Uncapped #36 | Pat Grady & Alfred Lin from Sequoia

Pat Grady and Alfred Lin are partners at Sequoia and were recently named as the storied firm’s new co-stewards. Alfred joined the firm in 2010, where he has led major investments into category-defining companies like Airbnb, DoorDash, and Kalshi. Pat has been a partner at the firm for nearly 19 years and has led Sequoia’s growth-stage investing since 2015, backing companies like Snowflake, OpenAI, and Harvey. In this episode, we unpack how Sequoia actually works: their partnership model, how they pick outliers, and what stewardship means inside one of the most respected firms in venture capital. Some highlights: Consensus doesn’t matter, conviction does Freedom within frameworks: see, pick, win, help, harvest Mid-funnel decisions are the most important The two fears that lead to bad decisions To do this business well, you need courage --- Timestamps: (0:00) Intro (1:01) Initial mindset as stewards (4:30) The business of outliers (6:27) Managing the inputs in venture (12:11) Sourcing coverage goals (17:57) Seeing the right companies (22:36) Proprietary map of talent (24:39) The impact of great engineers (29:06) Picking winners with conviction (36:26) Coaching asymmetry into picking (43:16) Mentoring younger investors (46:45) Frameworks on picking (53:20) What it takes to win (58:32) How to onboard with a founder (1:02:59) Proudest board seats (1:06:12) 2026 in the new roles --- More on Pat & Alfred: https://sequoiacap.com/ https://x.com/gradypb https://x.com/Alfred_Lin More on Jack: https://www.altcap.com/ https://x.com/jaltma --- https://linktr.ee/uncappedpod Email: [email protected]

• 0:00Speaker 00

  We've been recording the number that everybody votes on every investment for more than a decade now. Our internal data shows that consensus versus non-consensus does not matter at all.

• 0:12Speaker 01

  It's just not a factor.

• 0:13Speaker 00

  Presence of conviction is what matters.

• 0:16Speaker 01

  Huh.

• 0:17Speaker 00

  And so if everybody is a six, we vote zero to 10, no five, so six and above is positive, four and below is negative. If everybody's a six, probably shouldn't make the investment. It's consensus, but nobody has conviction.

• 0:29Speaker 01

  Strong yes, strong no is much better.

• 0:30Speaker 00

  If three peoples are nines and three people are one, we should probably make the investment.

• 0:38Speaker 01

  All right, guys. Thank you very much for doing this. This is my first attempt at a three-person podcast.

• 0:44Speaker 00

  And this is our first showing together, so.

• 0:47Speaker 01

  Yeah, so I apologize if this is a disaster.

• 0:50Speaker 02

  It's not gonna be a disaster. We're gonna ask you questions, too.

• 0:53Speaker 01

  That's what I want. And then we can edit everything out. This could be a five-minute pod with whatever's good.

• 0:56Speaker 00

  Love it.

• 0:57Speaker 01

  And that'll be fine.

• 0:58Speaker 00

  Five minutes might be generous.

• 0:59Speaker 01

  That's all right. We'll take what we can get. I guess to start, like, how are you guys, how are you feeling? And like, where's your mindset? Are you like, do you feel the way you expected to when you first knew this was happening? Like, you're a couple of weeks settled in, like, what's, what's going on psychologically?

• 1:15Speaker 02

  I mean, we just came out of a meeting where we both said we're more excited than ever before. And so we're excited. And it's part of it is because we're, we get to help lead, co-lead Sequoia into the next generation with a great team. And the team that we have is probably one of the best that we've ever had in the history of Sequoia.

• 1:37Speaker 01

  Does it feel like heavy or light? Like, does it feel more like you just got to pick up the most fun video game? Or are you like, whoa, I have the weight of something very serious on my shoulders?

• 1:46Speaker 00

  I think it's a little bit of both. You know, I think for both Alfred and I, the idea of being steward someday was sort of a dream, but not an objective. I mean, it wasn't something that we sought necessarily, but it's, it's an honor to get to continue the legacy that Ruloff and Doug and Jim and everybody else sort of started for us. So I think it's heavy in the sense that we feel a responsibility to make Sequoia great. I think it's also light in a sense that one of the kind of main things that we want to try to do for Sequoia is to kind of get it back to what it's been for most of our 53 year old history, where Alfred and I are doing minimal amounts of administrative work.

• 2:27Speaker 00

  And mostly in the field making investments alongside a team of people like Andrew Reid and Luciano Alexandru and, you know, David Kahn and Konstantin Bueller, who are amazing at what they do. And our job is really just to enable them as opposed to to really manage people.

• 2:45Speaker 01

  If you think about like, you know, aspirationally, like, how good could it get? Do you like have in your mind?

• 2:51Speaker 00

  So good.

• 2:52Speaker 01

  Things that have to be like, could it get better than it's, could it get more dominant than it's been? Or is the goal just to like, stay where you are?

• 2:58Speaker 00

  So, so actually, um, I'm obviously biased, but I think that if you took.

• 3:03Speaker 01

  You?

• 3:03Speaker 00

  I took, I think if you took the partners at Sequoia and you stacked rank them against all of the other partners in our business. I think that our seventh or eighth person is still in the top 10. Like, I think we truly have.

• 3:16Speaker 01

  Dang.

• 3:17Speaker 00

  I know, I know that's a really obnoxious.

• 3:18Speaker 01

  Like a highlight reel of all the other people.

• 3:20Speaker 00

  I'm just kidding. But I think we truly have like an unbelievably talented set of partners.

• 3:25Speaker 01

  You do.

• 3:25Speaker 00

  And, um, and I think for that reason, like you could even take me and Alfred out of the picture. And I think Sequoia would be in amazing shape.

• 3:32Speaker 01

  Well, it's an interesting thing because these are individuals who could be incredibly successful in their own, obviously. And then you put them on the Sequoia platform and they get all the advantages that you have on top of that.

• 3:41Speaker 00

  And our, our basic job is to get out of their way.

• 3:44Speaker 01

  Yeah.

• 3:44Speaker 00

  Like, our basic job is to let them run.

• 3:46Speaker 02

  And enable them.

• 3:47Speaker 00

  Yeah.

• 3:47Speaker 02

  And that's why we published our Sequoia. It's about the team-based approach and it's about the principles that we have laid out, that were laid out before us. Like, we've always thought that it's founders first, then LPs, then Sequoia, then the team, then yourself. We've always thought that we're only as good as our next investments. And we added a few things, it's just, we'll always do the right thing and do it the right way. We're always going to do that. And if we fail at that because we're human, we're going to apologize, fix it and move on. And this place, because we have such talented people, as Pat was talking about, we just want to make sure that influence is awarded to people with expertise, not, not necessarily tenure or form hierarchy.

• 4:30Speaker 01

  You guys are really explicit about your language here when you talk about like, you know, stewardship and like getting out of people's way. It's very much not CEO language. Like, I don't think you guys think of yourselves as like co-CEOs, right?

• 4:43Speaker 00

  Let's talk about that.

• 4:44Speaker 01

  Yeah.

• 4:44Speaker 00

  So, so, great point.

• 4:48Speaker 00

  If you are the CEO of an operating business, okay? Chances are you are aiming for something like consistency, right? You want to produce the same widget the same way over and over and over again. Or you want to provide the same service in the same way, at the same level of quality, over and over and over again. And so I think if you're the CEO of an operating business, one of your objectives is like quality at scale and quality to some degree is defined as the consistency of the experience.

• 5:16Speaker 01

  When you say an operating business, do you mean like something that makes a widget? Are you talking about like a technology startup?

• 5:20Speaker 00

  I mean, almost any other company, technology startup. It could be a restaurant, it could be a manufacturing business. I think for most of those businesses, it actually makes sense to have a CEO who is making decisions and pushing them down into the organization because you want to ensure that consistency across whatever product or service you're offering. I think our business is dramatically different because in our, we're in the outlier business. Our objective is not consistency, right? Our objective is to find the two or three or four outliers in any given year who are going to produce the most important companies of tomorrow.

• 5:54Speaker 01

  Yep.

• 5:55Speaker 00

  Get into business with them and help them realize the maximum version of their dream. And the key word here, the operative word is outlier, okay? And so in order to partner with outliers, we need to field a team of outliers. You can't field a team of outliers if you're telling them what to do. You can't field a team of outliers if you're managing them. And so our, our job is to like find these outliers who are crazy competitive, spiky in some direction or another, but also have a heart of gold so that they can actually operate in a team oriented environment and just like set them free and let them go do what they do.

• 6:27Speaker 01

  How do you then manage like inputs? Because like I would think, I would think that you do need consistency of inputs at least in some sense, or maybe you don't. But like, you know, there's this thing where it's like the outcomes that you're looking for are these like crazy spiky founders that you partner with. But the inputs, like the day to day work, does that have a consistent rhythm? Does that get managed or do you not even think of it that way?

• 6:50Speaker 02

  I think that, so again, like to Pat's point, inputs for each partner at Sequoia is going to be different because they're different and they're outliers in different ways. So you could have someone who's very, very thematic and their input is going to the whiteboard with founders and thinking about the future and whiteboarding the landscape and figuring out where the white space is and building a company from that. Or you can have someone who is going to like just be out there, meeting as many founders as possible, trying to. Be opportunistic. Those are going to be very different inputs.

