#618: Roelof Botha — Investing with the Best, Ulysses Pacts, The Magic of Founder-Problem Fit, How to Use Pre-Mortems and Pre-Parades, Learning from Crucible Moments, and Daring to Dream

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Optimal minimal. At this altitude, I can run flat out for a half mile before my hands start shaking. So then I'll do a personal question. Now it is. A cybernetic organism, living tissue over metal empty scale. Sure

Hello, boys and girls, ladies and gents, this is Tim Ferris. Welcome to another episode of the Tim Ferris Show, where it is my job every episode. Certainly this episode to deconstruct In this case, a world class performer to tease out the habits, routines, lessons learned, favorite books, et cetera, that you can apply to your own lives. My guest today is Rolof. Botha that's spelled R-O-E-L-O-F-B-O-T-H A. Roloff has spent more than 20 years building companies in Silicon Valley. He began within the walls of nascent PayPal in the early early days, which he joined in March of 2000 while completing his MBA at Stanford. He became CFO in 2001 and led the company through both its IPO in early 2002 and subsequent acquisition by eBay. And we have quite a few stories about all of that. Rolof joined Sequoia Capital.

in two thousand three. legendary and effective venture capital firms ever in the history of venture capital to help Founders build enduring businesses, which he has done many, many times now. He leads the US Europe business as managing partner and serves as senior steward of the Global Sequoia Partnership. Rolof is a director of Twenty Three and Me, Bird, Ethos, Evernote, inside.com, Landis, MongoDB, Netera.

Pendulum Therapeutics, Square, and Unity Technologies. There are more. Previously he was a director of companies that include YouTube, Tumblr, Zoom with an X. Asurex and Eventbrite. He also led Sequoia's investment in Instagram. Speaking of Instagram, you can find him on Instagram at RolofBotha, on Twitter, Same and LinkedIn as well. We'll provide all of those in the show notes at Tim.blog slash podcast. Without further ado, please enjoy this very wide ranging conversation with Rolf. What the.

All right. So for those of you are wondering why I'm laughing, I forgot to press the record button and I'm glad that uh we were able to catch it. Rolof. So nice to see you again. It's been quite a few years. And I'm so thrilled that You've been able to

make time and that both of us have have been able to make time to have this conversation. So thanks for being here. Thank you for hosting, Tim and Look forward to the conversation. So I thought we would start with a question that I asked before We pressed record on our back up and not the primary, and that is how do you pronounce your full name properly if you were in your homeland?

My parents would call me Rulof Bueta. Rolof Boyter. Pretty close. I'm not gonna pass for an offer Connor, but Your pronunciation's excellent. I'll respond to that.

I have heard a number of fireside songs. In Afrikaans, I suppose it would be Afrikaans. Having spent some time in in South Africa. in the last year, but we're not gonna spend a lot of time on that. I want to though spend time on Note taking. And also

Different visual cues that you've used. At different points in your life. And so here goes the first question. The first question is I have And you can't believe everything that you read on the internet, but something in front of me that says you used to have

Ten to the ninth power. Written in the corner of your notepad. I guess every week when you started at Sequoia. Is that accurate? And if so, could you explain why that's the case? That is accurate.

It was clear that if if I wanted to make it as a partner. You needed to produce meaningful games. And I'd set myself the goal of producing a billion dollars in gains. For the partnership,'cause that would mean that I I'm made it at some level.

And so ten to the nine, which is a billion. was my shorthand of reminding myself what I was striving for. Now What was the notepad used for otherwise? And was this on the top of every page or

Something you saw. On a weekly basis, I'm wondering on these the the frequency with which you saw this and also what the notepad was used for otherwise. This notepad was used generally for note taking, but it was really on Mondays in particular when we had a partner meeting. But we would review all the decisions for a particular day. And

That would be the notepad where I'd make notes about the companies that we're listening to. My own Views on companies, what did I worry about, what did I think was interesting? And so That was the most important day at some level for you know, we refer to it as the Olympic finals uh at Sequoia. It was the m the Monday partner meeting and the importance of getting those decisions right. And so that was the day where I needed to remember very acutely What was I striving for?

So now I done this when I was younger too. I don't know if you'd heard this. I had and we're gonna get to that. But let me ask you before we flashback and do the sort of the wavy Austin Powers flashback to childhood, which I will do in a minute. With the ten to the ninth, did you have in your mind a particular time frame? For that.

Or was it just a reminder of the magnitude of the goal? before you if you wanted to move the needle. I didn't really have a time to mention at the time. Things have changed a lot in the venture business. Technology has infused so much more of the world. I keep reminding myself when I was at PayPal in two thousand There were about two hundred million people on the planet that had internet.

Two hundred million. That's wild. And the vast majority of them We're on dialogue. Right, so by the time I joined Sokoi in two thousand three, we we didn't even have broadband reaching fifty percent of the US population yet. So the numbers were still much smaller and technology didn't have the scale that it does have.

Today. And so I just thought eventually get to a billion. Now honestly I feel like it's ten to the ten that you need to strive for.'Cause you know, technology just inf uh has infused so much of what we do. So let's do as promised the The rewind. Two

Childhood. And I'll let you take This ball and run with it wherever you want to go. But I did read a bit about your high school system of having your goals visible to you.

While you were studying. At least that's based on a bit of reading. I think this is actually from it should be accurate because it's from SquareCap.com or the articles thereof. So could you please elaborate On what you did. back during that era of your life. I thought I needed uh there there's a concept in psychology called the Ulysses Pact.

Which is this idea that you know in the birth of Ulysses he wanted to hear the siren, so he had all his soldiers, all his sailors Wax up the ears, tie them to a mast, and that way they could sail past and he could hear the sirens. And they wouldn't succumb to them. And so in psychology the Ulysses pact is this idea that you make a pact with your future self, knowing that your future self is going to be weak. And so my technique for doing this, not having read about psychology yet, was

On the door, leaving my room and candidly all over my room, reminding me of what I was aiming for. And in high school it was to be the top ten in my state at the end of high school. A college it was And I would just put all these reminders of what my goals were. So if I was tempted to get up to go make a cup of tea or watch television or take a break.

