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Sequoia’s Roelof Botha on Decision Making, AI, and the Next Trillion Dollar Markets | Ep. 28

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The discussion centers on the leadership philosophy and operational ethos of Sequoia Capital, emphasizing its long-term stewardship, the inherent pressures of maintaining a legacy of success, and the firm's unique culture of "pirates" driven by both hyper-competitiveness and deep trust.

When you're in my shoes as sort of part

of the third generation to run the

partnership, there's this enormous

burden that Sequoia has been at the top

of its game for a long time. Yeah.

>> And we have these legendary companies

that we've participated in. It was

something like 30% of the total value of

the NASDAQ is comprised of companies we

were investors in when they were private businesses.

businesses.

>> I still don't understand how that

happened, but that's crazy. Yeah.

>> And so there's this expectation of can

you keep going?

>> I am super excited to be here with you

today and I was um just commenting to a

friend that I was going to mess up your

name before we started. So, I haven't

done this before, but could you

introduce yourself?

>> My name is Bu.

>> I'm not even going to try, but you know,

I've been really looking forward to

this. This was also probably the best

pre-hat conversation I've had where it

turns out we both had a detached retina

and this miserable surgery. So, I uh I

feel lucky to have gotten to to bond

with you over that. It was brutal. I

hated it.

>> Misery loves company and we we can

certainly bond over that.

>> Spikes in your eye. Okay, here's where I

wanted to start. I was thinking about

trying to put myself in your shoes and

you're running what I think is widely

considered the best, strongest, most

storied venture capital firm and you've

been running it for 3 years now. And the

first place I wanted to start was tell

me about your mentality on day one when

you became, you know, the the head the

the steward of Sequoia and how has it

evolved over three years and what has

updated for you in your mentality as as

a leader of the firm?

>> Interesting. So, Lukquo has a long

history of generational transfer and so

we have a very interesting culture where

we um hence the title stewardship. We

are momentarily uh we have the privilege

of working at Sequoia and we have a duty

to leave it for the next generation. And

so even when I joined in 2003 I had the

sense that there were people ahead of me

who were willing to invest in me and

nurture me and train me in a mentorship

fashion and maybe down the road I'd be

in a leadership position at Sequoia. So

I think it says a lot about the culture

that we have and so we don't have a lot

of discontinuities in our leadership. So

when I joined and Michael Moritz and

Doug Leone were running the partnership. >> Yeah.

>> Yeah.

>> Don was still around. Don interviewed me

>> as the founder. He wasn't overbearing

but he was present and he provided

counsel without having to be in the room

and if there was a disagreement he

respected that. I became the steward

actually of the US business in 2017. uh

Jim gets and I had been running the US

venture business since 2010 and in 2017

I took over all of uh the US business

when Doug was our senior steward

globally and then as you say in 2022 I became

became

>> senior steward and then um

>> but I think the point is that really

that there's a lot more continuity than

you may think from the outside. Yeah.

>> This week alone I've spoken to both Doug

and Jim both of whom have been leaders

here before about interesting topics

that I needed their input on or wanted

their input on. not because they have

the right to it but because I want their

help and that's the kind of spirit we

have at Squa. when you think about sort

of what that uh you know that steward

role means, it struck me when I was

speaking with Peter at Benchmark and one

of the things I thought was really cool

was there was this sense that it's like

bigger than you and when there's this

thing that's been going for a long time

and it's been passed from leader to

leader and you're thinking about the

future obviously that's got some impact

but I'm curious how that shows up like

daytoday because like you know maybe we

can get into this but take it like the

opposite extreme like I just got started

like obviously there's Not like the

steward concept makes no sense to me

yet. Like I'm just at the beginning.

>> But congratulations by the way on your

new fundraising.

>> Yeah, I'm

>> 275 million.

>> Yeah, that's nice. Yeah. It's a start.

>> Get another competitor.

>> Absolutely. I'm a big one% >> collaboratory.

>> collaboratory.

Yeah, exactly. For now, you know, but I

think I'd imagine in your shoes that

daily there is a sort of presence behind

it of like this thing is this thing is

big and it's there's something before

me, there's something after me. Does it

impact the way you make decisions or how

you operate?

>> It comes with an enormous amount of pressure.

pressure.

>> Yeah, I would think

>> um you know, Don obviously made a wise

decision to not call it Valentine

Ventures, which was a pretty viable

option at the time, and most people

would have put the names of the founders

on the door back in those days for most

professional services firms. And he

called it Sequoia for a reason. Square

trees can live to be 2,000 years old.

>> He wanted to have a partnership that

would outlive him and invest in

companies that would endure. So it was

an important ingredient. I suspect it um

surpassed his expectations just as we

are sometimes often always surprised to

the surprised to the upside by our

winners. But then when you're in my

shoes as sort of part of the third

generation to run the partnership,

there's this enormous burden that

Sequoia has been at the top of its game

for a long time. Yeah.

>> And we have these legendary companies

that we've participated in. You know,

something like 30% of the total value of

the NASDAQ is comprised of companies we

were investors in when they were private

businesses. I still don't understand how

that happened, but that's crazy. Yeah.

>> And so there's this expectation of can

you keep going? >> Yeah.

>> Yeah.

>> Don't screw it up. And and that comes

with enormous pressure at some level.

And so there's an important dynamic of

how do you leverage this incredible

platform that you have? I mean, I think

we all feel privileged that we can do

the best work we could possibly do

because we have the benefit of the

Sequoia brand.

>> Yeah. we can win investment

opportunities, open doors for our

founders, help them do things for their

companies to help them realize their

ambitions that I wouldn't be able to do

if I was anywhere else. And that's an

incredible privilege. And yet, we have

to continue to innovate because I think

there's a real temptation for leaders in

industries to end up resting on their

laurels and you end up with the

innovator's dilemma where they stand

still and they quickly become

yesterday's winners. So, if you actually

I did this exercise when I joined. If

you look at the top venture firms in

Silicon Valley in 1990, the majority of

them no longer exist. There's a long

half-life in the venture business, but

there's no guarantee that you will

succeed long term. And so there's this

insecurity that we have at Sequoia that

really drives us. And it comes out in

the sort of people we recruit. >> Yeah.

>> Yeah.

>> Uh the culture we have, the idea that we

need to be both performance focused but

also innovative.

>> How do you keep the paranoia or the

sense that like, you know, we're only as

good as what we did yesterday? Because I

what I observe is there's a lot of firms

that are good but not sequoia where

there is much more of a sense of you

know comfort and sort of maybe resting

on laurels is too strong. I think like

ventures competitive in 2025 and I think

most people are working hard but I would

say sequoia is you know if there's a

quadrant of like how successful and

long-standing the firm and how paranoid

like Sequoia somehow seems like it's

really got both which is weird.

>> It's not always the easiest place to be

by the way. Sounds stressful. By the way,

way,

>> it is very actually if you come upstairs

to our office where the investors go

grab coffee and snacks.

On the wall, wallto- wall in each

individual's handwriting, we have

printed the handwriting that says, "We

are only as good as our next

investment." And so, every single day

when I go grab a cup of coffee and I

look at that wall, I see my own

handwriting and it's a reminder, we are

only as good as our next investment. We

cannot rest on our laurels. And so, I

think some of that is the sort of people

you recruit. Um, some of that is the

culture that we hone at at Sequoia. We

care so deeply if we lose an investment.

We are very diligent about looking at

the coverage analysis of what our

competitors invested in and did we have

a shot of that investment? Did we miss

it? Did we not understand it? Uh, is

there a category that's emerging that

we're slow to uh identify? We obsess

about that. So, I think it's a cultural

trait. You have to nurture that.

>> And the cost is that it's stressful, right?

right? >> Yes.

>> Yes.

>> Yeah. That's the only way.

>> Yeah. But you know, winning feels good.

>> Yeah. Of course. It's interesting where

I actually I'm curious because um you

know, if you're the Yankees, you expect

to win. Is there any dynamic where it's

like you become so deeply seated that it

uh that the pain of losing hurts more

than the joy of winning or how do you

basically keep culturally this paranoia

and you know we've got to stay there and

keep it joyful where it's not just the

sadness of losing and a relief when we

win but like a joy. I think you'd find

that most people who are very driven and

competitive will say that there's an

asymmetry and that the pain of a loss is

far greater than the joy of a victory. I

I think you'll find that with most

people that are driven and successful.