• 7:25Speaker 01

  Totally.

• 7:25Speaker 02

  And you know, that's, you know, that's Jim, who loves going to the whiteboard and landscaping things. And that's Doug, who loves just dialing people up, intermediaries or founders, the best, the smartest people he, he knows and is like, okay, what's going on? How, what can I learn from this person? Those are very, very different inputs. And if you saw a blank calendar on Doug's, like day, you would be worried.

• 7:50Speaker 01

  Yeah.

• 7:51Speaker 02

  But not for Jim. And if Jim's like, calendar is full and full of meetings.

• 7:56Speaker 01

  Yeah, this is bad. We gotta get him out.

• 7:57Speaker 02

  That's probably a bad day for him. And so he's like, okay, I'm like, meeting all these companies, but I'm not actually having time to think.

• 8:04Speaker 00

  So think about like, one way in framing it is, freedom within frameworks. Okay? So we do have frameworks that people can use as guidelines, so that they're not, so it's not pure chaos, right?

• 8:17Speaker 01

  Yeah.

• 8:17Speaker 00

  And so there's a framework that is, what are the capabilities that you need? And there are five basic steps in the value chain, sourcing, picking, winning, building, and harvesting. And then there's a framework, which is, what are the values that we expect you to have? And different teams have different values inside of Sequoia. Sequoia itself has the two primary values of performance and teamwork. But there are certain values that we expect people to adhere to. Assuming you're developing the capabilities and assuming that your values are aligned with the values of your team and of our organization, you can operate the business however you want. And, and so, for example, you know, Alfred mentioned Jim and Doug, we have a partner in Israel named Dean Meyer. You know, Dean has been very explicit about mapping out the talent nodes in Israel and getting to know the most

• 8:58Speaker 00

  brilliant former operators and the most brilliant, you know, academics, researchers, whatever the case might be. And just kind of like, mapping those nodes and using that as a leading indicator of where the world is going. Or, for example, our partner, Charlie, you know, Charlie is much more high volume, you know, he's out there in the market, meeting a ton of people. He's going through a bunch of lists, you know, he's doing a bunch of cold outbound to companies, like much more of a high volume, you know, build the funnel and then work your way through it sort of approach. And so different people have different approaches that are kind of authentic to who they are. And when you put it all together, if we have the right people and if we have the right sort of incentives in place, it tends to work out pretty well in the end.

• 9:38Speaker 01

  If I can like, you know, like a startup or an operating company, a lot of times founders, CEOs think about managing senior people to outputs and junior people to inputs, which I think, you know, maybe that makes sense in startup context. Do you think about that all in like a venture context where you're like, you know, the way that you're going to think about, you know, somebody who's fresh out of school, been in venture for a couple of years or whatever, that's a different thing than, you know, a senior partner on the team. Yeah.

• 10:03Speaker 02

  Yeah. But I think you have to realize in venture, the outputs are like 10 years into the future. So you have outputs that look like they're outputs, but those can be mirages too. Like markups can be mirages.

• 10:19Speaker 01

  Yeah.

• 10:19Speaker 02

  So we don't really measure that as much as the inputs and what people do. So like sourcing, there's inputs, like how many, how many quality companies have you met? Or how many quality companies do you like, want to bring to a Monday? For, for picking, it's like the quality of your memo. Like what, did you get to the first order questions?

• 10:40Speaker 01

  Yeah.

• 10:40Speaker 02

  Did you answer them? Did you call the right people? It's not about having a long memo, it's about having, getting to the right points.

• 10:47Speaker 00

  Well, for the

• 10:49Speaker 02

  Go ahead.

• 10:49Speaker 00

  Well, and so for the growth team to make it a little bit tangible.

• 10:56Speaker 00

  Every June, we review people based on values. So we have four core values for the team. Aggressive but humble, strong under scrutiny, I give a shit, zero bullshit, and demanding and supportive. So every June

• 11:09Speaker 01

  Ravi Gupta.

• 11:10Speaker 00

  Exactly, exactly. Yeah, demanding supportive came from Ravi.

• 11:12Speaker 01

  Good blood.

• 11:12Speaker 00

  And so every June, we all get reviewed on those values and literally rated with color commentary on like, to what degree does your behavior adhere to these values? Right? Every December, we get reviewed on capabilities, sourcing, picking, winning, harvesting, and building. You know, to what degree does your, you know, Capability in those different areas, you know, reflect the level that we want it to be at. And so those are values or behaviors are one kind of input, you know, capabilities are another kind of input. Over time, we expect those inputs to translate into outputs. And if they're not translating into outputs, then we get to go back and inspect and say, okay, well, what's the broken link in the chain? Like, what's going wrong here?

• 11:52Speaker 01

  Can we talk just like pretty brass tacks about each of these? Cause like, I think for, you know, I, I, I'm starting to think about this, you know, we're obviously tiny, but I'm starting to think about like, how do you measure and care about each of these, you know, aspects of the job? I would just be curious because you guys have done this a lot and know how to do it. So like, can we start with like, how do you decide what it looks like on the like seeing stuff? So like as an example, you know, do you, do you say, we want to see every company ever? Do you say, we've got, these are our zones that we care about?

• 12:23Speaker 02

  We had this discussion, man.

• 12:25Speaker 01

  Yeah. So like, I'd be curious, like, what is good? Like, forget the individual level for a second, but as Sequoia, I'm like you guys and I'm like reviewing my year. What do I expect to see? You know, if I'm like, of all the deals in 2026, how many do you expect to see?

• 12:39Speaker 02

  So because of the Sequoia platform, the partners at Sequoia can see almost any company they want to see. So if you try to see everything and you pass on everything, because most companies will not be successful. Because that's the world we work in, entrepreneurship. You have a very high accuracy rate. So is that the point to make, to classify a bunch of?

• 13:05Speaker 01

  You were right, 99% of the time because you passed on the whole world.

• 13:07Speaker 02

  You pass on the whole world. So that's not really input. That's not a good input.

• 13:11Speaker 01

  Yep.

• 13:12Speaker 02

  Good sourcing is finding the great companies and figuring out whether they're worth the time to put in more effort, to do the due diligence to then make an investment recommendation.

• 13:23Speaker 01

  So can you only know that historically? Like in other words, can I only judge how my, how my sourcing in 2025 was like by 2026? Or can I know in real time?

• 13:33Speaker 00

  We look at true positives, false positives, true negatives, false negatives. So we bucket it into the four quadrants. We keep a running list of what we think is what, you know, we update it as new data emerges. So that you can get higher confidence in your ex post assessment of like, did we make this decision correctly? And so we have, we have that as a running thing that we do. And then we look at it about once a quarter when we go into off sites.

• 13:57Speaker 01

  Yeah.

• 13:58Speaker 00

  But it's hard because by the time the decision, by the time it is obvious what the right decision is, you've long since forgotten why you made the decision that you made.

• 14:06Speaker 01

  Yep.

• 14:06Speaker 00

  So in the moment, we also try to really crystallize like, why are we making the decision that we're making? Which could be somebody does a cycle on a company and recommends that we pass, doesn't bring it into a partner meeting, but they actually send out a memo that's just a page and a half. Hey, here's what we learned and like, here is the rationale for passing. This is interesting enough to do a bunch of work. Let's do the last 5% and just codify that. So that when we look back on it six months from now, we remember exactly why we decided to pass.

• 14:33Speaker 02

  And then the sort of, the sort of process by which we do that is, is rolling. Like we'll get more information. It's like updating your priors. You get some information, you make a decision, you have to, you get new information, you have to update your priors. And we're constantly doing that. The other part about, you know, how do you know that the company is worth looking at? We've, you know, each business line has specs. And so for the early team, the spec starts with an outlier team. Are these people truly outliers? Like you can probably put some judgment around that, that is, that you can make like early on, even before you work with them. Now, of course, once you start working with them, you truly find out whether they're an outlier or not.

• 15:16Speaker 01

  Totally. So basically you're, you're, you're kind of observing this. Time goes on, you're updating it. Is there like a sense of depth versus breadth on this? Cause you're not a huge investment team. So it's like, you know, if you're looking, would you rather look at, you know, 3,000 companies deeply? Or is it better to actually have covered 8,000 companies, you know?

• 15:36Speaker 00

  So we.

• 15:37Speaker 01

  A little more shallowly?

• 15:38Speaker 00

  Yeah, we track, we, we track coverage and you know, we track all sorts of different metrics. Our coverage for the growth business tends to be about 70%. And 70% is defined, there's a list of, you know, 30 or 40 other investors that we say, okay, if they make the investment.

• 15:52Speaker 01

  Yep.

• 15:52Speaker 00

  You know, they look at things similar enough to what we look at, that if they make the investment, we probably should have at least seen it. Right? And we tend to, we tend to see about 70% of the things that other people end up doing. 70% is probably about right. Like, I don't think we want to be a hundred percent because that incremental meeting probably gets into CYA territory as opposed to net multiple money territory.

• 16:16Speaker 00

  20% is probably too low, you know, then we're probably missing a lot of stuff. And so kind of that 70% neighborhood seems about right. We don't track individual metrics for what it's worth. And this is in part because, you know, I

• 16:28Speaker 01

  Because it incentivizes bad behavior.

