Sequoia Capital (Part 1)

Acquired dives into the history behind storied venture firm Sequoia Capital and its legendary founder, Don Valentine. Part 1 tells Don’s story, starting from humble beginnings born to uneducated parents in Yonkers, NY, through shaping the fabric of Silicon Valley first as head of Sales & Marketing at both Fairchild and National Semiconductor, and then for generations to come via his pioneering concept of “company building” at Sequoia Capital. No matter where you sit in the ecosystem today, Don and the companies he helped build laid the foundation for nearly everything technology has become over the past 60 years. 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 Links: Silicon Valley’s “Traitorous Eight”: https://en.wikipedia.org/wiki/Traitorous_eightDon Valentine’s lecture at Stanford GSB: https://www.youtube.com/watch?v=nKN-abRJMEw&t=2555s https://www.youtube.com/watch?v=nKN-abRJMEw&t=2555sBerkeley’s oral history with Don: http://digitalassets.lib.berkeley.edu/roho/ucb/text/valentine_donald.pdfCarve Outs: Ben: The Business Roundtable on The Daily: https://www.nytimes.com/2019/08/21/podcasts/the-daily/business-roundtable-corporate-responsibility.htmlDavid: Amazon Music on 25 years of “Ready to Die”: https://youtu.be/Dsna1nIZzB4Sources: https://en.wikipedia.org/wiki/Traitorous_eighthttps://www.sfgate.com/technology/article/Silicon-Valley-Shockley-racist-semiconductor-lab-13164228.phphttps://signallake.com/innovation/Valentine101409.pdfhttp://digitalassets.lib.berkeley.edu/roho/ucb/text/valentine_donald.pdfhttps://www.amazon.com/dp/0875849385/ref=cm_sw_r_cp_tai_ZB8IDb7NNAFAHhttps://www.amazon.com/Troublemakers-Silicon-Valleys-Coming-Age-ebook/dp/B06ZZ1YDTX/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr= https://www.amazon.com/Troublemakers-Silicon-Valleys-Coming-Age-ebook/dp/B06ZZ1YDTX/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=https://www.scaruffi.com/svhistory/arun3.htmlhttp://www.ianhathaway.org/blog/2019/7/31/vc-an-american-historyhttps://www.axios.com/sequoia-capital-shakes-up-leadership-1513300220-7d255e34-f4bf-4178-af62-ec68023726e3.htmlhttps://www.slideshare.net/lebret/a-history-of-venture-capital-lebret-vers-11https://www.hbs.edu/faculty/Pages/item.aspx?num=47240https://www.inc.com/magazine/19850501/7289_pagen_5.htmlhttps://www.amazon.com/VC-American-History-Tom-Nicholas-ebook/dp/B07QV2YM3X/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr= https://www.amazon.com/VC-American-History-Tom-Nicholas-ebook/dp/B07QV2YM3X/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=https://www.youtube.com/watch?v=nKN-abRJMEw&t=2555s https://www.youtube.com/watch?v=nKN-abRJMEw&t=2555s

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

• 0:00David Rosenthal?

  I love it. You know, they, I'd been intending to upgrade them when I was in New York. I was like, I'm going to go to the flagship Nike store and get like the latest, latest model. They don't make them anymore.

• 0:09Ben Gilbert?

  They don't make the Flyknits anymore?

• 0:11David Rosenthal?

  Well, they make Flyknits, but they don't make the free Flyknits.

• 0:14Ben Gilbert?

  Oh, crap.

• 0:15David Rosenthal?

  The Nike free Flyknits. So I think this might be the last model.

• 0:18Ben Gilbert?

  Well.

• 0:18David Rosenthal?

  To stock up.

• 0:19Ben Gilbert?

  Yeah, I know what I'm doing this weekend.

• 0:32Ben Gilbert?

  Welcome to season five, episode four of Acquired, the podcast about great technology companies and the stories behind them. I'm Ben Gilbert and I am the co-founder of Pioneer Square Labs, a startup studio and early-stage venture fund in Seattle.

• 0:45David Rosenthal?

  And I'm David Rosenthal and I am a general partner at Wave Capital, an early-stage venture fund focused on marketplaces based in San Francisco.

• 0:53Ben Gilbert?

  And we, as you know, are your hosts. Today, we are talking about the absolutely legendary Sequoia Capital. And because it would be inappropriate to try to cover Sequoia's immaculate history in just one episode, this is only part one. And typically, I try and throw out some stats in this section about why the company that we're covering on this episode is important. Well, today, I'm only going to throw out one. Since its founding in 1972, the firm has helped to catalyze companies that now represent $3.3 trillion of public market value. And for context, the entire NASDAQ is $10 trillion. It is frankly absolutely

• 1:35Ben Gilbert?

  unbelievable that a single firm can be responsible for helping to create so much of our modern economy. David, this is bananas.

• 1:43David Rosenthal?

  Yeah. For comparison's sake, what did we say? Next, which is one of our A pluses, we said generated a trillion dollars in market cap value, the next acquisition. So here we are talking about $3.3 trillion. Now, obviously, it's a venture firm, not a company, but this is one of the reasons I've been so excited to dive into this new category here on Acquired and can't wait to tell the history of Sequoia Capital.

• 2:10Ben Gilbert?

  Absolutely. 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.

• 2:30David 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.

• 2:51Ben 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.

• 3:13David 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.

• 3:31Ben 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. So lastly, our limited partner bonus show this week was kind of a fun flip for me. David interviewed me on what is a startup studio and how does it work, and I dove into our process here at Pioneer Square Labs. If you want to listen and become a limited

• 4:13Ben Gilbert?

  partner, you can get started with a seven-day free trial and listen right here in the podcast player of your choice by clicking the link in the show notes or going to glow.fm slash acquired. I promise it's very easy.

• 4:28David Rosenthal?

  I like that. I like that. Yep. All right, David, it's time. It's time. Let's do it. So one thing that is oft forgotten these days, because it's just a name and is like, you know, reminds me of the quote about fishes and water, where you ask a fish, like, how's the water? And the fish says, what's water? And that is that Silicon Valley is called Silicon Valley because of silicon, even though it is mostly software these days and the internet. So to set the stage for this episode, we need to rewind back to the origin of Silicon Valley and indeed silicon. So we go back

• 5:11David Rosenthal?

  to 1957, when, and this is really the moment, I think you could argue, when Silicon Valley, as we know it, both in terms of silicon and in terms of the concept, was born. And that was when a group of eight employees leave a company called Shockley Semiconductor, Shockley Semiconductor Laboratory, and start a new company that ends up being called Fairchild Semiconductor. And this group of eight employees goes on to be known as the Traitorous Eight. And we'll, we'll link to, in the show notes, to this amazing photo. We'll link to the Wikipedia page of these eight individuals. It's just so great. So 1957 in all the best ways. Why did these eight folks leave Shockley and start their own company? And this was

• 5:53David Rosenthal?

  a radical thing to do at, at the time. Well, Shockley Semiconductor was started by Bill Shockley, and Bill was a genius. He was the co-inventor of the transistor that he helped invent when he was at Bell Labs. And for that, he won the 1956 Nobel Prize. I mean, he literally helped invent computing. But he did have a dark side, and that dark side was that he was a terrible manager, and people hated working for him. And to help you kind of get the picture, at this point in time, and then for kind of the rest of his life, he became a white supremacist and was a proponent of eugenics. So this is the sort of person we're talking about that would prompt people, as brilliant as

• 6:38David Rosenthal?

  he was, and as amazing as the innovation that was happening at Shockley, would be prompted to maybe leave and do something rash.

• 6:46David Rosenthal?

  So who were the traders eight? Well, among them, there are some names you might recognize, starting with Gordon Moore of Moore's Law and Bob Noyce, who of course, the two of them would go on to found Intel, although that's a story for another day. And Eugene Kleiner, who would go on to help found Kleiner Perkins, which is another venture firm story for another day. But what was interesting is when they left and they started Fairchild, it wasn't actually a startup in the way that we think about it today. It wasn't an independent company. It ended up, they had a really tough time getting it financed. And so how it ended up being organized was as the West Coast semiconductor division of an East Coast company called Fairchild Camera and Instrument Corporation.

• 7:30David Rosenthal?

  So Fairchild was located back on Long Island in New York and they owned the company. So funny. I always assumed that Fairchild was like one of the traders eight. No, not at all. Yeah, they didn't actually own the company. I believe they had equity in it, but no. So how did this happen? A man named Sherman Fairchild, at this point in time, who lived in Long Island, was the largest shareholder in IBM because his father had helped finance Tom Watson in forming IBM many years, many years earlier. So when the traders eight were trying to get their new company off the ground, they intersected with a man named Arthur Rock, who's going to come up again in a minute here, who was

• 8:12David Rosenthal?

  one of sort of the early proto venture capitalists in California. And he was a former investment banker and he was trying to get financing. It was really hard. And so he ended up going to Sherman Fairchild because he knew Sherman was the largest shareholder in IBM. He was interested in technology and Sherman agreed to set this up as a division of his camera and instrument corporation. Wow. Creative. Yeah. Yeah. Which is, which is crazy. So the way it happened, they loaned one and a half million dollars to the company in return for which they got an option to buy all of the stock of the company for $3 million. Imagine if, if VCs structured deals that way today with founders. It wouldn't, it wouldn't quite set up the, the right set of incentives.

• 8:56Ben Gilbert?

  But you gotta crawl before you can walk.

• 8:59David Rosenthal?

  Yeah, yeah. Fairchild would lead to many, many things, including, of course, Intel. And we'll get into that a little bit later. I mentioned Arthur Rock. So what was the financing environment for quote unquote startups in California at this point in time?

• 9:16Ben Gilbert?

  Knowing how markets work, I think we can assume that there wasn't much of it, given the terms of that other investment that you just mentioned.

• 9:24David Rosenthal?

  Indeed. So as you might guess, from how Fairchild was financed, the quote unquote venture capital industry, or the proto venture capital industry that existed in California at this time, was pretty much nothing like we know it today. For one, it was so small that the individuals who were doing it, all of them in California, they would meet for lunch once a month at the Mark Hopkins Hotel in San Francisco at like a table, a regular table, and they would sit around and talk about like the various companies that they were working on. That was it. That was the entire industry. And for two, none of them actually came from a technology or a startup or company background. So Arthur Rock, who

• 10:08David Rosenthal?

  we mentioned, he was an investment banker, and a few other folks that were kind of instrumental at this point in time, Pitch Johnson and Bill Draper, the name Draper might ring a few bells for folks, they had worked in the steel industry and come out to California and started financing companies. There was another gentleman named Tommy Davis. He was a real estate developer who developed an interest in this sort of thing. So that was really the state of things. And as evidenced by Fairchild, here you have eight of the most talented scientists and engineers working in the highest growth industry in the world, and it's literally impossible to finance them. They have to get essentially bought by an East Coast company to even get their company off the ground.

• 10:51Ben Gilbert?

  It's so interesting, like venture capital falls under the broad asset class today of alternative investments, which always seems a little funny, given how much, especially today with all the late stage money coming into startups, how much money is really invested there. And it's silly to call it alternative. Now, when you look at it in these days, it's very much, you had to be a very alternative counterculture person to believe that this was the best way to go and invest your money.

• 11:20David Rosenthal?

  So it's right at this moment in time that a quite a maverick, one might say, individual comes on the scene and basically, basically, single-handedly writes the playbook of what modern venture capital and alongside it, what a modern startup would look like. And that man's name is Don Valentine. So Don, of course, goes on and starts Sequoia Capital, and we're going to tell this story here. I cannot recommend highly enough anyone, whether certainly if you work in or are interested in venture, but even if not, if you're just interested in technology and startups, go do two things. One, watch the YouTube video of a talk that Don gave at the GSP at Stanford in 2010.

• 12:05David Rosenthal?

  And two, read this wonderful, wonderful oral history that Berkeley did as part of the history department there with Don. And you will get a sense for what an amazing character this guy is. And a lot of this show is, a lot of the history of this show is taken from those two documents.

• 12:23Ben Gilbert?