And so I don't think you can

wash that away or wave that away. I

think it's a reality. We have tried over

the last decade especially to do more to

celebrate our victories. Um one of my

partners Jim gets used to talk about how

you know we don't do celebration well at

Sequoa. Uh I think after the YouTube

acquisition, we literally spent about 15

minutes. We huddled around the reception

area of our office and we said, "Great."

And then it was back to our desks. >> Yeah.

>> Yeah. >> Yeah.

>> Yeah.

>> And and he was a little bit surprised

that we don't take more time to

celebrate. So we've tried uh culturally

to embrace celebration more and also to

tell the stories. So, one of the things

I'm really proud of is every time

there's a successful outcome, you know,

most recently we had the Cloner IPO, the

Figma IPO earlier this year, the Whiz

acquisition, and we were early investors

in all these companies, we would write

an email internally, and we would

celebrate not only the person who was

then the board member, but everybody

else that had an influence in that

success, the person on our talent team

that recruited that key executive that

made a difference, or, you know, the

communications team that helped craft

the narrative for the IPO story, or our

legal team that spend in endless hours

figuring out, you know, some nuance

around governance or how the company was

structured. Sometimes the people who did

diligence who or who found the company

were not the people who were the board

members by the time there was an exit.

And so we celebrate everybody's

contribution cuz we also play a team

sport here. What for you is like the

most enjoyable part? Is it about the

companies you're working with? Is it

like something to do with the team? Is

it like a purpose thing that's like

greater than the day-to-day? Like what

drives your sort of satisfaction now?

Interesting question. Um, there are a

couple of answers to that. I mean,

probably the most important one is

leaving Sequoia in a phenomenal place

and, you know, I'd love nothing more

than, you know, a decade after I'm I'm

long gone at Sequoa, being able to look

at the team and see them flourish. That

is probably the thing I think about

most. And if the team flourished, that

has a lot of um inputs to that. That

means that we've maintained a certain

culture while we've continued to

innovate. And it means that we're

serving our founders. It's the

development of individuals that I get a

tremendous amount of joy in. You know,

whether it's a young person who joined

our investing team and a decade later I

see how they're flourishing.

>> This is my favorite part of running a

company and it's

>> with individuals. Yes.

>> Yeah. Just getting to see your team grow

and you know, you you know, somebody

joins when they're early in their career

and then you just see a completely

different person 5 years later. It's

very gratifying.

>> Yes. And the same with founders. I mean,

the founders I've worked with with think

about MongoDB when we were an early

investor in 2010 and and what happened

to them. I think about um Jack when we

first invested in Square 15 years ago

and the kind of company it's evolved

into and how Jack has developed as a

phenomenal business leader. I look at

some of the the more recent investments

we've made because, you know, I've

helped us lead three investments this

year in a variety of categories. Not all

the investments are um publicized yet,

but one of them is a you know, he's a

young founder, first- time company. He's

a solo founder and we had a fabulous

30-minute conversation yesterday about

some of the challenges that he's dealing

with and just having a sounding board of

me being able to talk to him to help him

navigate a tricky issue. There's so much

gratification that comes from that. The

ability to pay it forward.

>> Totally. When you think about Sequoia

and its position in like an evolving

venture landscape. I'd be curious to

hear at sort of a zoomed out level how

you're reading sort of the playing field

today. And obviously we've got like a

bunch of dynamics happening at once.

Like you've got AI obviously is like the

big tech wave that's going at the

moment. There's others too, but like

that's the dominant one. You've got like

a bunch of firms that are really scaling

capital. Some are, you know, new, some

are older. Um, you've got firms that are

institutional and sort of have been

around for a long time. You've got sort

of new up and cominging founder firms.

I'm curious when you think about that

whole landscape, are you able to sort of

give like a summary lay of the land of

how you maybe like see things or what's

your framework for the venture world

right now?

>> So, we have the benefit of seeing seeing

many cycles over 50 years plus at

Sequoia. Uh obviously the scale of what

technology impacts today is different

from what it was a decade ago, two

decades ago. Technology just affects far

more of the world than I think we could

have imagined. So the scale is different

but you know history doesn't repeat it

rhymes and I see echoes of 1999 I see

echoes of what happened in 2008 I see

some echoes of what happened in 2021

>> happening now

>> the claims that are gravitydefying you

know this is different

>> you know and I sort of go back to the

principles of investing you think about

the truisms of Benjamin Graham's

teachings I think those remain and

things got a little unhinged in 99 and

it was different this time and it wasn't

and and it was different in 2008 and

then it wasn't and so I I just worry

about that a little bit that AI will

have a tremendous impact and some of the

other innovations that you mentioned

whether it's in robotics whether it's

happening with stable coins and how that

might change financial services there's

a lot of innovation happening I'm really

excited about the future we're going to

build we inevitably overestimate these

in the short run and underestimate them

in the long run you know I'm reminded of

the fact that it seemed pretty obvious

in 20201 that e-commerce was going to be

dominant and yet you here we are 25

years later and e-commerce is not even

20% of US purchases.

>> It's incredible. It's taken a long time.

Think about how long it's taken us to do

unbundling of cable.

>> Didn't it seem obvious that media should

go this way? And so I think human

behavior change a little more slowly

than technology is is presenting us

with. So I I think it'll take a little

bit more time. Um I don't think venture

is an asset class.

>> Why not?

>> It doesn't support the numbers. So there

was a lot of analysis back in the 1970s

and 80s with you know the capital asset

pricing model and people figured out

that there's this asset class that

supposedly has uncorrelated returns and

a bunch of asset managers deem that they

need to invest a certain percentage of

their endowment or foundation or pension

fund into this thing called venture

capital. If you look at the data they're

basically 20 companies per year on

average over the last 20 30 years that

have ended up being worth in realized

exits a billion dollars or more. just 20

companies. Despite a lot more money

plowing into into venture capital, we

haven't seen a material change in the

number of companies that are outcomes

that are that large. And I think part of

that is that there's a lot more talent

than really interesting ideas or

interesting companies to be built. And I

think we're spreading a lot of that

talent thin right now, similar to what

happened in 1999, by the way. >> Yeah.

>> Yeah.

>> So when you look at the data, the amount

of money going into venture capital

right now in America is in the order of

$250 billion a year. And the numbers,

you know, these are all estimates. Let's

just say it's $250 billion a year.

>> Need a lot of exits.

>> Well, let's just do some very simple

arithmetic for a second. $250 billion

going in every single year. If you

assume that the firms generate 12% irr

net of fees and carry, which isn't that

great, by the way. I mean, over the last

three or four years, the NASDAQ has

compounded at 16 17%. Let's just say

12%. Not spectacular. You basically just

average performance. You'd need a 3.7x roughly

roughly

>> on 10 years

>> on a seven-year exit horizon. So, I'm

being a little bit aggressive. I mean,

maybe it won't even be that good. So,

3.7x on 250 billion. That approximates

to a trillion dollars a year

>> coming out.

>> Coming out, by the way, that means and

and that's what the investors own. So,

let's say that the investors own

two-thirds of the company to make the

arithmetic simple. That's 1.5 trillion

annually in company exit value. >> Yes.

>> Yes.

>> Just think about that for a second.

>> Where's that coming from?

>> Well, Figma is worth what?

