Last November, longtime Sequoia partners Alfred Lin and Pat Grady became the firm's co-stewards. For more than 50 years, the Silicon Valley firm has backed some of the biggest winners in technology, from Apple and Google to Nvidia. Today, it manages more than $80 billion. But as detailed in Bloomberg Businessweek, it recently raised another $10 billion across its growth and expansion fund. Since then, the Sequoia partners have made a risk-to-the-franchise investment in Anthropic. They've returned to investing in chips and continue to hold on to one of the firm's greatest investments. With us now on Bloomberg Tech, Alfred Lin and Pat Grady, to discuss what's changing at Sequoia, the technology companies of tomorrow.
I want to start with how Sequoia, you published what reads to me like a mission statement. It outlines principles the firm's held for quite a long time, and I think some new ones that you are trying to emphasize. Alfred, is that fair?
Well, first of all, thank you for having us. It's really fun to be here with my co-steward, and we get to do this together. And it's because it's our Sequoia. It was never Don's Sequoia when he named it Sequoia Capital, 54 years ago. I wanted to make sure that everybody at Sequoia thought of it as our Sequoia. That's principle number one. Principle number two, if you take care of the founders, they'll do right by our LPs. We do right by LPs, we'll do right by Sequoia. We do right by Sequoia, we can take care of the team, and then we can take care of every single person at Sequoia. That is a principle that has been at Sequoia for a long, long period of time. And also, we are only as good as our next investment, and that is not a risk to your franchise. It is what makes us Sequoia.
And I noticed the smile when I read out the line. We will get into how that manifests. I mean, it's a title. You regard yourselves as partners.
Yeah, as part of a partnership. Yes. Correct.
As Sean Maguire outlined to me in a telephone call, he rejects the notion that you're bosses. You are partners in a partnership. So lots of people, like, how would that work?
Well, so first off, on this boss thing, we had a funny conversation with one of our partners a couple of years ago where he referred to somebody as a supervisor. They're like, your supervisor? What are you talking about? He's like, well, he's my boss. He's my supervisor. Like, no, no, no, no. This is a partnership. The only way that we're going to bring out the best in all of our partners is if it feels like a real partnership.
Okay, so one of those principles that you mentioned with our Sequoia is this idea that influence should be awarded to expertise and reason and not to tenure and hierarchy. And what that means practically is in any given conversation, if we're going to make an investment decision, I might have less of a say than our other partners, like Shawn or Andrew or Sonia or David or Constantine, because they might actually have more expertise on a particular topic than I do. In fact, they have more expertise on most topics than we do. And so this idea that influence should go to the people with the expertise, not the people who happen to have been around for a long time, that's what makes it a partnership, and that's what allows us to play at our best.
There's no tiebreaker, essentially, that you get awarded. You participate under the same rules as the rest of the partnership.
Right. I mean this with full respect.
What does the term co-steward communicate that any other title doesn't? I think you both don't want to get bogged down in administrative duties. You want to participate in the partnership.
That's part of the reason why it gets the two of us together. And part of that is we are partners across the board, and we get to help lead the organization. And part of leading the organization has to do with making sure that we have structure and we sign SEC documents. A lot of it is administrative, and we get to split that so that both of us can stay on the field.
I try to make sure that Alfred signs all the SEC documents, but literally, this is the part that is really good about this.
But this is a partnership. We wanted to show the value of partnership, and we want it to be a team effort. And not everybody has to do everything. And this idea of stewardship, if you go back to the original generational transition, which was Don Valentine head of the firm to Doug Leone and Michael Moritz in the late '90s, the standard at the time was to have the younger partners buy out the departing generation. Don instead gave it to them for free and said, your only job is to leave it better than you got it. And so that's become a very core part of this, continuing that tradition, this idea of stewarding it for the next generation, as opposed to there's no concept of ownership. All of the partners own the partnership together. Our job is to make it great.
We're sitting here talking about, you know, you're eight months in essentially as co-stewards. But in that time quite a lot of things have happened. I want to get to what you've enacted or changed that's different in that eight-month period to the history of the firm. And one of the things outlined in the Businessweek article is if you are a partner that is interested in an investment, you can propose at any time.
Yes. Through various means and mechanisms.
So traditionally in Silicon Valley venture firms, you have your Monday morning meetings. You guys have said basically seven days a week, any time.
Well, let's talk about being customer obsessed. Yes, we are.
Who are your customers exactly?
Our founders. And so we should work on the founders' timeframe. If the founder wants to raise fundraising, they have a timeline. We should abide by their timeline, not the other way around. And this notion that we get to have every decision happen on a Monday is kind of a little backwards. Are we the customer to the founders, or are the founders our customers? And for us, we want to send a clear message that the founders are our customers and we're customer obsessed.
