hey acquired listeners instead of a cold opener. We want to use this space to dedicate today's episode to the late Don Valentine, who passed last year. We're excited to be working with Sequoia today to bring you something really special for Part two. And with that onto the show. Welcome to Season six Episode two of Acquired the podcast about great technology companies and the stories behind them. I'm Ben Gilbert. I'm David Rosenthal and we are your hosts. Today we tell Part two of the Sequoia Capital Story. We're going to pick up where we left off in 1996. When Sick Way is legendary founder Don Valentine. Turn the firm over to Sir Michael Moritz and Doug Leoni in this modern era of Sequoia. Since 1996 Sequoia has been the investing partner behind on absurd number of the industry defining cos of the last 25 years, including Yahoo! Google, Papal linked in YouTube, Red it 23 me Hub Spot WhatsApp Dropbox Airbnb Docker stripe insta cart,

you AI Path, Gord Ash and Robin Hood Woo. No kidding. And while David and Ice belonged to depart one of sequoias history on our own. We have the very best person in the world with us today to help us do part two. Right? Doug Leoni. Now David, Who is Doug? Doug is the global managing partner of Sequoia Capital, in charge of overseeing the firm's many diverse businesses, which we will get into from seed to global growth investing across the U. S. India and China dug first Joint Sequoia in 1988 after famously cold calling Don Valentine and was the champion of sequoias expansion from a single $150 million early stage fund to the multi $1,000,000,000 global powerhouse It is today. Welcome, Doug, and thanks for joining

us. Thank you very much for having me. It's my

honor to be here. It's great to have you all right, listeners. Before we dive in, I'd like to welcome our sponsor for all of season six. Silicon Valley Bank. Whether you were at the seed stage, scaling to Siri's A or Beyond, as Phoebe has the insights and experience to help you hit your next milestone. I spoke this week with Jennifer Freel Goldstein, who runs business development at S Phoebe. No Jennifer. Today we're covering part two of the Sequoia story, which picks up in the nineties. Could you give us a sense of, Ah, how different venture is today than it was back then?

Yeah, absolutely. Venture has changed pretty significantly from back then, just to give you some statistics, we finished off 2019 roughly just below the record high levels of 2018 in terms of total dollars Deployed and I came in just under $140 billion in the exponential scale of what we're talking about now is so much bigger than what we were at in the eighties and nineties and even the early two thousands, and that also includes roughly 50 billion. I think the number exactly is $46 billion by our count of fresh capital raised in 2019 which will need to get deployed over the next couple of years, and that really has focused on traditional capital. When you start to add in things like corporate venture and family offices and all these diverse sources of capital that are really focused on the innovation economy, we're talking about a very different industry from the cottage industry that started out as many years ago. Great. Well, thank you, Jennifer. Listeners, you can visit spb dot com slash next toe learn more and now over to David to take us into Sequoia with Doug.

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

my dad's sister got married to a lieutenant, ended up in America, had a child call Mom. And so now we had grandma for me and aunt in America. And we were the Italian family with the American Ben. My first name was Douglas. But in the church, you cannot be called Douglas for the simple reason that you need to have a name from one of the 365 saints. So in Italy, I was model Douglas Leonie. Oh, Douglas, as my mom called me and my dad called me And in school I was motto. When I came here, I just flipped the two names. But a long story short. My dad saw an opportunity.

Maybe his career. It was not going so great in Italy. So an opportunity to come to America. He came here. It took me about two years and my mom to come here when? Two years without seeing my dad. Ah. And then we finally came here in August 1st, 1960

eight. What did your dad

do in New York? Uh, in New York. He was a service engineer for a marine equipment company. And the most he ever made, I remember, was $25,000.

That's amazing. So when you arrive finally 1968 in like America in 1968

by boat by Michelangelo, past the Statue of Liberty to the west side

of Manhattan. Do you remember the first time you saw this?

Absolutely. I remember being outside. I remember crying Day One and a two and just being in a fox for the next five days when we did the crossing.

Wow, that's amazing. So America, in 1968 must have been pretty different than the world you left in Italy. Great. How was adjusting and ditto high school.

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

And so this with Yang and what's that? Same deals integrated in high school at the same

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

So you've talked about another talk to given that we've listened, Thio that you do the Myers Briggs test here? Yeah, clia How did how did those combine into what you're Myers Briggs type is? I'm

not sure those effective Myers Briggs, but this is how I test it early on and how it changed. People think of me as an extra verb for the simple reason that if I have to turn that on, I can. Especially as I get older. I went from insufferable to charming. It's amazing how it happens. Ah, but what I really am I'm halfway between uninterested and extra vert. Exactly halfway in between and early on, I was tested as a process driven person, meaning my whole mind is a tree structure. There's a lot of logic to it, and so on. And in 2012 with Mike Moritz stepped down in their relationship, I would Mike, he was the intuitive one.

He was really the leader of Sequoia. I was one, eh? I was the seal. Oh, if it helps, I understood that would not be a winning formula. I always thought that Great SEAL owes would make lousy CEOs. Now I'm not too Celia, but you get the point. And so I took myself completely out of the comfort zone and understood I had a rely on intuition. And when I was tested in Maya's brig by a lady that tested me, she was shocked by the transformation. And she said, You and Michael Dell are the only two people have ever tested that have made that change. And when I hear people can change,

I chuckle a little bit because I felt like I changed. I felt like I had to rely on my gut. And I can have all the answers in tree structure prior to, you know, letting people create. I can manage every inch I just left. I have to let terrific people do their thing.