>> It's a lot, but billion let's say it's

worth you know 003 trillion so you know

if you start thinking in trillions and

figma gets you 003 trillion

>> you need 30 40 50 fig every year

>> to make that arithmetic work it just I

don't see that many companies of that

scale every year so the only thing

breaks is the return assumption doesn't hold

hold

>> and so venture is a return risk

>> not a risk-f free return

>> terrible yeah

>> you are better off investing in the

index or holding t- tilles honestly and

so I don't think venture is an asset

class asset classes scale if you add

more money you can build more real

estate there's a lot of equities there

you know trillions and trillions of

bonds to be purchased venture capital

doesn't scale with more money I agree

with you but just to take collective

sort sort of just to take sort of like

what would the collective argument be

that like you know the um that the herd

is all betting is happening I guess

there could be two things one argument

would be these companies are going to be

bigger than ever. This was kind of

roughly what Mark Andre said on the

podcast was something like there's going

to be multi- trillion dollar companies

in a way that there haven't been in the

past. And you look at OpenAI and SpaceX

and Anthropic and Anderil and so on and

there's a lot more coming out than there

ever has been before. That's argument

one. I guess the other argument is

everybody thinks they're a better than

average driver. Everybody thinks they're

a better than average allocator as an LP

and a GP. And so yes, the overall asset

class isn't doing well, but I as a

particular LP know how to pick the good

ones. And so the top decile is going to

be great. Do you think that there is

wiseness in the number of dollars going

in and like where the you know overall

industry is like does it make sense or

is is it collectively smart or

collectively stupid?

>> Well firstly I agree with Mark that the

scale of the outcomes are completely

different today and will be even bigger

in the future than they are now. So I'm

not trying to be a lite saying that you

know we should go back to the way the

business was.

>> Yeah. You know, when I was at PayPal,

there were roughly 300 million people on

the planet that had access to the

internet and most of them were on dialup

and today we have what four billion

people with, you know, high-speed mobile

devices connected to the internet. We

have all this data. I mean, so the world

is completely different and the scale of

the outcomes is much much bigger. So I

completely agree with that. It's just

that I don't think there are enough of them.

them.

>> Right. No, I hear you're the nuance

you're saying is there might be one and

a half trillion dollar companies, but is

there one every year?

>> That's tough.

>> Doesn't seem like it. That's the thing

that is really challenging this

equation. I just don't think they're

enough to make the math work for it to

be an asset class. Is it an industry?

Absolutely. Does it account for a lot of

innovation in America to keep our

economy competitive? Absolutely. Does it

drive an enormous amount of job

creation? Yes. All of those things are

true. I just don't think it's an asset

class. It's that particular word that I

have an issue with. And the amount of

money I think is in excess of what the

industry can bear to generate good

returns. So that is my quibble. People

thought that, you know, gravity, we'd

gotten rid of gravity in 2021 and that

we're going to have so many more

spectacular outcomes and it just did not

prove to be true. Yeah.

>> Not enough to merit the amount of money

going in. So, I think there's a little

bit of the uh prospect theory. You think

about Conorman and Tverki's original

paper. I think there's a little bit of,

you know, people are risk-seeking in in

this domain where take a chance may

maybe I'll be lucky, you know, maybe

I'll get the double zero on the roulette

table and, you know, now's my chance. I

think that drives more of this behavior.

Let's say you were like, you know, on my

board at Alt Capital. What would you be

pushing for me? If you were like trying

to give me advice or trying to push on

the thing that a new manager, you know,

getting started needs to do to be

successful if you want to build

something that lasts. What would you be

harping on?

>> The network you build, the tributaries

you develop for getting access to

interesting emerging investment

opportunities. This is not a business

that you do sitting at a desk, right?

You need to get out there. You need to

be able to uh meet people and understand

where interesting new founders are

thinking about building businesses. And

part of that is being smart where they

want to have a conversation with you. So

you need to, you know, study up if it's

not your field necessarily. Can you

study up on the categories that they're

innovating on so that you can have

interesting conversations that are

memorable to them because it is a

competitive business and then you need

to be congenial.

People want to do business with people.

>> Yeah. When you think about the best

investments that you've made over the

last, I don't know, let's say five years

or something, do you feel like more of

them are deals that were controversial

at the time and you picked something

that was hard to pick as a firm or do

you think it was deals that were clearly

good and competitive and you won them

through relationships and effort and all

the rest?

>> A bit of both.

>> Yeah. Like if you had to like bucket

them, do you feel like it's like a good mix?

mix?

>> It is a good mix. I mean, Zoom uh with a Z.

Z. >> Yeah.

>> Yeah.

>> Uh or Zed, as I I grew up saying, was

one of those investments that was not

controversial. We all thought it was

spectacular. The company was already

generating cash. Eric had built a truly

differentiated product in video

conferencing and sort of belied all the

naysayers that that was a a tough

category. And the challenge was winning

the investment

>> and we were able to win that investment.

And that was that was a case where we

were all above the line so to speak in

our internal voting system. And then

there are other ones that are maybe a

little more controversial where it's you

know it's a little more fuzzy. Um we had

one actually last year. It's in the um

it's a company called Aspora. They

provide um non-resident Indian

remittance services and they're built on

stable coin infrastructure. So they're

they're really reinventing the whole

process and not dealing with the

interbank system that's expensive and

cumbersome and slow and non-transparent.

And honestly that was a case where I

didn't quite get it. I was the one

person who listened to the presentation

and I really liked the the founder path.

I thought he was super dynamic and I was

a little bit worried that there were a

lot of risks in the business. And then I

looked at the the assessment from the

rest of the team and I figured out I'm

the one who doesn't quite get it today.

Maybe I maybe I didn't sleep well. Maybe

I got out of the wrong side of the bed

this morning. And so we looked at the

vote distribution and I said despite my

inclination we should absolutely make

this investment. We did and when we did

the first portfolio review um I was relieved

relieved

>> that we did make the investment because

the company's absolutely flourishing and

I'm glad I I didn't block it

>> which is actually probably super

important as a firm leader to be like

you've got you know things about you

know your vantage point that are going

to help but trusting the team in those

kind of cases obviously that's a good

good reminder. Yeah. And I think the

thank you for saying that the the one

thing we've realized um when there are

controversial decisions you you

sometimes have one or two people who

don't quite get it

>> and we make consensus investment

decisions at Sequoa. Actually when I

joined Sequoa it blew my mind that that

was the case. It sort of I thought that

committees were the you know this

exactly where bad ideas happen. And then

I understood that Sequoia has this

approach to teamwork which means that

every time we make an investment it's

our investment. It's not your investment

it's our investment. that it means that

6 months down the road when you need

help hiring somebody or you have a

strategic question, I'm helping you. I'm

I'm not going to brush it off and say

it's your problem. You you made that

investment over my objection. So, I

understood the power of us making

investments as a team. But that means

that sometimes you have a controversial

investment where one person is a

negative and everybody else sees it. And

Airbnb was a little like this when the

three founders came in. It was I mean it

was air bed and breakfast at the time.

>> It was just the three founders. It was a

nason company and there were a few

people in the partnership who had who

struggled with this idea that really

strangers are going to stay in each

other's rooms. I mean is that going to

happen? Those people were willing to go

with the conviction of the sponsors and

gave the full support after we had the

conversation and didn't block it. So I

think we've tried to harness that kind

of decision process. You you still have

a forthright conversation but we empower

those who have conviction. Do you need

to ultimately get a unanimous yes from

some like as part of the deal there that

like there's a sponsor and they have to

convince other people or can you get

through somebody who's like I still

think we shouldn't do this.

>> What we've done with our voting

distribution um as we discuss investment

opportunities is we want to have a

fullthroated full contact conversation

as we call it and it has to be about the

merits of the investment by the way.

It's nothing personal. As soon as you

walk out of the room it's as though

nothing had happened. >> Yeah.

>> Yeah.

>> Cuz it's very important.

>> It's so hard to have that. It's so

powerful when you have it. It requires a

lot of I maybe you could do it when

people don't like each other, but I feel

like you have to like each other and you

have to trust each other.

>> The key is to trust each other, by the

way. And one of the things we do when we

have our offsites, we do these check-ins

with each other. >> Yeah.

>> Yeah.

>> And almost every time we do a check-in,

somebody cries, at least one person cries,

cries,

>> and people talk about what's happening

with family health issues. They talk

about um challenges they're having with

one of their portfolio companies,

whatever it is. We have an incredibly

transparent conversation with each

other. And it's we've done all these

other things to build trust because

that's what you need. You need that that

well of trust if you're going to have

these kind of investment conversations. >> Yeah.

>> Yeah.