• 16:30Speaker 00

  Exactly. So, you know, 19 years ago, before I was at Sequoia, I was at Summit Partners. Summit Partners, amazing investment organization and like I'm

• 16:37Speaker 01

  It does seem like a crazy number of great people have come out of there, right?

• 16:40Speaker 00

  Summit is, I would recommend for anybody coming out of undergrad who wants to be an investor, go to Summit Partners, like amazing training ground.

• 16:47Speaker 01

  Paid advertisement. Come to Sequoia first. Yeah, exactly.

• 16:49Speaker 00

  No, no, go to Summit, crush it, then come to Sequoia.

• 16:54Speaker 00

  But Summit, Summit has this like really kind of elegant and brilliant system where everything is incented, you know, for output. And so the funnel is very granular and individualized. And the problem that you would run into is if you're a crazy competitive 21-year-old, as I was, and you were not number one in the call metrics, you'd pull out of your back pocket, you know, the three founders who you knew would pick up the phone that you're never going to invest in and call them to pad the metrics, right? And so there's just like weird behavior that ends up occurring. And so we've never had individualized metrics because we don't want people to, we don't want to think about hitting the metric. We want them to think about the ultimate goal, which is partnering with the most important founders of tomorrow.

• 17:36Speaker 01

  Yeah, which includes seeing many companies.

• 17:38Speaker 00

  And the, and the judgment that you have to use, the judgment that you have to use, the first, the first leading indicator of good investment judgment for a new investor is how they invest their time.

• 17:49Speaker 01

  Yeah.

• 17:49Speaker 00

  Like if you can figure out how to invest your time to get to that end goal of partnering with the best founders, chances are you're going to end up being a pretty good investor.

• 17:56Speaker 01

  Well, actually, maybe so. One more question on seeing, then we can kind of move sort of down the chain. But on some level, this 70% number, whatever it is, while it's an input to returns, it's itself kind of an output of like activities. Like I can't just wake up and say, okay, I'm going to see companies day. Like that's not the thing I do. So what are you like encouraging people to do to be good at seeing the right companies at the right time? And maybe like on the early stage business in particular, I feel like this is harder. Like it growth in some ways, it's like, you know, most by the time it's a B or a C, like, you know, you kind of could put the whole universe on a spreadsheet. It's all notable. C, it's not like that.

• 18:34Speaker 02

  But I think, you know, every business is difficult for a different reason. For growth, yes, someone else is invested, so you get to pick off what, pick those off. And early, it's hard because the waterfront is wide, to your point.

• 18:46Speaker 01

  Yeah.

• 18:47Speaker 02

  For us to cover, for seed, we probably cover 50 to 60% of what is done by a competitor that we

• 18:54Speaker 01

  Yep.

• 18:55Speaker 02

  believe we should be tracking. And in venture, we probably do see 60 to 70% because we have the information from seed funds that a seed fund invested in them. So to see that many companies, though, the question then is not, okay, you saw them. It's like, there's a notion that Luciana came up, which is false coverage. So to Pat's point about like calling your friend and you saw

• 19:19Speaker 01

  Yeah.

• 19:20Speaker 02

  you had a call, we can like just go and see a bunch of companies because we went to demo day for a variety of places and saw a lot of companies. That doesn't actually get to the point of finding

• 19:31Speaker 01

  substantive engagement.

• 19:32Speaker 02

  And substantive engagement. So like, okay, to Pat's point about like investing your time, you saw the demo day presentations, they were one minute each, very efficient use of time. Okay, what are the five companies out of that demo day that you're going to spend time with?

• 19:45Speaker 01

  Yeah.

• 19:46Speaker 02

  And so you can, the decision quality there is actually fairly important. And so that is measurable. So there's a relative list of companies that you went and looked.

• 19:55Speaker 01

  Yeah.

• 19:56Speaker 02

  And so out of that 30 to 100 companies, what were the top five that you thought were worth pursuing? Did you go pursue them?

• 20:03Speaker 01

  Yeah.

• 20:04Speaker 02

  And so those inputs are actually very, very measurable for quality. And we may be wrong, but then we update our priors on like, okay, why do we miss something that was, that you didn't take a meeting with? And so then, you know, the thing about each of these businesses and, like I tell the early team, we have basically three shots because we want to see companies before company formation, if possible.

• 20:30Speaker 01

  Yeah.

• 20:31Speaker 02

  So for that, it's like, okay, are you in the right networks? Are you in, you know, OpenAI or Anthropic or these people who are about to leave these companies? And are you able to sort of get in touch with them before they leave? Okay, maybe you don't get that shot or you passed for the wrong reason. You can then, once they've left and they've gotten momentum, invest at the seed. Only because you poured some heart and soul into meeting those people in the first place. If you didn't make the seed investment, we can make a series A investment. And so that, those are all trackable and it is a funnel that you can track and quality sort of ends up rising to the top.

• 21:11Speaker 01

  Totally.

• 21:12Speaker 00

  Part of what's different about the growth business, also you mentioned you can put the whole universe on a spreadsheet. You also know a lot about the companies on that spreadsheet. And so in 2007, when I joined Sequoia, the primary way that you learned about a company was you cold called them and you talked to the founder. Now, the amount of information that our CRM system

• 21:32Speaker 01

  Yeah.

• 21:32Speaker 00

  produces when you just put the name of a company into it is more than the amount of information that we had when we were making a final investment decision 15 years ago.

• 21:40Speaker 01

  Right.

• 21:40Speaker 00

  So there's an enormous amount of information that you can get. And so one of the failure modes for young investors is to think of their job as my job is to meet founders. No, your job is to generate net multiple money returns. Meeting founders is one of the things that you can do to do that.

• 21:57Speaker 01

  But reading about their company online is another way.

• 21:59Speaker 00

  Go spend 15 minutes in our, like our homegrown CRM system with all the data science signals and everything is fabulous at this point. Go spend some time in that system, beat it up a little bit. You know, don't just meet, you know, whatever company somebody told you are inflecting. Like go figure out what we know about them before you decide whether it's worth spending 30 minutes of your time.

• 22:20Speaker 01

  And what you know about them that has nothing to do with a meeting some other partner had, it's truly just information from the internet.

• 22:25Speaker 00

  It's information from the internet, but it's also information from a bunch of other sources, some of which are paid, some of which are proprietary. Like there's data that we create to feed into the system so that we have the most holistic possible view of these companies.

• 22:36Speaker 01

  You want to tell us about the proprietary data sources that you have gone?

• 22:38Speaker 00

  I'll, I'll give you an example. Imagine, imagine you found some great VP of engineering. And you did a favor for that VP of Engineering and now that VP of Engineering says, I love Jack. Jack's the best. I'd do anything for Jack.

• 22:50Speaker 01

  All the time, honestly.

• 22:51Speaker 00

  Yeah. Well, it wouldn't be crazy if you went back to that VP of Engineering and you're like, hey, VP of Engineering.

• 22:56Speaker 01

  You owe me.

• 22:57Speaker 00

  Any chance you could tell me like who your five smartest and most respected VP of Engineering friends are?

• 23:02Speaker 01

  I never do that. And I think that might be, but like, I truly never do that. And I just like, can't make myself. And I think I should.

• 23:08Speaker 00

  But imagine if you did that.

• 23:09Speaker 01

  Yeah.

• 23:09Speaker 00

  And imagine if you started doing that more than 10 years ago.

• 23:12Speaker 01

  Yeah.

• 23:12Speaker 00

  And imagine if you tracked all the responses for more than a decade.

• 23:15Speaker 01

  Yeah.

• 23:15Speaker 00

  And imagine if that all lived inside of a CRM system.

• 23:18Speaker 01

  Yeah.

• 23:18Speaker 00

  That has a talent map of Silicon Valley.

• 23:21Speaker 01

  Yeah.

• 23:22Speaker 00

  Not just the founders who are about to pop out of a lab.

• 23:24Speaker 01

  Yeah.

• 23:25Speaker 00

  But also like engineer number 37 in some growth stage company. So imagine that you could go.

• 23:29Speaker 01

  And so what are you asking? You're saying like, who are your five smartest people? You know, something like that?

• 23:32Speaker 00

  It's page rank for people.

• 23:33Speaker 01

  Yeah.

• 23:34Speaker 00

  It's the same basic thing.

• 23:34Speaker 01

  And you have the whole, the whole firms doing this.

• 23:37Speaker 02

  We have the whole talent team doing this. We have all the investors doing this.

• 23:40Speaker 01

  Yeah.

• 23:40Speaker 00

  It's. And we've been doing it. We had a, we had a former partner named Brett Record who came up with this idea more than 10 years ago. So we've been doing it for a long time.

• 23:47Speaker 01

  Yeah. And it's not that, I mean, it's, it's not like something that you could just say, oh, that's a good idea. I'll just do it. Cause it also requires actually helping people.

• 23:54Speaker 00

  And that's it. You can't be transactional about it. You have to like, you have to make sure that people, you know, that they're actually kind of feel good about helping us do this.

• 24:03Speaker 01

  Yes.

• 24:03Speaker 02

  In fact, if you make it transactional, they'll just give whatever response to like, get you off the phone.

