Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: Sequoia Capital's $9BN Global Equities Fund on The Future for NVIDIA, Google & Meta | How to Play AI in the Public Markets | China & Europe: Is the Future Bleak | The Opportunity for Crossover Funds with Jeff Wang, Managing Partner @ SCGE About this episode Jeff Wang is the Managing Partner of Sequoia Capital Global Equities (SCGE), a public/private crossover investment firm with investments spanning from late-stage private companies to public companies. As Managing Partner, Jeff has primarily focused on public growth technology companies but has also invested $3 billion in private companies including Bytedance, SpaceX, and Stripe. Prior SCGE private investments that have since gone public include Airbnb, Doordash, MongoDB, Nubank, and Snowflake. Before joining SCGE in 2010, Jeff also worked at TPG Capital and Silver Lake Partners where he focused on investments in technology buyouts. 10 Questions with the Leader of Sequoia’s $9BN Global Equities Fund: 1. Crossover Fund Opportunity: Why are crossover funds more attractive today than ever? Have the tourists gone? 2. Public Market Opportunity: Why is the opportunity in the public markets, not the private markets today? 3. IPO Markets: When will IPO markets open? What will cause them to open? 4. Breaking Hedge Fund Rules: What are the biggest ways that Sequoia break the traditional rules of hedge funds? 5. Google: Why does Jeff believe that Google’s cash cow of search is under threat? 6. Meta: Why does Jeff believe Meta will be the biggest competitor to Google? 7. NVIDIA: Why is NVIDIA’s price today reasonable? What is the bull and bear case? 8. China: Is there a recovery for China? How do Sequoia play China in this market? 9. AI in Public Markets: How are Sequoia playing the AI game in the public markets? 10. Investing Lessons: What have been Jeff’s biggest investing lessons from Mike Moritz, Doug Leone and Roelof Botha?
Transcript 14,013 words · 3 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 I do think there are more threats on Google's business than there have been ever in the company's history. I think Nvidia's price is reasonable if you think it's going to continue to keep going. For us, 70% of our research process is actually upfront on the theme and only 30% on the actual company. You have to be a pirate interpreting a treasure map. We need to sail to the right island. Now, if we don't sail to the right island, it doesn't really matter which ship you picked. Those are just not good investments.
0:29 Harry Stebbings? This is 20 VC with me, Harry Stebbings, and I promised you the best guests in the world that have never done a podcast before. Today is exactly that. Jeff Wang has scaled Sequoia Capital Global Equities from $50 million of internal partner funds to $9 billion in assets under management. And he's invested $3 billion into private companies like ByteDance, SpaceX and Stripe. And he also led investments in Airbnb, DoorDash, MongoDB, Nubank and Snowflake, all when they were private. Jeff has never done a podcast before, and so this is the first time you will hear him speak. And wow, what a show we have in store for you. But before we dive in, I'd like to introduce you to one of my favorite brands, Attio.
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3:36 Harry Stebbings? You have now arrived at your destination.
3:39 Harry Stebbings? Jeff, I am so excited for this dude. Listen, I spoke to Mike, I spoke to Doug, I spoke to Pat, many of our mutual friends. So thank you so much for joining me today.
3:48 Speaker 00 Oh, thank you so much for having me on the pod. By the way, I did see your tweet the other day about your frustration with folks going on the podcast circuit. This is my first podcast ever and I don't expect to do them regularly. So I've been listening to your pod for a long time. Sequoia folks have had such good things to say about you and so I'm super excited to be on.
4:06 Harry Stebbings? I pay them a lot of money to say such things and that's a big expand. Listen, I want to start in the early days, which is how did you come to join SCG? Just take me to that offer moment and the joining.
4:20 Speaker 00 Yeah. So it sounds like, Harry, you're asking me why I made the decision to join a hedge fund that hadn't even launched yet.
4:25 Harry Stebbings? Pretty much.
4:27 Speaker 00 So we started SCGE or Sequoia Capital Global Equities in 2009. And it was really hatched actually by Jim Getz originally. So he worked with Michael, Doug and Ruloff to really get it off the ground. And I joined a year later in 2010 before we externally launched and raised money from LPs. I think I joined for the same reason that most people join a startup. I believed in the mission and this was to build a world-class public equities business, partnered with Sequoia Capital, which I believed at the time and still consider to be the best venture capital firm in the world. And so I joined as an early employee. We had 50 million of internal capital. We now manage about nine billion of mostly external LP capital. But that internal capital amount is also now about a billion.
5:11 Speaker 00 The portfolio is about two-thirds public and then one-third private. And that one-third private is almost exclusively co-investments with Sequoia. And so when the SCGE opportunity came along, I was super intrigued because it was a chance to go build a public equities business that had true ecosystem advantages in technology. And I believe those advantages would translate into the public markets. I was also encouraged by the support and backing that SCGE had from Sequoia's most senior leaders like Jim and Doug and Michael and Ruloff. On the flip side though, I was taking a 70% pay cut and there was a real risk of failure, right? Most hedge fund launches don't survive. And so my career prospect, if it failed, wouldn't have looked very good.
5:55 Speaker 00 And so I took the plunge to try to build something special.
5:58 Harry Stebbings? I spoke to Doug before and he said that when you started, you were very much a shorts guy.
6:03 Speaker 00 Yeah.
6:04 Harry Stebbings? He said that you then showed this specifically nose for longs and had this unique ability to make the transition between the two. How did you make the transition so successfully between the shorts to longs? And how do you assess that today?
6:17 Speaker 00 The way we short is a bit different from how other hedge funds do it. So we are not looking for frauds. We are not looking for valuation arbitrage. We're looking to further express a disruptive thematic viewpoint that we hold on the long side, albeit on the short side. So it's really important to see these trends early. And so the view into the private ecosystem is actually quite valuable for that. So for example, if you hold a positive view on SpaceX and Starlink, what does that mean for other satellite businesses? What does that mean for rural telcos? If you are bullish on AI, what does that mean about call centers? So our showing is really expressing further conviction in the longs, albeit in the other direction.
6:58 Harry Stebbings? I'm so sorry for being naive. I specialize in venture where we're risk on all the time. Institutions allocate towards hedge funds in large part because of volatility minimization. Hedging is in the name.
7:11 Speaker 00 Yeah.
7:11 Harry Stebbings? This long short approach really concentrates risk profiles.
7:15 Speaker 00 That's right. That's right. I think you could take risk in different formats, right? So if you are, if you are Citadel, if you are another hedge fund that takes a lot of leverage, I do think you need to have low volatility because you're amplifying with, say, 6X leverage. In our model of the world, we don't take a lot of leverage. And so what we're trying to do is express more of a specific viewpoint with low leverage.
7:39 Harry Stebbings? Why do you not take leverage where many others do?
7:42 Speaker 00 You could take leverage, but then you're taking more volatility. And I just don't think in technology where you already have a lot of beta, you already have a lot of volatility, you don't need to take a lot of leverage, especially because there is a power law and even in the public markets. If you get a stock right, there should be a power law that helps you deliver and drive great returns over time without a lot of leverage. It's not that we don't take any, but it's that we take low leverage.
8:08 Harry Stebbings? Have you ever had this combination of long and short be very wrong? And what did you learn from that?
8:14 Speaker 00 There are definitely moments in time where the markets will say, we used to love growth, we now love value. And if you think about how we are positioned as a fund, it's generally long growth and short value, right? The, the value companies are in general, the ones that the growth companies are disrupting. So there are moments in time where the markets rotate. And that's typically a function of, say, rates or maybe macro scares where you want to be in more defensive companies. And that's tough for our portfolio. But that's why I think about performance over the long term. Those rotations are very painful, but they happen in a pretty short period. Let's say it's three months.
8:55 Speaker 00 We may have a very rough three months, but if I look out over the span of now we've been in business now 15 years. We've had one down year over that 15 year timeframe and you build your business in a way that you can weather these storms. So one of the, one of the key things for us is we partner with an LP base that is long-term oriented. A lot of them, as I mentioned, are Sequoia LPs. And so they know how we invest, they know our product, they know that technology can be volatile.
