Sequoia's Alfred Lin: "Software Code Is No Longer a Moat" | 2026 Upfront Summit

Yeah. The thing about Sequoia is when you try to look up their AUM, you can't find it. And so I wanted to ask you, if everyone's measuring their funds in AUM, what are you measuring, Sequoia?

No, seriously. One of the things that we talk about at Sequoia is just the funds that we invest in today. We just focus on today and the future. And so actually I don't actually know what our AUM is. We obviously file it with the SEC at the end of the year, but we just focus on the seed fund that we're investing in, the venture fund, the growth fund, the expansion fund, and our public pool in SCF. And that's what we're focused on, the investments that we're making today. And the line that we have is we're only as good as our next investment. The thing that we measure is being a net liquidity provider to our LPs. So we believe in alignment of interests and we think about founders first, then LPs, then Sequoia, then our team, and then ourselves. And when you do that, we actually measure how much we've distributed versus what our AUM is. And when you distribute, your AUM actually goes down. So we're giving money back to our LPs. And I think that's very, very important to our limited partners, many of whom are universities, endowments, great causes. They're trying to do good in the world. And I think it's a very, very important thing that we do that.

Yes.

What were the companies? Yeah. Airbnb, DoorDash, Unity, Snowflake. I'm sure I'm missing a few others. Square. I don't remember those. We're focused on the future.

We're only as good as our next investment. So we're focused on the future. As someone, we have the luxury of having a 53-year history. It's great to stand on that platform, stand on the shoulder of giants, but we're only as good as our next investment. That's what investment firms are about. It's about the future. It's about generating returns in the future. And if you think about it, I joined Sequoia 15 years ago. Pat's been in there a little longer than me, maybe 18 years. And the two of us are more excited than ever before because we're in this world of accelerating change. And AI is the biggest mega trend that has been around since our career. And you could probably say that about every previous mega trend. Like we probably thought that the internet was bigger than anything that we had saw before. But this is why it's exciting. When I joined Sequoia, the largest market cap company was probably 300, 400 billion dollars. Today we have companies that are worth four and a half to 5 trillion. If you give it another 5 to 10 years, those companies continue to compound, it'll be worth 10 trillion or more. And so what we're doing is a moving target. What is exceptional performance is a moving target. We have a wall at Sequoia which is the wall of legendary companies in our Valentine conference room, our main conference room named after Don Valentine. And those companies also keep changing. What we consider legendary keeps changing. And so yes, there are companies like Apple and Nvidia and Google that have been there for a long, long period of time. But when I first got here to Sequoia, what was required to get onto that wall was a hundred million gain. Today it's in excess of a billion dollar gain. And I'm sure in a few years we'll be looking at $10 billion gains or more. And so it's a really, really exciting time to build because what is possible was not possible before.

Well, things are just moving a lot faster. You can do things with fewer resources. And yes, a lot of the resources go into compute, but you can start a company with way fewer resources and get started much, much faster. And the revenue ramp and the revenue retention are just much faster than in previous generations. We used to talk about how long it takes to go from zero to one. And zero to one, most often we refer to that as product. You find product market fit. Then we renamed zero to one as zero to 1 million in ARR. But you see companies today going from 0 to 10 million ARR in very, very fast time frames which we have not seen in the past. So this is very, very exciting to see how quickly companies can develop. And I think one of the things that we forget is that when we become more productive, we just do more. And so there's a lot of dystopian messages about how we might have high unemployment. There's going to be a shift. There's going to be some things that are going to be out of favor or in favor for some period of time. But if you look over the long period of time, what we've done is just we continue to be able to do more and more with computers, with software, and that's not changing. And right now there's this big narrative that AI is going to do to SaaS what SaaS did to software. Well, don't forget all of that is software. AI is a lot of software. SaaS is a lot of software. Traditional software still exists. Oracle, the last time I checked, still exists. If you think that they're a legacy company, I don't know why OpenAI would want to leverage their balance sheet and their tools to be able to run data centers. So, there are going to be some people who are going to be disrupted. There are some companies that are going to get disrupted, but the people who embrace change, embrace the new tools, the companies that do that do survive over the long period of time. And we just, it's so cool that we don't have to do mundane tasks. We get to do much more of the strategic work, the more creative work, the more human work. And that's why we're very, very optimistic at Sequoia and I think the world should be very, very optimistic about AI.