• 24:09Speaker 01

  Yeah.

• 24:09Speaker 02

  So we, we very much pride ourselves on making sure that we give before we get.

• 24:15Speaker 00

  And so, so for example, if I hear about some growth stage company that's inflecting, I can go into our system and very quickly get a sense for like, what percentile is this engineering team? Because I, I can't think of a lot of great companies that, you know, became billion dollar plus revenue businesses without having a great engineering team at some point.

• 24:35Speaker 01

  Yeah.

• 24:35Speaker 00

  And so that's a pretty helpful signal.

• 24:37Speaker 01

  Yeah. Actually, this is a little bit of a side tangent. I want to stick with this sort of like the intricacy of venture, but just as like a quick Eddie. Do you find that there are examples where you can invest in something where the engineering team is not great? And you go in and you're like, we can help make it great. And there's so many other things to like, that this can become great. Or do you think if it's not great from the beginning, it never turns great?

• 24:59Speaker 02

  It's very, very hard to change the DNA of a company. So generally, it starts being great in some aspects. And then you can sort of augment things. So, but in, in, in early stage investing, like the, the problem is like, if they can't build a product

• 25:16Speaker 01

  Yeah.

• 25:17Speaker 02

  and it doesn't work, that's, you're not going to get off the ground. Now, I think there are quality engineers at different levels. And so you can get off the ground because Nate built all of Airbnb's systems. And it's a one-person show for a period of time. And eventually you have to recruit the next generation of people, the next generation leaders.

• 25:39Speaker 01

  Yeah.

• 25:40Speaker 02

  Those people may actually be good for a period of time and they will no longer be good. And you have to recruit the next leader and the next leader.

• 25:47Speaker 00

  I'll give you a couple of examples. So, you know, we got into business with ServiceNow in 2009.

• 25:52Speaker 01

  Yep.

• 25:52Speaker 00

  ServiceNow was founded in 2005. Okay. In 2009, all of the code was written by one person, Fred Luddy. When ServiceNow went public, most of the code was written by one person.

• 26:04Speaker 01

  Wow.

• 26:04Speaker 00

  Fred Luddy. So did they have a great engineering team? No.

• 26:08Speaker 02

  They had one.

• 26:10Speaker 00

  They had one guy who was like, not a 10x engineer, he was like a thousandx engineer. Okay. So that's one example.

• 26:15Speaker 01

  That's crazy. I've never heard a story quite like that, I don't think, actually.

• 26:18Speaker 00

  Well, Palo Alto Networks in a different way. Like Palo Alto Networks ended up with an amazing engineering organization. But for a very long time, Nir Zook, the founder, was kind of like the guy who would just fix everything.

• 26:28Speaker 01

  Yeah.

• 26:28Speaker 00

  Right? And so I think, I think there are a bunch of these examples where there's one person who's actually a crazy disproportionate share of the productivity.

• 26:35Speaker 01

  Ridiculous amount, yeah.

• 26:35Speaker 00

  Another example would be HubSpot. So we got into business with HubSpot in 2011. And at the time, amazing story, awful product. And Brad Endormesh would say the same thing. So I'm not speaking out of turn. They'd say mediocre product, but it wasn't great.

• 26:52Speaker 01

  This was before the CRM?

• 26:54Speaker 00

  This is before the CRM. So at that point, it was only a marketing product.

• 26:56Speaker 01

  Yeah.

• 26:57Speaker 00

  And they found this company called Performable, run by these two guys, David Cancel and Elias Torres. And they acquired it.

• 27:04Speaker 01

  Yep.

• 27:04Speaker 00

  And most of the time, that doesn't really work. In this case, they acquired these two founders with 15 or 20 engineers and product managers and whatever. They ended up rebuilding the entire HubSpot platform within a couple of years. And then the HubSpot went from being good story mediocre product to good story, great product.

• 27:21Speaker 01

  That was when they built the CRM.

• 27:23Speaker 00

  Christopher O'Donnell, who came in with that acquisition, was the one who built the CRM. There are obviously a bunch of people involved, but he was kind of points on it.

• 27:30Speaker 01

  Yeah.

• 27:30Speaker 00

  And then Whitney Sorenson, who also came in with that acquisition, is still CTO of HubSpot today. And Andrew Byleke, who is the founder of Klaviyo, had also been part of that team.

• 27:41Speaker 01

  I guess there are probably some types of companies where you figure the product has to be good, but the engineering doesn't have to be unbelievable and we can make it better. And then there are some types of companies where like the founding, you know, engineer has to be just a genius.

• 27:54Speaker 00

  Yes.

• 27:54Speaker 01

  Yeah.

• 27:55Speaker 00

  So that's like, part of the magic of HubSpot was.

• 27:57Speaker 01

  Like Airbnb and OpenAI can start differently.

• 28:00Speaker 00

  Yes.

• 28:00Speaker 02

  Yes.

• 28:01Speaker 00

  Yes.

• 28:01Speaker 02

  That's exactly our point.

• 28:02Speaker 00

  HubSpot managed to get really good engineers to care about marketing software, which most really good engineers do not. And I think another example would be like OpenEvidence. OpenEvidence is a, you know, vertically integrated foundation model for medicine. Right? Like all of their own training, all the way up to the application that is in doctors' hands. You can't do that with mediocre engineers. Like that is the absolute all-star team that was able to build that product. Because they're, you know, they end up competing with OpenAI and the other broad foundation models. You can't do that if you don't start with amazing engineering.

• 28:35Speaker 01

  Yep.

• 28:36Speaker 02

  The more technical the product, the more technical the founders have to be, the more technical the engineering team has to be. The less technical the product, the, then you can, you can rely on one person.

• 28:46Speaker 01

  Yeah.

• 28:47Speaker 02

  Literally.

• 28:47Speaker 01

  Yeah.

• 28:48Speaker 02

  And, you know, Airbnb started out that way, DoorDash started out that way, where the founders were just exceptional. They built everything and over time they complement that with, with people. So to all securities, you, you really want, you know, they're executing a micro nanosecond execution. You need a really good engineering team.

• 29:05Speaker 01

  Yeah.

• 29:07Speaker 01

  Okay, can we talk about like picking in some amount of detail? Like, I think there's so many, like, I think it's like a very hard to discuss part of the job, but it's obviously very important. I would argue for you all, I imagine in some ways it's like the most important maybe because, you know, you're seeing and winning is going to be very, very good. Obviously, you need to keep those very good, but then there's like this picking thing, which like, there's just like, you know, every year you got to pick well again. And so I imagine you spend a ton of time thinking about it. And it can't just be vibes, it can't just be this market's big.

• 29:45Speaker 02

  Vibes don't hurt.

• 29:46Speaker 01

  Vibes don't hurt, but like, so like, can you talk about like, in some depth, like what goes into good picking? And maybe just to like, pick a stage in the middle, like a series A or a series B or something like that? Because like, you know, growth is its own thing, seeds its own thing, but like, you know, maybe we can start and like, how do you talk about what goes into good picking in the series A, series B range?

• 30:10Speaker 02

  So I can do this in two different ways. One of which is like, back to like, making money on money, high multiple returns.

• 30:18Speaker 01

  That's not that important, is it?

• 30:19Speaker 02

  No, but that's what we're aiming for. So in a fund, we, you know, a venture fund.

• 30:25Speaker 01

  Yeah.

• 30:26Speaker 02

  And probably a growth fund too, but this, we have about forty-five to fifty-five shots, of which we need six to like, basically be a ten X or more. Of which, of those three, three of them, out of the six, we need them to be a hundred million dollar gain or a billion dollar gain. That's what makes for a good fund.

• 30:49Speaker 01

  Yeah.

• 30:50Speaker 02

  And we look historically at all Sequoias funds. And, you know, there's a high write-off rate. So when you say like, picking, are we actually that good at it? Now, our best fund is Venture 12, which includes Airbnb, Unity, and Dropbox.

• 31:11Speaker 02

  All three of them were billion dollar gains, but there were also 10 companies that were 100 million dollar gains.

• 31:19Speaker 01

  That's crazy.

• 31:20Speaker 02

  So that is a good fund. The write-off rate there was like 50%. So when you, when you think about picking, you have to be half right.

• 31:33Speaker 01

  But your point is that good picking isn't not losing money. Good picking is

• 31:38Speaker 02

  Yeah, take risk.

• 31:39Speaker 01

  High enough inclusion rate of asymmetry.

• 31:41Speaker 02

  So the point here is we're in the business of risk-taking and you have to be able to take risk on things that will run.

• 31:49Speaker 01

  Yes.

• 31:49Speaker 02

  So, and, and then the other thing that we've learned about picking is you can't just have things run that you put a small amount of dollars in.

• 31:57Speaker 01

  Yep.

• 31:58Speaker 02

  And have low ownership, like put a million dollars into this.

• 32:03Speaker 01

  Yeah.

• 32:03Speaker 02

  Investment in a, in a venture fund of 400, 500, 600 million dollars. It's just not enough.

• 32:09Speaker 01

  Yeah.

• 32:09Speaker 02

  You own, if you don't own enough, it's just not enough. You have to actually have conviction.

• 32:13Speaker 01

  Mm hmm.

• 32:14Speaker 02

  And so when you have conviction and you focus on the right companies, you're gonna, you're gonna be wrong half the time.