9:24 Harry Stebbings? You get it wrong and it goes the opposite of what you think. It could be up or it could be down depending on your long or short. How do you know when to call the decision wrong versus when to need more data to see if you were wrong?
9:38 Speaker 00 I think it's hard. I think it's hard to know, and this is part of the being emotional and attached or not. I think it's really important to be dispassionate and look at the data in a way that synthesizes it for what it is. So if it's good, we have to really call it good. If it's bad, we have to really call it bad. And so one of the things that we've done is we've actually pulled in our data science team as an extension of the investment team. They join our weekly pipeline meetings. We have them very tightly integrated with, with our investment team to make sure that I think we have that data science angle in all of our processes.
10:14 Harry Stebbings? What do they bring that you didn't have without them?
10:17 Speaker 00 What we have as investors is a thesis. On the private side, you can get a lot of data to go verify that thesis, right? You're under NDA or you're on the board and you have depth of information that you can then go verify a thesis. We don't have that in the public markets. The data that you have in the public markets is the same as every other investor. That's Reg FD, right? So the smallest investor to the largest investor in a company, you don't have any different information. So to the extent that we can, from the outside in, verify a thesis that is very helpful for validating, how big do we want to make that position? Is that thesis actually still holding true? Has something changed? Has competition come in and knocked us off, off the top seat?
11:00 Speaker 00 I think that is very helpful for investment process.
11:03 Harry Stebbings? Jeff, what thesis did you have that proved to be wrong and what did you learn from it?
11:07 Speaker 00 So Shopify has been one of our biggest winners. It is also one of my bigger regrets in terms of post-COVID. Coming out of COVID, we simply modeled a baseline that still had the post-COVID trend continue to go up and to the right. And that was the case for a lot of e-commerce companies, right? So one thing that we got wrong is a lot of things returned back to pre-COVID. Humans don't really change that much or they change more slowly. And so e-commerce really returned back to the pre-COVID trend line. Shopify is still continuing to gain share against the total e-commerce and the total retail pie in a very nice, solid way.
11:45 Speaker 00 But to model this 800 basis point step up in a year and to say that that was going to continue from that trend, that was obviously incorrect. We started to see that in the data and, you know, being detached to a company, really liking the management team there, having it be one of our biggest winners. I think it's, you have to be dispassionate when you see the data changing. And we held out hope for longer that, okay, this is just a blip in the data. It's going to get better again. It's going to return back to this very positive trend line we had. And instead, it stepped down. It's still a great business. It's still continued to grow against a very positive trend in e-commerce taking, you know, share from overall retail spend. But that trend line was was simply lower than than we thought.
12:27 Harry Stebbings? So how does that experience impact your go-forward mindset?
12:31 Speaker 00 It just makes you focus on being dispassionate in a way that I think if I can get help from data science, if I can get help from my partners, I think that helps us be better. One of the things that we do is we have a quarterly review of the entire portfolio where we do a re-underwrite of every single position. Because right, unlike the venture world, we can buy and sell every day, every minute. And so typically the re-underwrites driven by the teams that, the team, the individual partner and the analyst who are supporting a particular investment. In the controversial investments, one thing that we will do is we will have a fresh To write from a different partner where you have a devil's advocate position. I think that's important for helping us be dispassionate.
13:16 Harry Stebbings? In 2016, there was a leadership transition.
13:19 Speaker 00 Yeah.
13:19 Harry Stebbings? Which I think was a tough moment. Doug told me they did not know whether to keep global equities and made you earn it.
13:27 Speaker 00 Yeah.
13:27 Harry Stebbings? Writing down vociferously. Talk to me about that. What happened there, Jeff?
13:31 Speaker 00 So you've probably listened to the Sequoia Crucible Moments podcast, where Ruloff dives into these difficult moments in a company's journey that require a lot of fortitude, but ultimately set the company in a better direction. That was 2016 for SEG. I'm not a founder, but I did help guide SEGE through what I call a refounding moment. So Sequoia hired an original portfolio manager for SEGE. You know, in 2009, who was a smart, hardworking guy, but didn't really unlock the synergies that we should have within our ecosystem. So really, he had the same playbook at his prior hedge fund. And so in a lot of ways, he was trying to recreate his prior hedge fund, even invest in in non-tech areas, for example,
14:15 Speaker 00 as opposed to building something special and unique to Sequoia. And so performance was good. It was not great. And so there's this crucible moment in 2016 where Sequoia decided to part ways with the original PM and actually consider shutting down the business entirely. So as the senior most partner remaining on the team, I was asked to come up with a business plan and convince the broader partnership why version two would be better. And for us, it was an incredibly unifying moment because we were really fighting for our survival, right? The team actually, we actually all left the office. We rented some coworking space down at the Hana House in downtown Palo Alto, just to get some space and for clarity of thinking.
14:58 Speaker 00 And ultimately, the the prescription, the strategy was pretty simple. It was just simply focus on the areas where we have an advantage. That is investing in growth tech with a meaningful thematic overlap with broader Sequoia and co-investing alongside in late-stage privates. So gone were the days of investing in lodging companies, port infrastructure. We even invested in airline miles program. Yeah, and so we were just focused on the Sequoia sweet spot. And when you looked at the pro forma analysis of those returns, it was actually very strong if we just removed all the non-tech areas. And so what we did, we pulled together a 50-page PowerPoint strategy presentation and I had to sit down in front of the partnership in the Menlo Park office, in the main Ford
15:43 Speaker 00 conference room, in the hot seat for founders, and present to the partnership.
15:48 Harry Stebbings? How did you feel?
15:50 Speaker 00 I was terrified. I was terrified and I didn't, I didn't really know if it would really work. I give Mike Moritz all the credit for this. The way he suggested framing it was, yes, this is a leap of faith to invest behind this team and this strategy now. But it is way less of a leap of faith than back in 2009, when we didn't have a team, we didn't have any capital or LPs, no back office function, no clarity on whether we would have any ecosystem advantages in the public markets. And now we have all these things and we have a team that's bonded together that believes in it.
16:22 Harry Stebbings? I mean this respectfully. What's the leap of faith removing the non-tech activities and really staying cool to what Sequoia does best? My question more is, why do we need a separate team to do it? This feels just like a continuation fund.
16:34 Speaker 00 I think the public markets, especially when you're trading actively like we do, is actually a very different discipline from a continuation fund. So in a continuation fund, right, you're, what you're typically doing is saying, this company that I've known for a long time, do I, do I sell it or distribute the shares over time? And I think that, you know, most funds, most venture funds can be very good at that. What we do is different. So there is a portion of our business that, our portfolio, that is prior or existing Sequoia portfolio companies, right? That's maybe about a third of the portfolio is that. There's a lot of our business that is not. There, we own, for example, Shopify was not a Sequoia portfolio company. It's a company that we admired in the private markets, but we did not invest in the private markets.
17:19 Speaker 00 And our first chance to invest is when they go public, right? So that is a very different discipline. And then also having the discipline to go know when to buy and sell specific companies. You know, I was talking to Pat Grady about this the other day. We're not just judged on, okay, did we sell this company at the right time? But then did we go buy something else because we sold this company? That outperformed this company that when we sold at that time, right? I mean, it's you have to be deploying capital all the time. It's not just.
17:51 Harry Stebbings? Is that not a dangerous mindset to take? Because if you're always looking for the opportunity cost of capital increase. In other words, that if I sell here, I can put it elsewhere. It could force you to sell something you shouldn't or keep something that you shouldn't.
18:06 Speaker 00 Yeah, and so our bias is definitely, I'd say, to keep something. Because you just know it best. You know, the team, you have a lot of confidence in what they're doing. I think it's really hard to say, sell something that's 10% too expensive. Hope to buy it back when it comes down 10% and then continue to ride it. That is a very hard discipline. So I don't focus on the short term. I think that those are the small dials. I tell my team, don't tell me if, you know, ServiceNow is 10% too expensive. If we have a three to five year investment hold period, 10%. If you get six months ahead of yourself in terms of the pricing, it's not going to impact your IRR that much.