And there's a second concept here, which is outlier. Founders want to work with outlier people. And so our partner Ravi has this idea of playing free. Everybody should play free. And we don't want Luciano or Andrew or Constantine or Sean or David or Sonia to become another Alfred or to become another Pat. We want them to be the best version of themselves. And the only way we can do that is if they feel like they can play free, like they have rope to just go at 100% velocity all the time. And then our job is to help enable them, not to get in the way. And so we are tight on principles and we are tight on values. We're very flexible on process.
So some people that might sound chaotic. Just, it literally, how does it work mechanically?
It is. Somebody will send a WhatsApp to the rest of the partners saying, 'Guys, got a great offer. We have to meet now and talk about it.' A couple of days ago, an email came out recommending a controversial investment. We go into a document. There's a lot of commentary in the document. Here's what's good, here's what's bad, here's what I like, here's what they don't like. What are we going to do? We had six people on red-eyes to New York on five different planes. It was a spur-of-the-moment decision. We spent two hours with the company yesterday morning. Yesterday afternoon we signed a term sheet.
So gang tackle, get everybody in front of you. Sit down. Which company?
Oh, I know, I'm sure you would, but yeah. And the answer is, I can't say, but probably a monster. Probably one that's going to be huge.
Was it a big check? Were the stakes high?
Come on now. Hang on. We try to get the smallest possible dollars for the largest possible outcome. Our job is to put small dollars to work and make them large dollars.
There are some case studies we're going to get to later in this conversation that would say slightly otherwise. Let me ask you this. Conviction over consensus. So in lots of partnerships, be it a venture firm or a law firm, you know, you vote. Your structure is very different. Things are not achieved by consensus. How does it work?
We could do the big dollars if we have to. Conviction over consensus.
So in lots of partnerships, be it a venture firm or a law firm, you vote. Your structure is very different. Things are not achieved by consensus. How does it work?
We vote. But the point about conviction is that you need conviction to be committed to a company for a long period of time. We love building companies and helping founders build companies. We want to be an early believer and compound with them into the future. And that requires real conviction by the person who has the most expertise. And so when we debate, we are trying to get to truth. We are a truth-seeking organization. And there's much better conversation when there's a debate than when everybody says, 'Oh yeah, I agree,' and then it's usually a bad investment.
And let me give you an example on that since 2019. Sean Maguire joined Sequoia Capital. He joined the early stage team. 2019, Zoom had just gone public. We just got into business with Dylan Field of Figma, who I know you guys just had on. The combined market caps of Tesla and Nvidia were approximately the same as the market cap of Salesforce. So to set the stage in 2019, the thing on the menu was software. Software was consensus. We love software. Everybody loves software. Sean, a brand-new early-stage investor, shows up and says, 'I think we should invest in a rocket company at $20 billion.' We thought that was insane. But Sean had conviction. He had done the work. He painted the picture. This was pre-Starlink. It was a launch company and the main customer was the government. Sean painted the picture of what this thing had a chance to become. And it's become one of the best investments. We're talking about SpaceX. So that was conviction at work. That was 2019.
But what I'm trying to get to is the idea that in any number of voting partners, the majority might say, I have a lower conviction. You guys do it on a scale of 0 to 10, you don't count fives. But just two might say we are 8 or 9. We love those kinds of investors.
And you do go with the investments. We've been recording the data since 2014, so we now have 12, 13 years of data on this. And we thought that continuous conviction investments would actually be the best investments. And it turns out it actually doesn't matter whether it's continuous or consensus. All that matters is presence of conviction.
I want to get to Sean because it's outlined in the Businessweek article, and Sean has been on this program, and I've spoken to him somewhat regularly. The idea is that Sean has made, let's say, incendiary posts on social media. He has said things that are divisive, but you regard him as being unique, right? He has a unique background and set of interests that you believe put Sequoia into opportunities that you would not otherwise have. I don't want to speak on your behalf, but let's talk about that.
I think we should just talk about the balance sheet. Sean, like lots of people, has shown the positives and negatives. You just talked about a bunch of negatives, and I just want to make sure that people understand the positives. The guy was one of the top ten Counter-Strike gamers when he was in high school. He was a day trader in high school. He then went and got a PhD in physics and quantum theory. If you regard physics as hard, quantum theory is one of the hardest. When he joined Sequoia, he put together a hardware manifesto. He led us into hardware. He led us into space with a lot of conviction and a lot of courage, because the vote from other partners was a one. On a scale of ten, it was a one. And he kept pushing because he was a ten out of ten. He tends to be either a zero or a ten. Fairly binary person. And so in terms of conviction, he has strong conviction. He's been right a lot. He led us into crypto. SpaceX is one of the biggest returns that this firm has seen in its history.
And I also go back to the thing we were talking about earlier. We want everybody to become the best version of themselves. Now again, we are strict on values and principles, and so we need to believe that when people behave, they are doing so with the best possible intentions, and they're doing so with a standard of excellence that we expect of all of our partners. If they are doing that, and if we happen to agree or disagree with the output, the agreement or the disagreement doesn't necessarily matter. It's the inputs that we tend to focus on.