Yeah, well, I can totally imagine you know, the things that we're gonna talk about that you champion here. It's Gloria. Doing that is I think, what led toe a large part of your success. So you finish high school. You must have been pretty good student. You go to Cornell and then Columbia to study engineering. Right?

So I was a great student until I grew up. I went to Cornell. I got thrown out of Cornell, left in my first year. My, my, my 1st 2 seamen. That's not your bio. My 1st 2 semester grades were 134 and 1 to 2, which is not easy to do. I did not see half of my professors because I just never went to class. Um, it was my guys behind that. Ah, and I'll mention a second. What was behind that After being abused in high school? I was never abused.

When I was in Italy, I was a smart kid who was athletic in high school. Oh, my God, that was rough. A Cornell. I became normal again because when I went to Cornell, I could speak English and no sudden. I was one of the very accepted kids, and I kind of lost my mind. In some ways, I lost the opportunity to learn, but I became normal again. Now, for a fall term, I went to a two year school to make up a couple of classes where I got F's mainly math and physics,

which are my strongest classes. I mean, I love mathematics, and I also was working part time doing the deliveries, talking the truck drivers, and it just showed me a range of life off what life could become. Nothing wrong with truck drivers. Don't get me wrong. Was it right for me? Probably not. So a little bit of the carrot and the stick I will impact to Cornell. I did find I graduated and, ah, I went to work and I decided that I needed to do something.

And that's something you end up in sales. Was prime computer. Your

first know the first job was selling computers for Hewlett Packard. I remember there were three people. There were two people in a room age 45 to 50 and they said Quote kid, don't worry. We'll split Manhattan into thirds and I didn't know anything, so I trusted him. One got all the Wall Street one guy from Wall Street to 96th Street Midtown. And I got, by the way, that this is 1979 where it wasn't safe to walk north of 79th Street. And that's territory. My was north of 96. I don't think Night

Street, this is pre Giuliani and Bloomberg.

Oh yeah, pre Julian. Well, pre the fact that we became urban and so on burned out buildings and so on. But that was a lucky break because one thing that's up there is Colombia, and I remember there was a dean of the School of Engineering Doctor trial, but still remember his name that came from CMU and he explained to me what the Arpanet Waas And he explained to me what open systems were. And yes, I went to prime for a year and 1/2 because I wanted to sell computers on Wall Street because I knew that's what the money was. But that was with a short term money. Was

was their prestige associated with that? Or was

it just selling money? A Wall Street was, was money. It wasn't procedure. It was money. And Prime was the second youngest company to be invited. A New York Stock Exchange. It was a go go company. I chosen well, but I realized that was on Leah sales career, and I was beginning to crave for something more. I wanted to quote, make it. What does that mean? I remember walking on Sixth Avenue so and and seeing all these buildings and say, How do people become successful? Clearly there must be more.

And so I said, probably want more risk. So I co call Vinod Khosla. Well, actually, it was Owen Brown, which was the CEO at son. At that time. I got a job being heard about son because your systems. I went back to Colombia. Open system Call Sun Microsystem Employee number. I don't know. 50 60. I can't remember first people the first person in five states and I started doing volumes of business. So much so that the board wanted to know who this kid waas Vano Khosla wanted to know. Scott McNealy wanted to be consuming,

and I had an idea to open Wall Street. And the reason I did that. I learned of a machine called Convex, which back then was a processing, math processing type of machine. And I read in Business Week that peaches were dropping out of Yale going to Bear Stearns on Wall Street. What does that mean, man? And I don't if you won't hear the story. But the story was, I got a call from Bear Stearns. They said, Can we get a budgetary quarter? Budgetary quote is somebody you haven't met just wants to know how much I gave someone, and my quota was two million. I gave someone a budgetary quote I hadn't met for 2.8 million on,

went on vacation for two weeks. I came back and there was a purchase order on my desk for 2.8 million. I said, truly. Holy No. Holy cow. Uh, that

is the definition of product. Market

fit right there. Exactly. And so what I did is I poured all my time on Wall Street so much that my office was a depot because son could not support the system. So my office, my desk was apprenticed and that had a hole in it for the paper with messages all around it. I had a computer systems that were missing out of sun all around me. Because if you were down, I brought you back up in an hour and 1/2. I just drove to Wall Street with And Scott McNealy, support Internet was doing though this volume. What's going on? The Scott came to see my office. He was impressed and horrified at the same time. This is the CEO, Sun Microsystems, and we just leave lots of business. And long story short,

I met Ah, Vinod Khosla, Venture capitalists. What the heck is that? And I want to be one of those. Ah, boy. 134122 How do you get into business school? So I went to get a Mass is a Columbia. I got in luckily, and I did extremely well, which patted the resume a little bit so I could get into business school. And I went to business school. And then I co call my way into the venture industry.

Yeah, from what I I could read, you sent and called 80 different firms.

So there was. Back then there was a big green book called Prats Guy to venture capital sources way Somebody should publish that again today. Okay, You and I took all the venture firms in three states Connecticut, none of four. Connecticut, New York, Massachusetts, California. And I just actually wrote letters because you wrote letters, dear. In those days and in California, I would say things like, I'm going to be in California. Of course, that wasn't in California. Follow up a Ziff as if you know. And now it knows it was coming to California.

