like to change about tech in Silicon Valley, Pat?

• 30:11Speaker 02

  Maybe two things. I think, one, the ecosystem has become very good at telling the narrative around how tech does positive things. Things in the world, and I think that's very true. I think the ecosystem has kind of neglected the flip side of that narrative, which is that tech does not bring everybody along equally. And I think that's a dimension along which we need to improve over the coming years. And then the second thing, when I moved out here in 2007, Silicon Valley was Silicon Valley, but you could go to a coffee shop and hear about something other than somebody's startup in the conversations that were happening around you. And I feel like Silicon Valley has become such an unbelievable center of gravity that it's almost started to overwhelm itself.

• 30:54Speaker 02

  And people are kind of starting to lose sight of some of the more important things in life. And so I worry that Silicon Valley almost needs a chill pill and it needs to kind of relax and appreciate that there's more to life than what we all do every day.

• 31:07Harry Stebbings?

  You are more than welcome in London, Pat. My mojitos are always ready for you. Tell me, Sequoia never seems to miss anything. What's been your miss?

• 31:14Speaker 02

  Uh, we miss so many things. So we are lucky enough to get to know pretty much all of the interesting companies out there. And so you can basically just go through the list of companies that have been successful in the last five or 10 years. And if you don't see Sequoia as a major shareholder, it means that we screwed up. So we've missed so many things. We try like heck to be in business with the best founders, but nobody's perfect. It's never obvious at time zero. We make plenty of mistakes. Unfortunately, there are founders who are kind enough to give us another chance. If we screw up on the A, maybe we get to lead the B. If we screw up on the B, maybe we get to lead the C. So being able to participate at every point along the founder's journey actually helps us fix our own mistakes over time.

• 31:55Harry Stebbings?

  Totally. No, I do get you there and very envious of you as a seed fund. I do have to ask, what's your superpower and what's your weakness, Pat?

• 32:01Speaker 02

  The weakness is easy. I have plenty of weaknesses. The one that I guess I'm most envious of seeing other people who are great at this is if you throw me into a cocktail party or any sort of networking event, that's like my nightmare. The people who can work the room and, you know, seem to be friends with everybody and just have a magical touch with other people, that's never been my forte. And I just admire people who are so good at that. As far as strengths go, there was a good quote from Harry Truman that somebody brought up. Other day, which was it's amazing what you can accomplish when you don't care who gets the credit. And I think that really resonated with me because I've always had sort of a desperate need to win. But that's never been at the expense of other people.

• 32:43Speaker 02

  And so my number one objective, and this kind of goes back to Boston College and the Jesu tradition of men and women for others. Like my number one objective has always been for the team and the ecosystem around me to win. Whether or not I'm the one who takes the shot with two seconds left on the clock, so to speak, just doesn't matter. I just want the team to win and Sequoia is an environment in which that mentality can thrive.

• 33:05Harry Stebbings?

  And then final one, Pat, the most recent investment and why you said yes, publicly announced, that is.

• 33:10Speaker 02

  The one that's top of mind is a self-driving truck company called Embark Trucks, which was started by Alex Rodriguez and Brandon Moe. And we spent a couple of years looking at autonomous vehicles as a category. We ended up with a couple of investments, one, which is the leading car company called Aurora and two, which is the leading truck company called Embark. The reason we invested in Embark was twofold. First, self-driving trucks or trucking in the U.S. is a massive market. It's like two or three times the total size of the software market in terms of revenue dollars. So it's a huge opportunity. There's a dramatic supply, demand imbalance. Demand is increasing because of e-commerce and everybody trying to fight off Amazon. Supply is actually decreasing because there aren't a lot of people who want to be truck drivers these days.

• 33:52Speaker 02

  And so Embark is filling that gap between the excess demand and shortage of supply with self-driving trucks. Alex himself is one of those people that if he starts five more companies, we will be investors with him five more times. He's just a super, super special person. He won the robotics world championship when he was in middle school. He went to University of Waterloo to study mechatronics, ended up dropping out with a Thiel Fellowship, went to Y Combinator. And is today at the ripe old age of 23, the CEO of the leading autonomous truck company. And so it's people like him whose slope is so incredibly steep that inspire us and give us a reason to get out of bed in the morning.

• 34:31Harry Stebbings?

  Wow, I mean, more rarely do I feel old, but I feel sufficiently old listening to that list of achievements. And I'm actually thrilled to say, as part of my research for today's episode, I spoke to Alex and he's coming on the show next week. So that is awesome. But listen, Pat, you know, I always love chatting to you. I can't thank you enough for all you've done for me. So thank you so much for joining me again today, Pat.

• 34:49Speaker 02

  It's been a pleasure. Thank you.

• 34:53Harry Stebbings?

  I'm sure you got from that interview just what an incredible guy Pat is, but I do want to say again, he's been so kind and supportive to me since our very first episode, two and a half years ago, a truly special individual in the ecosystem. And I'm super excited to say we have Alex Rodriguez on the show on Friday, so stay tuned for that. It's a very, very special one. And if you'd like to see more from us, you can on Instagram at H Stebbings 1996 with two Bs. It would be fantastic to see you there. But before we leave you today, I'd like to give a big shout out to my friends over at Multiple. Widely regarded as the go-to firm for game-changing companies when it comes to building your brand, crafting your culture, and gearing up your growth. They've worked with breakthrough companies such as WeTransfer, PipeDrive, Mixcloud, Unbabble, Signal, and Kalo. And when we set up stride.vc, they were the first call we made to help us get our story straight. And what makes Multiple

• 35:38Harry Stebbings?

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• 36:19Harry Stebbings?

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• 37:02Harry Stebbings?

  ...to exporting CSV files and emailing attachments to a bookkeeper you can never get a hold of. Get your company's books in order and get your time back today. Check them out at pilot.com/20vc. That's pilot.com/20vc. As always, I cannot thank you enough for your support and I can't wait to bring you a fantastic episode with Alex Rodriguez that embark on Friday.