  Yeah. And listeners, the way to think about part one and part two of the Sequoia story, part one that we're going to focus on here, this is really Don's story.

• 12:30David Rosenthal?

  Yeah. And it's really cool, actually, the talk that he gives at Stanford, he holds up towards the beginning of it, the resume of an individual who had just joined Sequoia Capital that week. That individual is Alfred Lin, of course, friend of the show and former guest.

• 12:45Ben Gilbert?

  This is kind of amazing. He printed out Alfred's resume and brought it to this talk.

• 12:49David Rosenthal?

  I also love that Alfred, like, had a resume at that point. Like, he was, you know, COO and chairman of Zappos that had just been acquired for over a billion dollars, but always hustling. Okay, so who is Don? So he was born in 1933 in Yonkers, New York, back on the East Coast. His father was a teamster, so a delivery truck driver, and a union member, if you can imagine it, which Don took a, ends up taking a very, very different path in life. His parents were completely uneducated, both of them. Neither of them had finished grade school.

• 13:24Ben Gilbert?

  Wow, so not like, not like hadn't gone to college, like, hadn't finished grade school.

• 13:28David Rosenthal?

  No, literally like had not finished elementary school, but in good Catholic fashion. They do value education and especially Catholic and religious education. And so Don grows up in in New York, going to Catholic schools. And then he does, he ends up going to Fordham University, Jesuit University, graduates in the early 1950s. And promptly, as most folks did back then, at least most men, gets drafted into the army. This is, I believe, right, either during or right before when the Korean War is going on. According to Don, he quote, "had a terrible attitude about the military. He didn't like and doesn't like regimentation." And this is going to become very clear. Don does things his own way.

• 14:11David Rosenthal?

  But one thing that he loves is electronics and technology. And he ends up getting put in charge in the army of, in his words, trying to teach senior officers to use modern technology instead of the way that they were inclined to fight wars, you know, which was with like horses and, you know, in cavalry. All that said, the army and Don still don't really mix. So he transfers to the Navy. And this is a major, major moment for him because he gets stationed in California. He comes out to California and he steps off the boat and he's like, I have reached the promised land. It doesn't snow here in the winter. I'm never going back to the East Coast. I love this place. His goal is he wants to find employment at a West Coast electronics company.

• 14:55David Rosenthal?

  So he gets out of the Navy. It ends up taking a little while. He first gets a job at Sylvania Electric, which was actually based in Pennsylvania. I believe he was working for them in New York.

• 15:04Ben Gilbert?

  Is that the, is that the vacuum cleaner company?

• 15:07David Rosenthal?

  Well, it's the vacuum tube company. So this is how he gets into technology because this was still, you know, the semiconductor, I believe, had been invented by Shockley and others at this point. Most computing, such as it was, was being done with vacuum tubes. You know, remember the Eniac and like, this is what we're talking about back in these days.

• 15:26Ben Gilbert?

  I guess I know Silvania as a lighting company. I think, do they make light bulbs? I've like seen the logo around like Home Depot.

• 15:32David Rosenthal?

  Yeah, I think they make light bulbs now. I mean, who knows what the corporate structure of the company is these days. At the time, they were making vacuum tubes and selling them as computing components mostly to the Defense Department. And of course, Don had come from the military. So Don ends up jumping ship to Raytheon and moving to Los Angeles. So here he is. He's finally, he's achieved his goal. He's living in LA, out in California, loving life, surfing. He was a big water polo player and he's working in what at the time was the high technology industry, selling computing solutions to the Defense Department and the military. He starts taking part-time courses at the

• 16:14David Rosenthal?

  business school at UCLA focused on sales and marketing because he becomes really interested in, of course, sales, which is his job, but also the marketing component, like who are we selling to and why? And he has a great quote, he says, you know, where is the decision-making process in a great company? The answer is it's in marketing. In a well-run company, the marketing department, in conjunction with the science department, science being engineering at the time, decides based on what their capabilities are, what the problems they can solve, what sequence they should solve them in, and how much money they can spend, they can spend on building that product, and how big is the market? Who's going to buy this stuff? And all that happens within marketing in a primary position. This really

• 16:56David Rosenthal?

  becomes Don's life passion and that ethos, you know, ends up informing everything he does and everything. It's quite a capitalist, we'll see. So after a short stint at Raytheon, he ends up getting recruited to move up to Northern California and join a fresh startup in a really hot semiconductor company up there, Fairchild Semiconductor.

• 17:20Ben Gilbert?

  Was Fairchild independent at this point? Or were they still a part of the bigger umbrella?

• 17:24David Rosenthal?

  No, they were, they were, this was still very early. They were part of Camera and Instrument, as we'll see. So Don joins, he's not part of the Trader S8, but he joins, he's like employee number 40 or 50. They're doing a couple million dollars in sales, but still really small. And at first, they put him in charge of selling Fairchild semiconductor to defense firms back in Southern California. So they sent him back down to Southern California.

• 17:50Ben Gilbert?

  Which is kind of funny. It's, it's exactly what it is doing in the Army, right? It's educating about modern technology that, you know, to people who had been doing things an older way and trying to basically do a very complex sale.

• 18:02David Rosenthal?

  Yeah. I mean, it's kind of amazing that like, you know, Don's history from Yonkers, New York, everything basically, you know, sets him on, it's like the Steve Jobs quote of like, you can't connect the dots, looking forward, but looking back, everything you've done, you know, prepares you for what you're doing now. Don, you know, basically knocks it out of the park, selling, selling to defense contractors down in LA. He takes the company from this couple million dollars in sales when he joins to over $150 million in annual sales in just a couple of years. And, and it's, over that time, he gets promoted, ends up running all of sales and marketing for Fairchild. And he starts using everything that he's learned in his passion for marketing

• 18:46David Rosenthal?

  to tap into like, hey, maybe we should be selling to other markets too. And which other markets should we be selling to? And are there things that we can do to customize the chips that we're making to make them more applicable to these other applications in other markets? The quote he has here is, "Business was so good." I mean, this was like, God, to be at this moment in time, it was like, it was like to be there in, you know, the mid, mid 90s when the internet was taking off, or the mid 2000s when Web 2.0 was taking off. And it was literally just like, you could see the roadmap of what all the applications were going to be. And it was just like, go build them first and best.

• 19:24Ben Gilbert?

  Yeah, not only did the semiconductor have perfect product market fit, but it scaled horizontally across tons of industries. I mean, everybody was going to need equipment that required semiconductors. And I think that now we sort of like take it for granted. Actually, we're in this phase where we're sort of moving forward from IT departments into, you know, companies that don't have IT departments. But this was the development of IT. You know, this was every company that was starting to embrace technology would use something with semiconductor products in it.

• 19:56David Rosenthal?

  Yeah, I mean, we're going to see this here in a minute with the personal computer and Apple. But then with the internet, then with web 2.0, then with mobile, like you have this tectonic shift. And then it's like, okay, we know what the applications are. Let's go build the applications. And Don is really the first person in in technology to recognize that these are, this is the dynamic of how the broader technology ecosystem works. So he says, "Business was so good that we had more opportunities than we had engineers. And we devised a bit of an ad hoc technique for evaluating different companies, companies that Fairchild could potentially work with and sell to, before we would commit our engineering resources to work on them on a specific project.

• 20:37David Rosenthal?

  We had to understand the nature of the application and understand the size of the market. There are a number of kind of highlight things that we did before we committed engineering. And you know, you could think about that and think about like, gosh, man, that sounds a lot like writing an investment memo for a venture capital firm.

• 20:54Ben Gilbert?

  It's also what an incredible privilege to be in a position where you get to pick your customers based on who you think is going to be the most successful with your product.

• 21:04David Rosenthal?

  Yeah, yeah, totally. So remember though, Don's working at Fairchild. He's taken them from a couple million in revenue to over 150 million in revenue. And this is like, you know,

• 21:17David Rosenthal?

  Early 19s, late 50s, early 1960s. So 150 million wasn't just 150 million back then. Remember though, Fairchild, you know, it isn't an independent company. It's a subsidiary of this Long Island based, East Coast, you know, conservative camera and instrument corporation. So every time that Don is, you know, working on building, you know, a new customization and application, new market that Fairchild wants to enter, he has to go to the board of the company and get their approval for what they're doing. And Don starts, you know, that goes well enough. Like incentives are aligned. Of course, Fairchild wants, wants the company to grow and do well.

• 21:54David Rosenthal?

  But Don gets this idea. He's like, you know, we could really accelerate our market and our partners that we're working with. A lot of these applications companies are new entities that are integrating our technology into a full solution for a given industry. They're getting off the ground. We could really accelerate things if we invested in these companies and helped them, help them build themselves because the, the bigger that they get and the faster that they get bigger, the more sales they're going to have, the more sales we're going to have.

• 22:26Ben Gilbert?

  Right. It's this ecosystem mindset. You know, we need to, we need to help invest to build the ecosystem around our products.

• 22:32David Rosenthal?

  Totally. So he thinks this is brilliant. He takes this idea to the board and the board is like, absolutely not. That's a crazy idea. Whoever would want to do that? So, you know, Don, in typical Don fashion, he says, well, screw it. Like if the board's not going to do this, I'm just going to start doing this on my own with my own money. When he would be working on the, on the technology and marketing roadmaps for, for Fairchild and working with startups to help build applications, he would just start investing small amounts of money personally in these startups that he would, knew that he was going to make them into big companies. The only problem, though, is like, he's doing this personally. He doesn't have enough capital to really get these companies all the way to working.

• 23:16David Rosenthal?

  You know, it's so funny how like, we joke here at Wave that like, you know, you're raising money for a new startup and even today in 2019, like, the answer for how much capital you need always comes back to like, you know, somewhere between one to three million to get off the ground, and that was the case even back then.

• 23:35Ben Gilbert?

  This is totally amazing. This is like my, one of my biggest tech themes, but it is crazy looking at their first five investments. Two of them were at two million and one of them was at two and a half million. And it like, it is today's seed round. And yet what they're doing is they're building freaking, you know, semiconductor, physical applications, like they're, they're using semiconductors to make another product physically, manufacture it, like, it is nuts to me.

• 24:00David Rosenthal?

  Manufacturing, like, yeah. So even back in the 60s, you know, a couple of million back then was a lot more in today's dollars, but you had to do all this really hard stuff. Don starts doing this. Fast forward to 1967, and there was another company in the valley that had been around for a long time and was kind of founder-ing, called National Semiconductor. And National makes a big play. They're already a public company, I believe. They poach a number of people from Fairchild, including Charles Sprock, who becomes the CEO of National, and Pierre Lamond, from a name that's going to come up again very soon, Pierre Lamond from Fairchild, who becomes the chief chip designer and head of engineering there.

• 24:45David Rosenthal?

  So Charlie Sprock, as CEO, he does a couple really interesting things. First is, so, everybody in Silicon Valley at this point, remember, it's called Silicon Valley because they're making silicon chips. They're making the chips there in Northern California. Fairchild's producing them there. All these companies that Don's investing in, they're doing manufacturing right there. Charlie at National, he offshores chip production to Asia. And he reasons that like, hey, the intellectual property that we're building here, we can just do all the design and building here, and we'll just outsource the actual production of these, these chips of the silicon as a commodity. So that creates a huge price war in the industry and massively lowers the cost of

• 25:29David Rosenthal?

  silicon, which then ends up enabling all the things that come shortly thereafter, including the PC.

• 25:35Ben Gilbert?

  We should also say that the incredible growth and demand for silicon is Fairchild's fault because Fairchild was the one who pioneered the idea that silicon was actually the most effective material to use for semiconductors. That wasn't the case before.

• 25:49David Rosenthal?

  I believe before Fairchild, people were using germanium to make semiconductors, which is a rare precious metal.

• 25:56Ben Gilbert?

  Yep.

• 25:56David Rosenthal?

  National would actually go on later to acquire Fairchild. And Ben, do you know who would ultimately become the CEO of National Semiconductor? This is, you know, this is like the beginning of the valley being a small place and, and all of these dynamics enabling the personal computer. Gil Amelio.