How many entrepreneurs do that to Sequoia now, too? I'll be down in the Bay area in case it

happens. Toa Well, I pushed a little, and in the case of Sequoia, there was an assistant, a spicy New York person called Barbara Russell that work for Don did. The distribution may have been a reception, you know, it was at a time with somebody that it all. And so I sweet talked my way with Barbara and she tells me she's become a very good friend. She's no longer here. She's retired up in Seattle, She said she went into John's office and she said, This kid may have something You may want to spend some time with them is so on a five o'clock on a Monday, I was into you by Don

What

did he ask you? One question. What's important? And I talked for three minutes and silence didn't bother Don. He could just speak. We could be quiet for a now and be okay with him. And he waited 2030 seconds, which seem like gonna turn that terrifying. And then he said, What else? That I laughed. I said down. What if he went out? I just told you everything, but you know, he liked my how genuine I was. I think he loved the sales approach because a great company has product from the inside out and sails from and the customer from the outside in,

and he read correctly that I'd be a hustler, but not in the word hustler that I would hustle that I was smart. I was human and he knew the question was, Can we reprogrammed him? Can we break him down to pieces and will he build himself up?

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

Ah, it's a difficult question for me to answer, because I don't think I thought I didn't know anything about what would make a technology investor. What has led to my success is I hustled a lot. There's people like Jim gets who can product manage with a founder of product. There are people like Mike Moritz who have incredible intuition. Guess what I did. I bet you can guess. I made thousands of co calls. I get in front of everybody. I am not kidding. When I said I went from being insufferable to suffer ble overtime, Charming was maybe the last five years, uh, dirty and so exactly was complete journey. And so I just worked and build knowledge and I developed a network. And some luck.

There's always some luck. Lots of hustle, some brain, some skill. I was able to generate some of the right deal flow and had a very lucky good start my first reinvestments or I pose, which was good. But it also build a false sense of confidence because after that I thought I knew something and I woke up. One day in 2001 I looked at my 10 boards and I said, Oh my God, there's not a winner there. And so it was an early success. Go through the abyss and I see investors here go through the abyss. And when someone goes through the abyss, you gotta let him pull themselves out. If they come out the other side, they're terrific. And so I went through the abyss, and and then I went.

What were those 1st 3 in it, right pose.

There was Arbor software, which is a darling software company. That one public, and then we'll merge with that period. Okay. When, When Public It was the largest win Sequoia had ever had. A company called I N s, which was a service is company built on the notion that companies cannot swallow routers as fast as they'd like to swallow routers and therefore we could have a service. Is company a company we took public and soul for $7 billion to to Lucent. Seven billion in 1998 was a lot of money and a company called Renaissance Software, which was a Wall Street trading systems, which was which was really my strong point. I understood what I was looking there, huh? I

didn't know that was a coin

investment. And ah, funny story. In the case of Arbor Software, if you want to know the real story I was here for three years, almost got thrown out. People wanted me out. Don is the one that saved me. Give quote, give the kid more time kind of attitude. And I needed to get something done. The founders of Arbor, where two weeks from bankruptcy, personal bankruptcy. That night they came to my house. I said, You've got to get a deal done.

I got a good deal that I think you're investable. We created the presentation that they got presented the next day to Sequoia and the inside. I had and Don Valentine help for that. They understood the problem. Then, as consultant, they understood the domain of the pain, and they just didn't know it articulated in a fundraising pitch. And so we created a pitch and, ah, we got the company. If I say we because even those in Sequoia we got the company funded, the partners trusted me so much that one partner Mom, won't tell you who. The only reason why I did it is because there was a credible co investor in his mind. Nothing to do with what I knew was said,

but we got the deal done. And ah, we get the investment mate just starting with two people. Not a line of code a seed, if you will back then. And although he was a Siri's A two million and we made it.

So we ended part one of our quite history with Don in 1996 calling you and Michael into a conference room and passing the firm over to you. What was that day like for you thes three companies had become winners,

and I could imagine the conversation, too. We should made Doug a partner. I'm sure it was an easy one. In one case, I had a tracker. In the other case, remember the insufferable part and the conversation must have gone around. What is he gonna be like? If he's a partner? Is he going to turn into a monster kind of conversation, Which I didn't Obviously, it's not as black and white as Don. Turned it over to my parents and me. I actually went back and looked at carrier location. Not because I want to see how much Carrie got. I wanted to see if my memory serves me right.

It turned out that Mike and I had more carry than the other folks. It wasn't the black and white. It's yours. We were from a series. We were the ones with the track, right. Well, I got promoted to GP. I had one, you know, 1/10 of the carrier down, Valentine. A sequoia. Six and a year into the fund. Don said we ought to change all the Carrie, make us all equal.

He understood that he needed to make sure the young people were not gonna act like, uh, like associates, even though there were partners in sweet flattened the partnership on in Sequoia six and now it's Sequoia seven. It was more Mike and I were the the Morse aggressive ones, the ones that a bit of a track record. I remember Don set with Mike and I, and he didn't say You're the leaders. He did not annoying tests, but he had a conversation just with two of us. And Don had a green sheet of paper with all the things an investor does and check marks next to what he's willing to do. And he pushed a paper as he always would, and said, You figure out if you want me around and this is what I willing to do He wanted a We offered Cary in that fund we gave carried on the next phone, which turned out to be the Google fund. We actually took good Caradon.