I would just see what I'd written to myself and I'm reminded of what I need to do if I want to achieve what I want to achieve in life. Do you still use reminders? Like that? Of any type or d or do you feel like you've hit a certain Escape velocity where that's no longer necessary.

I still use some of those. I mean, when I was in Sequoia, you know, as you pointed out earlier, I had the ten to the nine. I try to keep track of how I spend my time. When I was in college I would literally Right down the time that I started studying down to the minute. And then I write down the time that I got up. So that I would have an accurate tally at the end of the day of exactly how much time I actually spent studying instead of just thinking that I was studying and just loafing around the house doing nothing. And so

I use Evernote to do that. I I organise Key things that I want to accomplish. for Sequoia and for each of the companies that I work with. So I always have this running list of What are the key things you need to focus on? The most important the three most important things you need to accomplish for a given company

over the next say six months. As a reminder of the most important things. I wanna jump next to a headline. And this is, I believe a headline in a local newspaper when you graduated from high school. You can correct me if I get any of these details wrong.

And it was and again, I'm not gonna pronounce this correctly because I will play it safe and use my my Long Island accent, so Both as grandson is number one. I believe was the headline. Could you Use that as a segue into explaining who your grandfather was, but also I'd love to just know

How that headline. Landed for you. And what it felt like. So my Grandfather was the equivalent of the foreign secretary for South Africa and I I think he served for close to twenty years in that capacity.

He was ambassador for South Africa to Germany, to Denmark and to the United Nations. In his time he'd met Reagan and Thatcher and Kissinger and these s were the sort of people he interacted with. And he was a part of the national party of the government that ran South Africa until The first democratic elections in nineteen ninety four. My grandfather was an agent for change, even though he worked in the party that was the ruling party that had enforced apartheid, he wanted to galvanized change from within. So he was part of the the group

that announced the unbanding of the ANC in nineteen ninety. And he actually served in Nelson Mandela's first democratically elected government. From nineteen ninety four till nineteen ninety six when he retired. So he was A very well known, very prominent politician, you know, by some measure when I was a child

Growing up he was probably the second most powerful politician in the country. I was named after him. It was literally, you know, the convention in in the African uh culture was that the firstborn son gets the father's father's name. And so that's why it was named after him. But because he was so well known, it meant that I also lived in his shadow and I was often referred to as so and so's grandson, my you know Pope Burta's grandson. And so the headline

Refer to him. And I was proud of my achievement and I was proud of my grandfather, but at some level I also wanted to be myself and Always referred to as, you know, in reference to somebody else. So we may come back to that.

But You seem like someone who is Repeatedly not taken the path of least resistance, which I mean is a compliment for sure. Let's talk about

Actuarial science. Now I must say one of the funniest things that has happened to me in the last few days is in the process of doing research for this. You may know this, but if you throw your name into Google, the first thing that pops up is role of both a South African actuary, which I love. I just think that's fantastic. So could you please explain why you chose actuarial science? as your degree and also by way of doing that just explain what actuarial science is. So I finished high school in nineteen ninety.

Yeah, the A NCO is unbanded and honestly. At the time it was unclear whether South Africa would have a peaceful transition to democracy. If you'd looked at the history of most other African nations that had gone through this kind of a change from sort of a quote unquote colonial past The picture wasn't pretty. And so when I chose what to study

Part of the dimension was would it give me an ability to work and live abroad? And actuarial science was something where after you got your undergraduate degree you'd study professional exams and become a British qualified actuary. So technically I became a UK actuary. Which meant that I could work in the UK, and Canada, and Australia and a couple of other commonwealth countries. And so that Portability of my own. Qualification was a really important decision point.

The other one was the most Difficult degree to get into. You could get a bursary to study for it. My family couldn't afford college, so I got an insurance company to actually pay for my tuition. And it was challenging. So what actuaries do, by the way, is they run insurance companies, pension funds So whether that's life insurance or general insurance and are involved with the in investment management for those companies as well.

So Think of it as a financial engineering degree. So technically I I majored in natural science, economics, and statistics. So there's a heavy emphasis on mathematical statistics as part of the degree. So in addition to the math, and I don't have the full context here in front of me, but does UCT stand for the University of Cape Town? Am I getting that? Right, I may not be able to do it. All right.

Well right, exactly. Yeah. So I wanted to just confirm that and build off of what you said to add, and this is a I guess an indirect quote the way that I'm gonna read it, but Professor Robert Dorrington. At U C T. has said quote Actuaries are trained thirty years into the future and accountants are trained to think a year in arrears. Do you feel like your training or maybe the attributes that led to you choosing actual science?

entrepreneurship and venture capital, or do you think that's too much of a reach? I think it did, honestly. As I said earlier, the actual degree is about financial engineering, sort of the mathematics of finance, if you will. And so In a very practical sense, when I was at PayPal

The techniques I'd learned. were useful in understanding the fraud problem that was latent at PayPal. And we were able to catch our fraud challengers. Months before others did, and it's part of the reason that PayPal survived. But of a twist of history that that training actually was very specifically helpful in that situation.

But this idea of thinking long term, there's a What's the horizon over which somebody Thinks and plans. And

I think part of What we Try to focus on Instagram but what I think has made me a decent investor is just Trying to think much longer term, not just thinking quarter to quarter or a year out, but thinking about the possibility of what might happen with companies.

And we've had a chance to go read the original YouTube investment memo, for example, but There were three founders. friends of mine from PayPal Days when we invested, so I was the fourth person really to join the company when we invested and There was a way of imagining what might happen if this actually works. What if it goes right? 'Cause it's so easy to worry about all the things that can go wrong with every company. So so I do think the training helped, but in the classic nature nurture debate, how much you know, was I prewired to think that way or not, I don't know, these things feed on each other.