• 26:16Ben Gilbert?

  Oh, what?

• 26:17David Rosenthal?

  Yes.

• 26:17Ben Gilbert?

  Of Apple fame?

• 26:18David Rosenthal?

  Yes. Future CEO of Apple.

• 26:21Ben Gilbert?

  Future floundering CEO of Apple.

• 26:23David Rosenthal?

  Yeah. I believe his first CEO gig was taking over for Charlie as CEO of National. Yeah. So all of this is going on. Fairchild is on the ropes. In 1968, Gordon Moore and Bob Noyce leave Fairchild. So Don Valentine's still there at Fairchild and they start Intel. And Don sees the writing on the wall and he's like, oh, man, Fairchild is cooked.

• 26:47Ben Gilbert?

  Brain drain.

• 26:48David Rosenthal?

  Yeah, brain drain. I mean, it's just like Silicon Valley today. These things start happening, like the, the key leaders and really smart people start leaving. You know, the writing's on the wall. He leaves, he moves over to National as head of sales and marketing at National. Now, this is where serendipity completely strikes. If Don hadn't made this move, I seriously doubt that there would be a Sequoia Capital and there may not be a modern venture capital industry as we know it today. So Charlie is obviously brilliant and this move of outsourcing production of, of chips is revolutionary to the industry.

• 27:24Ben Gilbert?

  And quite prescient.

• 27:25David Rosenthal?

  And quite prescient. But there's one thing that he's absolutely terrible at, and that is public speaking. And that's one thing that Don is not afraid of. So remember, National is a public company and they have to do earnings calls with Wall Street, even back in 1968. Charlie's terrified of this. He doesn't want to do them. And so as soon as Don shows up, he says, great, Don, you're head of sales and marketing. You lead the earnings calls. Whoa.

• 27:51Ben Gilbert?

  Which would be unheard of today for, I mean, it's your CEO and your CFO.

• 27:55David Rosenthal?

  And your CFO.

• 27:55Ben Gilbert?

  Basically without, you know, without exception.

• 27:58David Rosenthal?

  Yep. And you have other executives on there from time to time, but.

• 28:01Ben Gilbert?

  Sure, but not leading it.

• 28:03David Rosenthal?

  Don starts leading the earnings calls. Through that, he gets to know a lot of the shareholders of National. And it turns out that one of their largest investors is an enormous public investment fund based in Los Angeles, back in Don's old stomping grounds, called, at the time called the American Funds. And that was part of this institution called Capital Group, which I think a lot of people don't know about, but Capital Group still today is one of the largest mutual funds and pools and mutual funds and money managers in the world. I believe they have well over a trillion dollars in capital under management across many, many funds. Capital Group, they had been seeing what was starting to happen

• 28:46David Rosenthal?

  up in, you know, the new proto Silicon Valley. They'd seen the Intel IPO that had happened, which had, you know, was the first, and Intel was the first true venture backed company that had gone public and all the wealth that that had created.

• 29:01Ben Gilbert?

  And who originally backed Intel?

• 29:05David Rosenthal?

  I believe it was Arthur Rock. Arthur Rock organized a syndicate that backed Intel with equity. Well, it was a convertible instrument. It was like convertible debt, I believe. A story for another day. So Capital Group, they'd seen this and they actually funded AMD. And AMD also came out of Fairchild, which I didn't know until doing research for this, for this story. So yeah, both Intel and AMD, both were Fairchild alumni. I mean, the, really all goes back to the traitor, Saden, this legacy of like, hey, leaving dying companies and starting new ones out of them that propelled Silicon Valley to its day, to this day.

• 29:41Ben Gilbert?

  That is so much like all these other industries we've talked about. I mean, Verizon and AT&T, basically both coming out of the, the original massive AT&T company. It feels like chip companies are not unique in this characteristic of, of, you know, both modern giants coming from the same source.

• 29:59David Rosenthal?

  Yeah, yeah. So Capital Group, they've invested, they've privately funded AMD. They're a big investor in National. So they're like, you know, especially as a public investment vehicle, they're at the forefront of being, investing in Silicon Valley and its growth. They get to know Don and they learn from Don about all this private investing he's doing. And so they approach him with an offer. How about he do this full time, leave National and come and start working with them at Capital Group. They'll give him, you know, certainly capital and they have more capital than probably just about anybody in the world at this point

• 30:38David Rosenthal?

  in time, or access to capital and take him from, you know, the couple thousand dollar personal checks that he's able to write to finance these companies up to enough that he can actually support them to get to, get to a public offering where they need to get to. So Don jumps at this chance. You know, this is his true passion. He loves this and this is a chance to, you know, take all of these roadmaps and marketing and market analysis, this skills that he's developed and just have this be his full-time job.

• 31:11Ben Gilbert?

  This is of course, the birth of the illustrious and name we all know today, Capital Management Services, Inc.

• 31:19David Rosenthal?

  Yes. Well, it was part of Capital Group. So we'll get into the structure in a second. I want to throw in a few great quotes from, from Don here. He talks about why he had the courage to think that he could do this full-time. And this is crazy. Like, nobody is investing full-time in private technology companies at this point in time. It's, it's, you know, a bunch of folks who made money in other industries, having lunch at the Mark Hopkins Hotel, remember? And Don is going to make this his full-time job. So he said, "I had a sense that my system of selection would work far more than it wouldn't, but I didn't have the resources personally to play Texas Hold'em and put up more chips. The opportunity to have a large discretionary pool of money to continue to support the investment ideas was the difference in the environment I was in and the environment I

• 32:03David Rosenthal?

  was interested in going to. And after 12 or 13 years in the semiconductor business, I had a very high-profile reputation." In this community. And again, he was already doing the investing privately. So he says, so people who are interested in starting companies often gravitated to me to help them start their companies. From their point of view, I had some money. I knew how markets worked and how to help them position their company in the market. So I had a bit of an unfair advantage in those two respects. But the most unfair advantage I had was I knew what the future was and very few people knew what the future was. Nobody else, nobody else in the venture capital industry at this point was from the semiconductor business. Nobody else knew marketing and nobody else knew the microprocessor. So it's kind of amazing. Like Don has this, as we've talked about.

• 32:46Ben Gilbert?

  It's three pretty valuable things to be good at at this point in time.

• 32:49David Rosenthal?

  Exactly, exactly. So like, if you think about what, what he's saying. So it maps pretty exactly to the core functions of a venture capital firm. So on sourcing, he has a network of super talented technical people and scientists with the right experience to start technology companies. You know, he is, I mean, his name is Don. It's, it's perfect. He's like the original Silicon Valley mafia Don. That's one. That's like top of the funnel. That's sourcing. But then two, he has this unique experience that he knows all the roadmaps of, you know, Fairchild and National and the whole semiconductor industry. He knows what markets to attack. So he has like the selection judgment of which founders and ideas to invest in.

• 33:30David Rosenthal?

  And then he has the ability to actually help them, unlike anybody else in the industry at the time, actually help them build their companies. Through, you know, certainly recruiting management teams, but also strategy and decisions in the early days. Cause he's lived through it. So he can help them build their companies. And now finally, through Capital Group, he has access to essentially an unlimited pool of capital, which again, nobody else in the industry had. People were having to go back to the East Coast at Fairchild to finance their companies.

• 33:56Ben Gilbert?

  So David, you're saying an unlimited pool of capital. How does that really break down? And how much money from the capital group could Don really invest in startups?

• 34:04David Rosenthal?

  Exactly. So this is 1972. Don leaves. He starts working with Capital Group. And Capital Group sets up a new $5 million fund for their clients who want to invest in this high risk, high return startup in the.

• 34:19David Rosenthal?

  Semiconductor industry in in in Northern California and Capital Group calls it the quote unquote Sequoia Fund. And this is the beginning.

• 34:29Ben Gilbert?

  Oh, Capital Group came up with the Sequoia name?

• 34:31David Rosenthal?

  Well, I don't know. I don't know if Capital Group or Don did, but it is it is within Capital Group. This 1972 $5 million fund is called the Sequoia Fund. And so Don starts working on this on behalf of Capital Group and Capital Group's clients. But, you know, again, Don's kind of like a maverick and he does things his own way. He really he's not super interested in just working for Capital Group forever. He really wants to do this himself. And and Capital Group totally supports him in that. So he starts making investments on behalf of them. But he also starts working in parallel on creating his own fund and own firm that he's going to call Sequoia Capital and raising an outside fund. And you would think this would be easy, right? I mean, Don has this amazing track record. He has a brilliant strategy

• 35:16David Rosenthal?

  that nobody else can replicate. He knows what's going to work. He has the

• 35:20Ben Gilbert?

  Except that there are no LPs.

• 35:22David Rosenthal?

  Well, he has the stamp and imprimatur of Capital Group, you know, one of the most storied money managers, you know, in the world at that point in time. And Don, he learns a lesson that, you know, generations of people who start new firms have learned again and again. We learned at Wave, which was that even with all that, starting raising a first time fund is really freaking hard. Like, really freaking hard.

• 35:49Ben Gilbert?

  Yeah. And what Don was doing was raising a first time fund for an asset class that didn't yet exist. So for Don, there weren't a group of investors who were used to putting money in this risk return profile. It was going and convincing them, hey, like, there's not really historical data on this, but you should take a flyer, not only on me, but on this entire concept.

• 36:10David Rosenthal?

  Yeah, totally. I mean, you got to remember, this is pre, you know, for, for listeners who know about David Swensen at Yale, the chief investment officer at Yale, he really pioneered this, this approach that large pools of capital, especially tax exempt nonprofits pools of capital should, should put a lot of their assets in alternative investments where they can get extremely high returns over a long time horizon. And because they're tax exempt, they can compound those returns at a much higher rate than, than ordinary folks. This concept didn't exist. So, most pools of capital, you know, university endowments, foundations, family offices and the like, you know, all of capital.

• 36:48Ben Gilbert?

  It's bonds, it's treasury bills.

• 36:50David Rosenthal?

  Yeah, it's fixed.

• 36:51Ben Gilbert?

  A little bit of stock. Yeah.

• 36:53David Rosenthal?

  That they're investing in, you know, and, and these folks, they're targeting across their investments, a 10% IRR, which, you know, is great and better than like the, you know, average market returns, but it's nothing like what Don thinks he can generate and what the venture capital industry promises. So, he goes out and he makes this pitch about like, hey, I think I can at least double 10% IRR. And if you look at my personal track record, like, it's much more than that. And indeed, Sequoia's first few funds would be well, well above 10% IRR, many multiples above that. The reception he gets is like, well, this doesn't sound like the investing business, you know, this isn't fixed income, this isn't, you know, and, and Don's like, yeah, you're exactly right. This isn't the

• 37:37David Rosenthal?

  investment business. This is the company building business. I'm in the business of starting and helping build great companies. And, and he's so right. I mean, that is what true early stage venture is. It's not, you know, investing, allocating money and seeing what happens. It's really digging in and helping start something from scratch. And that's where, to this day, you know, the deep, the, the true outlier returns are. But the LP community is just like, they don't get it. So, Don tells this great story. He goes to see Solomon Brothers in New York, the story to investment bank, which I believe it was Solomon Brothers that was the subject of Liar's Poker, Michael Lewis's first book. And, and he sits down with the folks there. He gives them the pitch and they say, I see

• 38:21David Rosenthal?

  that you didn't go to Harvard Business School.

• 38:25David Rosenthal?

  And he says, right, I didn't go to Harvard Business School. I went to Fairchild Semiconductor Business School.

• 38:31David Rosenthal?

  And they didn't like laugh at all. And they're like, we're not going to invest with anybody who didn't go to Harvard Business School. So it ends up taking him almost three years while working with Capital Group to raise the first independent Sequoia fund. But finally in 1975.

• 38:49Ben Gilbert?

  And even that, that was like, single digit. Like, how big was that fund?

• 38:52David Rosenthal?

  I couldn't get the exact data. Well, I saw a couple of conflicting sources, but I believe it was somewhere between three to five million. So quite, quite small. And that's with three years of work on it.