We gave carrots some carry, not GP carry of a couple more funds, never aggressively asked for it. I remember when I had to walk into dons office and tell him no more carry refunds later, any chuckle, he said. What took you so on? Da And But Mike and I were the two, if you will, more senior we rotated the partners meeting, who would write down the companies who was the leader of the partners meeting for a year or two until my stepped up and said, This is not gonna work He offered to be the one doing it. We all agreed he did it. And so it became that Mike was really one and I was one A just to I don't want to rewrite history. One day we were, you know,

we had similar with exact comp. Mike was a CEO, if you will. I was a SEAL where Partnership, and that's so we ran Sequoia until 2012 when Mike step down for health reasons.

And Doug is a point of clarification when you say Sequoia six, Sequoia seven

to explain a little bit. But it's sorry they're the funds. The success of Funds Boy's Sick was a six fund I see. Where I became a general partner was the last really true partnership with Don was full full time. Savoy seven Don was in general partner. He had less, you know, and the partnership was run by five or six other partners and then Mike Moritz took the lead and I became

one a and and give us a sense of what early stage fun number we are now that we're in 17. Got it. Okay, so right, right. When this happens, the transition to Sequoia Fund seven. The whole world is changing right leg, because Sequoia originally and Don came from the semiconductor industry. And then there was the PC software wave. But now the Internet is here.

Yeah, well, not yet. The is actually a few parts, and part was, first of all, Sequoia five was 67 million. Because a truly lack of ability to raise more money we had raised the growth fund for 165 million that we didn't know what to do with. In fact, we invested the growth fund and the average check size, and that fund was $2 million. That turned out to be a 4.5 x net funds, which is a terrific performance because we invested like adventure. When we raise the Koya six, which turned out to be the out the Yahoo Fund. The returns from five were not yet visible when Mike and I went out for reasons. Sequoia seven the limited partners said who The heck are you guys?

And we lost some clients and we lost them. Big louse. Wow! And support of five turned out to be a fabulous fund. Sequoia six, An incredible fund. Sequoia seven. A spectacular fund. Sukhoi aid, the Google Fund on Amazing Fund. So Mike and I and the other partners got an incredible start. And then 1999 2000 happened. We did not know the meaning of the word claw back for your listeners were claw back. Means is when your funds are doing so poorly that now you are a lot of money back to your limited partners. And we had war room meetings here. Sequoia in 2000 where we owed Maur than our net worth. How do we get ourselves out

of that? And is that of the fees that

you've already taken his compensation fees and carry? Maybe we haven't early win, and we took Carrie and the rest of the fund is a turkey. And we'll not

only because you see, when you have early wins, you assume the

fund is going to be in Carrie. But if it's let me make things more difficult and that'll really win, you're given shares that you hold and they go to zero. So you didn't have that. So you hold the shares in your count because it's 1999. Those in that real companies that shares go zero. So we had warm conversations and we had a choice to make and the choice to make us to borrow a line from golf. And I don't play golf. Cold Mulligan. Most of the venture industry considers the funds of that period called the Mulligan. Yeah, their crappy. They lost money. But you know what? It's a do over. We took the opposite approach. No one was going to lose money.

That's a capital. So we took funds. There were 10.3 X, meaning it was $100 million. That phone was worth 30 or in that case it was 300 of five hundred's worth 30% of that. And we brought him up to close to two ex just by giving up fees, not collecting them and re investing money. Every time we had a game, we reinvested it, reinvested it because we wanted to have the pride of never losing money. Yeah, and so those were formative time for the kind of would have been so easy for you guys and

most other venture firms did say, Calm again. We're going to take the loss on this will start a new fund that we get fees on.

Yeah, well, think about it. So coy for is the Cisco Fund Done. Valentine's Sequoia five Younger team, older team, Terrific fun, Sequoia, six Iao and many others and video. Many Other Sequoia seven. Many companies Sequoia A Google. It would have been so easy for us to call it, and we just refused to and ah, we just refused

to Doug. It reminds me a lot of the 2008 story where Ford refused to take the federal government bailout and say, Yeah, yeah, it would be easy for us to do this. But reputation, Aly. It's important to us and all of our customers or your clients for the next decades to come that we don't do this

absolutely. And while I tell clients those times won't be Chapter one in the Sequoia book, they'll be a chapter. There should be a big chapter. That's the vote. It is maybe our proudest moment. It's a court capital. It is not when we had. You know, we have had funds close to 20 acts. It is not those 20 x fun. The most proud time is when we decided no one's gonna lose money at Sequoia Capital and we're going to go to work. And we went to work for 10 years to make sure tha

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

So Mike Moritz is a Brit. Strategic men, A few words things 14 step ahead on my gregarious Italian. And I'll tell you, it hasn't always been easy. Mike would say the same thing, but we made it work for 20 years. And I'll tell you, during those times we thought exactly alike you could burn us cigarettes and our arm, and we're not going to flinch. We're gonna bring these funds home. And it was amazing how two different cats with two different backgrounds with two different styles who get along a lot and really argued some, as you would imagine, which is terrific, because that means we pour two different views and issues where that is a strength. During those times, there was no question what we're gonna do.

Yeah, I don't think we ever had the conversation. I don't think we even set. Shall we do this? I just think we had to.