I'm not gonna even make an attempt to separate those. I don't think I can do it in my own life, so I won't even presume to be able to do it for anybody else. I would love to Ask you and we're gonna bounce around a lot because I don't wanna do this chronologically. I wouldn't do that if we were just having wine over dinner, so I'm just gonna follow my interest here. And uh then perhaps we'll we'll jump back. Two PayPal. So th the first question I suppose is somewhat chronological.

Under what circumstances would you recommend Two A young Would be entrepreneur. that they go into

Consulting. Or would you generally advise against That path. I would generally advise against that. As a career choice.

I chose to work at McKinsey, I don't regret the decision I made, but for me it was Again an opportunity to work with an international firm. I worked at McKinsey from ninety six to ninety eight, so South Africa just opened up from sanctions. We'd had sanctions from nineteen eighty five till nineteen ninety four. The country was starved for international talent. And so you know, this international firm shows up

I could learn from people from all over the world and they would give me an opportunity to either study or to work abroad. So that was a lot of the The magnetism for me to join McKinsey at that time. I think if you're Already in the US. Go do something a little bit more direct.

The best business school is actually being in business. Is actually going to join a company and actually experiencing what it's like. So if if that's your ambition, I mean there's if you want to be a consultant, there's nothing wrong with that, but I think As a way of delaying difficult decisions about what might happen your career. It's a play it safe decision. It's not a a risk seeking decision. So I have a number of friends. Including

fantastic, meticulous doctor named Peter who spent time at McKinsey. And Peter as one example. Loves matrices.

And specifically, he loves two by two. Matrices. And I'd love for you. To

Explain who Don Valentine Is And we're gonna uh we're gonna explore that a bit, but Could you also explain what his two by two matrix was? So Don Valentine is one of the fathers of Silicon Valley, one of the fathers of venture capital.

Don grew up in the semiconductor business. He was a national and fair child semiconductor back in the nineteen sixties. And he started Sequoia Capital in nineteen seventy two. And We should get back to this later, but he made a very important decision calling it Sequoia Capital and not Valentine Capital. Don had an amazing career as an investor. He

Back to Apple. When a lot of people were unsure about backing a barefooted Not well dressed Steve Jobs. He backed Atari. He backed EA. He backed Oracle.

Cisco and the list goes on. He had a remarkable track record as an investor. And When I joined Sequoia, he was Still around, still alive. Uh he passed away two years ago. And very early on he pulled me aside and he said

There's a two by two metrics of people we get to invest in. Exceptional, not exceptional. Easy to get along with, not so easy to get along with. Your job today, Rulov, is to figure out in which of those four quadrants we normally make money. Yeah. I have not heard this story. I don't know the answer. I could hazard a guess, but why don't you

Tell us. Number one, did you figure it out? And what is the answer? I think you have an intuition for it. It's you know, exceptional, not so easy to get along with. And

And the reason it's you know, when you think about the the uh the founder Prototype or personality type. You know, most of us encounter challenges in the world and we just let it go. This is difficult, this doesn't work, this frustrates me, and you just go, Ah, whatever, and you move on to the next thing. Founders are these people who don't accept the way the world is. They want to change it. They encounter frustration.

And they do something about it. Going back to the Cisco example, right? The founders of Cisco With the heads of the computer departments for computer science and and the business school at Stanford. And they were on different networks, so they could send primitive electronic mail within departments but not across campus, and the two of them were romantically involved. And we're getting tired of walking across campus to see each other. They wanted to I'm not kidding you, this is the like the first internet of the story. It's great. This is fantastic. And so the the founding inspiration for Cisco was connecting the networks of the computer science and business schools at Stanford.

And that's the founding story, right? Instead of just accepting the status quo. And so there's so many other companies we're back with, this is the example, right? Jack and and Jim started square because there was a lost sale. I mean these personal frustrations are just incredibly powerful. So so when you think about a person who wants to take on the world and doesn't just accept it, that tells you a lot. About what the founder is like. Right. highly likely to push back on Uh.

Anything that I would imagine that they don't feel is fully aligned with the change that they want to leave in the world or impart to the world. So let's

If you wanna Continue. Actually I would love to hear you continue. So what are some other characteristics? that could be related to the exceptional, not so easy to get along with, or they could be separate. that you have identified

within the data set of Hits from Sequoia. Where you've made money. And by you I mean Sequoia.

Well, first it starts with an authentic identification with a problem. that founding inspiration'cause if you If you're trying to start a business for the sake of starting a business, it's so hard. There are so many challenges on the on the way to building a successful company. If you're doing it for the wrong reasons You're gonna walt.

You simply won't persevere, but if you're deeply motivated by what you're doing You'll keep going and you'll overcome obstacle after obstacle. And so that to me is one of the key starting conditions is Found a market fit f found a problem fit. Yeah, I love asking a founder when I meet them. How did you come up with this idea?

What is the Eureka moment where something snapped and you want to do to address this problem and What is it about the current solutions that you must have evaluated that frustrated you that you didn't think was good enough? And then the next one is what's your unique and compelling value proposition? So Having evaluated alternatives and deciding to build something, why do you think what you're building is so distinct that it has a chance of flourishing and becoming a real business?

So I can tell you one specific story. There's a a founder, Matra Benevitz, he and I met in high school. In South Africa, nineteen eighty seven at a nerd camp. Uh it was actually called an academic vacation school, but it I mean that's just a a very nice way of saying nerd camp. And He's absolutely brilliant. He was gold medalist on our national science Olympiad. He came to Stanford, he studied physics, electrical engineering.

And in two thousand and two his sister had a baby died Then a week of birth. And He was shocked at the state of prenatal testing. And he went back to Stanford and he learned everything he could about biology and genetics.

And started this company Natara. Where I'm still on the board fifteen years later, we made a million dollar seed investment in him in two thousand six. Just an idea. Today they're They deliver millions of tests. To help people have healthy families.

But it started with an incredibly authentic inspiration for him, which is seeing what his sister had to deal with. No, I've never heard of The elegance of this phrase you used. Before the founder problem fit.