18:47 Speaker 00 Where we have to be careful, though, is if it's now 18 months ahead in a three to five year investment time horizon. Because now it really starts to impact your IRRs. And then we have to really think about trimming it back and maybe potentially rotating into something else. But, you know, if it's 10% too expensive, I don't sweat those details. I think about the big dials and the big dials are really, are you making the right investments? Are you make, is your investment process working? Is this company going to be a much bigger company over the next five years?
19:15 Harry Stebbings? Where was it 10%? And it didn't matter, actually. And where was it 18 months ahead of time? And we needed to make a transition or a change?
19:23 Speaker 00 I think most of the time it's 10% and it doesn't matter. I think 2022 was a period where a lot of these stocks got ahead of themselves. We had to trim, we trimmed a bunch, but we should have trimmed more. I mentioned the Shopify example where Shopify from the 2022 price is still back to, I think about halfway to the peak, right? Whereas you have other companies, say a ServiceNow that is now above the peak. So you do need to make those choices very actively.
19:51 Harry Stebbings? Which portfolio has performed better? The buy and hold of portfolio company stock from Sequoia's existing portfolio or the net new?
20:00 Speaker 00 We've looked at this and it's surprisingly consistent. I'm not really sure why that's the case, but it's surprisingly consistent. The area where we have done really well, actually, are some of these private companies where we can partner with the growth team primarily and co-invest alongside early on. And so I think the private portfolio has done really nicely. And then you write it into the public portfolio.
20:24 Harry Stebbings? Dude, I got to talk about that. Why do that? That seems to kind of muddy the waters a little bit. Suddenly we're now a crossover fund. We're moving into like late growth rounds, which traditionally much less data. Pricing is not great, actually. We still haven't reached that kind of realization moment in a lot of cases quite yet of public markets. Why decide to make that move into the private markets?
20:46 Speaker 00 I think a couple of reasons. So I think, one, the crossover thesis of investing in late-stage private companies, getting to know them well and then having a better view on whether to own them into the public markets is still fundamentally very sound. So.
21:02 Harry Stebbings? Do you really get to know them better? And if so, what do you get to know?
21:06 Speaker 00 So I'll give you an example. So New Bank is a Sequoia portfolio company, as you know, Doug is on the board. David and I joined Sequoia at around the same time. SCG led an investment in a secondary round in 2019. We participated in later rounds again at the IPO. We even bought shares even post-IPO in the straight public markets. It's now a top five position in the portfolio. And if we were doing our jobs right, I think we should know that company better than anyone else in the world.
21:33 Harry Stebbings? Would you not have had that existing from Doug's partnership with them? My question is, does it need your attendance at the pre-IPO stage? If you just have great tie-ins with the Sequoia board member?
21:43 Speaker 00 I think it still helps. I mean, I've known, for example, I've known to be, but I've also known the CFO of Wago for a long time before he was the CFO at the company. Just there's only so much that Doug can say, look, go help this person or go help that person. Go, go make these connections. There's a part of it that just has to be organic, right?
22:02 Harry Stebbings? Okay, so that was one. What were the other reasons? Sorry, I interrupted you on
22:06 Speaker 00 Yeah, so I think also having a perspective on these companies from a competitive standpoint also helps us inform public market investing and vice versa. And then we're also able to allocate between publics and privates based on where we see the best opportunities at that specific moment. And so right now, for example, we do not see for S E G E as many opportunities in the private markets. And so most of our attention is actually on the public markets. And so we can flex between those depending on where we see the opportunity set. One other thing is, over the last few years, there have been a lot of tourists, as you know, a lot of tourists, mostly on the hedge fund side who've dabbled in private markets and they've gotten burned. Those tourists are out of the market. We
22:50 Speaker 00 don't see them anymore. And so I do think the crossover market is getting more attractive, and it's getting more attractive. It's one tourist exit and two, as the IPO markets open up again.
23:00 Harry Stebbings? Let me add a lot to go with that. I have to ask, with the crossover in mind, do you think private markets ultimately are going to compete and overtake public markets when it comes to volume, depth of activity in various asset classes?
23:12 Speaker 00 I'm not sure, because the public markets are still the biggest. I mean, they're the biggest capital markets. It is freely tradable. Liquidity is important for a lot of institutions. And I do think there is still for companies, still a big branding event when you go public. There will be value to companies going public. I don't know when some of these big companies that have stayed private for a long time are going to go public. But look, I look at, say, a Klarna. I mean, Sebastian clearly wants to go public. There, there are a lot of reasons for that. And I think employees want these companies to go public, right? They're excited about it.
23:48 Harry Stebbings? I mean, I think he's also doing the most brilliant rebranding with his kind of removal of all software products and customer service products, brilliant founder brand being created there. Are continuation funds helpful? Or do you think they're just adding to the pre-IPO backlog that we have?
24:01 Speaker 00 I'm not sure if continuation funds are a permanent or a cyclical feature. Right now, the IPO markets have not been open. We have not gotten a lot of liquidity. I don't know what it looks like when the IPO markets do reopen. And I mean, right now, we are still well, well below, obviously, the 2020, 2021 levels for the IPO markets. We're also well below the pre 2020, you know, 2021 levels, right?
24:27 Harry Stebbings? Philippe Le Font published this kind of IPO data, and it was actually showing that we're actually worse than the financial crisis in terms of number of IPOs.
24:35 Speaker 00 I mean, I think these continuation funds exist, some of them exist today because there's no liquidity. And so it's effectively a way to get some of these LPs liquidity at a time where the IPO markets are shut. I do expect the IPO markets to open, say, back half of this year into next year. We'll see. But, you know, we have a number of companies on file. Sebastian, as you know, has been very vocal about going public. I think there will be a number of other companies that test the public markets. And one of the things that we've seen over the last couple of years is that it took a couple of years for these companies to right the ship in terms of the financial profile, right? And now, a lot of these companies, I think, are ready. The days of Rule 40, you're going out at 60 negative
25:19 Speaker 00 20, those are gone. You have to be a 30 and 10, 40 and 0, kind of growing into a nice profitability curve in order to get public. And it took a couple of years for the companies to get there. It also took a couple of years, I think, for a lot of these companies to get to a level of predictability of their revenue that the public markets expect, right? So if you're coming off COVID, you have all these just weird headwinds, tailwinds to your business that make it really hard to project. And so now, I think, we've rolled forward a couple of years. The markets are more stable. These companies are more IPO ready. And so I do think the IPO market will open as we look into next year.
25:59 Harry Stebbings? Why would you? So if you are Starlink or you're Stripe or you're any of these great firms, you can bluntly finance in private markets for as long as you need to. There is such a supply side if you're a great company and they've shown that. Why would you go public even if you could?
26:17 Speaker 00 I think that's kind of the deal that you made with investors and employees. I mean, I don't.
26:24 Harry Stebbings? I don't know with secondary markets being as transactional as they are today. Are you many people are getting secondaries on all of their stakes?
26:32 Speaker 00 I think there are a couple of companies that can do that. But do you think the $5 billion SaaS company? That's a good, it's not maybe the best company in the world can really do that?
26:44 Harry Stebbings? No.
26:44 Speaker 00 Right? So like, I think there may be a certain set of companies out there that can pull off what you're talking about. Before 99% of the companies out there, I think that's really difficult.
26:55 Harry Stebbings? So with this realization, actually, that right now we see more opportunity in public markets. Okay. And we're going to stay away from like late stage privates for now. What does that reshaping, resizing of the portfolio look like in reality then?
27:08 Speaker 00 I think it's actually pretty natural and organic for us because we're, we're at about a third of the portfolio that is private. That is probably more than I want to be steady state. And that's a function of some of these companies just not going public in the, in the timeframe that we thought they would.
27:24 Harry Stebbings? What would you like to be steady state?
27:25 Speaker 00 Closer to 20 to 25% would be more comfortable because then that gives us an opportunity to add. If we are focused primarily on the public markets, let's say if we had 50% of the portfolio private, that would feel too illiquid to me. So 20 to 25% feels like a pretty comfortable level.
27:42 Harry Stebbings? How do you think about position sizing on a per company basis?