Yeah, that's a special thing to be ableto get in that lock step with another person. Do you feel like that? Sort of that rare thing that happens once or twice in a person's life. And And how do you attribute Sequoia success to you? You to being in lock Step like

that on that issue? Yeah. Look, it happens in sports teams. It happens when people go to war. They never again feel Why do people keep on going to Afghanistan? A reason they do that They miss that sense of camaraderie. I don't know if you study situations. I found that was war time. Make no mistake. My we weren't. It wasn't our lives. I I don't for a second. I love and respect to people that serve our country. The things they do are far more important, far more courageous than when Mike and I did. I want to make that crystal clear.

We should be grateful to them, but it was a similar sense of camaraderie. It was your business, like it was No, nothing do with business lives. It was It was the fact each one of our cells in our body could not do that. Nothing to do. We've got to save our career, our money. None of that. It had to do with being a badass and doing what nobody else would do. That's what has to do it, do the right thing when it's inconvenient to you.

Yeah, yeah, that's because, yeah, it would have been. So many other firms did throw in the towel, get the Mulligan, their business lives. We're fine. We're talking about this era right around Google's founding, and we're talking about your partner, Michael. There's a quote that I've heard you mention in the past, right? It's something along the lines of Michael telling you a few months after making the Google investment. We've we've never paid so much for so little.

I think that quote is what John Dore told Mike Moore. It's Ah, we didn't know what Google did for a long time. We knew we had smart founders when you were aimed at the Internet and we just knew we have to be patient sometime. Patients sit on your hands. You know, I had a similar but a smallest story in Iraqi smart founders couldn't figure out which way to go. And if you talk to him, what what this acquired do most. They left us alone and let us figure it out.

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

Let us figure it out. If its creation time the founders create now that could be execution time where they don't execute as well, in which case you help him. But the thing I tell founders, you get to do product mark over. You should do Prada market fit. We can't help you there. If you got proud of market fit, we can help you with everything else. And so when founders are meandering there away early on and focusing on something that's gonna work later on, you just let him create. They're the creators.

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

So the first thing I don't like the notion of you and Michael it is. We're all standing on each other's shoulders. Michael stood undone. Shoulders. I'm standing on mike shoulders and Jim gets a shoulder rule of shoulders. So it is really we. It is really a wee effort. And the other thing when confused. There's only one curve I look at for the decisions I have to make. It's the exponential curve off accelerated change. It's not linear. It increases through time. Which means if you believe in that, which means that doing nothing is the worst thing can do. It's the riskiest thing you can do. And then we also know that in the early days of the curve, you over forecasts because your linear thinker in the later days of the curve,

when the courage to keep you on the forecast. So I'm not that smart a person. But I know these simple principles, and and I know that doing, you know, do stuff. Take the shot and we'll talk more about what that means. But turn the clock back to 2003. 2000 four's Mike and I are both immigrants. There's other immigrants here. Found, as we look at are immigrants more and more founders. And so I started wondering what happens if the world becomes globalized? They're going to go home, and I thought of any A's offices with posters from India, companies in India and the U.

S. And you found her coming here and we don't have those posters. I felt, Oh my God, defense. But defense alone should make you do things, and then you think of the world that's more globalized. The world is flat, blah, blah, blah, and I thought maybe we should go there. I learned that other firms were doing flyover going there and flying and flying and making the brand and kor making investment dual brand. And so you know Ah, a few brain cells said, If we're gonna do something,

where are the large and growing economies that brought us to India? So China and India? It didn't, as I say, then bring us to Vietnam because it grows. But it's small. It didn't bring us a year because it's big but not growing. So those were the two geo. So we started making trips in trauma me teams trying to figure out how to get there, investing teams, air founding to investing, founding investing team. And I'm very mindful of a line from an old sitcom from Ah, Seen there. The sitcom is Hogan's heroes. You know Hogan's heroes.

Colonel Klink is the commander off a POW camp, and you know he's a putts, obviously in the show, And Colonel Hogan is the American was very smart, and Hogan and Cling have a safe and if you turn the handle one way. You open the safe and there's money. If you turn the handle the other way, it blows. It blows up on Hogan, looks a clink and says Klink, Which way? And Klink goes left and Hogan pulls it writer, and it opens and Klink owes. How did you know? And Hogan says, I wasn't sure whether I'd get it right,

but I was sure that you would get it wrong. And believe it or not, that scene is the scene that caused me to say, I know for sure Mike Worths and I if we make investments in China, will get around. We didn't know if the team we found would get it right, but we thought that was the least riskiest thing to do. And so we're shopping for teams and we came across. It's funny. I made 20 trips to China, and then the team were introduced. What was introduced to us by a a founder of Bill Point, which is which was a predecessor to papal, sold to eBay Ah, she introduces to two Chinese nationals that, uh,

grew up in China, had gone to school here, which is exactly why I want to have moved back to China had served on me on the board of the same company focused media. One was an investor, a d F. J. One was a founder, co founder of a company called Sea Trip. We met him on a Tuesday. We met up again on a Thursday and on a Friday morning in a conference room. A sequoia. We did a handshake deal. No contract, no anything. They were going to another venture for many afternoon. They canceled that meeting by Monday morning.