>> So the idea is to lay it all out and if

I don't quite see it the way you do, I'm

going to give you my full opinion

>> and then at the end of the conversation

if I feel that you've really listened to

my objections, you've weighed them,

you've digested them, maybe you've come

back a week later and you've actually

answered some of the diligence questions

and you say, "Listen, Rof, I hear your

objections, but I see it this way. I

then have to decide, am I going to block

it or I'm going to say, I'm glad you

heard it. I don't quite see the same

way, but I'm going to ride with your

conviction. And that's part of the

nuance of a subtle investment

conversation that we have to get right.

>> Yeah. And if you don't have that, the

alternative is like, I think this is a

terrible idea and I'm just going to like

graciously bite my tongue and then like

complain about it to somebody else in

the firm later, which I think is a

common state of dysfunction in venture.

>> Yeah. We have this phrase front stabbing.

stabbing.

>> Like if you say something bad, say it to

them. Yeah, it's really hard. It

requires a certain culture. It's hard.

>> And that's why I'm exhausted at the end

of Mondays, by the way.

>> Yeah, I bet

>> at the end of a Monday partner

conversation. And I think our whole team

feels this way because we're thinking

about making really consequential

decisions. By the way, it's part of why

we keep our Mondays very light. Like

Mondays, it's like the Olympic finals.

This is when we make investment

decisions. That's this is what we're

getting paid to do.

>> How do you avoid people being afraid to

give you like the front stab? Because

I'm sure you want it.

>> You're right. because um

>> we want the triumph of ideas, not the

triumph of seniority. It's really

important. So um to give you one sense,

we had an offsite in 2019 where we were

debating certain strategic decisions for

Sequoia. And we asked each team member

to write a premortem and a pre- parade

for Sequoia in 2030. So this was in

2019. So it was roughly a 10-year

horizon. And this premortem pre-parade

we put in our investment memos as well.

And then we anonymized each person's

write up because we wanted to be

untainted by the name or the seniority

of the individual. We only wanted to

focus on the merits of the ideas and the

criticisms and the you know you know

what might go right, what might go

wrong. When we do an initial vote on an

investment on a Monday, we do it anonymously.

anonymously.

>> How many people are in that Monday

meeting? Like how big a group can you

have looking at things together? So we

separate our early team and our growth

teams conversations and then we get

everybody's vote even if they're not yet

a managing member because we want

everybody's input. So it's roughly a

dozen people for each fund. We only have

six technical decision makers because we

think you want to have a small number of

people actually feel the accountability

in the heat for the final investment

decision. But this is good

>> but we have a dozen people who would

vote because somebody who might have

joined a year ago might have the right

insight. It might be the person who just graduated.

graduated. >> Yeah.

>> Yeah.

>> Who has a fabulous connection or a

fabulous insight on a new emerging

technology. We want to harness their

insights, but we look at an anonymous

vote distribution. And if you look at

that and you go, hm, we have we have

three people that are below the line.

That's interesting. And and how do we

tease that out in the conversation to

really have a a proper conversation

>> when you think about like um natural

limits to scaling a venture firm

effectively? Obviously, we just talked

about like the money in money out thing.

It would strike me and obviously, you

know, we're very, but it would strike me that

that

>> How many people do you have in your phone?

phone?

>> There's uh three others besides three. 2

plus three. I know they're all on the

investment team or is some of that

>> we all kind of I mean it's so early that

we're all sort of like working together

um you know and I'm like they're all

earlier in their career than me but like

it's a team that like what you're

describing like I trust a lot and who

will tell me when I'm you know when they

think what I'm saying is stupid or when

I don't I will very much defer to their

jud like their judgment. I think I don't

have any particular reason to think that

my judgment's any better. And so, you

know, there's advantages and

disadvantages to all this stuff, but I

think of it very much as like a team

where um I know about myself that I'm

too optimistic and I believe in people

too much and I think any idea can work

and I am dreaming about the future all

the time. I just know about myself.

>> You and I are alike.

>> I need to be optimism.

>> Yeah. I need to be balanced with people

who remind me that most companies aren't

big and that's just how it works. That's

like my starting point in the world is I

like go around liking everybody. So you

just got to be careful if you know

that's your state.

>> Interesting. But by the way, it's useful

sometimes to appoint a devil's advocate.

>> So now and again when we have a

situation where everybody's above the

line, I might privately message somebody

in the Zoom chat and just say, "Listen,

do you mind being the devil's advocate

and just

>> just so we can actually have a proper

conversation and reassess." >> Yeah.

>> Yeah.

>> So you might want to think about that as

a technique, but it certainly helped us

a bit. But like I would think that past

a certain size group it becomes like I

felt this with like my exec team at

lattice where you know we would go

through these evolutions where you know

the exact team grows and grows and then

at some point the exec meeting becomes

useless and then we would split into

like a broader exec and a senior team

meeting or whatever and like that

evolution happened many times. I would

think there's some limit to the number

of people you can have working on a

team. You know you talked about like you

know going deep enough with people that

people can like share things that make

them cry. Like you just can't do that

with a big group. >> Yes.

>> Yes.

>> I guess that's a limiter to what a

venture firm can do. I completely or at

a subunit decision-m so we have an early

team and a growth team at Sequoia. So

the early team we have about a dozen

people in the room. The growth team we

have about a dozen people in the room.

No more than that I think to make

effective investment decisions because

you need that trust. You need that

>> sense of camaraderie. You also need

enough time with each other. You know we

have you know of all the GPS I think at

Sequoia now everybody's been here

basically for at least five years. So

we've had many years of working together

on understanding each other's nuances

and traits and quirks.

>> You can have a heated discussion and

you're still friends afterwards.

>> Exactly. So and I think there's a lot of

um behavioral science research on group

size, you know, for effective decision-m

and and it doesn't. It's about the upper

bound of what you can do. You know,

there's this phrase that the the camel

is the horse that was designed by the

committee. We don't have a committee

making decisions. We have a small group

of people making decisions. And I think,

you know, by the way, that's one of the

conclusions of that 2019 offsite we had

was for us to be a leading firm in 2030.

We thought we had to keep our our

investment team small. It was so

important for us. I mean, in total, we

have about 25 investors at Squa. That's

it. And what we've done is we've

invested in technology to give us more

superpowers so we don't have to grow the

size of the team. To the point about

what's coming out, there's not that many

companies that are going to drive all of

the returns. And so you shouldn't need

that many people to find your way into

those over time. I would think

particularly when you can invest at many

stages. I mean the caveat here would be

at early it seems extremely hard to

catch everything. One of the things that

I'm jealous of that you have is a

multi-stage. You can miss things at seed

and the A and you can track it and then

you can go lead the B and the C if you

want to. And that does seem like a

powerful thing. Obviously, you know, the

earlier the better and we chatted for a

little bit before about how like you

kind of always need to be in the

business of early I believe which I I

strongly believe that but it does seem

like you have the advantages where like

on some level I imagine if I'm you know

in your seat I would be like I need to

no matter when I enter I need to be in

every important company at some point

roughly speaking. Is that kind of how

you think about it?

>> I mean that's the right price. I mean we

don't want to it's okay we're not in the

business of buying posters. Um, we want

to be business partners to founders that

make a difference and build great

long-term companies. And in almost every

single case, we are on the boards of

these companies by the invitation of the

founder who wants us at their side as

they navigate, you know, tricky issues

in their business. Um, Alfred is still

on the board of Door Dash years after

it's gone public, helping them think

through their international expansion

strategy and becoming a the last mile of

commerce in general. I'm still on the

board of and Square which were

investments from uh you know more than a

decade ago because the founders still

want me on the boards. So I think we we

want that association. You're right that

it's convenient in some level that you

might catch them later but that's also

risky because it means that you there's

a risk of complacency. Yes.

>> It's like oh I don't have to make the

seed investment if if it works out I'll

catch them in 12 months or I'll catch

them you know for the B. And so we

obsess about making the right decision

at every single stage.

>> Just never let yourself off the hook.