Well, every time we go through one of these paradigm shifts, I think there's this desire to have very simple narratives. And the simple narrative, as we just talked about, is AI is going to kill SaaS. And I just don't think that's the case. And the reason I know that that's not going to be the case is because I lived it. When I dropped out of my PhD program in statistics, it was 1997 and I made this proclamation that I needed to drop out of grad school because the internet was happening and I didn't want to miss it. And the statement I made, the simple narrative I made was that e-commerce was going to destroy brick and mortar, that Amazon was going to kill Walmart. And that just didn't happen. Walmart is 20 times larger today than it was in 1997. Now, if you had to pick one stock, yeah, sure, Amazon's a better investment, but it's because Walmart embraced the change and they changed with the time. There are just as many companies disrupted in e-commerce by the technology, and those companies were disrupted and went under because they ran a poor business. There are plenty of brick-and-mortar companies that were disrupted and went out of business. But if you embrace the change and embrace the technology, many of the companies that we shop from today have both physical and an electronic digital website. And so I think that the same will happen here. We're going through a paradigm change here. And some of the things that we believe to be true are not true. And so it's this tension and this balance of, okay, what were moats in the past? What are moats in the future? Those things are not going to be the same. And the very obvious statement is every single line of code that's generated has a marginal cost of zero. So therefore, the lines of code is no longer a moat. That's probably overstated. If some company has written 10 years of code, can it be replaced faster than 10 years? Yes. But that's always been true. A copycat competitor is going to be able to come after you and do it faster than you. And now with coding tools, maybe can do it much faster. But even then there's so many aspects of a business. What is the moat? What about distribution? How about your customers? How do you keep them on, etc. And I think these are the questions that we have to struggle through. And I think people want to snap to the endgame all the time. The end state is where all these companies that are going to survive, whether it's traditional software companies, SaaS companies, or native AI companies, all of them are going to embrace AI. That's the end state. All these companies that shift will embrace AI. And so we know that that's to be the case. But who wins, who doesn't win along the way, we get paid and we get joy out of working in the midgame. And the midgame is so fun because we have to figure out our ways through this world.

Yeah, I think a lot of the board conversations, because we're board members, we just snap to the end state. What does the end state look like? How do we navigate there? I think the plan to navigate there is just as important as stating what the end state is. I think it's probably easier to state the end state and much, much harder to understand the path from where you are today to where you want to get to in the end state. And I often talk about this with founders and their vision. They have this vision of the world, of this world that doesn't exist today because they have this vision of the world. And we can all agree that that's a better state of the world than it is today. But you have the realities of where you are today. And your job, as a founder, a founding team, a management team, is to connect the dots along the way between these two states and these two worlds. If you don't, how do you know you're on the right path for yourself? And then if you don't know it for yourself, how do you communicate that to your employees to make sure that they're aligned along the way? I think we've always learned from the best founders. They just are maniacally good at making sure that their companies are completely aligned on the mission and where they are and how they get there. That is true for Elon. That is true for Brian Chesky. That's true for Tony Hsieh. That's true for almost anyone that you know that has been a successful founder and have navigated a company from their start to what you consider to be success, which may look like an overnight success but it's at least a decade long journey and maybe it'll be faster, things are accelerating, but we keep moving the goalpost so it will still probably be a 10-year journey, a decade or two decades or three decades because the goalpost keeps moving. When I joined Sequoia, the term unicorn was not even created. I think Aileen Lee created that term in 2012, 2013. I joined in 2010, but today we have a lot of unicorns and that, yes, you go from zero to being a billion dollar company. That's great, but that's not the endgame anymore. And a billion dollar exit is not what it used to be.

I'm not in the failure business. I'm in the success business.