• 39:03Ben Gilbert?

  Just think about the tenacity. I mean, most people would give up.

• 39:06David Rosenthal?

  Yeah, totally. Think of Sequoia Capital today, and then think back to the early 70s and one man, you know, Don Valentine, scraping together for three years just because he believes so deeply in this vision of the future to, to put, you know, three to five million together and start investing. Like, it really just like tells you a ton about, you know, you look at their ethos today, and this is where it comes from. Once he gets started, he sets what he calls a few ground rules for investing. So these are, this is the original Sequoia Capital investing checklist. One, must be in a very big market, the, the potential investment. Two, must be in Northern California. That's changed.

• 39:47David Rosenthal?

  Three, must be in advanced technology. Four, must have high gross margin ability. That has also changed. And five, must have the potential for Sequoia to make a hundred million dollars on the investment. I mean, that's incredible. Like, a three to five million dollar fund, and he's still like, he's only aiming for shooting for the moon. But Sequoia alone could make a hundred million dollars on these investments.

• 40:10Ben Gilbert?

  Which is basically by today's standards, saying it has to be a unicorn, because in general, an early stage, call it a Series A investor, is going to get diluted to around 10% ownership by the time there's an exit. It's sort of the finger in the air way you would think about this stuff. Sequoia's had some examples where they've bought up more. Think Dropbox. And there's also examples that we're about to go into where the, the terms were much different. And you didn't just buy 15 to 20% of a company. You bought much more in these early days.

• 40:41David Rosenthal?

  Well, and these companies, most of them weren't raising multiple rounds. So Sequoia was financing. That was the only private capital that they were raising. And then they were going, achieving profitability and going public. But still, like, you know, you think about today, people talk about, you know, oh, VC investment, you got to underwrite to 10x returns, you know, even from day one, Don's underwriting to 20x plus returns. And if he doesn't see that, and still to this day, I mean, I think one of the things Sequoia is really known for is they will only attack markets that truly have the potential to be large. Like, a billion dollar market is not enough for them. You need a multi-billion dollar, you know, ideally 10-plus billion-dollar market. Because again, like, they're aiming for each of their investments to make 20x

• 41:23David Rosenthal?

  plus. And then the final, I love this, the final item on the checklist for Don's criteria for investing is, must be positively responsive to our active participation, you know, which is great, though. And, you know, obviously, Don develops quite a reputation, as we, as we talked about with Trip on the EA episode.

• 41:44Ben Gilbert?

  Being very active in

• 41:46David Rosenthal?

  Being very active.

• 41:47Ben Gilbert?

  Not only governance, but influencing management of the companies.

• 41:51David Rosenthal?

  This is really critical. Like, Don, he has the credibility to be very active in these companies because he has helped build the previous generation of, you know, of defining companies that are setting the roadmap for everything that's going forward. The other thing that he develops is, is a methodology for kind of assessing entrepreneurs.

• 42:15Ben Gilbert?

  David, but before diving into the entrepreneur side of things, the thing that struck me on these ground rules, and as we've danced around a couple of times here, Don plays by his own rules, and he sort of has this ethos of, this, this early-stage investment business is a subjective business. It's not a highly analytical, data-driven business. Like, it's a, it's a feeling business. And yet, in these ground rules, it's, it's interesting to see what hard and fast financial things jump out. So even in this high area of subjectivity and gut feel, must-have-high-gross-margin ability is in there as one of these precious few rules. You know, as an early-stage investor, that's, that's like, really ringing home to me, and thinking about how important that is in the ability to, to sort of, of course,

• 43:00Ben Gilbert?

  scale a company, but, but generate outsized returns. The only number that you see in here is that, that 100 million. And then the only other thing that sort of close to resembles a number is high-gross-margin ability. It's interesting to think about what makes the cut.

• 43:13David Rosenthal?

  Yeah, well, this also leads into the, his methodology for assessing entrepreneurs. But Don, you know, as so many other things in pioneering the venture capital industry, like, I think he, I don't think he would put it in these words, but he recognized that this is a business that is both art and science. And that is what is so incredibly awesome and fun and rewarding about working in this industry and early-stage venture capital. But again, you know, if you think back to the folks that were doing this before, it was all art, you know? And if you think to a lot of the entrepreneurs who were starting companies like the Trader S8, it was all science.

• 43:56David Rosenthal?

  Like, they weren't thinking about the art of like, oh, how do we make this into like a huge wealth generating vehicle for ourselves and for the ecosystem? It was like, no, we just want to go do science, you know? And let's like, find some way to do science. And Don is really the first person, I think, to bridge this gap. The methodology for assessing companies and entrepreneurs, he kind of goes back to, and I assume this, he was doing this while he was working at companies too. You know, remember, he has this Jesuit education and Catholic school upbringing background. And he goes to, he goes to the Socratic method. You know, still to this day, I think this is a lot of how Sequoia runs their interactions with entrepreneurs. They ask questions and then they just listen to the answers. This is such a key to being a great VC.

• 44:41David Rosenthal?

  One thing that I struggle with a ton is like, you can, the temptation is always to insert yourself into what's going on. Don recognizes that like, what you need to do is listen to what the entrepreneurs are saying. You may agree or disagree or like, understand or not understand, but like, you need to understand how they think about things, not how you think about things.

• 45:04Ben Gilbert?

  Yeah. And it's, and it's not about their answers, but why they're thinking that answer is the right answer and how they arrive there and what the thought process is.

• 45:13David Rosenthal?

  Yeah. And so, you know, Don talks a lot about, and if you watch the YouTube video of him at Stanford, how formulating a question, he believes is the most important thing in his business. And so he has a rule that questions can only be 20 words or less. And yeah, when he solicits questions from the audience at Stanford, he says 20 words or less or I'll kill you. It's great. But that's how he approaches things because he's really interested in the storytelling technique of the entrepreneurs because he says it's about the building of the idea, the size of the market, the degree of technical risk to get this product finished, who's going to care, and explaining that in a very simple way.

• 45:55David Rosenthal?

  We can tell that that person who can do that, explain it in a very simple way, is somebody we want to be in business with. People who are instead complex, rambling all over the place, they're not, you know, Donna's realized that the value, the only competitive advantage that startups have is focus and speed and stealth. And so if you're all over the place, you're not going to be able to execute on those things. And that's still true today.

• 46:21Ben Gilbert?

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• 46:36David 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.

• 46:49Ben 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.

• 47:00David 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.

• 47:17Ben Gilbert?

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• 47:33David Rosenthal?

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• 47:50Ben Gilbert?

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• 47:59David 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.

• 48:10Ben Gilbert?

  So David, how do you square all of this with Don's sort of off-stated principle that he invests in markets, not founders?

• 48:20David Rosenthal?

  Yes.

• 48:21Ben Gilbert?

  And how does this assessment of founders fit into that notion?

• 48:26David Rosenthal?

  Well, you know.

• 48:27Ben Gilbert?

  And I'm asking you this as a technology historian, not, obviously, you're not in Don's head.

• 48:33David Rosenthal?

  Exactly. Well, I think, of course, they're interrelated and like all investing, it is, it is early-stage investing, it is about both the market and the team. But I think that's, this is the key is like, the market is the important thing, but you need a team, this gets back to Don's last point on his checklist of must be receptive to our active participation, you need a team that's going to be focused and able to quickly get the right solution into the market. And so he has this, this really great quote that I think encapsulates this, he says, "So our view has always been preferably, give us a big technical problem, give us a big market when that technical problem is solved, so we can sell lots and lots and lots of stuff. Do I like to do that with terrific people? Sure.

• 49:17David Rosenthal?

  Are we willing to invest in companies that don't have them? Sure. You can augment management, you can help them with more people that are highly qualified. We invest in the size and the dynamics of the market. I don't care if Genghis Khan is running the company, we'll give Genghis Khan some help. Give me a giant market, always."

• 49:36David Rosenthal?

  But I think, you know, Steve Jobs is going to come up in a minute here, but I think, you know, his point about Genghis Khan is that Genghis Khan may be Genghis Khan, but he was focused on, you know, winning and speed and conquering, and that's what they're looking for.

• 49:52Ben Gilbert?

  And that to just beat this metaphor to death, and that Genghis Khan also has weaknesses and therefore must have a team that surrounds and complements. And I think Don has some quote, I don't have it exactly, but about how the most critical thing for an entrepreneur, when sort of listening to these questions, what are you listening for, is, is really this self-awareness of what they're good at and what they're not, and exactly, point number six, how receptive they're going to be to, to being helped with those weaknesses.

• 50:20David Rosenthal?

  Yeah. I mean, again, think back to this moment in time, the people that were starting these companies, they were engineers, they were scientists by and large. And Don's superpower was he was able to augment these companies and these teams with folks like himself who were able to do sales and marketing and go to market. And then Sequoia could help augment with finance and accounting and everything around that and the outsourcing of all that. What he couldn't have was folks who thought they knew everything. So what actually did they end up investing in once they closed the first Sequoia Capital Fund in 1975? So it turns out, Don makes his first investment in indeed, a quite giant

• 51:04David Rosenthal?

  market enabled by semiconductors, but one a little off the beaten path and certainly different than the defense contractors that he started his career selling to. And that was Atari. And we're going to talk much more about Atari later in the season here on Acquired. But it was the very first independent Sequoia Capital investment. Don invests $600,000 in the company in 1975. And the very next year, the company ends up getting acquired by Warner Communications for $28 million. And Sequoia makes a quick 4X return, which is great, great IRR, but does fall short of the 20X that Don is hoping to underwrite too.

• 51:46Ben Gilbert?

  Did I find a different source on that? I thought it was a $2 million initial investment? Or was it, did he do a follow on for 2 million?

• 51:56David Rosenthal?

  I believe the initial investment was 600K. Now Atari had also already been around for quite a while.

• 52:02Ben Gilbert?

  I think three years they had gone without before raising.

• 52:05David Rosenthal?

  Yep. And Don had known Nolan Buschnell, the CEO, for many years. So I have to assume this was one that he had kind of waiting in the wings until he closed the fund.

• 52:16Ben Gilbert?

  Which every good venture capitalist should have when out raising their first fund is who's going to be your first investment.

• 52:22David Rosenthal?

  Oh, man. We did that too. We have, it's amazing. It's amazing how much the industry is still the same. So then in 1977, Sequoia makes what could have been perhaps their biggest and most important investment ever, and unfortunately becomes perhaps their biggest and most important lesson.

• 52:44Ben Gilbert?

  Just to pile one more thing on before the big reveal, which everyone probably already knows, is responsible for about a trillion of that 3.3 trillion number that I quoted of public market value today.

• 52:55David Rosenthal?

  Yeah, yeah. Well, it's a good thing they still have another 2.3 trillion that they're part of. So in 1977, as Trip alluded to on our E A. episode, Sequoia invested in another little company that was founded by an early former Atari employee, and that was Apple Computer. So Steve Jobs had worked for Nolan Bushnell at Atari, and Don had gotten to know him a little bit then. And they'd so Jobs and Woz had started the company, and they brought on Mike Scott as the first president of the company.

• 53:26Ben Gilbert?

  Yeah, we should say Doug got to know Jobs a little bit at that company, but did not have the impression that this was a venture backable guy at this point in time.

• 53:36David Rosenthal?

  I believe his quote on Steve Jobs was that he looked like Ho Chi Minh.

• 53:40Ben Gilbert?

  Yes.

• 53:41David Rosenthal?

  And so Mike, the two Steves had brought on as the first president, and it turns out Mike used to work for Don back at Fairchild and National. And so Don gets wind of the company, you know, he meets with them, and Don also knew a very important guy in Apple's history, Mike Markela, also used to work for Don back in the semiconductor days. And Don, quote unquote, sends him to the company with the intention that Markela is going to replace Mike Scott as the president and run the company. Ultimately, though, you know, as Trip talked about, Markela makes a brilliant decision, says, you know, I don't actually want to run this thing day to day. I'm going to be the chairman and really help these guys. But regardless, with, you know, this is a, you know, kind of perfect example

• 54:26David Rosenthal?

  of Don's company building at work and management team recruiting. On the back of this, Apple raises their first venture capital round of just over half a million dollars. Interestingly, the lion's share of the capital comes not from Sequoia, but from Venrock. Uh, which does a little over $250,000. Don and Sequoia do $150,000 and Arthur Rock does the balance. So Apple is off to the races and they really, you know, as we've chronicled many times and will continue to chronicle in the future, really invent the personal computer and usher that wave of technology in. Two years later, though, and this is, this is the- David's sigh there comes heavily.