• 32:21Speaker 01

  When you look, when you look at your basket of across many funds of the things that truly ran, like the billion dollar gains, let's say, or the 500 million dollar gains, let's say, did those at the time feel like a lot of people wanted them? And like, can you draw any correlation between how hot consensus those rounds were?

• 32:39Speaker 02

  Not really.

• 32:40Speaker 01

  Or because like when you're describing like, you know, this, this sort of like asymmetry where you're seeing something that's not obvious, where something has a shape like, or, and then you have these rounds where nine venture firms all agree, this looks good. Like, is there, do those correlate?

• 32:55Speaker 02

  I can give you lots of examples where they don't.

• 32:57Speaker 01

  Both?

• 32:58Speaker 02

  There's both, right? So one, one of the sort of in DoorDash's situation, the series, the seed round was really, really hard for DoorDash. Almost everybody passed, including us, and that's kind of my fault for not having enough conviction. When the series A came together, I think everybody knew that it was working. So there were, they probably got like six turns. Sheets in the same week that we offered the term sheet.

• 33:23Speaker 01

  So in that case, winability was super important.

• 33:25Speaker 02

  So winability was super important. And, you know, I had passed, so we were coming a little bit from behind, even though we tried to stay

• 33:33Speaker 02

  with, try staying with the company and learning about the company and trying to add value. In the Series B, it was red hot.

• 33:43Speaker 02

  It went from a $50 million valuation to a $600 million valuation.

• 33:48Speaker 02

  And winability was really, really important, but, you know, the Series C, which nobody wanted to do, was basically at the same valuation, slightly less given, and that turned out to be one of the best, not venture investments, growth investments. And Series D was, you know, very difficult. E, F, G, those were super consensus. They all made money.

• 34:14Speaker 01

  Yeah.

• 34:14Speaker 02

  But the best, the best rounds were the Series A and the Series C. And those were not consensus at all.

• 34:21Speaker 00

  If I go further back, we led four rounds in a row with Okta, the Series C, D, E, and F, because nobody else wanted to invest.

• 34:30Speaker 01

  Yeah.

• 34:31Speaker 00

  When we got into business with HubSpot, we were the only term sheet. I remember with Zoom, Zoom, Zoom was like a reasonably hot company because there were a lot of people using the product. But it wasn't a consensus investment and they weren't raising money. And I remember a couple of weeks after we made the investment, I was at dinner with some other investors and one of them was making fun of us for having, for having made the investment, you know? Oh my gosh, you paid a billion dollars for Zoom? How crazy, right? Snowflake, you know, we passed on Snowflake and then six months later begged them to give us another chance. Because in that six month period, it felt like things had inflected and that, that was also not a consensus investment. And so I think our, our, our internal data, at least for our own decision making, we've been tracking,

• 35:17Speaker 00

  we've been recording the number that everybody votes on every investment for more than a decade now. Our internal data shows that consensus versus non-consensus consensus does not matter at all.

• 35:30Speaker 01

  It's just not a factor.

• 35:31Speaker 00

  Presence of conviction is what matters. And so if everybody is a six, we vote zero to 10, no five, so six and above is positive, four and below is negative. If everybody's a six, probably shouldn't make the investment. It's consensus, but nobody has conviction.

• 35:47Speaker 01

  Strong yes, strong no is much better.

• 35:48Speaker 00

  If three peoples are nines and three people are one, we should probably make the investment. Because the presence of the nines is a much more powerful signal than the presence of the ones.

• 35:57Speaker 02

  But if you want to describe that mathematically, we're in the risk-taking business. We need, we need that volatility because the truth is not somewhere in the middle where everybody agrees.

• 36:07Speaker 01

  Yes, yeah.

• 36:08Speaker 02

  Yeah, we're, we're trying to build the future. The future does not look like the past. And so if everything looks consensus, it's usually because it's, we have something that is measurable to the past, comparable to the past. It's all like, it's, everybody's thinking about it. And when it's consensus, it all gets priced to consensus too.

• 36:25Speaker 01

  Let's say you have an investor who is good. You're happy with them, but you notice over a period of six, seven years that like their, their, their portfolio includes a lot of good stuff, but it doesn't have that outlier tail. What would your coaching be? Like, what would you, what advice would you give that person to get more asymmetry into their pick? Like, if you're like, I'm gonna help you be a better picker.

• 36:48Speaker 00

  Yeah, this is not hypothetical.

• 36:49Speaker 01

  The way I'm gonna help you be a better picker is by helping you get more of the asymmetry.

• 36:53Speaker 00

  There are at least three different names in my mind right now. This is not hypothetical at all, so.

• 36:57Speaker 01

  Now I say X to you, yeah.

• 36:58Speaker 00

  No, so we're, you know, Jim Gutz has this expression, front stabbing, which is you want to tell people whatever concerns you have or whatever bad news to their front, instead of like saying it behind their back. So we have this conversation all the time with people who, you know, seem to be too risk averse or don't, you know, have enough of that kind of upside potential in their portfolio. And so when that situation happens, we start having the conversation, you know, hey, you seem to be more in the base hits kind of business. We're more in the grand slams kind of business. You know, let's, let's work on taking some more risk, you know? Like, let's work on this together.

• 37:35Speaker 01

  Yep.

• 37:35Speaker 00

  And if years go by and their risk appetite remains kind of modest risk appetite, which is very different than what we tend to seek. At some point, the conversation becomes, hey. You're actually very good at what you do.

• 37:49Speaker 01

  You should.

• 37:49Speaker 00

  Do something that's a little bit different than what we do.

• 37:51Speaker 01

  Okay, but so how do you, you say the like, we should, let's get you more risk appetite. How?

• 37:57Speaker 00

  I'll give you, so concrete example, there's somebody on our team now who we've been working with over the last few years. And it literally starts with this thing that you are talking about right now. We're going to invest in that company. Oh, no, no, no, but we still need to figure out this and we still need to figure out this and I have these five more calls. Oh, no, no, no.

• 38:16Speaker 01

  Yeah.

• 38:16Speaker 00

  We're going to invest in that company. Let's go invest in that company now. And so you start with a little bit of a two by four. Because you can see, you know, in this example, I'm not going to name names, but in this example, like this person is so good at what they do. And they come across so many interesting opportunities and they come up with a reason to pass on all of them. And so at some point, you just have to say, look, this is the good one. Okay. Let's go do this one together. And you do that a few times.

• 38:45Speaker 01

  And you show, you basically teach by showing.

• 38:47Speaker 00

  And you go from, it goes from like, you know, Alfred or me or whoever is the last 30% to now we're the last 20% to now we're the last 10% to now we're the last 5%. To now this person's doing it on their own.

• 38:59Speaker 01

  Yeah.

• 38:59Speaker 00

  Cause once you've done it a few times, you actually get comfortable with taking the risk.

• 39:03Speaker 01

  In those, in this situation, is the person like, are they like, they kind of know it's good? And you're just encouraging them to trust their instinct? Like, is it about like cutting off the process a little bit earlier? Is that the learning?

• 39:14Speaker 00

  That's giving them a little bit of courage.

• 39:16Speaker 02

  What Pat's referring to is like, everybody here at Sequoia came with a lot of quote unquote success. They went to good schools, they had great careers beforehand and they were the A students or the A plus students. And in this business, it's not about not making mistakes. As I shared with you, our best performing fund had a 50% write off rate. You're gonna make a mistake half the time.

• 39:41Speaker 01

  Yeah.

• 39:42Speaker 02

  And so you just have to like readjust.

• 39:46Speaker 02

  And think about it from that perspective.

• 39:48Speaker 01

  Yeah. I was, I was gonna say the exact same thing. It goes back to the people we hire. The people we hire are these competitive overachievers.

• 39:58Speaker 02

  Diligent.

• 39:58Speaker 01

  Most of them got straight A's their whole lives.

• 40:00Speaker 02

  Yep.

• 40:00Speaker 01

  And so one of the interview questions that is most uncomfortable for them, but most important for us is, what's your biggest mistake? Like, what's the biggest failure you've had in your entire life? And usually get some, you know, BS one, and you kind of have to keep pushing until you get to a real one. But a lot of these, a lot of the people that join our team haven't had much failure. And so we kind of have to help them get comfortable with it.

• 40:21Speaker 02

  Yeah.

• 40:21Speaker 01

  Because otherwise, we're not going to get the outlier wins.

• 40:24Speaker 02

  But to, to do this business well, you really do need courage.

• 40:27Speaker 01

  Yeah.

• 40:28Speaker 02

  You do need to be able to, hey, you know, in both extremes, if you're gonna pay a ridiculous amount for a company that you saw and passed a month ago, or two months ago, or a year ago.

• 40:38Speaker 01

  Yep.

• 40:39Speaker 02

  Like Pat did with Snowflake. You have to have real courage. He could have invested a year ago in Snowflake when he decided to pass. And he's like, it's to swallow his pride. And actually say, okay, I made a mistake. I'm gonna pay up for this round. Even though it sounds ridiculous, I'm going to do it. Or the other extreme, where you're like, nobody likes this company.

• 40:59Speaker 01

  Yeah.

• 41:00Speaker 02

  Anywhere in the world, except you.