You can't I mean that's and by the way

part of the joy is being able uh to

participate in the company building

journey from the get-go helping those

founders from from that initial idea

before line of code was written totally

different relationship

>> and navigating all the tricky issues

along I mean there's so much by the way

just from a fun point of view

>> those are that's the formative time it's

so much fun to be part of the company

you know from those early stages and so

we love that and we love doubling down

on companies when you know um

>> I mean I do think when you join a series

B or C and you've got special people,

you know, like I know like Pat Grady or

Radi Gupta or Andrew, you know, it's

like there's people who can still become

kind of the partner of record even at

the B or the C, even the great A

members. So, you know, it's not so late

that the all the like glue is dry or

something like that.

>> Absolutely. There's a tremendous amount.

I mean, that's part of why we remain on

boards of companies sometimes after they

go public. There's a lot to do from that.

that.

>> There's a long runway and that's why we

created the square capital fund in 2022

because we believe so much of the upside

can be in these companies long after

they go public. Yeah, I mean just give

you a sense service now, HubSpot, MongoDB,

MongoDB,

all in recent memory. Palto Networks,

these are all companies that are 10x

returns after the IPO. So we believe

there's a lot of money to be made for

LPS after the IPO, but there's also a

lot of fun company building to be done.

So you're absolutely right that there's

a lot of company building all along the

way, but it's so much fun to be part of

it from inception. And so we can't rest

on our laurels. We just can't take

comfort in the fact that we might catch

them later. I mean, you know, Figma is

an example of a company that where

Andrew helped us lead the investment

from our growth fund. Uh, we led the

series C and boy, the early team, you

know, we're kicking ourselves. You know,

at the time that we first met Dylan,

this idea of the browser being

sufficiently performant to realize

Figma's vision, it wasn't quite yet

obvious and we didn't get it right. And

boy, do we beat ourselves up for not

getting it right. We're delighted we got

it later, but we keep trying to to learn

from that lesson. It's also like when

you do it early and then you lead, you

know, like what I think with WhatsApp

you led like a bunch of rounds and you

end up with like these unbelievable

results like you you can only have those

dynamics happen when you, you know,

really just keep doing all those early

rounds I guess too. So there's that.

>> Yeah, we've often doubled down whether

it was at Service Now, whether it was at

WhatsApp, whether it was MongoDB,

>> Unity, Airbnb, Door Dash. I mean, a lot

of these examples where we've kept on

investing in great companies down the road.

road.

>> I find that more impressive almost than

a single good investment decision. even

like you know one seed investment I'm

like obviously it's still impressive

when you get a good one or you know it's

sad when you miss it when you do it

wrong but like um there's so many of

these decisions when you know the a

first decision a first you know round

decision where you're on the cusp and

you barely pass or you barely you know

say yes to me when firms can do the

round over and over and keep making a

correct decision you know in a you know

market contra way or they seem to be

overpaying or they seem to you they own

25% but they lead a whole another round

when they don't really have to they're

you're so exposed. There's something

more impressive about that to me. It

seems harder to do, especially I would

imagine like, you know, once you're

already like a few rounds in, there's

something about that that really

impresses me.

>> Yeah, we don't always get it right, but

I I agree with you that it's it's

impressive when it can happen. And part

of it is the psychological anchoring

we're all subject to. You know, we just

invested in this company Seed.

>> Now it's 10 times more expensive 5

months later.

>> Really? I mean, why, you know, so we

doubled down on a company called Listen

Labs recently. uh Alfred and Floren

building this company to bring AI to

market research. Company's on fire. Love

this investment. We made a seed

investment, you know, roughly two years

ago and we double down on the series A,

but we own a lot. We're in the seed and

why don't we let somebody else lead the

A and it's it's a very interesting

conversation to have and then you plunge

in and you make the series A investment

and you're delighted. Now, now the next

question will be the B obviously, but it's

it's

>> I just think it takes a lot of it takes

a very clinical mindset to be untethered

to that stuff.

>> Yeah. clinical unemotional without being

a sociopath.

>> Yeah, that's a tough balance. Maybe a

little social for some people. I don't know.

know.

>> One of the things I've really thought

about a lot is behavioral economics and

psychology and how it applies to

investing and we're all subject to it.

I'm I'm, you know, I'm as guilty as the

next person of falling prey to

heristics. The key is when you can

identify and name them and when you

educate your team about it and we can

all hold each other accountable to it,

you can get over these biases more

effectively. Yeah. And we actually have

started to put this in some of our

investment memos where we'll actually

write down the biases the author thinks

they're guilty of as they're

recommending a particular investment

because the more you can name it, the

more you can discuss it and look at it

clinically to the point that you're making.

making.

>> I've heard of some firms where you're

not where the partner who did the

initial investment is not allowed to

make the call on a double down because

it's too hard. they believe it's too

hard to like dissociate yourself and

that you can either have the version

where you just like become too obsessed

and you go native and you're just like

this is back in to the end of the earth

or you know the other direction where

you're like you know all the warts and

nooks and crannies and so you just like

don't see it as cleanly as somebody

who's coming in with fresh eyes or

something which I thought was kind of an

interesting way to go around it.

>> Yeah, we definitely get fresh eyes on

it. We still want to harness the insight

of the person who is working closely

with the company and complement that

with somebody who brings a slightly

third party perspective.

>> A lot of focus right now in like AI

software companies goes to the product

which is obviously very new and

interesting and AI is powering that. I'm

curious to talk to you about the other

side of it which is like the cost

structure. I know you've spoken about

this, you know, in other places, but I

find it very interesting and kind of

underdised. Before getting into how it

applies in like AI times, which I think

is like new interesting dynamics. How do

you think about the component of cost

for a startup building a company, its

product, it's go to market, everything?

It's a very unsexy thing to talk about,

you know, because what certainly what

most journalists want to write about is

the snazzy new product innovation and

the features that are so cool and

whisbang. And then I tell people cost is

the secret of Silicon Valley. And they

look at me very puzzled and unpack it

for them slowly, which is I think

relentless cost reduction is actually a

far bigger ingredient to Silicon Valley

success than most people realize. And

some of that makes technology available

to many more people and it democratizes

access if you want to think about it

that way. Whether it's the little square

reader that turned every mobile phone

into a credit card terminal, whether it

was the way that SpaceX reduced the cost

of travel to space by an order of

magnitude or Google's innovation in its

data centers. I mean, just look at

industry after industry. Um, cost

reduction has enabled technologies

ubiquity and so I think people need to

obsess about that. There are two pieces

of it. One is the gross margin that goes

into the cost of your particular product

and the other one is the fixed cost of

running your business.

I think today, partly because of cloud

infrastructure, mobile technology, and

our AI, the basic cost of running a

business is lower than it's ever been. I

think it's a continuum, by the way. So,

um, 25 years ago, when I was the CFO at

PayPal, we would cut checks to Oracle

for databases and Sun for servers. 5

years later, when YouTube came around,

we were using MySQL, Memcache, bunch of

really good open-source software, and we

were starting to use the beginning of

cloud infrastructure. We didn't actually

have to stand up a colo facility. We

could use commodity servers. Google

obviously took that to another extreme.

When YouTube was acquired, it had about

50 people in the company. I think when

WhatsApp was acquired by Facebook, they

had about 30 odd employees. When

Instagram got acquired, another company

we invested in early on. Kevin and Mike,

uh, that company had about 20 people

roughly speaking at the time it got

acquired. And I think there's this

potential that you're going to end up

with a company that has literally single

digits of employees and is worth a

billion dollars. >> Definitely.

>> Definitely.

>> I think that's around the corner. And

it's this incredible um availability of

infrastructure for scaling. And you

know, it's a magic time to be a founder.

So that's on the fixed cost, but you

still need to think about your marginal

cost. And I think the the founders that

really succeed in my mind are obsessed

with understanding how they drive down

the cost to serve their customers. and

they end up with very high gross margins.

margins.

>> Why is it so important to have high

gross margins? I mean I like on some

level you could be like oh well you want

to make you want more money drop to

bottom line but I think it's deeper than

that. So I'm curious like why does this

rise to the level of like a secret of

Silicon Valley?

>> I think there's a misunderstanding where

people often think that price is a

competitive advantage. What's the secret

to your company's success? Well, I'm

going to price lower. Like that's not an

advantage. Cost is an advantage. If you

have a fundamental cost advantage of

your competitor, you might price the

same and just end up with high gross

margins. Maybe you price a little lower.