• 55:09David Rosenthal?

  I know. This is just so painful, uh, so painful and, and clearly has left its mark on, on Sequoia. Two years later, I couldn't find all of the circumstances around this, but to the best of my understanding, so, uh, the first Sequoia fund did not have only, uh, tax exempt nonprofit LPs in it. Uh, it also had, I believe, individuals and maybe corporations and, uh, you know, not Solomon Brothers, but other folks like it, and certainly Capital Group. As a result of that, uh, those folks needed to pay taxes. And apparently some of these LPs were encouraging Don to make a distribution of some of the gains in the fund so that they could pay their taxes on the gains. And so, Apple

• 55:54David Rosenthal?

  had grown quite a lot. It's now 1979 and Don, before the IPO, sells Sequoia's stake, which they had invested $150,000 for $6 million, uh, to make this tax distribution to LPs. Now, that's a enormous return. Phenomenal return, yeah. Phenomenal return, but, oh my goodness, $6 million compared to what Apple, you know, would shortly become and then ultimately in the long term, of course, become. And it's this lesson, you know, that drives, uh, Sequoia in subsequent funds to take, uh, to take their capital only from nonprofit tax exempt sources, which becomes, you know, really not, uh, certainly the norm across the industry, but a goal and the lion's

• 56:38David Rosenthal?

  share of money that moves into venture capital is, ends up being university endowments, foundations, folks that are super long-term and patient and aren't going to force VCs to make, uh, these terrible decisions like this.

• 56:52Ben Gilbert?

  Yeah. And another, you can sort of check me on this, David, but my understanding is Sequoia, more so than your average venture firm, holds the stock in companies longer after they go public and often sticks with the companies for a very long time. I think probably also inspired by this lesson.

• 57:11David Rosenthal?

  This and others that we're gonna, that we're gonna talk about here in short order. You know, we're gonna talk about Sequoia's playbook in a little bit, but one of the key lessons that they learned is like, when things are going well, go long. You know, like, value creation in these companies that are building and creating enormous markets takes a long, long, long time. I mean, just look at, you know, Airbnb, look at Google, look at, you know, look at Apple. You know, you can still be getting enormous, enormous value creation a decade plus after these companies are founded, regardless of whether they're private or public.

• 57:46Ben Gilbert?

  Yep. So it's fascinating to think about, you know, the first couple of investments, or first two out of a handful of investments being Apple and Atari. In total, you returned a profit of about $10 million or a max of $10 million. It is wild to think that that is the sum total of Sequoia's return on those two companies.

• 58:07David Rosenthal?

  I know, I know. But at the time, I mean, like, even, you know, pulling it into context today, like, if we, within, you know, two to three years of starting Wave, if we could be sitting on 2X cash distributed, like, I would feel great about that, you know? But the lesson here is like, that's not the game we're, the business we're in, or the game we're playing. The game we're playing is like, 10X plus cash distributed. And to do that, you really need to be in it for the long haul, especially when you're investing early.

• 58:36Ben Gilbert?

  Yeah. The other thing to know here, and David, as you, as you foreshadow, and you'll be smiling a little bit, we will get into this much more later this season. But with Atari, the Atari boom that we all sort of know of in the 80s was after it had sold to Warner. And so, you know, Sequoia didn't even have an option in participating in that upside unless they were gonna block the sale.

• 58:58David Rosenthal?

  Yeah, yeah, totally. And that also leads to another part of the Sequoia playbook, which is like, when things are going well, really try and convince these companies to stay independent and not sell. I mean, look at Instagram, right?

• 59:13David Rosenthal?

  Selling Instagram to Facebook was was a terrible, terrible mistake by the founders and the investors, even though, you know, it netted them great returns at the moment. And it was interesting, Sequoia ended up investing right before that deal happened.

• 59:27Ben Gilbert?

  That is a debatable topic, but we can.

• 59:30David Rosenthal?

  You think that's debatable?

• 59:31Ben Gilbert?

  I think if it had gone a lot longer than Facebook would have had to pay a lot more, like in the dozens of billions of dollars to acquire purely because there is a very, very high user count, uh, social network that is a threat to them. However, do I think that Instagram would develop the business that they have today that has billions of dollars of revenue flowing through them by advertisers? Maybe, but that's not a sure thing. I mean, that's all, a lot of that is because of what Facebook had had done funneling all their existing advertisers there.

• 1:00:01David Rosenthal?

  I think that's true, and certainly they helped accelerate it, uh, grow it, uh, more quickly, but at a minimum, Instagram should have waited, you know, longer and then had a WhatsApp-like acquisition at a bare, bare minimum. You know, and again, it's so hard to, you know, it's easy to armchair quarterback this now and hard to be sitting in the seat of, you know, Kevin and Mike when they have a billion dollar offer in front of them. But this is the value. I mean, Sequoia has learned these lessons over so many decades and seeing it time and time again. So the other lesson that they take from Apple is what Don and Sequoia call an aircraft carrier approach that they start taking to these big markets. They realize, Don realizes that Apple has created this PC market and it's not just

• 1:00:45David Rosenthal?

  going to be Apple that's going to succeed in the PC market. They're going to usher in all of these other enabling companies that you need around the PC. So like, Apple is the aircraft carrier, but you need all the destroyers and the, you know, uh, the ships around it and like all the planes on the ships and all that stuff. So they start financing component companies around the PC industry. Apple and Don helped start a company called Tandem Corporation that makes disk drives. Uh, they are first investors in Tandem. Tandem goes public after a couple of years, reaches a market cap of over one and a half billion dollars. This is in the early eighties. Company called Printronics that makes printers, a company called Preum that makes disk drives, a company called Dyson that makes magnetic discs, uh, for the disk drives.

• 1:01:30David Rosenthal?

  All told, I believe Sequoia ends up making about 15 investments, kind of in this aircraft carrier strategy around Apple and it drives. Much of their returns in these early funds. Some other notable investments that they make during the seventies and eighties. In 1981, they invest in a company called LSI Logic, which makes, again, around PC and computing. They make storage and networking products. In 1983, so just two years later, LSI goes public in the largest IPO on the NASDAQ in history at that point, raising $153 million in the IPO, which is, I mean, $153 million. That's like a solid, you know, SoftBank-sized round today. This is two years after Sequoia invested in the company.

• 1:02:15Ben Gilbert?

  Yeah, inflation adjusted, I mean, that's in the sort of 500 to a billion range.

• 1:02:21David Rosenthal?

  Totally.

• 1:02:21Ben Gilbert?

  And the way to think about how much they raised.

• 1:02:23David Rosenthal?

  Totally. 1982, as we chronicled, they invest in Trip and Electronic Arts, or Amazin Software in the beginning. They also invest in 3Com in 1982. Folks might remember 3Com, which was made networking gear and eventually bought Palm and the Palm Pilot. 3Com, I didn't realize, came directly out of Xerox PARC. So that's the other thing that Sequoia, you know, kind of on the back of Apple, starts doing is they start raiding Xerox PARC and IBM's West Coast Division and all of these old-school East Coast companies that had been training these technologists and developing, you know, advanced technology, and they just start commercializing them left, right, and center. 1983, they invest in Oracle and also Cypress Semiconductor, both of which become massive successes.

• 1:03:08David Rosenthal?

  And then in 1980s.

• 1:03:10Ben Gilbert?

  The one point I want to make on Oracle before breezing, because we, of course, we need to do an episode on Oracle and Larry at some point. But there's a crazy thing here that Oracle went six years before raising money from Sequoia, and I think they had bootstrap off of $2,000. And if you think about it, like Oracle was really one of the first true software companies. They were wildly capital efficient, and Larry was very outspoken against, you know, pushing back against this rising venture capital industry and speaking all kinds of ill tongues of the venture capitalists and what they do and come in and try and control companies and raid them, all these things. And of course, ends up partnering with Sequoia six years in, but a very different start

• 1:03:54Ben Gilbert?

  than a lot of these other companies, which required much more capital to get going.

• 1:03:57David Rosenthal?

  Yeah, and the reason I didn't want to dive too deep into it is that I might be speaking a bit out of school, not having done the deep dive on Oracle and their history yet, but. To jump in and speculate a little bit, I think part of the reason why Larry

• 1:04:10Ben Gilbert?

  That said.

• 1:04:11David Rosenthal?

  That said, I'm going to speculate wildly. I think part of the reason why Larry was so anti VC was VC was anti software and anti Larry. Like this was like, they didn't understand, Don didn't understand software, you know, like he was a semiconductor guy. All of these companies we're talking about, with the exception of EA, are hardware applications companies. And so I don't think Oracle could raise venture capital when they got started. They were the first real, you know, real software company.

• 1:04:37Ben Gilbert?

  It's the highest gross margin of them all, you know?

• 1:04:39David Rosenthal?

  I know, I know.

• 1:04:40Ben Gilbert?

  It fits that thesis so well.

• 1:04:42David Rosenthal?

  But it wasn't, you know, the, the venture world hadn't woken up to that just yet. They would, they would, and Sequoia would too, of course. But, but so much of the DNA comes from this hardware world. The last kind of great, and for Sequoia, certainly the greatest hardware investment that they make is in 1987, Don invests $2.5 million in a little company called Cisco for 30% of the company. Started on the campus, actually at the GSB at Stanford, started on the campus of Stanford. Sandy and Len were, I can't remember which was which, one of them was the IT administrator for GSB and one I think was, was elsewhere on, on the campus. And networking was just becoming a thing and they were married. They were sending messages

• 1:05:27David Rosenthal?

  to one another and

• 1:05:28Ben Gilbert?

  This is this amazing romantic story that they had, had jerry-rigged the network to be able to send messages to each other at work.

• 1:05:34David Rosenthal?

  I know.

• 1:05:35Ben Gilbert?

  And that turns into Cisco.

• 1:05:37David Rosenthal?

  And that turns into Cisco. I mean, it just goes to show you how these companies start. And, and, you know, Don, having learned the lesson from Apple of like, you know, hey, we'll finance Genghis Khan, you know, he doesn't care. Like, most VCs would look at this team and be like, we're not going to finance this team. But he cares about the market and the application. At the time, there were no routers. So networks, like, local networking was just becoming a thing. But networking networks was impossible. And so Sandy and Len developed the first router. And just, you know, such a brilliant, Sequoia still uses this example today of like, the very, very best, most elegant expression, simple expression of what a company does. It's three words for Cisco. We network networks. That turns out to be not just an

• 1:06:20David Rosenthal?

  enormous, enormous market, but really the enabling technology for the internet.

• 1:06:27Ben Gilbert?

  Cisco stock was the tracker for the internet hype in the, in the dot com era. I mean, it was like, if, if you wanted something that was emblematic of people's excitement about this new technology, it was Cisco.

• 1:06:38David Rosenthal?

  And so now we're in 1987, we're 12 years after the kind of independent constitution of Sequoia Capital. Don has learned all these lessons. He's not letting this one go. So not only does he fully finance the company upfront with two and a half million dollars, gets 30% of the company. The company then goes public shortly thereafter. I believe they raise 160 some odd million in the IPO. Don stays on the board. Don doesn't distribute the shares. He remains chairman of the board, I think, until the mid 90s. And they ride Cisco up and make enormous, enormous returns on this company. And that is, that really becomes the playbook for, for Sequoia Capital going forward.

• 1:07:19Ben Gilbert?

  Amazing run.

• 1:07:20David Rosenthal?