27:45 Speaker 00 We have a pretty concentrated portfolio, so about 15 to 20 longs. I want to make sure that the top longs can really move the portfolio in a major way. And as, as I mentioned, I think the power law still exists in the public markets, obviously to a lesser extent than, than the private markets. But we want to have the top side of the portfolio be pretty chunky. And so about 15 to 20 longs, about top five or about. Thirty five, forty percent of the portfolio. So it's pretty meaningful. And then what we'd like to do is to, you know, have the shorts just essentially fall out of that. Again, it's really how much more conviction do we want to express on our longs, albeit on the other side? We're not necessarily trying to solve for the short side in a target, a particular grosser net.
28:29 Harry Stebbings? Have you ever had it where both your long and your short were in in Congress? And what I mean by that is, you know, if we said, hey, I'm just making it up here. I'm going to bet on Shopify and as a result, I'm going to short Amazon. And actually you were right and you were wrong.
28:48 Speaker 00 Yeah.
28:49 Harry Stebbings? E-commerce just grew and both went up.
28:51 Speaker 00 So it's a really interesting question, and this is a visualization that I like to give to everyone who joins our team. You have to be a pirate interpreting a treasure map. We need to sail to the right island. And if we get there, great. If we get there first, great. There is a massive amount of buried treasure. But if we're the second ship there, we're also doing pretty well. Even the third ship is going to do pretty well. So if we get AI right, there will be a lot of good ships. Nvidia is clearly the best ship today, but a lot of others are doing well also. Now, if we don't sail to the right island, it doesn't really matter which ship you picked. Those are just not good investments. So yes, we want to pick the best company, but we definitely better pick the right theme.
29:33 Speaker 00 And so for us, seventy percent of our research process is actually upfront on the theme and only thirty percent on the on the actual company. And so the example that you gave there, I think we'd be more positive both Shopify and Amazon. I don't know which is the first ship to get there, but we are positive overall on that theme. You know, what we want to avoid is we want to avoid some of these themes that I don't think have legs, where companies, whether or not you do a lot of great company analysis, it just doesn't matter.
30:02 Harry Stebbings? What theme did you swim towards plant a flag and the boat never came to that island?
30:07 Speaker 00 Honestly, we haven't. One, we spend so much time making sure the theme is actually working. And then two, we have, you know, pretty good insight from seeing what's happening at Sequoia. Doug liked to say, you gotta look at what wiggles, right? And you gotta go hit what wiggles.
30:25 Harry Stebbings? What does that mean?
30:27 Speaker 00 So being able to see what wiggles, be it a company or theme, early, I think is really important. And then being able to see, is that wiggle becoming a tremor? Is it becoming an earthquake? Is it getting to be more than a wiggle? But if you don't see the wiggle, you could do great analysis, but if you never see the wiggle, you're not doing any analysis on anything.
30:47 Harry Stebbings? What did you not see that you should have seen?
30:50 Speaker 00 One of my bigger regrets and one of our bigger losers is in a company called Twilio. Twilio initially was a very good investment for us and actually ended up being a decent investment overall. It could have been a legendary investment. We held on for too long and as competition started to eat away at the business. And we actually saw some signs of it. So gross margin was off a few points here or there, a couple questionable acquisitions, key executive departures. And I think each one of those things, you can explain in a vacuum, right? You can pro forma analysis for this gross margin, this specific quarter, or you could say this executive left for a really good opportunity. But I think when you take them all together, I think clearly something was a little off.
31:35 Speaker 00 And so again, that's why I think it's important to regularly re-underwrite these investments each quarter and have a discussion with the full investment team. And so again, I think that's where one of the ones where the devil's advocate point of view actually was really helpful to get a fresh, dispassionate perspective.
31:52 Harry Stebbings? I actually share your mistake on that.
31:54 Speaker 00 Oh, yeah?
31:54 Harry Stebbings? I did the same. Everything was good and then I saw Jeff left and I was like, right, I fucked it. I'm fucked. Like, yeah, good, fuck. There's that moment when you're like, ah, bugger, that's the final nail. And you're like, hmm. And I remember one of my oldest mentors told me, Harry, be greedy when others are fearful and fearful when others are greedy. Do you buy that?
32:16 Speaker 00 I think it's really hard to do in practice. I think most people are fearful when other people are fearful and most people are greedy when other people are greedy. The best way to do it is just to be really long-term about it. This really long term, let's not trade all the time. You know, there was that day, I think it was just last month where the Nikkei was down 12% in a day. I mean, we just don't trade those days. Sit there, try to figure out what's going on, be long term about it and not overreact. I think it's hard in those moments, but it's also hard to act in those moments, right? You're just running around with your, your head cut off.
32:51 Harry Stebbings? Dude, this is why I think private and public at the same time, you're a fricking genius because Harry sees CrowdStrike, you know, get hit to shit. And I'm like down 20%, still a great business, still love the management team, bye. Next day, legal lawsuits, just like down another 20%. I'm like, maybe, maybe timing is important, you know?
33:11 Speaker 00 I, I think you'll be right there. I think you'll be right there, by the way, but.
33:14 Harry Stebbings? Thank you. I'm still down, so I'll keep holding, holding out for that one. Can I just go back to a really interesting element for me though, which is actually the building of the business side?
33:23 Speaker 00 Yeah.
33:24 Harry Stebbings? Which is, you know, you started, as you mentioned, there with like 50 million of partner money, I think it was. Can you take me to fundraising for this business?
33:33 Speaker 00 Yeah.
33:33 Harry Stebbings? How did that go in the early days and what's your favorite memory?
33:36 Speaker 00 It was difficult. The history of venture PE firms launching public funds has not been a good one. It was difficult to go convince LPs that we're going to go do this. We have fortunately some very supportive LPs, some of who will take the leap of faith with us because we've had such long-term relationships with them. But it was very difficult to, to be able to convince folks. It was a lot easier once we got a track record and got things going, but the initial, you know, 50, 100 million dollars.
34:08 Harry Stebbings? What were you selling them? Consistency, absolute returns?
34:12 Speaker 00 I think it's really just to be the best tech, public, private crossover firm in the world. And with our advantages, I think we can go deliver on that. We still got to go execute. The other thing that we're not selling though is we're not Citadel. Citadel, I have a ton of respect for Citadel and Ken Griffin. We're not selling a product that is not volatile. We're selling a long-term product because I think our advantages are long-term. Right. It's seeing these long-term themes that will play out over the next 10 years. And so if we measure ourselves on a short-term basis, I don't think that is productive. One other thing that we did to set up the structure is because we have this long-term investment horizon, we have a long-term capital base, we also have long-term incentives. And I think that's really important.
34:56 Speaker 00 So three-year or more-year investment time horizon, three-year minimum capital base, i.e. it takes LPs three years to take your money out.
35:04 Harry Stebbings? Is that standard? I'm sorry.
35:05 Speaker 00 That is not standard. That is not standard. And then the least standard part of what we have is we have also a three-year incentive crystallization. And so what that means is most hedge funds, as you probably know, just take carry at the end of each calendar year. We take carry once every three years. And we also vest ourselves over a three-year period. And so we have that 3-3-3-3 type of framework here, where I do think it helps us, encourages us to think long-term. If you were a fund where you had monthly redemptions and you paid your people an annual bonus, I think it would be really hard to really, truly be long-term. I think you're really setting yourself up to incentivize your team to think short-term.
35:49 Harry Stebbings? I'm so sorry for such a naive question, but I'm from the venture world. How on earth can anyone plan their business on a long-term horizon when you have monthly redemptions?
35:57 Speaker 00 I don't think you can. I think it's really hard to think about business building if you're making investments and you don't know what your capital base looks like in the next six months.
36:05 Harry Stebbings? How does the rest of the business do it then? I'm sorry, I don't understand that.
36:09 Speaker 00 So I think that's why most hedge funds fail. It is really hard to go build a real business. If you are one of the large hedge funds like Citadel, you have strong LP relationships, you have lockups, you've got an incredible long-term track record. That makes it a lot easier when you have periods that are not up to your expectations. But if you are a $100 million hedge fund today, you don't know if you're going to be in business in a year. It's hard to go recruit. It's hard to go spend money and say, we're going to go build out a data science team. And you don't know, how much time do I spend on recruiting? How much time do I spend on management, business building? LP relationships and that's before you get to the investing.