Maybe you have the same gross margin

percentage as your competitor, but you

can price below them and gain market

share because your costs are

fundamentally lower. And so I think the

reason I obsess about cost is it gives

you the degrees of freedom to choose how

to play the game. And when you think

about being powerful in business, when

you dictate the rules, that's how you

can end up succeeding.

>> Yeah. If you're talking to a founder

about this and they say, "I don't have

higher I don't have lower cost right

now, but I will. and in the interim I

can raise a ton of money because of XYZ.

Does that argument land for you or do

you say that is like that's just like a

hope and a dream and we don't we don't

think about it that way.

>> The question there is what is the logic

train and is there evidence to support

the hypothesis? So when we were an early

investor in Door Dash, we led the series

A Tony showed us the unit economics that

he had at a city level and there was a

point in time when the company needed to

raise expansion capital where the burn

rate was increasing. And so if you

looked at the company's financially

superficially, you might have concluded

that, you know, it isn't building a

viable business. But if you peel the

onion and you went down to a basic unit

level and you actually understood the

profitability in a particular town, town

by town, you saw that the business was

working and the reason it was burning

more money is they were expanding and

building new markets, but they perfected

the playbook. >> Yeah.

>> Yeah.

>> And I think that's the kind of diligence

that you need to understand. So that's

why we doubled down on Door Dash through

the early conversation and we're

delighted we did because Tony understood

the unit econom e economics of his

business and he has a detailed

understanding of his business which is

unrivaled. I also think um in the long

term this margin question is to me it

basically tells you what you can afford

to spend building your company. One day

you want to make money as a company. So

let's just say you want to be

profitable. You've got like 100% of your

revenue that you can spend on

everything. If you've got 80% of that

left for R&D, go to market, everything

else, like that like affords a certain

envelope versus if you got 20% left,

it's like, okay, how many companies have

a really good R&D or that's 6% of

revenue? Like not many. Like most of the

great ones, for whatever reason, like

the R&D or seem to be a lot higher than

that. And maybe that'll change over

time, but I also think of it as this

like offense where it lets you spend a

bunch more on project marketing.

>> Profits are power.

Profits are power. that's what you want

to focus on. So I mean that gives you

the the interesting thing about empires

by the way relative to to just regions

or countries or nations. Empires have

flexible borders and relentless

ambition. And I think about the great

companies have those two

characteristics. Flexible borders means

they keep on innovating and pushing the

boundaries on interesting new

innovations. They expand into categories

that maybe were unanticipated or novel,

you know, uh unexpected.

>> And they're relentless.

>> Yeah. And that ambition is part of why

you create these great companies, but

you need profits to fuel that.

>> I want to just connect really quickly to

the like cost structure in AI world

because obviously margins on a like if

SAS companies before AI were often 80%,

a lot are lower now. They're not like

zero, some are zero, but a lot are 60 or

four, you know, whatever. But like

there's these costs in there and then

everybody's kind of collectively

assuming that like the price of

intelligence will go down at like a

certain rate. And so you can kind of

capture market at a, you know, certain

speed and, you know, these markets are

blue ocean right now, but they won't be

for long. And so like when you're

triangulating and reasoning through

these dynamics right now, how do you

look at this when you see a company

that's a SAS company with a 40% margin

because they're using a lot of compute?

>> So I think this is a really good

question. And it's a contemporary

question because a lot of people are

looking at the current margin structure

of these uh especially AI application

companies and wondering if it's a

sustainable or a good business given the

margin structure and there's so many

parallels to think about. Um in general

in business there's this idea of an

experience cost curve that as you

increase production in a particular

industry production you know

conceptually you end up with a very

predictable curve and how costs decrease

and there's an economist and a British

economist right back I think in the 19th

century who originally coined this and

actually uh modeled it very accurately

if you go back to what happened in the

photovoltaic industry solar today is

less expensive than we thought it would

be 15 years ago and solar is

producing more electricity today than we

had predicted 15 years ago. You don't

read about this often. People often

think that, you know, solar was

overhyped 15 years. It was actually underhyped.

underhyped.

>> We fail to understand how it compounds

and a lot of people have written about,

you know, humans don't intuit compound

interest anthropologically. You know,

understanding compounding didn't benefit

us in, you know, when we were hunter

gatherers or whatever the case is. And

so, we don't quite anticipate that. And

so, I remember in the early days of

cloud infrastructure, people were

dismissive. I remember at MongoDB when

we went from being a on-prem software

company to building Atlas our cloud

database as a service initially our

gross margins were basically zero and

people were wondering well are you going

to build a real business you know being

a cloud database as a service because

the costs are so high but we had

confidence that you would drive those

costs down it was such a clear curve

that you could walk down and today the

company has fabulous gross margins the

same is going to happen in AI I think

you know if the company has product

market for today the cost of tokens is

going to keep on coming down very

aggressive ively I think the algorithms

are going to improve. The scale is going

to increase. You have open- source

models are going to compete against some

of the the proprietary models and I

wouldn't not invest or not believe that

the company isn't going to be able to

improve its gross margins. I would bet

on that all day long. Do you think that

we uh in some sense need the rate of

progress of frontier models to slow

because the faster that they're

progressing the more people are willing

to pay for the frontier and then the

margin improvements never come? or do

you think they'll come even if the

models keep getting better and better

for the next 20 years?

>> Oh, I think they'll keep coming because

the the application space is vary. And

I've I spoke to uh one of our founders,

Max, who runs a company called Fair and

he described to me how they're using a

an ensemble of different models for

different use cases in the company

>> and they use some cheap ones in some

cases and expensive ones in some.

>> Exactly. In certain cases, the

application is relatively low value and

paying for the latest greatest frontier

model doesn't make economic sense, but

they they can sacrifice the quality and

speed with an open-source model

>> and it the cost benefit works in that

particular application and in other

applications it doesn't they they need

to use the frontier model.

>> So basically in a world where you'll use

the frontier for some percentage but not

100%. probably

>> some very cheap stuff for some large

percent probably

>> depending on depending on the cost

benefit you know and I love the fact

that if the frontier models keep pushing

you'll get a continuum you'll have so

many choices for picking the right model

for the use case that you have

>> to go back to something you said earlier

um that I thought was interesting that

you know empires are relentless ambition

and open borders

>> flexible borders

>> not open borders not open borders let's

cut that from the I'm just kidding we

can keep that there's companies that are

like that too which presents an

interesting problem which is conflicts

that the founder feels that the VC

doesn't feel. You know, a company thinks

that a space that they're not in today

is one that they may or may not be in in

the future and they'd really prefer that

you don't stamp, you know, the nice

green Sequoia logo on that company

because it might be on the road map in a

few years. Please don't do it. What do

you say? Like how do you handle this

situation? cuz I think like um I think

going back to limiting factors for

venture to scale conflicts present

another one which is when you're deep

enough with the founder it is feels

treasonous to invest in a competitor but

those borders are are fuzzy when

companies are empires

>> and I think we at Sequoia have a

distinct challenge when it comes to this

because we're your business partner. I

think if um I think sometimes if you're

an early seed investor uh I think seed

investors can maybe invest in several

companies in a category.

>> Yeah. Uh but

>> so can the super growth investors.

>> So can the super growth investors

because they often aren't taking board

seats and not involved with helping with

the strategic guidance of a company. And

so I think it's it's a firm like ours

that's in the middle where we really are

your business partner of choice >> where

>> where

>> but you've chosen me and you know I'm

you know you are my thought partner to

help me figure out how to achieve world dominance.

dominance.

>> Yeah. Exactly.

>> I don't want to share you with anybody

else. And so we feel that pain probably

more than most. Um in some situations

we've invested in companies that

subsequently became competitive. So we

invested very early in both Stripe and

Square. Uh and so you know John and

Patrick at uh at Stripe at some point

realized that they had ambitions to move

into spaces that Square was competing

in. And Jack over time realized that he

wanted to compete in some areas where

Stripe is competitive in. I think

candidly the companies have more in

common and can work together very well

and yeah uh I've introduced them to each

other and I think there's more

partnership opportunity now but there

was a time where that the two viewed

each other as competitive and so when

John and Patrick would give the

partnership an update I would actually

not join the meeting

>> uh and I was not allowed to read the

investment memo and I in our internal

systems I actually couldn't access any

of the information about Stripe because

we wanted to make sure that we preserved

the sanctity of their information

distinct from anybody who was working

with who they deem deem to be a

competitor. So sometimes it happens that

you know subsequent to our investment

because we were um early investors in

both they converge. So this happens to

us frequently. I think the the real

challenge is at entry point.