  Also just such a great example of like Sandy and Len weren't thinking about the internet. Nobody was thinking about the internet when they started Cisco, but things just kept, the market kept evolving and kept getting bigger and expanding. And Don, again, you know, in Sequoia being so focused on the market, they knew that like, even though this company was public, there were still enormous returns to be had because the market was nowhere near penetrated. So alongside all these investments that they're making, the funds kind of steadily grow in size from that first fund of three to five million. It stabilizes at around 150 million per fund in the 1990s. That's Sequoia's raising every three years or so and having that be their investment period.

• 1:08:02David Rosenthal?

  Along the way though, of course, to do that, you have to not only build these companies, but you have to build Sequoia, you have to build the firm. You can't do, you can't invest in all these companies and give them the time and attention that you need to do true early stage company building alone. So Don starts adding partners to Sequoia and, and he talks about the process of doing this. Back when they started, like, the the number one requirement for being an investor, quote unquote, was going to Harvard Business School, not Fairchild Semiconductor Business School.

• 1:08:33Ben Gilbert?

  To be clear, investor, in this sense, was generally a public market investor, or perhaps some other alternative investment, but not investing in startups. I mean, the Solomon Brothers folks probably looked at this more like gambling. Like, what you're doing isn't investing, and you're not a person that looks like an investor. So what are we even talking about here? You know, I think that-

• 1:08:52David Rosenthal?

  And the irony of it all is, it's the exact opposite of gambling, it's building.

• 1:08:58Ben Gilbert?

  Yep.

• 1:08:59David Rosenthal?

  But yeah, so, okay, so Don has this great quote, he says, "Adding new talent was and remains a continuous process. Conventional education was never a high priority." You know, plenty of folks who've gone to Harvard and Stanford Business School, you know, worked at and work at Sequoia, but that's not what they look for. "We look for people with functional experience in a startup, i.e. design and application engineering, product marketing, sales, aspects of outsourcing manufacturing. Our investment decision-making process requires very self-confident people, able to be challenged publicly. I look for people that are as far different as possible than I am, because we do things here on the basis of consent among the partners, and I don't like having a homogenized set of opinions."

• 1:09:42David Rosenthal?

  Don wants people to be, he says, "I want as much confrontation and different thinking as possible," and he wants people that are going to be confident and comfortable enough to put their thoughts out there and debate as part of the group. One of these lessons that Don's learned is that sometimes the most amazing companies, like Apple, like Cisco, they look crazy. And so you need somebody that's willing to see the potential behind the craziness and stand up for them. And oftentimes, that's not folks who are coming from Harvard Business School. I believe the first partner, ironically, that joins Don at Sequoia, does come from the investing world. In 1979, Gordon Russell joins Don. He had worked with Don at Capital Group, so he comes from Capital Group, comes in and

• 1:10:26David Rosenthal?

  joins Sequoia, and he builds Sequoia's healthcare and biotech investing practice. So kind of in parallel, even from the 70s back in Sequoia, they're not only investing in technology and hardware and semiconductors, they're also investing in healthcare and biotech. But of course, it's it's technology that the firm finds its its true success in. And and in 1981-

• 1:10:48David Rosenthal?

  We mentioned Pierre Lamond earlier. Don convinces Pierre, already had an amazing storied career as a chip designer and architect at Fairchild and at National, to come in and join him at Sequoia as a partner. And Pierre has an amazing run. He stays as an active investing partner at Sequoia for almost 30 years. And then, this is incredible, he moves to Cosla Ventures and joins Vinod over at Cosla in the mid 2000s. And then, he goes and he joins Formation 8, and he's now, after Formation 8, at Eclipse. He is still an active general partner, making and leading investments today. He just turned 89 years

• 1:11:29David Rosenthal?

  old. This is incredible. He was born, I believe, in 1930 in France. He is a true, true legend in the industry. But that's the kind of folks that, you know, Don is looking for, is people who are literally going to die in the seat because their, their lifeblood is building technology companies. And Pierre absolutely fits that to a T. So then, in the late 80s, two very, very important people joined Sequoia from interesting backgrounds. So in 1986, a gentleman, a true gentleman by the name of Michael Moritz, now Sir Michael Moritz,

• 1:12:10David Rosenthal?

  who was from the UK and had come over to America and had become quite a famous journalist for Time Magazine. I believe he wrote a book on Apple while he was still at Time, right? The Little Kingdom, I think it was called? Sounds right. And that's how he gets really interested in Silicon Valley and technology and sort of the people behind Apple and venture capital. He leaves Time and he starts a VC newsletter with the goal of he wants to break into the venture capital industry. I remember that. What's old is new again, baby. Mike is never, you know, other than this VC newsletter company, he's never built a company or worked in technology in his life. But remember, Don's looking for these mavericks, and he has a soft spot for people that kind of do things their own way. Don

• 1:12:53David Rosenthal?

  decides to take a chance on Mike and invite him into Sequoia and to join the partnership. And That ends up being just an incredibly, incredibly prescient decision that leads to Yahoo and Google and many, many other companies.

• 1:13:09Ben Gilbert?

  Does this, does this count as how to hack your way into VC? Is this like the first example of?

• 1:13:15David Rosenthal?

  Start a VC newsletter.

• 1:13:16Ben Gilbert?

  Yeah.

• 1:13:17David Rosenthal?

  That actually probably still works today.

• 1:13:20Ben Gilbert?

  Yeah, I think there's a quote about Moritz, which is, he had the journalist instinct to go for the jugular and not hold back. And a friend said that about him. David, we've started a podcast and have a love for media, but I have this sort of reverence for really good journalists who not only are able to really tell a great story, but sort of get the truth out there. You know, it's a special talent for someone to be able to cover an industry and yet have their respect in this way.

• 1:13:49David Rosenthal?

  You know, we talked about the Socratic method of questioning that Don holds so dear. And I think this is what he saw in Mike, and we'll save a lot of this for part two of our Sequoia journey here too. But, but that's what Mike was so great at as a journalist. And Don actually says, you know, he says the two people that he's met in his life who are the best questioners are Mike and Steve Jobs. High company. The other very important person who joins Sequoia Capital in the late 80s is a relatively young, brash, sales guy who comes from Hewlett Packard and Son that also is an Italian immigrant, decides that he wants to work in venture capital.

• 1:14:32David Rosenthal?

  He just calls Don up one day, Cole calls him and says, hey, I want to join Sequoia. And if you know anything about the person that we're talking about, this is exactly in character. And this gentleman is Doug Leone, who today, of course, is, runs all of Sequoia and all of their operations globally. And I believe will be the person that ultimately advocated for and took Sequoia into becoming a global firm. We're going to talk much more about both Mike and Doug next time on part two. But just to wrap up part one, which again is really, you know, the story of Don. And I mean, you can't extricate Don not only from Sequoia, but from venture capital and the whole industry in total.

• 1:15:12David Rosenthal?

  In 1996, after it had become clear that, that Mike and Doug were amazing investors, and not only amazing investors, but had internalized all of these things that it meant to be Sequoia and then built on them themselves. Don does something pretty amazing. He literally hands the keys of Sequoia over to Mike and Doug. Doug talks about this in an interview with, with Dan Primack and Axios, that, I don't have the exact quote here, but he says, "Don, one day in 1996, invited Mike and Doug into a conference room, and he sat them down and he said, 'I'm giving this firm to you.' And there are three things. One, you're going to run the firm. I'm not

• 1:15:55David Rosenthal?

  going to run the firm anymore. Two, you get to decide what I do. You can keep me around, I can continue making investments, or I cannot. It's completely up to you. And then, three, if you do want me around, here's the things I'm willing to do and not willing to do, but one of the things I'm not willing to do is run the firm. So like, you guys make all the decisions about what's going to happen from now on." And that's just like, even today, that's so rare. I mean, this is the first very successful, well, not the first in the industry, but the first successful generational transfer at Sequoia. Most venture firms, and most founders of venture firms, don't have the ability to do this. And it's so hard. I mean, Don created all of this, and he's willing to say, "You guys are the future. Change is part of, not only what we invest in, but part of the venture industry

• 1:16:40David Rosenthal?

  too. And like, you guys are the people that are going to lead the change."

• 1:16:44Ben Gilbert?

  It takes a lot to do something like that. It reminds me a lot of another great venture firm that we may also cover Benchmark.

• 1:16:51David Rosenthal?

  It was a very different way of doing this.

• 1:16:53Ben Gilbert?

  Very different, yes. But, you know, equal partnership. There's a great sort of interview with Andy Radcliffe and Patrick O'Shaughnessy on Invest Like the Best, where Andy talks about how, at the peak of their power, the original partners handed us the keys. And I think it's, well done, very differently. There's, there's definitely common elements between both of these, these great firms.

• 1:17:15David Rosenthal?

  Yeah. And if you look at the firms that have managed to survive, you know, generation after generation and wave after wave of, you know, the technology industry and venture capital's evolution all excited, it's the firms that do this well. The firms that don't, don't make the transition. And, and Don has a great quote about this. He's, you know, when Sequoia was started, the positioning was to LPs was We're going to deliver vastly superior returns to anything else you can get out there. And that proved, well, we'll talk about it in grading, but I think that proved true. But the positioning of Sequoia is now two things. And he says, this, it's this stability that comes with generational transfers. He says, the stability is part of why we have had the same limited partners for almost 40 years. When Dom was saying this, now almost 50 years.

• 1:18:00David Rosenthal?

  Stability and returns is how Sequoia is positioned. For the type of LPs that they're trying to attract, which are patient, very, very long-term capital, you actually need both of those things. Returns isn't enough. You need the stability that accompanies those returns so that people will have confidence that like, hey, you can get great returns, but if the firm blows up, then you're, you're useless to me.

• 1:18:21Ben 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.

• 1:18:34David 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?

• 1:18:51Ben 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.

• 1:19:06David 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.

• 1:19:30Ben 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.

• 1:19:49David 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.

• 1:20:19Ben 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. Do we want to go into what would have happened otherwise?

• 1:20:46David Rosenthal?

  Yeah, let's do it.

• 1:20:47Ben Gilbert?

  All right. So listeners, the way that we want to do this section on this unique episode is what would the world be without Sequoia? And there is a very Sequoia-centric view of the world, which is all of the technology industry looks very different. And without building this sort of aircraft carrier strategy around Apple and financing all of that in a very scarce capital environment like there was then, we may not have, you know, the Apple that we have today. We may not have some of the other tech giants that we have today. There is a alternative view that you could take to that that says, look, capital is capital. And the 99% of the value, or maybe 110% of the value that comes from receiving investment

• 1:21:31Ben Gilbert?

  from a venture capital firm is the capital itself. And everything else is either hullabaloo or value detraction.

• 1:21:36David Rosenthal?

  And capital will always expand to fill all attractive opportunities.

• 1:21:41Ben Gilbert?

  Exactly. Exactly. That we, despite some friction points, we live in an efficient market. And if it's truly a great opportunity, then capital will flow to go and fund that thing. And so the world would look no different today if, you know, if there was no Sequoia. I think I fall slightly toward the former. Part of that scale. And I'm not willing to say that we, you know, we wouldn't have some of these amazing technology innovations without Sequoia, but I do think in just poring over the hours and hours of reading that, you know, that we found about Don and really learning about the history of this firm. Don played a very active role in, in building a lot of the companies that they invested in and deserves a lot of the credit for that.

• 1:22:22David Rosenthal?

  Well, listeners, let us know how you like this type of episode focusing on venture firms. We, of course, love it as, as, you know, venture investors ourselves, but we've been talking all about Sequoia on this episode. There is really along the exact same timeline, there is a perfect example of what would have happened otherwise, and that is Kleiner Perkins, which over this timeframe that we're talking about was equally, if not arguably more successful than Sequoia. But what's really interesting and we'll dive into when we ultimately do an episode on Kleiner, their philosophy was quite different and was a lot more interested in the entrepreneurs and

• 1:23:05David Rosenthal?

  the backgrounds of the entrepreneurs than necessarily Don and Sequoia were. So I think, to my mind, what would have happened otherwise, of course, Silicon Valley would have happened. Of course, the modern technology or modern venture capital industry and startup industry would have happened, you know, even though Don helped catalyze all of it, somebody would have. And certainly Kleiner would have indeed, Kleiner Perkins would have indeed. But I don't think there would have been as many chances taken and opportunities given to, you know, the quote unquote ho Chi Minh's out there that Sequoia was willing to fund. And, you know, it wasn't just in those days. I mean, look at Airbnb in the early days and Sequoia's extremely prescient early investment in, you know, the three Airbnb founders. They didn't look like what, you know,

• 1:23:50David Rosenthal?

  a prototypical founder looked like at the time, far, far from it. You know, I think it's Sequoia and Don's DNA coming from a true, you know, incredible marketing background and markets focus that, you know, maybe wouldn't have developed in the same way without Sequoia.