But And I am just a tourist in the startup world compared to your immersion as an entrepreneur, operator, and investor. But if I look back at all of the angel investments I've made The founder problem fit is the defining feature of any of the hits. Not.

Product. market fit, which may also exist, but in terms of The hierarchy. of weighted importance. It's this founder problem fit. That's a fantastic phrase. What else have you learned or did you learn?

Rather from Don. Valentine. And it could just be anything that you observed in him. attribute, behavior, habit, or otherwise, but What are some of the

Takeaways. From having spent time with him. Incredibly good listener. You think about the Stereotype maybe of an investor who's

Fast talking and needs to be heard. Don was very comfortable sitting for an hour and just listening. And absorbing. And then he was very Precise.

With these questions. Precise with his notes. I remember Receiving a note in my inbox from Don. I was confused initially because there was no to or from so I didn't know who it was Yeah, who'd written me this note.

So I walked around the office saying Who you know, who left this for me? And people looked at it and said It's written in green ink. It's done.

So Donna had exclusive use of green ink in the office. No one else was allowed to use a green pen. He loved the colour of money. But you would take a full page and there maybe be ten words on the page. They were just so incredibly concise in describing the feedback that he wanted to give about a company or when he interviewed people. I saw some of his interview notes about people. You know, instead of writing two pages of notes about the interview

It was just so crisp and on the point. And so his ability to distill things Very concise, it is incredible. You mentioned Earlier. The question of

What happens if this goes right? And I'm paraphrasing. But like what does this look like, say five, ten? Years down the line, even more, if this goes right. Could you speak to

The practice of pre-mortems and pre-parades, if I'm getting The term. Correct? Correct.

It was actually a technique that I picked up from Larry Summers. Former Treasury Secretary Summers is on the board with me at Square. And he actually joined pretty early. He's been on the board for almost a decade with me now. And he posed this as a challenge to the management team at Square about

Imagine things go incredibly well over the next three or five years. Actually write it down. Don't just think about it. Write down what does that look like. What does success really look like? What does the company look like? What have you achieved? Which markets do we operate in? Which products have we shipped? Then go write a pre

Mortem. Things didn't go the way you want it to. What does that look like? And so we've Taken that concept, we actually use it in our investment memos. So for every investment we contemplate, we write a pre mortem and a preparade.

And when we've had strategy off sites for us ourselves for the Sequare Capital Investment team. We did this too. We had a pre mortem. It literally said twenty thirty. Autopsy of Sequoia Capital. And what went wrong?

What are all the things that gonna cause us to not be a great firm in the future. And it the the value of this exercise is in again back to the insights from Don. It really crystallises first order issues. Because you can spend all your time scurrying around doing all the busy work. If you're not focused on the things that will really compound and matter over the next five to ten years, you're missing the boat. And it's the the urgent important trade off It's all those things woven into a very practical exercise.

How often would you do the Pre mortems. At the Sequoia I suppose team off sites. Every two years.

Every two years. I think every year is too frequent because things just don't change that often. I mean, we may revisit something if if there's something that's really changed. Mm-hmm. There's a why now qu uh why now is one of the questions we love to ask obviously is like Why now? So You know, we made an off cycle decision to open up in Europe, for example, something we hadn't done for

a decade. We kept on thinking about should we open up an office in in Europe, should we be on the ground. Instead we kept on flying into Europe and we made some great investments. We were early investors in Unity and Klarna and No, several other companies. And at some point we realized There's just so much company formation.

Happening in In Europe. And especially after the global financial crisis, there's a whole crop of young people in Europe that now aspire to building companies when that wasn't the case before. So we revisited our assumptions and changed and that was an off cycle decision. Let's dig a little bit deeper on the the premortems specifically as applied to Sequoia.

So let's just say Your At and off site. And let's Can pull a real one to mind.

Yeah. And you're asking yourselves, you know, imagine the venture business In ten years time. Sequoia's gone. What happened?

Are there any Answers that you can brainstorms that you can share. that proved to be very valuable in decision making for the firm because I will say for people who don't know the venture capital Ecosystem. One

thing of many that has impressed me forever, for as long as I've known about Sequoia is the longevity. Of Sequoia. Are there any examples that you could give of pre mortem answers? That have proven very important in decision making.

For sure. By the way, the Long live. You know that the Sequoia tree is the longest lived tree in California. Right. And that's the reason that Don chose to name Sequoia Sequoia. It wasn't an accident. He wanted the partnership to outlive him with a lot of

Consequent behavior. And actions. And you also wanted us to invest in companies that stand the test of time, which I think we've done disproportionately. So You know the couple of things from the off sides.

I think one of the most important ones is hubris. The downfall of every Greek tragedy. And the extent to which we raised. Yeah, one of my favorite quotes is No wreath.

Walt's as fast as one that's restored. Mm-hmm. We cannot Best on the past. And it's part of what motivated me when I joined Sequoia, by the way. I you know, the mo the motto we have inside our building is you're only as good as your next investment. And I saw that hunger and determination from people like Michael Maritz and Doug Leone who clearly made it in life.

And yet they were relentless in the pursuit. So very important for us as a team to think about hubris. We need to make sure that we continue to meet companies at the earlier stages of formation. So If you think about the history of Sequoia's investments, when when we invest it in Atari or Apple or Cisco, we were the first investors.

They were often Single digit numbers of people around the company when we first invest it. We invested in YouTube there were three people. LinkedIn there were seven people. Pala Alto Networks, one founder in our office. Thank you better. If we start losing grip of that early stage of being in touch with entrepreneurs right at the inception, that's very dangerous for us.

There's this temptation to then drift downstream and become a late stage investor. And so that's probably one of the most important things we talked about in our venture uh in the off site is we've gotta make sure that we stay at the fountainhead of company formation. Yeah. Just a quick thanks to one of our sponsors and we'll be right back to the show. This episode is brought to you by Wealthfront. There's a lot happening in the US and global economies right now. You see it every day in the news. Are we in a recession? Is it a bear market? What's going on with inflation? What's going to happen? I can't tell the future. I don't know anyone who can, but I can tell you about a great place to earn more on your savings, and that's Wealthfront. Wealthfront is an app that helps you save and invest your money.