I mean, I work in a business where our most successful fund had a 50% write-off rate. I think you might have heard us mention that. So, we don't dwell on the companies that are most vulnerable. I think the companies that are most vulnerable have very similar characteristics. I can tell you that it's not exactly the companies. It's the companies that don't embrace change, the companies that don't understand that they're in a paradigm shift. They think that what they did yesterday was going to work today. One of the things that is really interesting to me about what was a moat yesterday and what is a moat today is that I think if you are stuck in your ways, you cannot see that at the limit of every paradigm shift, the next shift has a completely different system of moats. So legacy software, the moat was your ability to get your software sold and embedded, and once it's embedded, because one person made the decision, which is the CIO, and they can force the whole organization to use it, that was the way to stay in. So you took them out to dinner, you'd wine and dine them, etc. SaaS had a completely different way of selling. It was bottoms up. It was to the user. I mean, in some cases the user started using them and then the sales team inside of Slack would say, 'Hey, Mr. CIO, you have like 30 employees using it. Oh, actually that was last year. You have 200 employees now. Maybe you should buy an enterprise version of this.' That's a completely different way of selling. And the moat is usability and not your ability to know who the CIOs are, and that's a very, very different way of going to market. I think in the world of AI the same will be true. I think a lot of things are shifting right now and I think it's incumbent for founders to sort of think through some of these things. The shift from traditional software to the internet to the cloud to mobile. There was a shift in development that most people don't really talk about, which is from waterfall development where releases were 2 to 3 years old, and probably not all of you are old enough to remember, but I used to remember Microsoft having to update their OS every 2 or 3 years and I have to go buy it because it was a new OS. They would release their Office every two or three years and then in the cloud the two or three years became one year, became a quarter, became monthly, became daily, and became whatever patch time that they needed because there was a security hole. Now you don't even have to go to the store to buy these CDs and download new software. You don't have to buy the new software even through the cloud. It just automatically updates to your phone. And so we've moved and we've pushed Scrum development to its natural limit where the teams are much, much smaller. Waterfall development teams were much larger. Scrum, you heard Bezos talk about the two pizza teams. It's usually a small number of developers, a small number of engineers, some small number of product managers or maybe one or two, and a designer. That's why it's called EPD, engineering, product, design. And maybe they add data science now because the data informs how the product is going to be. All right. So you're talking about four to eight, maybe 10 people, that's why it's called two pizza team. Well, now with all these coding agents, a developer can develop and use Figma and use everything else that they need together to launch a product. A product manager who doesn't code anymore can now just prompt Claude code to code. A designer can come up with a creative design and then embed all the things and launch a prototype. So every single person now can be their autonomous team and in that world, what is the new world development paradigm that's going to significantly change. I was at a board meeting last week where they looked at how many people were using these tools and there's some correlation. It's not a perfect correlation between the number of people who utilize a bunch of tokens and the people who utilize less. And they looked at the productivity of their top engineers. The top 5 to 10% of their engineers shipped three times more than they did last year. That is a significant change. But now since they're shipping so much, those people are bottlenecked by coordination and communications and things that we haven't figured out yet because those people think that they can move even faster. But they still have to get the rest of the organization behind and aligned. We have to solve those problems. Every problem has a solution. Every solution creates new problems. And so, so long as we have more problems to solve, we will all be employed if we embrace the new problems. If you don't want to embrace the new problems and you just want to solve yesterday's problems that's already been solved, I'm sorry.

I wouldn't say a plethora. We're very selective. Each partner only makes one or two investments per year. We have a seed fund, a venture fund, a growth fund, an expansion fund. And some of these investments are in the expansion/public portfolio. And those tend to be much larger public buys, kind of investments. I think the reality of the situation is, if you ask what people are using, they're using everything. And yes, the sands are shifting and there's a lot of leapfrogging. And because there's a lot of leapfrogging, there's just a strong desire for all these tools. And I think there are a lot of companies that are just paying for all the tools because it's making their employees way more productive than without them. And so instead of choosing, they're choosing to buy all of them. And the question is does that last forever or do you start standardizing on one or two or three? Our view is that it's not a zero-sum game. And part of that is there is really no price on intelligence. If you're more intelligent, if your system is more intelligent, if your product is more intelligent, if your company is more intelligent and makes better decisions, you're going to make more money. And so, so long as that's true, you're going to continue to consume more and more of these tools.