36:51 Speaker 00 I think for us, one of the things that was most helpful, actually, in going through that period is that Sequoia does a great job of injecting Sequoia DNA. While also allowing these individual businesses to grow up in a way that fits their specific area. So Doug and Michael, and I give them a lot of credit for this, the way they set up the various businesses. So S E G Sequoia China, now Hongshan, Sequoia India, now Peak 15 and Sequoia Heritage. Was to give each individual team and set of partners full investment discretion. That's very different. So obviously we shared a brand, administrative functions, office space, leadership. So Doug's on the S E G, but was on the S E G board, now it's Ruloff, and we collaborated closely. But the day to day management and investment process is up to that specific team.
37:36 Speaker 00 And I think what it was, was it was a recognition that is really hard for an American investor to go make great investment decisions about Chinese startups. Similarly, it is very hard for a venture investor to go make great decisions about managing a hedge fund or a family office. It's just not what you're spending every minute of every day thinking about. It's also really hard to recruit great talent if you watch over and second guess every single investment. But that said, there are also many aspects of running a first-class investment firm that do overlap. So for example, hiring the best talent. So instead, what Michael and Doug did was they were heavily and actively involved, contributing through leadership and mentorship.
38:12 Speaker 00 So Michael and Jim Getz joined our portfolio reviews for the first several years from inception and helped us refine our investment process. Every week Doug and Jim have been critical with LP relationships. With recruiting, Ruloff still interviews all our key hires. Michael's even come with me to meet public company CEO management teams. We've taken multiple international trips together, including several to China. So they helped inject Sequoia DNA in a way that was very, very valuable for us. Now, when I speak to other V C P funds that have reached out to me over the years to get advice about launching a similar effort. They almost never want to give up control.
38:55 Speaker 00 They want to dictate the investing and I just don't think that's a recipe for success. It's when the fundamental discipline is so different from, from what they're doing at the core.
39:05 Harry Stebbings? There are so many benefits to being tied to such great people and such a great brand. What are the negatives?
39:10 Speaker 00 I think the biggest risk for us is being based here in Silicon Valley, you believe everything's going to happen overnight. Mobile or cloud and now AI are taking over the world. There's just leave all this destruction in the wake. And the reality is, these things usually happen very fast, but also much more slowly than peak enthusiasm would suggest. As a hedge fund, we're we're trading off the Wall Street echo chamber for the Silicon Valley venture echo chamber. And that certainly got puts and takes. One thing that we try to do is to to combat that is to host outside voices to speak on occasion. And so I forget if it was Doug or Ruloff organized this, but we organized, for example, Charlie Munger before he passed to come in and talk to the partnership. We've had Stan Druckenmiller
39:55 Speaker 00 come in and talk to us. They think in a very different way than we do.
39:59 Harry Stebbings? And so you're saying the weakness is you can think like a venture investor?
40:04 Speaker 00 Well, we get the benefit, right, of seeing things very early on. We get really excited about AI, how it's going to take over the world. Maybe we put on a short that it's just too early. It's going to take time for some of these things to actually happen. There are areas within AI where I do think it's very happening very fast. I think there is going to be massive disruption, for example, in call sales. And I don't think that's going to take a lot of time. There are other areas in AI. Now, there's this, there's a narrative that I hear now that software companies are going away, right? AI is going to write all all software. And I just think that's, that's a naive view. It may happen, you know, over the long term, but
40:40 Harry Stebbings? Klarna are helping to make that happen.
40:42 Speaker 00 And Klarna is a very tech forward company. Ninety nine point nine percent of the companies in the world are not Klarna.
40:48 Harry Stebbings? So I completely agree with you there. I think there is still a tremendous, tremendous amount of room to run. Is Mag Seven sustainable? It is carrying so much of this market.
40:58 Speaker 00 Yeah.
40:59 Harry Stebbings? Is it sustainable?
41:00 Speaker 00 I think it is for some time. So when you think about AI today, productization of AI is a function of owning the customer and owning the data. We are not in a world where AI has created a new distribution Methodology. And so if I think about some of the walled gardens like a meta, you own the customer experience, you own the data. And so your ability to productize and roll out AI features and functionality to Instagram users very seamlessly is incredibly powerful. And because Meta has this auction marketplace for ads, you also have the ability to reprice your AI features very quickly, right? All these merchants are getting a return on their ad spend.
41:43 Speaker 00 And if someone is getting better return on ad spend, the CPMs for these ads go up. So there's a massive moat for some of these largest companies. Now, what I worry about is this will start to disperse more broadly. But at least in the initial stages of AI, where your data and distribution are so important, I think the Mag7 will continue to do quite well.
42:03 Harry Stebbings? How does Zuck's cash cow not being cloud impact his freedom and flexibility to act? If you think about Google and Amazon, you've got Google Cloud, cash cow, AWS cash cow, and then Zuck is like Instagram is the cash cow. How does that change how he has? Because Google and Amazon do also have distribution.
42:24 Speaker 00 On Google, I'd argue GCP is not the cash cow. It's search. With search, I'm not sure. I'm not sure how AI is going to impact search. Where it is today, AI is really good at taking low signal data and translating into high value output. So in the case of Meta, taking what you're looking at on Instagram and figuring out, okay, you want to go buy this type of product. That is incredibly valuable. Google's got an incredibly valuable machine in that you type into the Google search bar exactly what you want. You type in skiing in Park City. Well, guess what? I know you want to go skiing in Park City. Your intentionality is 100% known at that point for me. Whereas I think for Meta, I think the value of AI is, at least on the ad matching side,
43:07 Speaker 00 I look at a bunch of what you're browsing on Instagram and I say, okay, Harry wants to go skiing. He hasn't decided yet that he wants to go to Park City. Maybe he wants to go to Whistler. How do I then move you in, you know, that path to get you to a different location? Or maybe you're even earlier. You're on in the funnel and you say, I just, Harry wants to go on vacation. And maybe I didn't decide on skate. Maybe you want to go, you want to go to the beach. So I think AI has a lot of value for that. I'm not sure as much for Google. How do you influence? How do you drive a material uplift in search when you have one of the most beautiful businesses out there ever? I tell you what I want.
43:47 Harry Stebbings? Would you be short or long Google today? Just in a hypothetical world, you've got perplexity eating a lot of consumers fast.
43:54 Speaker 00 We're not either long or short Google, but I do think there are more threats on Google's business than there have been essentially ever in the company's history. I don't think it's just perplexity. In fact, if I were to say, who do I think is going to be the number two threat in search to Google? I think it's probably Meta, right? You are going to have the number two chatbot in the world, you know, before your end. In your Instagram, your WhatsApp, your Facebook. Just go right, right now, just go search Meta AI.
44:27 Harry Stebbings? I totally agree. You also have Search GPT, by the way, obviously from OpenAI, which will be a pretty dominant competitor, I think. A question that I am perpetually stuck by, will the infusion of AI into products lead to an increase in average revenue per user? Or will it just lead to a better customer experience?
44:45 Speaker 00 I think it's already delivering incremental ARPU. It'll happen first in companies like Meta. Like I said, because you have an auction marketplace, this gets repriced immediately. And so if I look at Meta, we estimate that it's not just delivering revenue. I think it's already delivering about 15 billion of incremental EBIT. EBIT for Meta, right? Just in the form of more content recommendation means you have more time on Meta properties. Equals more ad inventory and better ad matching equals higher CPMs. And higher CPMs is, you know, it's straight flow through to the bottom line. So it's, it's beautiful already for Meta. Now, I look at the software companies and I just think it will take more time because you have to go out to your customer and say, look. I'm delivering you this value. Here's the data.
45:29 Speaker 00 And when your contract comes up again, we're going to raise your prices. It's just a harder conversation. But what you have seen, even since you recorded the pod with David, Canva, which you mentioned, has raised prices on its enterprise plan by 3X. 3X. A lot of flow through, I think.
45:46 Harry Stebbings? Can I ask, on the infrastructure layer, do you agree with David in terms of like the $600 billion question and the divergence between revenue and capex? Or how do you feel about that?