>> Yeah. Cuz the convergence is like no

harm. I mean like

>> Yeah. Sort of you know it happens

subsequently and and what do you do when

it's a very mature company that has an

ambition on a on a space. So yes, and

those companies often have 17 ambitions

going at once, you know, that look

adjacent to them when they when they get

to a certain size.

>> Yeah. So I mean it comes down to a

conversation and and having, you know,

is this really in your bullseye or is

this an adjacency in an option value?

Because by the way, often if if we don't

invest, somebody else is probably going

to invest in this company. And so, you

know, you're going to deal with them as

a competitive issue. And so we want to

have a conversation with our closest

business partners to really understand

is this really one of your top five issues.

issues. >> Yeah.

>> Yeah.

>> Or is this a peripheral issue that you

can live with and and it's a

conversation because we're in a

relationship business with our founders.

So sometimes we do walk away from

investments for competitive reasons

>> and I guess it's probably a judgment

call about how deep is the partnership,

how much do you agree or disagree with

the founder, how upset are they? And you

basically just have to make these

ongoing business judgment calls.

>> Yes. But that's that's what we get paid

to do is render judgment.

>> One of many things I want to talk about

a couple of the sort of areas around AI.

Um I want to start with robotics. It

seems to me that it really ought to

work. A couple of the podcast guests

I've had have sort of walked out, you

know, like Venode Ka for example have

like walked out these articulations

where I left being like this is the next

trillion dollar market for sure. I'm

curious where you think about a market

like that where it seemed like it could

be a, you know, expensive, ubiquitous,

completely new type of product. How much

time do you spend on something like that?

that?

>> Veron and I agree on many things.

Uh, we've worked on a on a few companies

together. Uh, and on this one, I agree

with him too. I'm very optimistic about

the future of robotics. Some of that is

enabled by AI. uh you know we made an

early investment in Deepak and Abinov

who the founders of skilled they're

building a foundation model for robotics

out of CMU and it's incredible to see

what they're able to do with commodity

hardware and infusing uh it with the

knowledge and the systems that they

have. You get these off-the-shelf robots

that are imbued with the ability to just

walk stairs, climb stairs, navigate new

environments they've never seen, open

doors, uh do dishes, you know, do house

cleaning work, all the sort of things

you'd expect from a future robotics. So

whether it's that uh uh Roman who's the

founder of Robco in Germany, you know,

he's building automation for, you know,

small medium-sized enterprises, often

they're struggling to hire people and so

robotics is a fantastic solution for

them. I now have two examples like

immediate recent examples in our

portfolio where we partnered early with

these founders and I'm seeing the

results. You know, Cobalt is another

example. Brad Porter who built most of

the robotics at Amazon uh we backed that

company. They're seeing traction with

their business too. Like it's here.

>> Is it like self-driving cars where like

there's going to be you know some large

number of years between oh my goodness

the tech works to like oh wow we're what

riding Whimos around? Like are we is it

that kind of ramp?

>> No, I think it's a little bit different.

The challenge with autonomous vehicles

is the the risk of paper crashes, which

is part of why we don't see Whimos on

freeways just yet.

>> Um the challenge in robotics is a little

different. Most of robotics until

recently, I mean, obviously robotics is

a massive massive industry, but they're

typically very large machines that are

relatively dangerous and they're

cordoned off for humans. Like I don't

know if you've visited a Tesla factory,

it was actually when I bought my first

Tesla, it was such a fun thing to go see

the Tesla factory and you see all these

robots. You're like, "Oh, this is so

cool." But because of the risk of harm

to humans, they had to be kept separate.

I think the beauty of this age is when

you get computer vision in these robots

and they can interact with us in our

normal environment, that unlocks so much

more possibility. And if you can get

them into a form factor that is not

likely to cause human harm, I just think

it unlocks possibilities. Look, at some

level, we already have robots. I mean,

you have roomos running around cleaning

floors and things like that. I mean, at

a small scale, we already have some of

the early inklings. And I think we're

going to stair step our way into this. I

mean, if it gets to something

generalizable in the home, it should be

truly enormous. I would think

>> you're right about that. But both

Skilled and Robco, well, all three of

them, Skilled, Robco, Cobalt, all of

them have revenue today actually serving

customers in a variety of different use

cases. Whether it's hospital systems,

whether it's airport security, whether

it's uh small manufacturing firms that

need robotic assistance to help them

scale, all these companies have revenue.

They're actually up and running today.

And so I don't think this is a a lab

experiment where you see the demos but

who knows if it's real.

>> Like it works. It just has to get everywhere.

everywhere.

>> It works and it's slowly progressing

into more and more areas where the cost

benefit of of it makes sense. And a lot

of it comes down to the cost of human

labor by the way. Yeah.

>> And part of the reason Japan has

roboticized so much more than other

countries is because the cost of labor

got very high and so it made economic

sense for them to do so.

>> That should be the case here too, I suppose.

suppose.

>> And that's part of what's changing is

the cost of labor in America is changing

and that necessitates that. So if you

think about, you know, the way the

minimum wages have gone for um the

restaurant industry in California, for

example, it's driving many more

restaurant chains in California to try

to figure out solutions for automation

because otherwise the business models

don't work anymore. It's actually one of

the favorite books I read this summer

was um how economics explains the

history of the world.

>> And it's, you know, just because you

invent something doesn't mean it'll be

applied. It needs an economic driver.

And I think that's precisely what's

happening now with robotics, too.

>> We're back to costs. >> Exactly.

>> Exactly.

Other than robotics, what are some of

the other big like societal level things

whether it's education or government or

healthcare? What are like other like big

big areas that you think outside of like

business applications that AI you think

is going to matter a lot in the next few years?

years?

>> Healthcare is one I'm enamored with in

particular. Um genetics

>> sequenced the human genome 25 years ago.

It's actually the 25th celebration of

that. That was an enormous research

initiative to get to that point. Uh, by

the way, the cost of sequencing the

genome follows one of these phenomenal

cost curves. Uh, if you've ever seen

these plots, it's actually faster than

Mo's law and how the the cost of

sequencing has dropped dramatically. And

that's opened up so so many more

possibilities for us. Whether it's

prenatal screening, which is basically

ubiquitous now in America, whether it's

helping do oncology screening, uh organ

transplant rejection screening, um

newborn analysis. You know, one of the

one of my friends at Stanford in the

genetics department has got this

technology to be able to do a whole

genome sequence. he developed originally

for the NICU unit at Stanford where they

can sequence a full human genome in hours

hours

>> because they have these babies where you

need to understand their genetics very

quickly to make clinical decisions that

are um life-saving

>> and so I think about all these

possibilities around the field of

genetics they're incredibly powerful and

that's a dividend we keep on benefiting

from um as that cost curve rides down so

I think genetics is super interesting um

and then I think about AI by the way in

the healthcare industry either you We

only have about a million physicians in

America. It's stunning.

>> It's not that many.

>> And we have got a population of roughly

350 million. We only have a million

physicians. What can we do to make them

more productive? Partly by giving them

tools. So, you know, we partnered early

with Daniel at um Open Evidence. that

company is now being used by something

like 40% of American physicians,

>> which is great because by the way, like

you speak to physicians who have been

doing it for a while or you speak to a

new one, it like seems clear that like a

a newly minted doctor today is like

exhausted and overworked and there's

like too many patients and like they're

rushing through things and they're

documenting and the patient experience changes.

changes.

>> I don't know why it seems somehow

different. I don't know if the ratios

changed or something else changed, but

it seems like if you talk to older

doctors like something's different.