• 1:24:10Ben Gilbert?

  Yeah. And one way to look at this is like, if you're the Kleiner Perkins in 1978, you know, you are backing founders and outsourcing a lot of your judgment to them. And you're just saying, you run, you know, obviously, they weren't hands off, but you run the company and the reason I'm investing in you is because I trust you to, you know, figure out how to run this company. And what Don was looking at is you're really on to something in this killer market. We're going to go build this thing together and I'm going to help you do that. And the downside to that that we haven't painted yet is if you're a founder that believes that you need to be the CEO of that thing forever, and you're in a market that deserves a team to really go and value maximize the way to tackle that opportunity.

• 1:24:53Ben Gilbert?

  Like, the terms of these investments, especially at this time, were that, you know, often firms would own 33 to 51% of the company. They would have the right to buy the rest from you. They would have the right to replace you. They would have, I mean, all these rights. Of course, much of this still exists today. The job of a board is to hire and fire the CEO. But it was much more prevalent back then, especially within Don's view of the world, is that I'm building this company with you right now. And like, this company may outlast your leadership.

• 1:25:25David Rosenthal?

  Well, the unspoken words in Don's, you know, quote that we said earlier about management can be augmented is, management, of course, can also be replaced. Now, you know, there's upsides and downsides there, right? Like, if you're focused on, if your focus is building a great company, sometimes that's the right thing to do. And, you know, sometimes, of course, Don and Skoye would get that wrong. But sometimes it is the right thing to do. Thinking back to our conversation with Trip and what attracted Trip and EA to Don was this knowledge, you were getting what you saw with Don, and he was going to force you to build a big company, one way or the other, you know, with you or without you.

• 1:26:07Ben Gilbert?

  All right, we are in tech themes now, but to officially call it that and move through it here, the thing that really jumped out at me, and of course, you know, being in this industry, knowing folks funded by Sequoia, knowing folks at Sequoia, you know some of this tangentially, but it's worth taking a fresh look when preparing for these episodes to really ground yourself in what assumptions am I making. The thing that jumped out at me was Sequoia and all of their copywriting never says investment, but rather partnership. It's not, "We led an investment," you know, it's not, it's, "We decided to partner with that company." And they have a statement on their website called their ethos, which

• 1:26:48Ben Gilbert?

  says, "We're serious about our work and carefully choose the words to describe it. Terms like 'deal' or 'exit' are forbidden. And while we're sometimes called investors, that is not our frame of mind. We consider ourselves partners for the long term." It immediately jumps out at me as, David, you so often say, "company builders," you know, "we are partners," and the way that we do that is we've got this, you know, huge fund that we manage, that of course, we have a fiduciary responsibility to our LPs to maximize the value. The way that we decide to partner is through investing in you, but, you know, "we are your partners in this business." Five, six, seven years ago, I always thought that was, when I heard, we were so excited to partner with this venture firm on this thing, I was like, "Oh, God, here it comes." VC speak again.

• 1:27:31Ben Gilbert?

  They invested money in you, just say it. I finally am sort of like seeing, I think, what firms like Sequoia, and it's, you can't really say firms like Sequoia, because there's no firms like Sequoia, but what Sequoia means when they say partnership rather than investment, it is a very different frame of mind. It's not, "I'm looking for opportunities to get a multiple in my cash. This looks pretty good, so I'm going to throw it in and hope that I get a multiple out of it." It's, for some reason, I believe that this is going to be a society-defining company in the next, you know, coming decades, and I'd like to be a part of that with you.

• 1:28:04David Rosenthal?

  Well, it gets back to, I think I've talked about on the show before, but when we were starting, one of the first people we talked to was Greg McAdoo, who was a longtime partner at Sequoia and led their investment and initial investment in Airbnb and was on the board for many years and was a big part of the reason why my partner Riley joined Airbnb. And he said to us something that'll always stick with me. He said that doing venture extremely well and at the highest levels, early-stage venture, it's all about alignment. And I think this is what, through this history, we've told how Don and Sequoia came to understand what this alignment meant. The alignment is around building long-term, big, great companies.

• 1:28:48David Rosenthal?

  And so if your focus is that, you need LPs, unlike the original set of LPs who wanted a tax distribution and forced them to sell their stake in Apple, you need LPs who are willing to sign up for an essentially infinite, not infinite, but decades to multiple decades-long time horizon, because when there's true opportunity, the lion's share of the value gets built at the end. Think about the run that Amazon's had, or even Apple's had in the last 10 years in their market cap relative to the first 10 to 20 years of the company. So that's the LP aspect. But then to this company-building aspect, if you're truly aligned around that, you're optimizing for those outcomes, which means you aren't just like sitting on the

• 1:29:32David Rosenthal?

  side and letting things play out. You are helping make the decisions and build the company and build the culture that is going to enable a super-long-term, great company to be built like that. And I think that really is their ethos. Now, that's not the only way to do investing, and we've talked about and we'll talk about many more on this show, but it's a really, really unique one that I think it's been cool doing this episode to see exactly how this was developed.

• 1:29:59Ben Gilbert?

  All right. My second tech theme is that it's called Sequoia, not Valentine Capital or Valentine and Co. and Valentine Group.

• 1:30:11Ben Gilbert?

  Exactly. The way that Sequoia thinks about themselves is that Sequoia exists behind the founders. It's not about Sequoia, it's about the founders, or no, it's more importantly, about the companies.

• 1:30:24David Rosenthal?

  Yeah, not the founders.

• 1:30:26Ben Gilbert?

  Right, right. And even more so, it's not about the person, but it's about Sequoia. So even when you pop up that one level, it's not, hi, I'm Don and, you know, I'm, you know, extremely public and loud and writing op-eds all the time and doing all this. It's if you want to talk about the investment company, let's talk about the investment company, and that's Sequoia, and I happen to be a part of that. But, you know, it's not all about me all the time. And it's interesting, you know, you talk to people and you say, do you think Sequoia's low ego? And people would say, no, absolutely not. Like, that is not the way that I would use to describe them. But I think you talk to folks at Sequoia, you talk about companies that have been funded by Sequoia, and they do take that

• 1:31:09Ben Gilbert?

  very, very seriously, where we're one of the best firms in the world. But it's, at this level, it's about the firm, not the partners.

• 1:31:18David Rosenthal?

  Well, I think it all comes back to this super long-term orientation. Like, you know, does Sequoia have ego around that? Of course they do. Go look at their website. Like, you know, but it's all about long-term. It's not about, like, look at this deal we just did. It's about, like, look at this company that was built over decades that we were part of, and look at all of these companies, and look at Sequoia itself, which we're going to get into much more in our next part of this, of this series here. So I tried to, for the section, kind of catalog and crystallize, like, what are the elements of, if you had to distill the Sequoia playbook from this history and from Don's experience? I think these are the, these are the points that I would put in it. You know, one,

• 1:32:03David Rosenthal?

  First and foremost, of course, is focus on the market, both the size of the market and whether the dynamics of the market will lead to rapid adoption by a new entrant. Second is that change equals opportunity. This also didn't make it as much into the history and facts, but Don has this great, great quote about this. So he says, "One of our theories is to seek out opportunities where there's major change going on, a major dislocation in the way things are done. Wherever there's turmoil, there's indecision, and wherever there's indecision, there's opportunity. When it becomes obvious to anyone who reads Time Magazine that it's useful to have a disk drive on a computer, then it's already too late in the cycle to invest in disk drives. So we look for the confusion phase, when the big companies are confused, when the other venture groups are confused.

• 1:32:45David Rosenthal?

  That's the time to start companies. The opportunities are there if you're early and you have good ideas." Which I think that is just like, ah, such a perfect way to frame it. So hard to do in practice, but a really perfect way to frame it. Next, I think, is when you find one of those opportunities, don't get caught up in overly focusing on the team. Like, of course, you want the team to be great, but like, if the team doesn't look like a traditional team that you would pick from central casting to do this, like, don't worry about it. You're better to pursue the opportunity and you can augment the team if they're receptive to working with you on it. That gets to the next piece, which is be a company builder, not an investor. You know, to really do this at the early stages, you've got to dedicate the time and effort. You have to have a partnership of people made up of people who have actually

• 1:33:28David Rosenthal?

  built these companies, whether that's in their career as investors or their career as operators, but people who really know what they're doing and can help the companies make good decisions and recruit great management teams around them. Related to that, you can only do that at the early stages. Like, Sequoia now, of course, and we'll talk about this much more, invests at all stages of a company's lifecycle. But this type of company building investing that we're talking about, you can really only do it at the outset. Once, once the DNA is set, and it's interesting, I think Sequoia used to have a, one of these quotes on their website in their ethos section. I don't think it's on there anymore. They believe that the DNA of a company is set within the first 90 days of operation, and after that, it's really, really hard to change it. And having lived through that and now,

• 1:34:13David Rosenthal?

  you know, making the whole focus of my investing at, at that stage of the market, and you too, Ben, like, I completely agree with that.

• 1:34:20Ben Gilbert?

  Just reflecting on how crazy it is that this asset class exists, we all take for granted that there's early-stage fundraising, that like in mass, a couple million dollars are going to get deployed into ideas hundreds, if not thousands of times per year. And that there's a whole asset class of investors that are willing to do that. And now it makes sense because we've seen the handful of those become so, so valuable that, you know, you index the whole asset class and like sometimes it overperforms, sometimes it underperforms, but like it, it sort of tracks other asset classes in terms of, of risk-adjusted return.

• 1:35:05Ben Gilbert?

  It's a pretty special thing that it exists. And this is, this is probably an ethnocentric statement, but that it exists in our country. Like if you think about the impact that it has had on GDP, the access to early-stage capital from a large group of people who it's their business to take a flyer and their business to underwrite a tremendous amount of risk by, you know, having a 20-plus company portfolio. I think it's a really good thing that, that this system got created and that this type of capital is, is available today. And surely it is not deployed in the best way that it could, or certainly the most fair way that it could.

• 1:35:46Ben Gilbert?

  But the fact that it exists at all is intensely value creative and, and we take it for granted that it exists today and it's, it's kind of mind-boggling how difficult it would have been to convince people at this point in history that they should plow money into it.

• 1:36:02David Rosenthal?

  I mean, gosh, remember the Solomon Brothers meeting that we talked about that Don had, you know? One of the other reasons I was so excited to do this episode is we deeply believe it wave something that I think Sequoia also believes in this history shows, which is, you know, you mentioned this asset class exists now and it, you know, you can have an index on it and it works because like, you know, a few companies out of these, you know, many, many seeds of small companies will get built into, you know, giant Sequoia like trees. That's true, but I think there's a, there's a faulty logic conclusion you can draw from that, which is that we should have an index fund on this. Because what this history illustrates is that That defeats the whole cycle. Like, the reason that, you know, sequoia-sized

• 1:36:46David Rosenthal?

  trees get grown from seeds is because of, you know, careful watering and feeding of them from people who are experienced gardeners who really know what they're doing, you know?

• 1:36:56Ben Gilbert?

  I really want you to change your Twitter bio to experienced gardener.

• 1:36:59David Rosenthal?

  Experienced gardener. I love it. Experienced forest keepers, let's put it that way. You know, that's a big part of, you know, a change that we, and I think you guys too, like, hope to be in the early-stage ecosystem now, is getting away from this, like, watering a million seeds and into, like, tending a garden.