45:57 Speaker 00 I do agree with it. I think where a share is view is that there is a $600 billion AI problem in the sense that ultimately application companies need to deliver positive ROI from these massive investments. Where I'm probably more optimistic is in the pace that these application companies can actually realize that ROI. We've already talked about Meta. We've already talked about Canva. I think ServiceNow will start to really flow through some of the Pro Plus price increases later this year and into next year as well. I think you're starting to see, you know, the initial hints that AI is going to come through in terms of incremental ARPU for a lot of these companies. Now, it's happened probably a little bit more slowly than I would have guessed. That probably would have been more first half this year as opposed to back half this year.
46:43 Speaker 00 But I definitely think you're starting to see it. And I think you're starting to see it because you see the features that can be productized and the clarity from other companies. What I mean by that, so if you look at, what Meta has done is really just take what ByteDance has done, right? With a recommendation engine now, like I'm plugging a bunch of GPUs into it. I'm copying the same thing and I'm just rolling it out to my customers. Co-pilots, I think you will be able to use what you see at GitHub and be able to roll it out across many different companies. If you look at enterprise semantic search, if you look at case summarization, these are all features that have been proven to deliver ROI at certain companies. And now you could just pull that into other companies, other products. I think that's going to deliver value. Now, what I don't know, and this is where I do agree with David,
47:28 Speaker 00 there is a massive amount of capital that's going into, not the productization side, but the model training, research side. That is where all of the capital is going.
47:37 Harry Stebbings? Larry Ellison yesterday said, how much do you think it is to the audience? How much do you think it is? I don't know if you saw this clip.
47:44 Speaker 00 Yeah, yeah.
47:45 Harry Stebbings? And then he goes, a hundred billion just to play the game, just to enter. Do you think that's right?
47:51 Speaker 00 I've been surprised at how the scaling has continued, how just throwing more compute, more data has improved these models. I don't know where that ultimately gets to, but I do think a hundred billion, there are not a lot of companies out there that can spend a hundred billion. What I do believe is you don't need 10 foundation models out there. I think you need certainly more than one, just for the sake of humanity. China will have one. I think the Western world will have at least one. So maybe there's three to five foundation models in the world. It's not going to be 10, it's not going to be 20. And so I do think the the pool of spend is going to shrink in terms of the number of companies. But the amount that each individual company is going to spend is also going to go up.
48:36 Speaker 00 There is real overinvestment risk, I think. The way that we've decided to invest in AI in the public markets, we have some investments that are semiconductor or hardware stocks that power AI. But we more so invest in the application companies that over time I think will profitably infuse AI into their products. So if you can buy a nice core business with a call option on AI, I think that is a very good way to play it.
49:00 Harry Stebbings? What's an example of that?
49:02 Speaker 00 ServiceNow is a really interesting way to play it. So it's got obviously a very good underlying core business. And I don't know that ServiceNow has necessarily the biggest opportunity in AI, but it's a very clear opportunity. IT ticket deflection is purpose built for AI. To be able to deflect tickets, to resolve them automatically, that is very clear. That is a very, very clear use case in my mind. I don't know if it will be the biggest use case right now with all the all the incremental innovation that there is in models. I think coding will obviously could obviously be a much bigger use case. But in terms of clarity, ServiceNow's opportunity, I think, is one of the most clear. Then I'd also argue that overinvestment in the semiconductor and foundation model layer actually should accrue to application companies over time in the
49:47 Speaker 00 More better AI capabilities that we can infuse at lower cost.
49:51 Harry Stebbings? The other thing that stuck out to me at Larry Ellison's talk was when he said, "It was me and Elon sitting down in a Uber with Jensen and we were both just trying to buy GPUs." And you know, your natural takeaway is holy shit when you have Larry Ellison and Elon Musk begging a provider, "Please take my money, invest in the provider."
50:13 Speaker 00 Right.
50:14 Harry Stebbings? But Nvidia's price is so high.
50:16 Speaker 00 I think Nvidia's price is reasonable if you think it's going to continue to keep going. So Nvidia trades at what, 25 times next year earnings? I think the bigger question is, what does 26 look like? You know, hyperscaler capex is going up. I think it's going up at a rate that is surprising to us. It's grown what, 50% year over year this year? 25 grows another 30%? Is 26 up another 30%?
50:39 Harry Stebbings? I spoke to one of them the other day who will run it, may nameless, otherwise I will literally be sued. But they were like, "It's like the Manhattan Project, Harry."
50:46 Speaker 00 Yeah.
50:46 Harry Stebbings? "We can't back out now."
50:48 Speaker 00 Right.
50:49 Harry Stebbings? So 26 is going to be higher.
50:51 Speaker 00 Is it 30% higher? I mean, 30% higher, I think would effectively eat away every single dollar of Google EBIT.
50:59 Harry Stebbings? So what does happen?
51:00 Speaker 00 I think it's a great question. This is where being a hedge fund is actually helpful for investing in something like AI. So we can invest, obviously, as I mentioned, in the application companies. But the way we invest in the semiconductor hardware companies is we can be long Nvidia, because I do think Nvidia has the best position. And whether or not Nvidia has 100% market share in, you know, three years like it does today, I don't know, but it will still have very, very good market share. And so if you believe the market is growing, and I don't know if data center, you know, GPU spend is 100 billion or 200 or 300 billion, but we can go long Nvidia and then we can short a bunch of the companies that I think don't have the depth of modes that Nvidia has. So if you think about some of these server hardware companies, for example,
51:43 Speaker 00 where I think they're going to get beat up on gross margins because Nvidia now has a reference design. You have a smaller shrinking pool of customers that are getting more sophisticated. They're going to, that are going to do their own server design. So that's how we've chosen to play AI. And I do think there is overinvestment risk, but we can be hedged on that.
52:00 Harry Stebbings? Have you gone into the infrastructure establishment category? Have you gone into really the data center deployment space?
52:09 Speaker 00 You know, we haven't because I don't know that these ultimately are better businesses after, right? So what you know now is that there's an incredible amount of demand, that demand is growing at very high levels. But if I'm talking about a power electronics company, or a company, a construction company that builds data centers, let's say, let's say there's incredible growth over the next two years, that's going to attract incremental competition. Are these really great, sustainable businesses with deep modes? I think they're okay businesses. I think the stocks may work over the next two years, but in year two or three, do I still want to own them? And, and I just want to think about these things as a long-term investor. I don't want to be trading in and out of
52:53 Speaker 00 stocks as quickly as, as I can.
52:55 Harry Stebbings? Can I, you've mentioned Klarna several times. Everyone is beating the crap out of Europe right now. Degrowth, no growth, unbelievable regulation. How do you think about the long-term prospects of Europe and how you think about resource allocation? Does Europe even matter?
53:10 Speaker 00 That's a great question. For Klarna, I think Europe matters, but is incrementally mattering less because they have broadened the business. They did a terrific job of expanding the business into the US and other markets.
53:25 Harry Stebbings? Amazingly so. I mean, that is, you know, Revolut tried, Monzo tried, like different products completely, but that is a very hard expansion.
53:32 Speaker 00 So I, I think for Klarna, it matters less. But I do think if you are any company that can go global, you start in Europe. Europe is a very nice prize, but I think the best companies will want to go global and they want to go after the US opportunity. It is, you know, the US is still probably, it is the largest opportunity for software companies. It's probably the largest opportunity for fintech companies. You know, if I look at most software companies, you're probably two-thirds kind of US, Canada in terms of revenue contribution and then one-third everything else. So you have to succeed in Europe if you, you know, start out there, you're a European company. But man, the US is a pretty big prize.
54:17 Harry Stebbings? Do you worry that we're going to go through a period of deglobalization? I worry about this intensely, which is that we've spent the last few decades obviously globalizing incredibly well, and now we are more insular than ever before.
54:28 Speaker 00 I think it's already happened. It's already happened.
54:30 Harry Stebbings? Does that impact how you invest?
54:32 Speaker 00 I think it has to. It has been more difficult for us to say invest in Chinese companies. And it's not just the macro, right? It's these companies have been become less transparent with us over time. We appreciate less what's going on internally. So I think about a company like PDD. I think it's a great company. I don't know what's happening there in terms of why they decide to tank the stock because everything that we see on the ground is still very positive for PDD. And so those things I think do give me pause in terms of not appreciating what's going on internally in those businesses.