Well, I think the the burden the ratio

of patient to physician has changed

because I don't think we're we're not

creating as not the right word. We're

not educating as many physicians as we

need to support the level of population

we have. So the burden per physician has

increased. So we need tools to help

efficients make better decisions but we

also need need to alleviate their

administrative burden. So

>> you know the US healthcare industry is

something I think it's 16 17% of US GDP

is spent on healthcare. Yeah. Roughly

one in5 dollars in healthare is for the

administration of healthcare. >> Yeah.

>> Yeah.

>> So if you think about that it's almost a

trillion dollars a year.

>> I mean they're typing in Epic a lot.

>> So you know we have a company called

Freed that's helping with automating uh

the workflow for a physician. So it's

not helping with the clinical decision

making the way that open evidence is but

Freed is helping just automate the

workflows. How do you um take a

dictation of the patient visit and

automatically understand how to write

the record? What is the follow-up

appointments that need to be scheduled?

What are the referrals you need? What

are the prescriptions to follow up? And

if you can save a physician an hour or

two a day of admin work, I mean that is

pretty dramatic in their uh their

day-to-day lives.

>> Yeah. Are there any other areas in

particular outside of those robotics,

healthcare? There any other like society

important things that have you like

particularly animated?

>> This may sound cold, but I think money

is societal.

>> What's cold about that? Yeah.

>> You know, sometimes people feel that

money is dirty or whatever. I think you

know at the end of the day commerce and

capitalism has been the

>> the financial system

>> the financial system is the biggest boon

to human welfare

>> and when we um improve the efficiency of

the commerce system I think it has

massive societal benefits and one of

those in my mind is stable coins and the

way that we are using stable coins to

rewire our financial infrastructure. A

lot of our systems were built decades

ago with what was the best technology at

the time, but it's dated and it's slow.

And so we have this ability to use

stable coins to reinvent that. And um

Stripe is one of the companies at the

forefront of this with uh some of what

they've developed. They also bought a

company called Bridge that we're an

early investor in. Uh and Bridge is

being used for international transfers.

I mentioned this company Apora that's

helping at a consumer level with

international transfers. And so I I

think there's a really interesting

possibility for us to to completely

change our financial system and make it

far more efficient. uh ultimately for

businesses and for consumers.

>> As a final sort of topic, what I wanted

to ask you about was your team and how

you think about building the team, the

composition, who you want to attract,

what values and activities you want to

sort of promote or dissuade. My first

guest on Uncapped was Shawn Magcguire,

who I love. I think he's awesome. Um,

and he's also like a polarizing figure.

He says a lot of stuff online that I'm

like, go Sean. And a lot of people are

frustrated. Um, and on first glance it

could seem like Sequoia is this

extremely professional, not like overly sort of bombastic place, but Sean, you

sort of bombastic place, but Sean, you know, says what he feels online and is

know, says what he feels online and is an important member of the firm and is a

an important member of the firm and is a great investor. And so I guess my first

great investor. And so I guess my first question is, is that a sort of tolerated

question is, is that a sort of tolerated edge of the center of Sequoia's culture

edge of the center of Sequoia's culture or is that in some ways like the heart

or is that in some ways like the heart of it? I think it's the heart of it and

of it? I think it's the heart of it and it actually goes back all the way to Don

it actually goes back all the way to Don and his own streak of irreverence. Don

and his own streak of irreverence. Don told me a story when I joined where he

told me a story when I joined where he was going for an interview at IBM and he

was going for an interview at IBM and he was sitting in the waiting room for this

was sitting in the waiting room for this interview and he noticed how everybody

interview and he noticed how everybody was wearing the same navy blazer and he

was wearing the same navy blazer and he just thought wow this is a place of

just thought wow this is a place of conformity and he realized then that he

conformity and he realized then that he needed to move to the west coast and

needed to move to the west coast and break out on his own and I think that

break out on his own and I think that streak of irreverence actually runs very

streak of irreverence actually runs very deep in Sequoia. It's part of why Don

deep in Sequoia. It's part of why Don backed the sort of founders he did when

backed the sort of founders he did when he backed Steve Jobs who at the time I

he backed Steve Jobs who at the time I believe wasn't wearing shoes and maybe

believe wasn't wearing shoes and maybe had just come back from a trip to India

had just come back from a trip to India and was not bathing regularly, maybe

and was not bathing regularly, maybe didn't smell that great. Don saw through

didn't smell that great. Don saw through that and so we've always had this view

that and so we've always had this view at Sequoa that we're backing the

at Sequoa that we're backing the underdogs, the unknown, the defiant. Uh

underdogs, the unknown, the defiant. Uh you know, our founder prototype is

you know, our founder prototype is somebody who's a little unusual. These

somebody who's a little unusual. These people want to change the world, the

people want to change the world, the audacity to change the world and the

audacity to change the world and the will to do it. And we need to reflect

will to do it. And we need to reflect that on our own team. And so we have

that on our own team. And so we have always had a band of kind of quirky

always had a band of kind of quirky people. My partner Doug always said, "We

people. My partner Doug always said, "We want to recruit people to Sequoia who

want to recruit people to Sequoia who want to be pirates, not people who want

want to be pirates, not people who want to join the Navy." To me, Sean is like

to join the Navy." To me, Sean is like that. We we want to have a band of

that. We we want to have a band of pirates at Sequoia. And that's how we

pirates at Sequoia. And that's how we think about our team composition.

think about our team composition. >> Yeah. It's really hard to build

>> Yeah. It's really hard to build something outlier as a founder, I think,

something outlier as a founder, I think, if you yourself don't have some outlier

if you yourself don't have some outlier or out of distribution traits.

or out of distribution traits. >> Absolutely. And and by the way, an

>> Absolutely. And and by the way, an outlier is not one standard deviation

outlier is not one standard deviation from the mean. Yeah,

from the mean. Yeah, >> you know, Alfred, my partner, talks

>> you know, Alfred, my partner, talks about this and an outlier is, you know,

about this and an outlier is, you know, not two, not three, probably four

not two, not three, probably four standard deviations from the mean. And

standard deviations from the mean. And these people are crazy enough to start

these people are crazy enough to start companies and they actually want to

companies and they actually want to change the world.

change the world. >> Yeah. Uh the other thing I'd say about

>> Yeah. Uh the other thing I'd say about Sean and as it applies to the rest of us

Sean and as it applies to the rest of us and this is my partner Pat Grady who I

and this is my partner Pat Grady who I think you've spoken to he had a great

think you've spoken to he had a great way of saying this was just we look for

way of saying this was just we look for people who are hyper competitive but who

people who are hyper competitive but who have a heart of gold because you can

have a heart of gold because you can sometimes get people who are hyper

sometimes get people who are hyper competitive who are individual

competitive who are individual contributors don't want to play a team

contributors don't want to play a team sport uh and don't necessarily look out

sport uh and don't necessarily look out for the others and we need people who

for the others and we need people who have a heart of gold at Sequoia uh

have a heart of gold at Sequoia uh people who bleed Sequoia green people

people who bleed Sequoia green people who go do whatever is necessary to help

who go do whatever is necessary to help a founder succeed but also look after

a founder succeed but also look after the well-being of their own teammates.

the well-being of their own teammates. And anybody who's actually had an

And anybody who's actually had an opportunity to speak to Shawn would know

opportunity to speak to Shawn would know that, too. Somebody recently used a term

that, too. Somebody recently used a term to describe a sort of similar type of

to describe a sort of similar type of person as a killer teddy bear. And it

person as a killer teddy bear. And it really stuck with me that it's somebody

really stuck with me that it's somebody who uh is ultimately very high

who uh is ultimately very high integrity, high caring, but they're like

integrity, high caring, but they're like playing to win and they're going to do

playing to win and they're going to do what it takes.

what it takes. >> I love that. Yeah.

>> I love that. Yeah. >> Yeah. All right. This was extremely fun

>> Yeah. All right. This was extremely fun and I uh means a lot that you took the

and I uh means a lot that you took the time for this. So, I uh want to say

time for this. So, I uh want to say thanks and uh really enjoyed it.

thanks and uh really enjoyed it. >> Thank you.

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Sequoia’s Roelof Botha on Decision Making, AI, and the Next Trillion Dollar Markets | Ep. 28