Mike Moritz, God bless him, had a P. P. M private placement for Sequoia China one and gave it to them with the notion that you want to delight your partners. When people do a deal after deal is done, you always find out it wasn't as good as you thought. We love doing the opposite, would want people to be blown away. Holy cow! Wow! Culture! And the first

the second person there was, Neal said

it was Neil shown. There were two founders, one of them what was the ocean? And so we went fund raising. We'd still don't have a signed contract and we raised $160 million fund. We were ridiculed by limited partners. We held the annual meeting in Beijing in a brand new hotel with a He broke everybody's freezing, were slightly abused. That that has turned out to be a spectacular fund. And the rest

is history. Yeah, What are some of the companies that Sequoia China has invested

in Pin Dodo Ali Baba mate Juan Baik Dan ah dot dot dot We've had somewhere near 50 60. I pose. And so I had the idea on a one page sheet. But if I tell you that that would leave you with the wrong impression at critical times where we need it, This is kind of funny. When we needed operational is move. It was Mike that had the inside that we needed to make those movie was might have made the move. So I I I've never told like this. I was incredibly grateful that Mr Intuitive, as I had him slotted in my brain, became operational at key times. Even better than I was. If truth be told and so it wasn't me wasn't Mike, it was also quite because it was as we're doing this, other people were carrying the load in America. You know, when and so it was a team. It was truly a team effort.

So while you were an U. N. Mike, we're sort of championing. Hey, we should be doing this because we think that the rest the world's gonna hit this inflection point. At least these areas. Did you have this? This is sort of a Bezos is, um that's more recent, but was there this sort of disagree in commit mentality for anybody who was here that knew that they had to hold down the fort even if they weren't pounding the table like you were? How did that go?

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

my mid two thousands when you know 10 Cent and Ali Baba exists, but like it's not clear that they're gonna be that China is going to be what

it is. It's about building a dominant world class global powerhouse that at the same time connect very local because the foundation of our business seeds If you loose seed and venture, you become, as I say, private equity firm, because later on, all you have to compete is on price. And so how do you at the same time, go global while not losing an inch on the local side? And some of the best seeds were made here in those days, and so we somehow manage to pull that off by isolated. Well, the thing I initially became the global person. Nobody else had to do that somewhere. Long line. Mike and I reverse roles where he was Mr International, I spend more time in the U.

S. And in 2012 when Mike step down due to health reasons, we thought about you. Three of us run it, you know, and we made the decision that I should run it, but we should have second in commands. And the logical wasn't with someone from the U. S. Jim gets at that time in the ocean

that makes incredible stories. Thank you for sharing all of this at the same time that you're expanding geographically, you're also expanding the suite of funds in each geography, right? In terms of adding the growth funds that ultimately the Global Growth Fund. How did you How did you think about that decision and doing that? A separate funds versus one fun together? And obviously the company needs were evolving with state private longer and everything.

So the most important thing, as I said, is to be the 1st $100,000 to help that founder. So whatever we did, we understood that is the strategic part of the House. We've always done seeds, but we thought both for clarity of thought marketing. We should do it. See fun, because we're starting to have a lot of see programs such as a scout fund and a whole bunch of others we don't really talk about. Then the world continue to change. And while it's never been cheaper to start a company and by the way I think the world change with Netscape, at least it had a major change, which meant that we went from being deep technology investors where we really only invested in technology pre Netscape to being application layer investing across many market segment travel, shopping, iPhone, Internet being part of the reasons,

So a thing started to happen. It's never been cheaper to start a company. I seat investing. When when you're doing deep tech investing, there's no need for seeds. It takes you to your little product.

But now FBN be Seed was 600,000. I think Max was 1.2

million, but that's because a nap can be built in a month. At the same time, though, it's never been more expensive to launch a company. Why you've got business is that of the words you and that economics the 02 online to offline uber door dashes the card and so on. And then, if you don't have those businesses, turn the clock back. 20 years ago, we used to launch the US Let's say in B to B, we used to be profitable. Five years later, we used to go to Europe. You can't do that anymore because you look like you have to, but you can't do that. You have launched the US six months later,

you launch your because if you wait but the time we get to Europe, they'll be 20 competitors, half of which one to come to the U s so you've gotta run fast. Which means you have to spend a lot of money, which means is bigger and bigger rounds. So we were seed on venture when we understood the company's neither more money and keep in mind we were the folks carrying the suitcases where they're from. They won. We were carrying the luggage and we thought to ourselves, Yes, we want partners, but why are we letting other people come in and dictate terms to our company's? We were vulnerable and weak, so we got deeper into the growth business. We vertically integrated. And then when? When rounds McCabe even larger.

And we have this incredible portfolio today of maybe 567 other companies, we launch the global growth. The global growth is a global vehicle to double and triple down in the best company in the Sequoia portfolio. And yes, we partner with other firms and so on, but we're able to enjoy the full ride. I view those are being more tactical product versus see being more strategic. That's the most important one. And then we also had a hedge fund because we realize that it's way tougher to go from 0 to 100 million in revenues from from 0 to 5 billion. Market captain from 5 to 25. And this is what

we talked about. This a lot. In part one of this are sick white history. The vast majority of the magnitude of gains of returns happen late Post post,

type O. And so we, you know, we learn to distribute shares to our clients carefully, not the week after the I pose or the week after the lockup. We learned that a public investment vehicle would help us many ways, including how to look at these companies retrospectively. If you're in the hedge fund, you look back to you to youth and you explain how youth can grow up. Most of us that invested in seeing adventure look up. Well, you know, we look from zero to something. The hedge fund guys look from a lot to something. So we were able to have deeper conversations about companies and what companies could become dare to dream of what companies could become. And so we found that to be quite useful, and then we launch the heritage business,

which is to make it easy. It's a family office endowment style and the reason for that. We have founders and friends of Sequoia who had done quite well. And wouldn't that be a terrific way to maintain a relationship for another 30 years? And so that's why we did it. These would just to try to build a global powerhouse, which is what we want, where we conserve founders from idea to I, P. O and beyond to personal needs. I'll go. It will go so far beyond when they have the personal needs so we can have these relationships that would last a lifetime. We all take a equal percentage off our profits. The venture group is walnuts, that China is peanuts. The Heritage Fund is cashews.