55:10 Harry Stebbings? Will China recover, do you think?
55:13 Speaker 00 It has to. I mean, the level of just pure entrepreneurship, the level of just the founder quality, how smart and aggressive they are, it's just remarkable. I just don't think that goes away. I mean, if you look at...
55:26 Harry Stebbings? It doesn't, but under the current administration, that has clearly dissipated. When you saw the net new company creation in the graph.
55:33 Speaker 00 Sure.
55:33 Harry Stebbings? It's destroyed.
55:34 Speaker 00 But but I think the best Chinese companies, like the best European companies, will also go global. So PDD has gone global, Shein has gone global.
55:44 Harry Stebbings? A final one, and then I promise we'll do a quick fire. Everyone's so jacked up about India these days. India is kind of a bit like Europe in my mind, which everyone's kind of always going, now's the time. Now's the... Wait for it, wait for it. And we're still waiting.
55:57 Speaker 00 I'm optimistic. Overall, the market, what it has created is it's created great consumer companies, great financials companies. I think what we haven't yet seen is great technology companies, in part because some of the best technology founders come to the US. But I'm optimistic. I just I just caught up with a couple of the GPs on the Peak 15 team last week. I think what they're seeing on the ground, I mean, I've been impressed, for example, by what Zomato has done. The stock price chart there is incredible. And to be able to go from the level of burn that they were doing early on to now really turning that into a profitable business. I think one of the things that we've seen in India is that that brutal level of competition that you saw.
56:42 Speaker 00 Actually, in the US, right, too. You saw in the US, in the zero interest rate environment, that has subsided in India as well. And so that's allowed companies like Zimato to just become more profitable, better businesses.
56:55 Harry Stebbings? You have had the chance to work with Doug, with Mike, with Rodolfo. Before we do the quickfire,
57:01 Speaker 00 Yeah.
57:02 Harry Stebbings? What is your single biggest lesson from working with Doug?
57:05 Speaker 00 With Doug, first of all, Doug's an incredible human being. So he's so good at building trust. He's always generous with his time. I can get him on the phone no matter what continent he's on. He's traveled the world with me to meet with LPs, so I can tell you what Doug likes to eat in every city. If you get him to Boston, he will absolutely crush cherry stone clams. He's just someone that you want to go with to war with on their side. Second, Doug has what he calls a great sniffer, just incredible commercial instinct. He's always listening out, keeping those ears open, looking for what's working and connecting the dots. Doug is exceptional at that. For Michael, I'd say Michael has superpowers that I will never possess.
57:46 Speaker 00 He's got an incredible nose for talent. He's a terrific communicator. He's even an accomplished painter now. So one thing that I've learned from him is to borrow his superpowers as opposed to trying to develop them on my own, right? Which is really a lesson in teamwork, except that Michael is the star player at almost every position on the team. Michael still helps me write my quarterly letters to this day. I recall flying out to Ottawa to meet Toby at Shopify with him. And Michael walks out of that meeting, he just says, "Look, Jeff, just squat in that investment and just set an alert for yourself if Toby ever gets hit by a bus." His nose for talent, I can borrow. The second, I'll tell you a quick story here.
58:22 Harry Stebbings? Who's got a better nose for talent, Mike or Doug?
58:25 Speaker 00 I think Doug probably has a better nose for enterprise talent and Michael for consumer talent.
58:29 Harry Stebbings? Good hag.
58:33 Harry Stebbings? Sorry, I interrupted you.
58:34 Speaker 00 And so, so, quick story about Michael and an important lesson that he taught me somewhat indirectly. So, when I joined S E G, I obviously had the interview with Michael. It was intimidating interview. So, Michael back then had an office where he actually literally had the wall and door removed from one side. So, three walls, but one opens up to the entire floor. So, I think he meant it as the ultimate open door policy. So, some people have an open door policy, he had an open wall policy. But that meant that everyone on the floor could hear everything that was said in his office. So I E my entire interview. So I walk in, I'm in my suit. Michael's peering over my resume.
59:15 Speaker 00 And the first thing he says to me, and by the way, don't forget that the only thing that I've done up to this point is really technology buyouts. So he says to me, do you think private equity has poisoned you? Yikes, right? Like the interview did not go well. I tried to answer the best I could, but it was not a good start. And I'm sure that people around his office within earshot were cringing for me.
59:38 Harry Stebbings? So What did you answer?
59:39 Speaker 00 I don't remember. I don't think it was a good answer because I had to interview with Michael again. But I think his point, and it took me a couple of years to understand it, was that just staring at the numbers isn't enough. Too much focus on EBITDA multiples or financial levers isn't healthy. You have to have the dream gene and you have to be able to dream about what a founder or company, a team can become over time. And it's just not static. And so I deeply appreciate that lesson and I'm not even sure that he intended it to be a lesson.
1:00:08 Harry Stebbings? Final one, Roloff.
1:00:09 Speaker 00 Yeah.
1:00:09 Harry Stebbings? Roloff, now he's joined your board and replaced Doug in that.
1:00:12 Speaker 00 Yep. I love how Ruloff has forged a new path to take Sequoia into the next 50 years. So first, it's not easy to transition from great investor to great leader, as you know. It's also not easy to take over for a legend like Doug, right? So Doug led the firm from 2012 to 2022. The venture world was very different back then. And so Ruloff led the development of the scouts program. He supported the product team, data science team, ARC. The Sequoia Capital Fund is a good example of his long-term thinking. I'm also impressed by how focused he is on team and culture. So at our semi-annual, what we used to call these steward council meetings. So it's like a management group. We provide business updates to each other. So everyone else, myself included, would come in with these long PowerPoint presentations.
1:00:56 Speaker 00 But Ruloff would walk in with this two-page Word document. And yet somehow he always put the most thought into the talents of both the investors and the functional leaders on his team and how to put them in the best position to succeed. And then at events like our holiday party where he makes a speech every year, he makes it a point to remember every single person within all of Sequoia who had a baby that year and the name of their child. He memorizes it, no cards. He's also super comfortable with the process of becoming excellent. So the idea that it takes time, obviously, that applies to Sequoia. But he just, it doesn't happen overnight. He doesn't get frustrated by it. You know, Sequoia and all the initiatives, but also applies to his personal life.
1:01:38 Speaker 00 So I've obviously got to know him a little bit personally, played ping pong with him, pickleball with him, golf with him, golf actually just last week. I've been playing the game for a lot longer than he has, Harry. As you probably know, it is a tough game. He is frustrating, but he does not get frustrated. It's because he's hyper focused on that process of improvement. It's everything he does. It's from investing to pickleball, from leadership to golf. So it's frustrating that he doesn't get frustrated.
1:02:06 Harry Stebbings? I want to do a quick fire with you, Jeff. I can talk to you all day. What do you believe that most around you disbelieve?
1:02:12 Speaker 00 I think that optionality is the most expensive thing you can buy. So both financial options, but also more importantly, life options. So too many young people spend too much effort focused on preserving optionality in lieu of actually making decisions. So I find this problem to be most acute, the more accomplished you are, because your talent opens so many doors. And a lot of folks just waste too much time and effort keeping those doors open as opposed to just choosing one to walk through.
1:02:38 Harry Stebbings? Which venture investor or investor do you most respect and learn from outside of Sequoia?
1:02:44 Speaker 00 I think on the venture side, I'd probably say Brad at Altimeter. He's also got the public private strategy. I think he's a little bit heavier than us on the private side. But I love the way that he can connect dots across stage, industry, especially because he will go pretty early sometimes. And I think that flexibility of mindset is impressive.
1:03:02 Harry Stebbings? I actually spoke to him before this show.
1:03:05 Speaker 00 Oh, really?
1:03:05 Harry Stebbings? Because I was like, right, who does private crossover that comes straight to mind? Brad. He was very helpful. What's been the most challenging moment in the SCG journey, other than the 2016 transition?