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Dot com Slash Tim. This was a paid endorsement by Wealthfront. So let me

As a follow up related to that last year. Points. And this may g be getting too into the weeds, but I'm curious. Early stage investing. has become

So I would say competitive, or at least the field is flooded with players. Compared to say two thousand seven when I first started paying attention to startup investing world.

It's almost nothing. like it was today, uh in in terms of competition and the number of just sheer The sheer number of people willing to write checks. In different forms, in different fashions. I would imagine with a

Famous Firm. with multiple funds as you get to larger fund sizes. in order to invest at the earliest stages and have those offers be accepted without over diluting the founders. It seems like you would have to amass

An army of people. Two. maybe handle that to have sufficient capital outflows to make the entire operation work. How did you guys think about solving for Still investing.

at the very early stages as the firm and the funds grew. We don't wanna hire an army of people. Our investment team candidly is about unchanged over the last decade. We only have about Two dozen or so investors in our US and Europe business. Because if you want to make good investment decisions, you need to have small decision making groups.

Committee don't make Great decisions because then you have you know your average To the mean. And great investments depend on. Outlier instincts.

And we are looking for the outlier founders, the founders who dare to build Really exceptional companies, not just investable companies. So we've tried to keep the team small. We've also kept our fund separate. So we have a seed fund that's distinct from a venture fund that's distinct from our growth fund. And the teams are lined up against each of those'cause I think what you point out is a real risk that if you have I'm just gonna make it up. Let's just suppose you have one pool of capital, you have one ten billion dollar fund. Making a five hundred thousand dollar seed investment in something promising seems

And then the whole team starts. Chasing what they think are bigger investments. And so that's one of the dangers that we've guarded against. So we have separate teams focused on different areas. And the key is to look at the the multiples. It's not about the input, but you know.

Many of these small investments we've made have turned into very large gains. It's not about how much you invest, it's about the the impact it can have. In terms of the competition, by the way, I actually think it's fantastic that there's this much competition. Because what used to be a cottage industry in the nineteen eighties and nineties, because that's just it wasn't a big market. I I'm not saying that dismissively, it was just it was a smallish industry. The industry has had to professionalize. The beneficiary of that ultimately are the founders.

But we've had to up our game. Yes, we had a talent team when I was still at PayPal, Sequoia had a talent team, but Yeah, just one or two people. Now we have fifteen. And

We're just delivering many more services to startups to help these companies succeed to give them an unfair edge and a chance of outsize success. So So I think it's really in service of founders, it's it's fantastic that the business is like this. It makes it more competitive, but it's all right. Yeah, I think you guys are gonna be fine.

I mean it's also I think incredibly advantageous to build a winning streak. say a firm such as Sequoia has because you also

have a selection bias with inbound with respect to very good deals. So I suppose that helps in part with maintaining a smaller team as opposed to a larger Scouting team that's going out and canvassing sort of every corner. of the landscape. Is that a fair comment or do you think that's

Is there more to the story that you'd like to to flesh out? Do I think it's true. Yeah. Blessed. By having the history we do so the companies that we backed when they were private today account for over twenty five percent of the total value of the Nasdaq.

That's wild. Over a quarter of the Nasdaq were companies that we backed when they were private. No other venture firm comes close. So that is an incredible achievement, and it means that we're a magnet for other opportunities, often because of sector expertise or experience. So because I'm the board of unity. I might disproportionately get people who work in VR and AR because they're they're developing on the Unity ecosystem. And so that gives us access to this. So there is a way in which the industry success begets success for sure.

But it can also be a curse because if you have a lot of Inbound. Are you spending enough time thinking critically about where you want to spend time? where the opportunities for tomorrow might lie. And so there's a danger there that you you may spend all your time just taking inbound opportunities instead of pursuing The best founders and the best company. So there's a balance there.

Roll of what? Books. if any, come to mind as books that you have recommended or gifted the most Two

Other people. The two different ones. There's Man's Search for Meaning by Victor Frankel. Mm-hmm. Which invariably shows up on these lists of you know, a hundred books you should read before you die.

Which really had a big impact on me. Spoken about it at Sequoia founder events, I've given it to many people. I just think the book is amazing in terms of helping clarify What it is that motivates you and what drives you? Like what is your purpose?

Because we're not really driven by monetary rewards or Pleasure by itself. So that to me is a fantastic book. The other one is uh an annual series called America's Best Science and Nature Writing. And it's a collection of about Two dozen articles.

from American publications Written for a lay audience across a range of topic, you know, it could be What's the latest? Insights from the Physics and um

Astronomy to what's happening in genetics, what's happening with anthropology, or things like that. I mean, it's absolutely fascinating. Could you give us and it doesn't have to be short, certainly. But I wouldn't expect you to to re deliver Why has

Victor Frankel's book head. Such an impact on you. And it is an exceptional book, to be clear, but I'd just love to hear how it resonated with you or impacted you. I think it's reduced

Very clearly. The need to think about what motivates you. The fact that he He was in a concentration camp, you've obviously read the book and it's not The story about the life in a concentration camp which is horrific, but the fact that he wanted to live He wanted to survive'cause he wanted to

to recreate his work. His manuscript was taken from him When it was sent to Oswich in the first place. And part of what he learned when he was in the concentration camp was that some people gave up. And that even though the population in the prison was Jewish, the mortality rate actually increased around Christmas and New Year. Because it was a marking of time and a reminder for people that they maybe had no more hope, or if they knew that their family members would die.

They gave up. So this idea that whatever it is that motivates you, your purpose might be your company, it might be your family, you know, it might be your hobby or whatever it is, but identifying what it is that really motivates you. And leaning into that and not pretending that you're actually motivated by fame or fortune or some other superficial Motivator. I think it's just incredibly clarifying. I'd like to ask you about it.