We blend them and then we redistribute him so that we all get a share of mixed nuts. But no one but no one gets more nuts is just different kind of nuts that financially into twine us, I see. But nobody makes more money. But we all have bought in that were part of this team, this global team, where we help one another while doing the very right things for the founders because it is all about the founders founders come first, by far limited partners. Most of ours are non profits. Come second and we come third. And it's not because we're altruistic, because that's if we achieve that, then it's the way to run the business for the next 100 years.

An interesting takeaway here is, as it became more and more expensive to get to your I p o or to get to be a scale global company because you have to do things exactly like you're talking about. Launch New Geo's faster grow more quickly to get ahead of your competition in these winner take all markets. You know, a major takeaway is a lot of firms took the specialization route where they say were purely Siri's A and they stay smaller, a word dedicated seed where this new asset class were precede were growth or, you know, these these large public equity institutions come private and just stay growth capital. But what Sequoia said was, Look, we're just gonna grow with the company the entire life cycle and take a very different approach rather than specialization exactly what you're saying to follow them and have the right products for them along their entire growth curve just a very different approach than a lot of people took. And and certainly there are other people doing something similar today. But it feels 5 10 years later than then. When you did it at Sequoia,

I'll made two points. The first thing is I will add I agree with everything you said and to get there as early as possible to in the first second. If we said we're on Lian a firm, what happens when? And no company has a linear trajectory member. Your Google question. They all have a little bump. What happens when that company is a little bump and you have to invest in that questionable round? If you're in, only quote a firm only see firm and you own 20% was your capital to show to the new investor that you believe. And so because it's never linear because it's never slammed on from Day one. By being there, you can support the company's at times were there are darker clouds in the sky, which helps the tracks other investors to then get to the sunny skies.

This is the perfect time, since I know we're running out of time to switch overto playbook. I think they're two questions I really want to ask you in Playbook for listeners and for you, Doug playbook is we talk about. Let's abstract out some of the themes from this conversation to what's applicability all to entrepreneurs running their businesses, too. US is. We think about parting with companies. The 1st 1 is it's just struck us and doing part one of this Koya history would actually like it. The core makes Sequoia successful is some pretty simple things. It's focus on the market. Founders come first listening. What entrepreneurs tell you, You know, Don't run your mouth. Be a business partner, not an investor. How have you guys and you thought about staying disciplined on those core things? As you've grown so much, I've imagined that takes a lot of active focus and effort.

Yes, there many answers. I think our little secret is our culture. And when I was young and business, I used to hear seals talk about culture. I used to thought it was a talking point handed to the seal by marketing. Nothing could be more incorrect. Ah, and the culture of sequoia. If I can spend 10 seconds on it pleases finding these quirky individuals who had shock to their systems, who have something to prove. Who, as I say, we're not the quarterback of the football team in high school. And you know what I mean by that? They were the shunned ones. If anything,

maybe a couple like you, Pointes High as something to prove. Maybe something happened. The family put him in an environment of teamwork and trust were relatively flat at Sequoia. So we've taken comp off the table, letting them know it's okay to make mistakes and instilling a culture that we're looking for. The truth, not your truth, not my truth, that the truth in the middle of the table that helps the founder a number of times, I said in a partners meeting. After proclaiming a point, I hear one of our young partners making a point. I say, Hold on a second. I didn't think of that.

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

just more of a sport, Nolan Bushnell told. Sometimes or no Mr Pockets. Sometimes you don't want to be number one, because then there's people sniping at you from behind

I'm providing should be into. I actually argue that Don used to say that Don Valenti's say, Let's let somebody else be one. Ah, it's better to be too. And so how how we do that is making sure we have a mindset that we've done nothing. We have a mind said that we're here from going out of business. If your Amazon you've got customers, you've got billions. You've got relationship. If you're Sequoia, you have 20 chickens walking in the back. That's all you have 20 chickens and our reputation. So I tell people, Take the Don shot everybody. It's Sequoia would know. We'd rather go out of business in a week that in five years,

for sure, and so is just have the minds that Take no prisoner, do the right thing when it's painful. To do so. Help the founders recognize when there's no product mark. You know, it's not always helped. It sounds so wonderful. At some point there's no product market fit. Then the market has spoken 19 times. Then you got have a different conversation with the founders or five e peace. Come see you. And they say it's either him or her, all of us. Those are tough times, but that happens once out of 20 times.

Some firms do the calculus that says, Oh, we don't want to ruin a reputation. Let bygones be bygones. We can't do that. It just goes against member than 1999 thing that goes against every bone. Everybody, you have to help as much as you can.

It's interesting that you talk about how it's a negative, all the previous success, and I've heard you talked before about how you pulled down all the posters on the walls here. Of all these I pose like a baron.