1:03:17 Speaker 00 I think nothing comes close to the 2016 transition, but certainly there are moments in time where, you know, performance is down, you question your process, what could we do better?
1:03:26 Harry Stebbings? How do you not let a bad year hit your confidence and your investing mindset?
1:03:32 Speaker 00 I think the only thing that you can do is focus on the long term. I mean, a bad year will happen. We're fortunate to only have had one down year, but man, that was a tough year. It was tough.
1:03:42 Harry Stebbings? Which year was it?
1:03:43 Speaker 00 2022.
1:03:44 Harry Stebbings? How do you rally a team in a down year?
1:03:47 Speaker 00 It is hard. It's really hard. I think, so we do these surveys, it's every six months, just to get a sense for how, and they're anonymous, for how the team is doing. And man, the, the initial, I'd say, right post-COVID, the surveys were very positive. You know, everyone was super happy, you know, everyone's feeling fulfilled, they're doing good work. And then you can see the surveys is getting worse and worse. And then in 2022, they're just downright awful. I think one of the things that I've learned is that your mentality is so dictated by performance. And that's just, you can't, you can't live that way. You can't manage your business that way. You can't actually go make decisions that way. You have to have, stay even keeled and say like, what is,
1:04:29 Speaker 00 what about my process is not working? Let me go fix that. And this is, this is the discussion about greed when, you know, your, others are greedy, fear when others are fearful, right? If you actually let that impact you in that way, you are going to make the wrong decisions. And so I think those surveys are actually quite helpful because it gives you a sense for the team's mindset and how it's impacted. You could probably almost draw a line on, you know, the NASDAQ and the team survey.
1:04:55 Harry Stebbings? The heaviest things in life are not iron or gold, but unmade decisions. What unmade decision rests on you most significantly?
1:05:04 Speaker 00 Probably not taking Google more seriously. So I was at Stanford at the time of its founding. I was even a section leader for Marissa Mayer for a computer science class where she was a lecturer. And, and so I heard about it from her too. And I just thought to myself, you heard of Yahoo? You heard of Infoseek? You know, and, and so it's a good lesson in just not underestimating the disruption that can occur, especially early on in an industry's development.
1:05:29 Harry Stebbings? How important is it to be the first?
1:05:31 Speaker 00 I think it's important to be early, but if I think about the public markets, we're talking about not years but months, right? If you are, because the public markets price something so quickly. If you figured out last year that hyperscaler capex was going to explode upwards and you're going to buy a lot of GPUs, you could own Nvidia at any point, you know, last year or even this year, and you will have made money and you will have made very good money. So I, I think it's not important to be first, but it's important to be early. And again, it's months, not years.
1:06:00 Harry Stebbings? Have you ever seen a technology environment like this before?
1:06:03 Speaker 00 Yeah, it happens all the time. There's always a lot of enthusiasm. I, I say technology-
1:06:08 Harry Stebbings? You've never seen the explosion of capex. You've never seen-
1:06:10 Speaker 00 Oh, that, that, so-
1:06:12 Harry Stebbings? Spend a hundred billion-
1:06:12 Speaker 00 I, I thought you were talking about the markets. I agree, you have never seen this level of investment. Because I think if you, if you roll back to 1999, for example, you didn't have this Mag 7 that was throwing off, you know, 150 billion of free cash flow and you can go invest gobs and gobs of money. I think that is truly different right now, the, the amount of capital that is going in.
1:06:36 Harry Stebbings? Okay, what concerns you most in the world today, Jeff?
1:06:39 Speaker 00 The disillusion of the family structure in the world. And I worry about the negative impact it has on kids and the next generation. I get that everyone's life circumstances are different. I, I don't frown on anyone who chooses not to get married or get divorced, but I do think it's healthy to think hard about it. So anyone on my team who's getting married, I give them a copy of a book, uh, The Meaning of Marriage. It's by a Christian pastor by the name of Tim Keller, who's actually since passed. It's been a big influence on, on our marriage, so I think it's really important.
1:07:07 Harry Stebbings? How's it influenced your marriage? It's wonderful to hear.
1:07:10 Speaker 00 So one of the key ideas is that marriage is, is not to make you happy, right? And I think a lot of people approach marriage as like, okay, I'm gonna, you know, I'm gonna get married, I'm gonna be happier now. Well, no, marriage is hard. And what marriage does, one of the principal ideas is that marriage makes you more Christ-like in that you have this other person who is in your life that you are sacrificing for and you develop, hopefully over time, a Christ-like love for that person.
1:07:36 Harry Stebbings? I was with a dear friend the other day who's been married for 40 years. He said, Harry, you don't understand marriage. I said, no, I don't, tell me. And they said, marriage is not about happiness. No, no, no. It is about endurance, who can survive longer?
1:07:51 Speaker 00 There's no way to think about it.
1:07:53 Harry Stebbings? I was like, you know what? That's romantic. Thank you for that inspiring words of wisdom. Final one for you, Jeff. What question are you not often asked by your team, by your investors, by your partners that you should be asked more?
1:08:07 Speaker 00 I'd say, what would you be doing if not SCGE? So it's one of my favorite questions to ask in an interview because you get to appreciate what else makes a person tick. So I love investing. I really enjoy it, but I think I'd also be very fulfilled in my career if I, if my career had taken different turns, if I was building product that's say Instagram or Apple and just making things that touch billions of people, I think that would be also a lot of fun. So I'm going to turn the question back on you, Harry. So what would you be doing if not 20VC?
1:08:37 Harry Stebbings? It is kind of the same ish, but not, which is I'd be a filmmaker. And the reason I'd be a filmmaker is because I love telling people's stories and I find people fascinating. And we kind of do that. Why am I so jacked about our episode? Because you are a phenomenal talent, Jeff, that the world has not heard from. It gives me great joy to be someone who is able to tell a little bit of your story. Being a filmmaker, you're able to bring a light to previously very opaque areas which should be told.
1:09:05 Speaker 00 That's a different medium. I mean, maybe you should do that, too.
1:09:08 Harry Stebbings? I think Dave Fialka has nailed it. First performance, a move from venture investor to filmmaker. Jeff, I've so enjoyed this. Thank you so much for making this your first podcast and honestly, it's been fantastic.
1:09:20 Speaker 00 It's really been really fun for me, too. Thanks a lot, Harry.
1:09:24 Harry Stebbings? The first time Jeff has ever done a podcast. I thought he was incredible. If you want to watch the full interview, you can find it on YouTube by searching for 20VC. That's two zero VC. But before we leave you today, I'd like to introduce you to one of my favorite brands, Atio. Atio is the next generation of CRM. Setting up Atio takes less than a minute and in seconds of syncing your email and calendar, you'll see all your relationships in one place, all enriched with valuable data. Atio also lets you build Zapier-style automations, gives you powerful reports and works perfectly for any go-to-market motion from PLG to sales-led. Atio is designed for the next era of companies like you.
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1:11:22 Harry Stebbings? In the future, there will be two types of businesses, those that have automated and those that wish they had. UiPath's new AI agents don't just follow rules, they think, make decisions and work alongside the world's most powerful software robots, already trusted by over 10,000 businesses. If agentic automation sounds new, just think of UiPath's as your more growth, not more overhead platform, or your happier customers, happier employees platform. Whatever you want AI to do for your business, agentic automation with UiPath will make it happen. Try UiPath's new AI agents for free at uiPath.com. The future of automation is both agentic and robotic. Don't get left behind.
1:12:02 Harry Stebbings? As always, I so appreciate all your support and I cannot wait to bring you a fantastic episode on Friday with Owen McCabe, co-founder and CEO at Intercom.
Previous 20VC: Raising $500M To Compete in the Race for AGI | Will Scaling Laws Continue: Is Access to Compute Everything | Will Nvidia Continue To Dominate | The Biggest Bottlenecks in the Race for AGI with Eiso Kant, CTO @ Poolside Next 20VC: Why Most AI Investments Will Do Worse than the S&P 500 | Why Early Stage VC is F******* | The Danger of Kamala Harris and Why Trump and Vance are Best | Freedom of Speech, Censorship and Government Control with Eoghan McCabe @ Intercom Page updated October 26, 2026 · transcript and summary are machine-generated