• 41:01Speaker 01

  Yes.

• 41:02Speaker 02

  But it's a really good company.

• 41:03Speaker 01

  And by the way, this, this courage thing is like, um, it's the type of thing that always strikes me as very tidy and nice sounding in a historical story. You know, you, you tell a story of, we did this DoorDash round, this Snowflake round, everybody thought we were stupid. And then look what happened. But in the moment, when you do something where everybody thinks you're stupid, it's like, I'd have to be like, hey, guys, let me tell you about this deal I did. And you guys walk away and you're like, Jack's actually stupid. Like, you know, it's like, like, in the moment, it doesn't feel good when everybody around, like, your partners disagree with you, your, you know, peers at other firms are like, you're not like stupid in the cute, like this turned into Snowflake way, like, we actually just think you're bad at the job. And like, you have to stay with that.

• 41:43Speaker 02

  Yeah.

• 41:43Speaker 01

  I think that's really hard for people.

• 41:44Speaker 02

  I think it is, I think you're right that it's really hard, but it's also like, the two fears, fear of missing out and fear of looking stupid, are the two fears that prevent people from making the right decisions. And you kind of, kind of to block out those fears.

• 41:57Speaker 01

  We do, on this note, we do a lot of, um,

• 42:01Speaker 00

  Introspection, postmortems, post parades on decisions that we got right or wrong. Just kind of looking at the outlier decisions one way or the other and saying, okay, like we've got this one really wrong. Why? We got this one really right. Why? What's interesting about the ones that we get really wrong? Every single one of them, if you play the five whys game, like why, why, why, why, why? Every single one of them comes down to some psychological bias or emotional trap.

• 42:28Speaker 01

  Totally.

• 42:28Speaker 00

  None of them come down to an error in calculation.

• 42:31Speaker 01

  Yep.

• 42:31Speaker 00

  All of them come down to these background effects that were clouding your judgment.

• 42:35Speaker 01

  Yeah.

• 42:35Speaker 00

  And, you know, we cataloged them, you know, we have a list of 40 of these things so that we can kind of like use the common vernacular and be able to

• 42:44Speaker 01

  Yeah.

• 42:44Speaker 00

  be able to kind of get in front of them so that we can have a conversation before we make that mistake. Like, hey, hey, do you have separation of church and state here? What's separation of church and state? Well, letting the thrill of the chase bleed over into your clinical decision making.

• 42:58Speaker 01

  Yeah.

• 42:58Speaker 00

  Right? The thrill of the chase is a very passionate, emotional thing where you're falling in love with the founder. But then you have to come back and put your emotions aside and clinically assess all the merits and risks and make a good decision. And so it's pretty natural to co-mingle those two things, but that can lead you down the wrong path.

• 43:16Speaker 01

  How do you guys as senior partners, stewards, like, you know,

• 43:20Speaker 00

  Partners.

• 43:20Speaker 01

  Partners, equal partners. How do you, how do you, with younger partners who are newer? How do you react when you see them doing something where they're doing something that is courageous, but you think is genuinely a bad idea?

• 43:34Speaker 00

  Love it.

• 43:35Speaker 01

  You're like, let them, let them learn the lesson.

• 43:38Speaker 00

  No, be curious, not judgmental. The conversation, the conversation that we have with our partners all the time is, I observed you doing this thing. I am curious, why?

• 43:50Speaker 00

  When you start a conversation that way, they immediately are like, oh, did I do something wrong?

• 43:54Speaker 01

  Yeah.

• 43:55Speaker 00

  But if you genuinely come from a place of curiosity, this is what makes us all better. Like, when somebody joins our team, we don't want David Kahn to become another Alfred or another Pat. We want David Kahn to become the best possible David Connie can become. And so if David goes off and does something that's not obvious to me or Alfred, I'm going to be pretty curious. We know this guy's incredibly talented. What does he see that we don't see? Like, what method has he come up with that's not in our toolkit today? And so we, we would much rather let people just run, make some mistakes. Now they're doing something that we don't understand. They do it four times in a row and they're oh for four. Okay, now we're going to say, hey, maybe we don't want to do that anymore. Right? But we're going to start with curiosity.

• 44:35Speaker 01

  Yep.

• 44:37Speaker 01

  What else besides courage? Would you sort of like, that was very resonant. Besides courage, is there anything else that you would imbue as lessons to help people be better at picking as defined by including this asymmetric upside?

• 44:52Speaker 02

  I think the, the other, that, the other thing that comes with courage is to play your game. Like figure out what you're like uniquely good at. Like for me, when I got into this, to this business, I knew nothing. Well, I knew a little bit about investing, but not really. Cause I made some seed investments here or there. Yeah, sure. But this business is about making sure you partner with the best companies of tomorrow. How do you break that down? Like, are you market led or you founder led? I just thought, thought of it as like, well, that's interesting. How about founder market fit? And so I'd encourage everybody just like.

• 45:30Speaker 01

  Founder market fit is sort of your lens on things?

• 45:32Speaker 02

  It's my lens on things. Like you can't really, for Uber, Travis is like a perfect fit for Uber. For Airbnb, Brian's a perfect fit for Airbnb. For DoorDash, Tony's like a perfect fit. You can't, you, they can't go actually run someone else's business.

• 45:48Speaker 01

  So when you go into meeting a company, the top thing you're trying to figure out is, was this person made for this company?

• 45:53Speaker 02

  This person is made for this company and the problems of this market.

• 45:56Speaker 01

  How do you do it?

• 45:57Speaker 02

  We're just like by asking them questions and riffing with them. And they all come prepared with a pitch and I try to like, say, okay, be on this pitch. What do you know about this industry? What, why, why is this industry interesting to you? Okay, you started with a problem that you're solving for yourself. What other problems do you want to solve along the way? If that's the only problem you want to solve, that's not a lot, that would be some runway, but that's not going to be, that's not going to get you to act two and act three and act four. And the companies that are, you know, just mega legendary companies, they have multiple acts.

• 46:32Speaker 02

  That one can lead you a long, long way. It can be a decade or two decades. But most companies that are around for a long period of time and are considered legendary, they're around for a few decades.

• 46:45Speaker 01

  When you meet the company, have you already like visualized this is kind of what shape I think this company is? And I'm therefore trying to figure out if the founder sort of like fits that shape?

• 46:55Speaker 02

  No, because that would imply that I know something. That would be bad because in that situation, we often talk about this as like for the former operators at Sequoia, you're likely to do that because you're, you see a problem, you're think about a solution.

• 47:08Speaker 01

  I know what this company will become.

• 47:09Speaker 02

  I know what it should become. And then you're trying to force fit your vision onto the founder.

• 47:14Speaker 01

  Yep.

• 47:14Speaker 02

  And that's usually a mistake because if the founder, if you're, if it's your vision and you're force fixing that and the founder isn't aligned with that vision, that's a mistake. And the other mistake is like, oh, you know so much about this industry. It doesn't matter of the quality of the founders. Like, well, you don't actually run this company.

• 47:33Speaker 01

  Yeah.

• 47:34Speaker 02

  You actually have to let the founder run.

• 47:37Speaker 01

  Yeah.

• 47:37Speaker 02

  And so I always approach these conversations with, as we kept talking about curiosity. You have, in this business, you just have to be very, very curious and you have to ask questions five levels deep of why, five levels deep of what, five levels deep of how. And through that process, you riff with the founder and hopefully the vision gets more clear to you and to the founder at the same time. And look, this is a 10-year journey at the minimum. Okay, I think in some of these situations with seed companies, because of how seed funds are becoming larger and larger, it's at least a five-year journey, even if it doesn't work.

• 48:18Speaker 01

  Totally.

• 48:18Speaker 02

  And if it works, you know, I'm still on the board of Airbnb. It's been, it's almost two decades now. And so, and then Jensen's still doing it. It's been like 30 years.

• 48:28Speaker 01

  Yeah.

• 48:29Speaker 02

  So if you want to shoot for a legendary status company, you want to find a founder and a team that want to go for it for many decades.

• 48:38Speaker 01

  Yeah.

• 48:38Speaker 02

  And, and then you yourself may be on that board for a decade or two.

• 48:45Speaker 01

  Yeah. Do you have an equivalent lens to this founder market fit sort of idea?

• 48:50Speaker 00

  Well, can I zoom out and kind of give like an overall framework on Wherever you want. Picking? Yeah. Perfect. And my, my lens fits within the framework, but there's kind of the, the like, what, the why and the how. Okay. So what are we trying to find? We're trying to find the most important companies of tomorrow. And one way that you can think about that is the market determines how big the company can get. And the founder determines how big the company will get. And so the market and the founder are by far the most important variables. And the thing we care about in the market is not how big it is today. It's how big is it going to be in 10 or 20 years? So it's more of a why now question than a what exists today question. So the what, we're looking for the most important companies of tomorrow. Why?

• 49:34Speaker 00

  We're in the outlier business, you know, we got to take risk. If we can actually get into business with the most important companies of tomorrow, that's where all the outsized returns are going to come from. You know, we, we don't, we don't serve our mission for our limited partners. If we're just getting doubles and triples all the time, like we actually have to find the most important companies of tomorrow. It's also way more fun. Like, have you ever tried company building with a company that is not working? Versus have you ever tried company building with a company that is working? Company building with a company that is working is the easiest thing in the world. Right? And so it's way more fun. Um, and then the how, there's a lot that goes into the picking that we do. Right? So part of it is a shared language. And Alfred mentioned earlier that we have, we have a spec.