Term you used earlier. with reference to some of the other general partners at Sequoia, the relentless in pursuit piece. Yeah. And I'd like to ask about this because one thing I've observed.

in some of my friends who are serial entrepreneurs who've had massive exits. I mean they they have become wealthy beyond Their wildest. Dreams. is that this relentless in pursuit or relentless pursuit can produce incredibly good outputs in terms of objective wealth creation, job creation, solving problems in the world, but it doesn't always

Translate and in fact it seems sometimes to be inversely correlated to contentedness. Or A feeling of peace or happiness. How do you think about

If you do. And maybe the question is just the wrong question, but balancing The relentless pursuit. Yeah. Counterbalancing it.

So that you don't always feel discontent. That's difficult because If you're not a little discontent, I I don't think you're alive. Yeah. Yep, probably true. I mean is why people say, Oh, Silicon Valley's dead, innovation's dead. Really like there's so many problems to be solved.

As long as the problems the opportunity. So Yeah, I don't think Silicon Valley's dead or tech is dead. No, absolutely I think the people that I found who ended up getting unhappy Wasn't because they they were still in pursuit of something, it's actually that the pursuit was over. Hm. It's the getting, not the having.

That makes you happy. And so unfortunately I've seen founders where they've had a A big exit. And maybe the company was acquired. And what do you do then? And Maybe you can borrow from analogies of athletes often

Right. The peak of their careers when they're twenty eight or thirty two, whatever the case is, but they peak relatively early in their life and then Oh, you're the person who once was that, as opposed to what you are now. And I think that's very hard to deal with. But I've seen like the Instagram founders who I worked with

Got involved with them very early and they're just incredibly well adjusted. Company was acquired. It's been a huge success. Massive impact on the world and the two of them are of of just building and Having fun and They've found all sorts of other pursuits to keep them engaged. And they clearly haven't suffered from what I described because they found another outlet for meaning for themselves.

Do you remember when you hit your ten to the ninth? If you do. Could you tell us about That experience? I probably can't get you the precise year, but it was probably about five, six years ago when I'd reached that, I think it was after the IPOs of

MongoDB and Square now called block. I think after those two IPOs and Terra's IPO it achieved that milestone. Well what what did you do? How did how did it feel? Did you pause to celebrate? Or were you just like All right now it's ten to the twelfth, let's get moving, folks.

I definitely celebrate it a little bit, but it it's not over. 'Cause there are other interesting companies to be built. And and even more importantly for those companies, I'm still on the boards of those companies because they're still so early in their own innings. But there's so much more to be done at these companies. I I think it's one of the and it you know, I don't know if we have time to talk about the quoi capital fund, but this is part of the thing I've all time in the world. Go for it. Yeah.

Last year we conceived of and launched this thing called the Sequoia Capital Fund. And For a long time I've been frustrated that the the venture capital model was built on this idea of a ten year closed end Fun cycle. When it was first invented in the late sixties, early seventies and no one had questioned it.

And there's this presumption that because you have such a short lived fund life That when the company goes public You should distribute and move on to the next thing. But the truth is that Many of the great companies endure and they keep compounding.

And so with most of our companies that have gone public, the majority of their market cap accrued After the IPO. Not before the IPO. Square today is worth Ten times what it was worth at the IPO. So almost

Definitionally, ninety percent of its market cap was created after the IPO. So why I sell after the IPO, I leave the board. What about all the other fun company building to be done? I mean that's The thing that really floats my boat is working with entrepreneurs to help them build businesses. And for me to have the founder call me and say, Listen, I'm resting with this issue, can you please help me? That's one of the most gratifying things that I I have in my job.

Is being able to help. On thy journey. So what is the structure of the Sequoia Capital Fund? So the structure we created is essentially an open ended fund. That'll become the sole investor.

In all our future private funds. So we'll keep organizing private funds. And part of the reason is what we described earlier. If if we have a single pool of capital, it dilutes Attention and focus. So we'll still organise a C fund, a venture fund and a growth fund. And those will be time bound, have dedicated teams A certain amount of money and it's accountable for the returns that it generates.

In a given vintage. But all the capital comes from a main Sequoia Capital Fund where we Have cash, but we also have some of the longstanding positions of our enduring businesses. But we believe the companies have an ability to compound for many years after the IPO. So that's the spirit of the of the investment structure.

Okay. I I'd love to Ask some probably naive questions and and feel free to give me a wrist slap if they're stupid questions. But I've this is deeply interesting to me. So The first question Actually I'll just give you two questions and you can tackle them in whichever order you'd like. The f the first is understanding and I have seen it might have been published by Sequoia, it may have been benchmark or someone else, but looking at

the financial outcomes if you had held their private investments and sold as soon as lockup expired when these companies went public, or if you had invested the first day you could invest in those companies and held for X number of years and you would have made more or just as much by investing as a public market investor, which blew my mind. I can't recall the source, but my question, I guess, is with the assumption that a lot of this value will accrue post IPO. Why not just distribute? in kind and then let other people, the LPs, decide if they want to hold or sell. And then the second question is

The Sequoia Capital Fund. And Presumably there are limited partners. Entities, institutions, and maybe individuals who invest in the Squay Capital Fund. How do you pitch an open-ended fund to A pension fund or an endowment.

Yeah, maybe she should spend a second just on who our clients are. So it's a query we work for what we call great causes. Mm-hmm. So if you come to visit our office, our conference rooms Uh actually named after a longstanding Limited partners.

Hm. So The Ford Foundation, the Welcome Trust. Stanford University, MIT, Harvard, then for Burkins Institute. Boston Children's Hospital.

These are the people we work for. Got it. We put their names in the door as a constant reminder that when we generate Returns. They're the ones who benefit.

Mm-hmm. You know, and there was a period actually, uh as a short digression, a couple of years ago, we thought about whether we had the right fee structure for our business. Because You know, we're capitalists, we teach our companies that they should figure out the right price for their product and we have excess demand for people wanting to invest in our funds. So why don't we raise the prices? Why don't we charge even more? Could you just explain for people who are not familiar with venture capital, just the typical fee structure or your fee structure at the time so they understand how

Venture capital firms. Make money. Sure. The typical structure is to charge a Management fee. As a function of the fund size, so typically it's two to two and a half percent.