• 1:37:17Ben Gilbert?

  Yeah. Yeah, I mean, we thought long and hard about that with PSL when we were first getting started. And I think, should we be doing sort of more companies, you know, should we be doing this in like, an accelerator-style way? And, I mean, we talked about the studio model on the LP show, but it's very different and it's much more concentrated bets. And I think sequoia is a great example of, especially, you know, in the era that we're talking about it, of incredibly concentrated bets and a lot of work into them after the investment.

• 1:37:49David Rosenthal?

  Yeah. Okay, so my last two for the Sequoia playbook are, you know, one, let your winners run. Everything we've been talking about, like, if you've got something that's growing into a sequoia-sized tree, like, most of the growth is going to become, after, you know, decades-plus into the company, let your investment in them run. And then the last one, you know, which is what Don did that we ended history and facts on, which is, hand over the keys before you fall asleep at the wheel, you know, if you're running a venture firm. So much easier said than done. All right, should we move on to value creation, value capture?

• 1:38:22Ben Gilbert?

  Yeah. Let's see, what's the best way to do this one?

• 1:38:25David Rosenthal?

  Well, one thing we talked about is, we don't have the exact data on the returns of Sequoia's early funds. We have a general sense from a few sources that we can talk about. But compare that to how the NASDAQ performed over a similar point in time, which is kind of the closest you could come to, like, approximating this type of investment as an investor at this point in time.

• 1:38:51Ben Gilbert?

  Yeah, and I guess what we're doing here is we're sort of rolling together value creation, value capture and grading. To touch on what we do in the section with value creation, value capture, normally when we're covering a company, we say, you know, hey Shopify enabled $250 billion of sales or something like that. I can't remember the number last year. How effective were they at actually capturing that value that they sort of created? I would say Sequoia has been surgically good at capturing the value that they that they create in the world with, I think, few misses. I don't think Don had any trouble capturing the value he created in the world.

• 1:39:30David Rosenthal?

  Well, I would say yes, yes and no. Certainly no in Sequoia today, no. But I think it took them many years to learn, you know, how to do that, right? Even Don coming from the background and the personal investing he did. I mean, you know, the Apple decision was such a huge mistake. You know, Sequoia captured $6 million of value from Apple and, you know, lost out on dozens to hundreds of billions. Like, so yes, I think they

• 1:39:56Ben Gilbert?

  I said few mistakes.

• 1:39:58David Rosenthal?

  Few mistakes. One very costly one. But yeah, I think that's I think that's fair. The real testament here would be to ask the entrepreneurs that that Sequoia worked with, like, do they feel, the successful ones, that the value that Sequoia and their limited partners captured from the value that was created at those companies, did they, as entrepreneurs, feel that it was worth what they got in return?

• 1:40:24Ben Gilbert?

  [email protected] if anyone wants to email us.

• 1:40:28David Rosenthal?

  Well, I think we didn't ask Trip that directly in the EA episode, but I think he probably would have said yes, right?

• 1:40:35Ben Gilbert?

  Oh, yeah. Yeah. That was my, I mean, that was definitely the sentiment I got from him.

• 1:40:40David Rosenthal?

  Good point. We were mixing grading and and value capture and value creation. Should we move on to grading?

• 1:40:45Ben Gilbert?

  Yeah, so I mean, grading the way that we traditionally do it for folks that are new to the show is a big company buys little company and we have history as our guide. Was that a good use of capital by big company to buy a little company? Dave and I were talking before the show on how to think about grading for this episode. And I guess the way we sort of landed on it is opportunity cost for LP capital. So what, you know, if you had just put money into the NASDAQ to try and do some technology investing, you know, from 1975 onwards, sort of how would that have looked? Just interesting to know, the NASDAQ between 1975, conveniently when it was created, and

• 1:41:25Ben Gilbert?

  1990 grew about 6.5X with a couple of pretty serious hiccups in the middle where it lost 30% of its value and then took a long time to creep back up. So a stock market like any other. And so that's sort of the basis that we decided to compare it to. David, how do you think Sequoia sort of stacks up against, you know, that public market accessibility?

• 1:41:48David Rosenthal?

  It's hard to compare exactly because we don't know the returns for any given fund, let alone all the dollars in aggregate. But I believe, based on some quotes from Don and some of our research and other data we have, that Sequoia was probably averaging a 50 to 60% IRR on their funds during this period. So if you look, I actually haven't done the math of what that would be over 15 years, but it's well, well, well above 6.5X. And so now if you assume Sequoia is taking as carried interest, you know, probably in the early days, 20, and I believe now they're at 30% carried interest that they take on their funds. So taking that out of the returns, I still believe that you're performing well. I believe you're performing much, much better than that.

• 1:42:32David Rosenthal?

  And there's a great quote, there was a Forbes profile that they did on Sequoia in 2014, and there's a great quote in there from the CIO at Notre Dame, which is a great LP, one of the most sophisticated endowments out there. And they say that Sequoia is the single best performing manager that they have had in their entire portfolio for the last 30-plus years. And that is across all asset classes, which is pretty incredible. Wow.

• 1:43:05Ben Gilbert?

  Okay, so how do we assign a letter grade to this one?

• 1:43:09David Rosenthal?

  Well, I mean, clearly it's an A, right? Like, I think the question is like, is this an A+? I think it has to be an A+, right? Like, if we're...

• 1:43:20Ben Gilbert?

  Looking at a whole bunch of funds bundled together is like, too difficult to like, assign a single letter grade to. You know, I think like, were we looking at one that had, it was of significant size and had the highest IRR of all time? Then we could go, oh, that's an A+. But like, it feels reasonable for me to say that like, the first 15 years of Sequoia's existence were an A, relative to other venture firms. I mean, yeah.

• 1:43:47David Rosenthal?

  The reason I make a case for an A+ is twofold. One, how much Don really was a part of inventing so many things about the way the whole, not just venture capital, but startup ecosystem works today. And two is that quote from Notre Dame. Now, you know, maybe there are other great managers that Notre Dame has not invested in. But, but man, to be the single best performing manager over 30-plus years in a marquee endowments portfolio? Like, it's hard not to, hard not to assign that an A+.

• 1:44:22Ben Gilbert?

  All right, I'll go with you.

• 1:44:25David Rosenthal?

  All right. Well, with that, this has been a blast for us. Audience, hopefully you guys have enjoyed it too. Certainly hit us up in Slack or [email protected] if you have stories to share, thoughts, or other areas you want to see us dig into, especially on our continuing saga of telling the story of Sequoia from Doug and Mike, well, their generation when they were coming up, then taking over and taking Sequoia into the now 12 billion-plus-dollar global growth behemoth that it is today.

• 1:44:57Ben Gilbert?

  Yep. Would love your feedback. All right, carve outs.

• 1:45:01David Rosenthal?

  Carve outs. Let's do it. You want to go first?

• 1:45:04Ben Gilbert?

  Yep. Mine is an episode of The Daily, the podcast by the New York Times from a few weeks ago called, What American CEOs Are Worried About. They report on an event that happened last month where nearly 200 executives got together at something called the Business Roundtable, which I didn't know was a thing. It's not like a governing body of any sort, but it's like 200 of the Fortune, I don't know, 1,000 CEOs that get together and make proclamations. And one such proclamation that they made this year was that they are going to not just think about their stakeholders, their only stakeholder, as their shareholders,

• 1:45:47Ben Gilbert?

  but also their employees, their customers, their community, a broader set of stakeholders. And in my head, the thing that first occurred to me was, well, that feels like illegal in some way. It feels like the purpose of a corporation is to maximize shareholder value, and I just have taken that at face value. Call me a capitalist, but like, that is my understanding of...

• 1:46:09David Rosenthal?

  It's a relatively recent phenomenon.

• 1:46:11Ben Gilbert?

  Yeah, and I didn't realize. And like, it got me thinking, because I've always thought like, well, you should do all these other things. You know, that's bending the rules of the company to potentially sacrifice shareholder value to go and, you know, do things that you don't think long-term will accrue to shareholder value. So obviously, like, you should be active in your community, and you should take care of your employees. But I always thought with this lens of like, oh, companies do that because it's going to accrue to shareholder value at some point. And it's fascinating to, number one, listen to this proclamation, and then they dive deep into exactly, David, what you were talking about. The fact that it's a relatively new phenomenon, one that sort of grew up in the 70s and 80s

• 1:46:52Ben Gilbert?

  in the sort of professionalism of Wall Street and companies changing their bylaws to basically say, "We exist to be a publicly traded security," and then we are at the sort of mercy of that. It's this interesting, if we actually drift this direction that they brought up, it's much more a return to sort of the business as a pillar of the community from the sort of early 1900s. And I'll be very curious to see if this sort of comes of anything, and if this stirs more, more sort of similar sentiment.

• 1:47:21David Rosenthal?

  Yeah. Yeah, super interesting. Well, and you know, definitely reflective of the times we live in, in terms of corporations and the world at large. So I hope things go more in that direction. It's interesting to see, we have, one of our five portfolio companies is a B corporation. Do you guys have any B corporations?

• 1:47:41Ben Gilbert?

  Oh, awesome. We don't yet, but we're super, yeah, super supportive of that.

• 1:47:45David Rosenthal?

  Yeah, it's been really cool to see that, you know, emerge as a way to institutionalize some of the governance rules around this idea. We invest in B corporations, as in C corporations, but no preference necessarily for one or the other, but we're, we and many other VC firms are super open to it and supportive of it. Okay, my carve out, as listeners may know, for some reason that I even I don't understand, I use Amazon Music instead of Apple Music or Spotify. I'm actually, yeah, I'm definitely gonna change that because Amazon does so many things great, but music is not one of them. But one thing that popped up on the homepage

• 1:48:26David Rosenthal?

  of Amazon Music last week, which maybe is worth the whole thing, is, I have no idea, last week was the 25 year anniversary of Notorious B.I.G.'s first album, Ready to Die. So like, speaking of mafia dons on this episode, Biggie, it's so good. And so Amazon did this cool thing where they have a bunch of tracks from the album, and then in between each track, they have like a commentary from, you know, journalists and people that were there, producers, Puffy, you know, everybody part of making, making Biggie's first album. Just listening to it all again, just, man, like, it's so good. Like, you know, maybe some of the content and language he uses, you know, haven't aged too well, but, but

• 1:49:08David Rosenthal?

  like, he was so good. Like, I've never heard anybody that can rhyme like Biggie, and just the music and the tracks and like, what Diddy did producing it, like, it was really cool to rediscover and be listening to that over the past week.

• 1:49:22Ben Gilbert?

  David, I love the incredibly eclectic collection of carve outs that you have. It's this like, you know, crazy place in France. It's this really hard to get through, you know, thousand page book that like, I will never have a prayer of actually, and then, oh, yeah, well, it's this, you know, it really takes me back to when I was really into Biggie, you know?

• 1:49:46David Rosenthal?

  Well, the secret is I keep a little note in my Apple Notes of any time something strikes me, I just put it in there as a potential future carve out.

• 1:49:54Ben Gilbert?

  So that's awesome. Good idea.

• 1:49:57David Rosenthal?

  All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 1:50:03Ben 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.

• 1:50:14David 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.

• 1:50:34Ben 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.

• 1:50:47David 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.

• 1:50:58Ben Gilbert?

  All right, listeners, thank you so much. Thanks to all the great sources that you can find in the show notes for helping us research and put together this episode. And if you would like to either join the Slack, you can do that at acquired.fm or become a prestigious Acquired Limited Partner, you can do that at glow.fm/acquired and it comes with a seven-day free trial.

• 1:51:22David Rosenthal?

  Yeah. One quick note on the Slack, we found a couple of questions about this recently. The Slack is awesome. You absolutely should join if you're not part of it yet. The way to do it is go to our website, acquired.fm, and then on the homepage, there's a little button on the left-hand side of the homepage, right below the main image. Click that and you'll get an invitation to sign up and join the Slack.

• 1:51:44Ben Gilbert?

  All right, listeners, we'll see you next time.

• 1:51:45David Rosenthal?

  See you next time.