• 50:18Speaker 00

  We have a spec for seed investing, venture investing, growth investing, expansion investing. The spec is just a shared language. And the shared language for growth specifically is emerging market leader, unique and compelling value prop, sustainable competitive advantage. And if you map those onto a set of financials, the emerging market leader piece basically says, this will be the most important company in a market that is important tomorrow, which implies high revenue scale. The unique and compelling value prop piece, unique suggests that you're going to have good gross margins because you're not having to compete on price. Compelling suggests that you're going to have good operating margins because you don't have to spend a lot of money on sales and marketing to get people to adopt your product. And then sustainable competitive advantage says that the free cash flow

• 51:01Speaker 00

  produced by those nice margins on that nice revenue scale is going to be around for a while. Those are the characteristics we're looking for in a business. Back to what I said earlier about the founder and the market being the most important thing. By the time a company reaches the growth stage. If the founder is as good as you think they are. Chances are these characteristics have materialized. So the thing we care about most, even at the growth stage, is actually the founder. But the sanity check on is this founder as good as we think they are? Is whether or not these characteristics have started to show up in the business.

• 51:33Speaker 01

  Yep.

• 51:34Speaker 00

  And then in terms of mechanizing that, you know, we have a funnel like anybody does. And we realized a long time ago that the most important decision is actually not the final decision that happens on a Monday. The most important decision is the mid funnel decision. That determines what gets to a Monday. By the time it gets to a Monday, we're pretty good at making the decision. Our biggest misses are the things that don't even make it to a Monday.

• 51:58Speaker 01

  Is you looked, but you didn't spend real time on something that deserved it.

• 52:01Speaker 00

  Exactly. And so having better hygiene around those mid funnel decisions. You know, we used to just go back to back, meeting to meeting to meeting to meeting to meeting. Now, you can't have a meeting if you don't save time afterwards for a debrief. So that we can have a concrete conversation about what did everybody think about this meeting? What are the pros and cons? You know, what's the thesis? Where do we go from here? And similarly, back to our, you know, CRM system that we have. Every single meeting you take, you put a rating in the system. You know, you're rating it on like quality of the opportunity. Zero to 10, no fives. And so we, we just have this kind of. By the way, none of that is perfect. None of that guarantees that we're going to make good decisions. It's just trying to get a little bit better every day so that over time, you know, hopefully we end up with more wins and losses.

• 52:45Speaker 02

  We believe in consistent compounding.

• 52:47Speaker 00

  Yeah.

• 52:47Speaker 02

  So just like doing this over and over and over again, adjust, adjust, adjust, adjust.

• 52:52Speaker 00

  Yeah.

• 52:53Speaker 02

  Because the, the debrief thing, we didn't have probably like five, five years ago.

• 52:57Speaker 00

  Yeah.

• 52:58Speaker 01

  Yeah, it's a really good idea.

• 52:59Speaker 02

  Yeah, I mean, it makes sense. I mean, it was like, wait a minute, why didn't we have this before?

• 53:03Speaker 01

  So I just run between these to the end of the day, you can't remember what happened.

• 53:06Speaker 00

  Yeah.

• 53:06Speaker 02

  Yeah. And then if you don't write down exactly what you thought. Maybe you want to still sleep on it, but at that moment, what were your impressions? Like, we want to be able to marry thinking fast and thinking slow.

• 53:20Speaker 01

  We can spend the least amount of time on this, but I'm just curious about winning. Let's like when you want, when you want to partner with an entrepreneur and you've decided we would like to do this deal.

• 53:32Speaker 00

  I know. Strike this long-term business partnership.

• 53:34Speaker 01

  Yeah, exactly. That's a nice way to say it. What do you, um, you know, like, what do you do? Like, I realize, like, you know, a lot of what you're trying to do is show them that you're a good partner.

• 53:44Speaker 00

  Actually, no.

• 53:45Speaker 01

  No?

• 53:45Speaker 00

  So, and we might, and again, like, everybody has their own styles. So often I may have different responses to this, but my basic mental model in this has always been, if you genuinely love a founder and the company that they are building, they'll be able to feel it. And so what I've found is that if you actually do your homework to really understand this person and to really understand this company, and then you just tell them why you want to be in business with them. Like the authenticity and the passion and the, you know, the depth of the thinking, like, all that stuff should just come out.

• 54:26Speaker 01

  To ask that pointed question on that, does that work for you because this is Sequoia or is that a good strategy in general?

• 54:33Speaker 00

  That worked for me when I was 24 years old and nobody had any idea who I was. And honestly, half the companies I was talking with didn't know who Sequoia was.

• 54:40Speaker 01

  So what does it look like to show that much like love for what they're doing? Cause you know, you can just say it, but I'm sure you're not just saying it. I'm sure that it was expressed through some work you were doing on their company or reflecting some thought you'd put into something.

• 54:55Speaker 00

  It's kind of like when, you know, when people say that your brand is the sum of the experiences that people have with you. You can't just like be lazy and sloppy throughout the process and then pop out of a cake and tell somebody you love them.

• 55:07Speaker 01

  Yeah.

• 55:08Speaker 00

  Right? That's not consistent with what they've experienced of you thus far. And so every moment as you're engaging with the founder. Forms their ultimate impression of you. And if you are consistently engaged and thoughtful and responsive, and just kind of behaving the way that you would expect or want somebody to behave throughout that process, by the time you get to the end, having now done your homework, if you are also now saying like, hey, here's why I'm really excited about this opportunity. Usually that resonates pretty well. Usually that's consistent with their experience of you so far.

• 55:42Speaker 01

  I don't know if you remember this, but, and this is like, this was like a positive thing, but you passed on one of the early lattice rounds.

• 55:50Speaker 00

  I know.

• 55:51Speaker 01

  And it was the most gracious, high-quality pass that I got in my life. And I got hundreds of passes. And I still remember that you called me and explained exact details of like, what you were thinking and what the risks were and limitations and whatever. And it was just like, clear that you had thought about it more than anybody else. And I was like, that's like, that is like the gold dinner pass. So I guess it can't be faked because you have to do the work along the way to do that.

• 56:20Speaker 00

  Yeah.

• 56:20Speaker 01

  Yeah. Passing, I guess, well, is really important for you all because like, you know, if you're, you know, if you're me, it's like, if I missed the A, I don't have been like, I'm not going to do it. You always want to be in business with a great company. And so I'm guessing on this, you know, picking thing, the way that you pass has to be like excellent in general.

• 56:40Speaker 00

  Yeah.

• 56:41Speaker 01

  Like you need to pass in ways that keep the relationship healthy.

• 56:44Speaker 02

  Yeah, I think the way we talk about it is, it's maybe not now. It's not that we're passing. We're not, we're just not investing at this point in time. And look, I experienced this when I was on your side. Even though we made money for Sequoia at Link Exchange, when we were running Zappos, Sequoia passed on Zappos like two or three times before they invested. But it was always very gracious. There was always a good reason. This was Mike Moritz doing it. And then we learned from previous partners on how to pass. And, you know, one way is to show a lot of love. One way is to show a lot of work and being diligent and telling you why as a founder,

• 57:28Speaker 02

  like, maybe you should work on these things. This is what we found in your diligence. And hopefully we make your company better even when we're passing. And that shows to Pat's point, real love and real love for the problem, real love for your business and real love for you.

• 57:43Speaker 01

  Yeah, it also shows love for your own craft, which I think founders respect too. Like I always respect it when I'm like, these people are working really hard and they care about what they're doing and all of that. Like that matters a lot.

• 57:53Speaker 02

  Yeah, and just to add on the winning side, it really helps that we're on the Sequoia platform. But we have like really strong competitors. We don't take it for granted that we're going to win.

• 58:03Speaker 01

  Totally.

• 58:04Speaker 02

  I think if you start with that, that's a good, that's a good position to start.

• 58:08Speaker 01

  Yeah.

• 58:09Speaker 02

  And we, we do it from a level of humility.

• 58:12Speaker 01

  Yeah.

• 58:12Speaker 02

  The founder is going to run the company.

• 58:14Speaker 01

  Yeah.

• 58:14Speaker 02

  We're there to help. We're supposed to be the shock absorbers. We're supposed to be the sparring partners. We're not cheerleaders. We tell the founders that. What we want to strive for is at the end of the day, because we love the company, we love the business, we love the founders, that we're always the first call.

• 58:32Speaker 01

  Once you've won and now you're working with the company, how do you start the relationship? Like, obviously, it's like the beginning of this long thing, but like, what do you, you know? You start working with the founder, you're in business with them now, like, what do you, what do you say? How do you start things?

• 58:46Speaker 02

  I think different partners will do it differently, but maybe from the same level of humility that we have, which is, we don't know anything about the business. Let me like learn as much as I can. And we start there. And there have been times when I go to the first few board meetings and I don't say very much. I'm just observing, I'm listening, I'm reading the materials, I'm asking follow up questions.