Of whatever the fund size is, the charge To pay for salaries and rent and you know Research, all that sort of stuff. And then there's carried interest, which is a share of the profits, if any, that we generate. And the carried interest varies.

Between twenty and thirty percent based on a firm's history and their Performance history. So let's just say that if you if you invest at a hundred million and you turn it into two hundred, and let's just say your carry was twenty percent, there's twenty million. So Only a hundred million of gain, obviously. Twenty million would go to the partners and the limited partners would get

Hundred and eighty million in that scenario. That example. So that's how fee structure works. So we we actually talked about whether we should raise our fee structure. Yeah. People were still gonna invest in us. And we actually made an affirmative decision to not do that because

We're very happy with what we earn and and we appreciate that the majority of what we Generate. goes to great causes. It goes to Education. It goes to medical research, poverty alleviation.

The Ford Foundation was helping to fight apartheid in South Africa in the nineteen sixties before I was even born. So we're proud that these are the people we work for. Because we've had such a long history with him We invited them to roll into the Suquay Capital Fund and ninety five percent of the dollars that were eligible to roll into the Sokoa Capital Fund did. So

They are the same investors that have rolled into the structure and we've had decades of experience with them. We have clients that have been clients of ours longer than I've been alive. And there'll be clients long after I've gone, and that's the way we want it. We want our LPs to outlive our G Vs. G GP is the general partner, the people who work at the partnership. And we really care about that. That's part of this long term orientation we have at Sequoia. So to answer your do you need to go to the other question?

Yes, please. Sure. The reason we ended up with the structure'cause it's a fair question. We talked about it. Let other people decide why why should we hold the shares? Here XYZ L P you can take the shares and decide. If you're

An endowment or a foundation somewhere, you're managing a couple of billion. Maybe if you're a big university endowment, you have twenty billion or something like that. You don't know This latest company that we've just distributed. And so what we found is that our LP is almost exclusively cell. As soon as we distribute.

And part of what we observed, we did other analysis, which is if we'd waited twelve months longer than we actually did to distribute, what additional return would we have generated for our LPs? And that was a lot of what informed the decision to form this fund. I'll give you a concrete example at the point that Uh Square went public. The gain for our limited partners was about a hundred and forty, a hundred and fifty million dollars.

And IPM. And we waited. We waited several years in that case to distribute. And we ended up generating well north of a billion dollars for LPs in that case, by being patient because I was On the board, I'm still on the board, I'm involved with the company, I understand their prospects. And I just had a different view that the company's

Share price eventually was going to catch up with its performance. A question on the research. If you look at the Data. And

You have each of your portfolio companies value at time of IPO and then there's lock up or whatever it might be and Let's just say even if it's hypothetical that you do the math on what the value would be at that point and then twelve months later. And you've made the decision to

Hold. What percentage of the time with your portfolio companies to date roughly would you say the value is higher? Versus lower. After an additional Say twelve month hold period.

I don't have the precise number of At my fingertips. But it's the majority. Yeah. That's good enough. Yeah, I was just wondering. The overwhelming majority, I should say. Yeah. Yeah. If that's the case. Obviously, you know.

Past is no guarantee of the future, you know, disclaimer, disclaimer. But the thing that's even more important, and I don't know if you've run across this book by Sebastian Maliby equal to power law. It was. Was recently published. It has been recommended to me. I'm sure it's amazing. His book, More Money Than God, on the hedge fund industry, I thought was exceptional. So I haven't yet read The power law, but it's been recommended. But please uh continue.

I'll second the recommendation. The reason he chose the title for the book is that our our industry follows a power law curve. Yeah, so where fun, I can just cite some of the Parameters roughly. Venture fund that has let's just say thirty five to forty five companies in a given vintage, in a given fund.

We're probably have a third of the companies that fail to recover capital. Which may mean there's a complete write off, or it may mean we s we only realize fifty cents on every dollar we invested. But you know, it's not a success. Then there is a a whole group of companies that have modest success. Maybe you get your money back, maybe it's a two X or a three X. But what really drives the performance of the fund is the typically Five to eight companies that end up being 10X.

Companies, ten X returns. And the key is that the ones that are The get to ten eggs sometimes run. And they become fifty five X, they become a hundred X, they become two hundred X returns. And so

You know when you have A YouTube and Airbnb uh A Unity, a Snowflake, uh Power Alter Networks, WhatsApp, Stripe, Square. You have these companies, they're just they're completely blow it out on the on the right hand side. And so you get a power low curve if you know Look at it mathematically. It's just a very steep curve where a small number of Investments really account for the majority of our returns.

In our history Between five and fifteen percent of the investments we make account for over eighty percent of the returns. Sounds about right. And so to your question about holding off to the IPO window, it's not just that Even if it's fifty fifty, whether it goes up or down, it's what's the asymmetry.

The ones that keep compounding. Look at the scale that has been achieved by a company like Google. Over time. Right. Like that's the kind of compounding potential that exists. Not with all businesses, clearly. There aren't too many trillion dollar companies out there, but you know, when you get'em right, they can make a big difference. Yeah, the biggest takeaway for me and my as I mentioned, sort of amateur

Tinkering in startup investing is Tim Ferris, you don't know what the hell you're doing with public investing, do not sell after lock up because you have clearly no idea which companies are gonna end up compounding incredibly all of my worst mistakes Have been Panicking. I shouldn't say panicking.

Well, actually this is a perfect frame for a question I wanted to ask you. So On one hand. I can look at for instance selling Shopify right after lock up. In retrospect, from my financial position now, and say that was a stupid mistake. It cost me a hundred million plus dollars. I should have made a different

Decision. However. I can also take the counterposition and make a very compelling argument f for why, even though now It seems.