The Post is in this room

is very true. It's still very lovely, but it is lovely. Some would argue that the way that the venture model works. A firm like Sequoia has massive benefit from this Momenta MB of you've made great investments, which then, in hindsight, make you sort of look like a king maker. And so then you get all the best deal flow now because everybody wants to be a part of this or that you've created. Do you think there's truth to that? Do you think that's

there's a modicum truth of that? But success is a drug, you know, and you can't fall prey to that. You know, we've had investors here that have been successful, made some money, and then work is hard. You know, we have 10 10. It's a sequoia. Number one is performance, the other nine important, but you're missing one. The other nine don't matter. You could have clarity of thought. You could have teamwork,

but you're not performing. You're not here, and I tell people we're not a family. Make no mistake where a team if you don't like teams, we are a shore production, maybe the investors of the actors. But you know, the actors don't look so good without a script without the lighting person without a director and so everybody matters are the team, especially the people that make us lunch and and breakfast. They're the ones we have to treat with the most kind of dignity. They are our team members, the other ones that make this place run. And that's how Sequoia works internally.

Michael wrote one of my favorite books of the last 10 years called Leading with Sir Alex Alex Ferguson about his courier. You know, obviously all of that applies to school as well, But yet, so it's an organization that you're building. It's not a family. That's fantastic. All right. Now, before we get into grading here, I'd like to think Wilson Sonsini, the official legal sponsor of Season six of Acquired Wilson Sonsini, is the premier legal adviser to technology, Life sciences and Growth. Enterprise is worldwide, as well as the venture firms, private equity firms and investment banks that finance them.

Thank you. Tow Wilson Sonsini on a greeting. All right, So, Doug, on the show, when we great an acquisition that, you know, we big company buys little company, Facebook buys instagram, and then we grade how good of a use of capital that was. And that instance as you're well aware is ah, one of our foreign away a plus of a pluses. And we thought about how do we do grading on an episode like this and the way that we wanted to pose it to you are what are some of the things as you reflect back, you know, in your stewardship pond all your time at the firm where you would say that was an A plus and some things where,

um, you swung and missed or you watch one go by and you say, actually, you know, that's a C D or F. Um, and you know, we made up for it in this way, But this is a way to be critical of a previous decision.

First of all, I'll tell you the overall grade I'd give us and then I'll drill down greater somewhere between being a B plus. That is what I would give us. I'd give ourselves an A for the war room times of 1999. Those were our best days. I'd give a self in a for the times when we had those 51 49 conversation where will lead the right way and then to give ourselves a lot of EFS in things that came through this conference room and we just got him wrong and we tend to get him wrong, for the most often reason is that we overthink things. Sometimes we see revenue growth even early on and we overthink Well, what can this company B why? You know and we are. And at some point, revenue growth speaks for itself. I'd give myself fairly high grade and how we treat people how we wrap everybody in Sequoia. I give us high grades that we bring everybody in in this teamwork approach when we have an I. P. O ah, Big One will send an internal note about how many people touch a company.

You would be shocked to see how many names are attached to success. I'd give us grade on how we embrace failure, our failure. It's always us. I'd give us a much less agree on a missus. I give us efs because a lot of them came through here. So my blended grade. If I'm in a mike merits mood, I'll give them ourselves a be Doug Leoni mood. I'll give myself give ourselves a B plus.

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

that actually go down. So my daughter from Cornell told us about Facebook very, very early on. Kristen Georges, now product manager at Instagram. And I told it to rule off and for a number of reasons, some good, some bad, some justified, some not we would never able to get in. And we knew about Facebook for a very long time, which culminated in that presentation at Sequoia where Zuk mistaking Lee any sense, said that obviously, you know, we've all grown up. We don't hold it against Chuck came to Sequoia. I wasn't in that meeting because I was in China looking for teams,

but then we had another shot of Facebook. We had a shot of Facebook early on at a very high price, and then we were asleep at the switch when all those 89 $10 billion rounds were done completely asleep at the switch. I'd give us lower than enough. I don't know what slow on that. I give us a G. Well, you did have. What's up? So, yeah, it's Let's say that we got some Facebook

shares. Get some extra credit. Yeah. Ah, fantastic. Thank you so much, Doug, for joining us. This has been really special. Last question. How can people, and especially entrepreneurs, get in touch with you and get in touch with Sequoia?

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

Does that still work? It still works because I had written down

in the night. We get a lot of calls, but it's a email us and make it a thoughtful email. If you send an email to 14 of us, no one's gonna answer. Send us an email. That's I don't say Spend a month on it by well thought out. You know, I'm the Ah, I was this. I want to start a company. Would you be interested in meeting something like that? There are some e mails. I just don't respond. There's no chance that you know, there's no chance we're going to do that and just us too many. But if you send an email anywhere kneeled the viability that somebody may 1 in 10,000 chances ever make an investment, you'll get a response.

Loving love be aggressive. Fantastic. All right, Well, Doug, thank you so much. Um, listeners feel free to email, Doug and ah, with that, listeners, if you aren't subscribed and you like what you hear, you should were available in any podcast player of your choice. If you wanna become a limited partner, subscribing gets you access to our bonus show. Where we go deeper into the nitty gritty of building companies in real time to listen, you can click the link in the show notes or go to glow dot FM slash acquired an all new listeners get a seven day free trial with that, thanks again to Silicon Valley Bank and Wilson Sonsini,