• 59:09Speaker 02

  You can't help unless you understand. And as a board member, your job is not to like operate. Your job is, we're not management, we're board members. And we're there for you to be a sounding board. But the thing that we can help with is pattern recognition of things that have worked in the past and have not worked in the past and asking the question. Hey, I've seen this not work nine out of 10 times. Explain to me why you're going to be the one company that is different. We don't, we don't ask it like, oh, 90% of the time, this is not going to work, so don't do it. Just, we just, we try to be very, very open minded.

• 59:48Speaker 01

  I think in your first year.

• 59:51Speaker 00

  If you, if the founder actually trusts you by the time you're a year in, you're good. Like that, that's a good place to be. Because I think, I think it's hard to actually get somebody's trust. And, and so with that as the objective for year number one, you know, the two components of trust are competence and intention.

• 1:00:15Speaker 00

  I think the competence piece, people mistake as let me show them how valuable I am. That's nice, but it's actually probably better to make sure that you have all of the relevant context on the company.

• 1:00:29Speaker 01

  It's better to be like, let me show you how much I understand.

• 1:00:31Speaker 00

  And so, uh, I go through employee onboarding. So that I have the same experience that a new employee to the company has and kind of understand things the way that they would understand it on their first day at the company. Usually we do one-on-ones with all the sort of key VPs or direct reports as part of diligence. But if we haven't done that as part of diligence, we do that, you know, as part of onboarding. Usually we get access to the last couple of years of board decks as part of diligence. If we haven't done that as diligence, we do that as part of onboarding. If there's any sort of employee like culture or manual or whatever, we get access to that. And so we, we try to get as much context as we can after the investment has been made. To make sure that when we go into those first handful of board meetings, we're, we're not just saying random things off the cuff.

• 1:01:16Speaker 00

  Like to the extent we have an opinion to share, it's at least grounded in the reality of the business as it exists today. So that's, that's on the competence side. On the intention side,

• 1:01:28Speaker 00

  I think because every founder has the horror stories of the venture capitalists that, you know, did them wrong. You know, I think because our competitors like to say nasty things about us from time to time. Like I, I think we really have to show that our intentions are pure. And one of the ways that I describe it to founders is look, I have two objective functions. Okay. I have the objective function that I owed to our limited partners, which is to maximize the share price of your company. Because our objective function is very explicitly net multiple money returns. Right? But then my second objective function is my personal one. Which is like, the reason I do this is because I really enjoy watching founders

• 1:02:08Speaker 00

  become amazing CEOs, right? And like, build these world-changing companies. And so, my personal objective function is to help you become the absolute best possible version of yourself. And you can't just say that and then do whatever you want. Like, you have to say that and then behave accordingly, right? But I think starting off by saying that and just kind of explaining that to them, at least kind of lodges that, you know, idea in their head, like, okay, maybe this person really is here to help me get better. And then if you behave accordingly, by the end of the first year, hopefully, you're in a position where the founder thinks that you have both the competence and the intention to kind of like be in the trenches with them. And then from there, you can actually start to make an impact.

• 1:02:53Speaker 00

  But to me, the first year is all about like, actually become trusted by the founders.

• 1:02:59Speaker 01

  When you think about the board seats where you are the proudest of, that you'll like, look back at the end of your, you know, career and say, that's where I shined. Like, what is that? What do those look like? You know, like, are you, are you like part, are you like an extended part of the executive team? Are you a consigliere? Is it a differ situation to situation? Like, what are the ones you're proudest of?

• 1:03:21Speaker 00

  There is a company that I was involved with that went public. And, you know, when you go public, you go to the NASDAQ or the NYSE or whatever. And, you know, they ring the bell and they take a bunch of photos. And, and this is a trivial thing, but this meant a lot to me. There was a photo that was board and management team. There was a photo that was management team. There's a photo that was board. There's a photo that was founders. And then there was a photo that was founders and me. And they didn't do it with the other board members. And I felt so special, you know, like, I felt like that was a, you know, like, they were treating me as an extension of the founding team, which I wasn't. I was just an investor.

• 1:04:06Speaker 01

  No, it's a great sign of respect.

• 1:04:07Speaker 00

  But it like, meant the world to me.

• 1:04:09Speaker 01

  Yeah.

• 1:04:11Speaker 02

  It's always the founders and how much you engage with them that sort of matters. And it's not, you know, for me, it's about helping them get it right and helping them reach their full potential and helping their companies reach their full potential. And in those situations, I'm pretty proud that we got to the right sort of outcome and conclusion. I think that a lot of boards that you've been involved with a lot of boards where there are people who always have to be right, they have to prove how smart they are. Those don't tend to be the great board meetings or the board discussions.

• 1:04:48Speaker 01

  No, those are particularly tough when that board member is like, you know, a real accomplished personality and like everybody, I think those can be very difficult. You know, sometimes those situations are, there's a lot of value, you know, obviously from those people, it's just, it changes things.

• 1:05:05Speaker 02

  But I think that being right, you can, in business, things change so much and in technology, they change even faster. So you, you know, your paradigm of what makes you right can change. And if you're not curious, if you don't update your priors, that previous notion could be wrong. And we've seen that time and time again. For most of our careers, software is the way to make a lot of money. And it was on-prem software, it was SaaS software. And then something changed, like hardware became this interesting place to invest. Defense tech became an interesting place to invest. There are just going to be more and more things in the world and the world is going

• 1:05:48Speaker 02

  to expand and you have to be open to new ideas. And whatever worked for a software company may not work for a hardware company and vice versa. So if you've been in a successful like chip company going into a software company, you do have to sort of check some of your paradigms and just be cautious that maybe those things may not work the same way in a software company and vice versa from a software company to a hardware company.

• 1:06:11Speaker 01

  All right, my last question, you guys are going into first holidays, you know, I'm sure you're going to have some downtime, you're going to think about 2026. What are you, what are you thinking about? Like what's, what are your bullets on your little note to yourself of like this is, this is what we gotta, you know, do in 2026 in our new roles?

• 1:06:31Speaker 02

  Well, you know, we're gonna have an offsite in January 2026 and we'll put those down then.

• 1:06:37Speaker 01

  Yeah.

• 1:06:38Speaker 02

  But it's not, you know, we've delegated that to Luciana and Andrew and they're gonna run that offsite. So that's gonna be fun for them to run that.

• 1:06:46Speaker 01

  Yeah.

• 1:06:46Speaker 00

  That's our new role is, our new roles are 95% our old roles. Like first and foremost, our job is to help the daring build legendary companies from idea, IPO and beyond. You know, in 2025, Alfred and I spent the vast majority of our time investing, working with founders. In 2026, Alfred and I are gonna spend the vast majority of our time investing, working with founders. And so I, I think part of the reason this is a good time for generational transition is because our business is in really good shape. The teams are in really good shape, the funds are in really good shape, the strategy is in really good shape. The operating teams, sort of the platform that we have is in really good shape. And I think 2026, like the punchline is it's gonna be more of the same.

• 1:07:29Speaker 00

  Like our, our partners are doing an amazing job, winning in the market with the very best founders and becoming great business partners to them. And we want to do more of the same.

• 1:07:38Speaker 02

  It's business as usual.

• 1:07:39Speaker 01

  See, it's funny, cause I would just be, and this is why I would be terrible at your job. I would be so tempted to be like, you know, what's next? Like what, what do we add? What's the new thing? And it seems like there's a commitment to just improve this, you know, and perfect the core of what you have.

• 1:07:59Speaker 00

  And like Alfred mentioned it earlier, you know, we try to get a little bit better across multiple dimensions every single day. We will always try to get a little bit better across multiple dimensions every single day. From time to time, we'll take a big swing and a big swing could be adding something big to our business. A big swing could be removing something big from our business, right? Um, and so we're, we're always hypothesis testing and evaluating and experimenting and, and trying to figure out how to get better. But as we sit here today, the business is in great shape and we're in the, I don't know, third inning of the tectonic shift that's gonna define our lifetimes. And so.

• 1:08:34Speaker 01

  Yeah.

• 1:08:35Speaker 00

  We don't see a lot of need for big structural changes. We just need to go execute.

• 1:08:39Speaker 02

  You know, just building on that, I mean, one of the things that investors share in this business, in the venture business, is that we have a novelty chain. Like, we like the next new thing, but what you have to build is something that is stable over time. So the things that we're building on are things that we've like built on again and again, year in and year out, improving those things. And so, yeah, every now and then we'll take a big swing, but the core business is a good business. And so, why not keep that core business and, to your point, like, perfecting that craft, getting better every single day, and just build that core business?

• 1:09:17Speaker 00

  And the stability at the partnership level is what allows for volatility at the partner level.

• 1:09:21Speaker 01

  Yes.

• 1:09:22Speaker 00

  So when we talk about all these crazy outliers that we get to be in business with...

• 1:09:25Speaker 01

  The high-trust small partnership lets people do high volatility decisions.

• 1:09:29Speaker 00

  Exactly.

• 1:09:30Speaker 01

  Yeah.

• 1:09:30Speaker 00

  Exactly.

• 1:09:31Speaker 01

  Yeah. All right, guys. This was amazingly fun. Thanks for doing it.

• 1:09:33Speaker 02

  Thank you.

• 1:09:34Speaker 01

  Thank you, Jack.