Like I made the wrong decision that the absolute dollars at the time were a life changing amount for me then. And so it was a logical decision. And I use that as a segue because Please correct me if this is is wrong. But I found

A supposed quote from you, which was, you know, PayPal was a one point five billion acquisition and today it's a company worth over three hundred billion. I'm not sure of the timing of of this article. And Mike Moritz was on our board and Mike, I think, saw the potential and pushed us and challenged us to think longer term. And what did we know? What did I know? And I made the wrong decision and didn't quite fathom how much potential PayPal had as a business. But

I imagine. That Yeah it had a significant impact. on your life. So I'd love to know if you still feel

That was the wrong decision and also how you Talk. to founders about this. Because not every

Slamming of the briefcase, Zuckerberg style walking out on Yahoo after a Yeah, billion multi billion dollar offer. Works out. Sometimes it backfires. Do you still think that was a wrong decision for you and If this quote is even accurate.

And how do you talk to founders about this kind of thing? So the question I ask founders is my partners tease me'cause they know that this is my question. And it's what's the scale of your ambition? What are you aiming to achieve? Are you interested in a company that gets to a hundred million in revenue? And that's the end of your ambition, or do you want to get You're gonna blow past the hundred million in revenue on your way to a billion in revenue. Quick question. Sorry to interrupt. At what point do you ask them this question? Because I imagine if it's in a pitch meeting, they know the right answer.

But w when are you asking them? Well, in a bench meeting often. And And they may not have thought about it, but and And it's not to be critical. I mean o often when you're a founder Like you just found a problem that you're passionate to solve.

But I'm still interested to understand Like where do you want to take it? Are you trying to build a small company which is and again, that's fine if you want to do that, but you know, we're looking for outliers who want to build really, really Big businesses. That's what the business we're in. And I want to make sure that there's an alignment. And they were on the same page.

No, that your ambition matches what we're looking for. Yeah. So that is the scale of ambition question. Critically important question.

throw out just as a thought exercise uh hypothetical, right? Because I've seen it happen with founders I know. They start off they have incredible founder problem fit. And in the beginning, their scope of ambition actually is quite Modest.

Right. They just wanna be able to buy snowboards online or whatever the hell it is, right? It's not to build an enormous company. And then Partially through competency partially through timing, partially through luck. They end up having tremendous traction.

And then Let's say they End up In a pitch meeting with you, you end up investing and then Years later, fortunately the company's doing really well.

and they get an acquisition offer. And let's further say that these two founders come from middle class families, maybe their parents made fifty grand a year. And one founder wants to Swing for the fences and say yellow. It's all or nothing. Although in this day and age, I mean they've probably taken some money off

With secondary and so on. But Let's say the other really wants to cash out. because they're looking at how their life would change and they're just saying, You know what, this is a bird in the hand.

I don't know what the future holds. I want out. How do you navigate? A situation like that.

And maybe the fa fast answer is if we can, we just buy out. Founder B. But that is not but like but like how do you How do you handle a situation like that? This is and you alluded to it, secondaries are so important.

At PayPal we did a small secondary in two thousand and one. You know, people talk about it as though it's a recent invention. Many years ago. And I remember going from having been a student still paying off student debt. My net worth was negative in two thousand and one.

And we did a secondary and I think I got fifty thousand dollars. Um I felt rich. I mean It was it was transformative. I could actually travel and I could stay in a hotel and it was really amazing to have this experience. But the reason I mentioned this is In the summer of

Two thousand one, eBay made a run at us. In August. And I think part of what stiffened our backbone was that we'd all taken a little bit of money off the table. We were such a young team. And none of us worried about making rent next month. And it was a really important

I think ingredient to us Pursuing the IPO and getting a a far better price. We got triple the price that they offered that summer twelve months later. So it was a wise decision to have done that. So I love being able to provide secondaries for people and then then there's a conversation with people about the the meaning, going back to Victor Frankel you know, just

What is it that you wanna do? Do you really think Having the money and having the beach house is gonna make you happy. in a fancy car.'Cause and what we often do is we'll put them in touch with founders who've been in that predicament. And have them speak to them and talk about

The regrets. About maybe having sold too early. Do they ever run into someone who says, You know what, given your specifics? I think now is the right time. Yes.

Mm. No that uh that does happen. I mean and it's it's part of what sorry to interrupt you but that's Part of what we try to do just given our experience is try to to shepherd The conversation and to let people know looking at the first time. We we we have this front row seed to hundreds of portfolio companies. I've got the unfair advantage.

That I've seen many, many more companies unfold than you have, the founder. We've obviously pushing many companies. And so I can't give you a perfect prediction, but I gotta tell you, you're in this outline category. You're in this one in ten companies that we see that really just has outsized potential. And I think you're gonna regret letting go.

Sometimes it's not the case. We're valiant, we made an effort, we thought you the company had a shot and Sort of it's ended up where it's ended up and I think this is a good acquisition offer, it'd be a good home for your team and your technology will end up flourishing in With somebody else at the helm. And that's happened sometimes. Where the companies have really flourished.

being acquired because that company has the right distribution maybe for the technology or And that also is gratifying for the entrepreneur because their creation sees life. And flourishes, not just because it's a independent business. For for people who don't know what secondary transactions are. Would you mind just defining that quickly? I brought it up, so I should have defined it. But if you wouldn't if you w you're far more qualified to do this, so if you wouldn't mind.

A primary issuance of shares is when a company sells equity in the business As part of raising capital. So the company sells A million shares at ten dollars a share and they actually raise ten million dollars that goes into the coffers of the company to help the company pay For payroll and for helping to grow the business. A secondary transaction is where the money doesn't end up in the company's balance sheet.

But instead it's just a secondary transaction between two individuals that are unrelated. So An employee of the company, a founder of the company sells shares to somebody outside who's interested in owning shares in that company. And so the company doesn't raise money, it's just The founder sells, you know, hundred thousand dollars worth of shares to an investor. That might be an example.

Perfect. Thank you for that. So we've talked about The counsel you might provide Founders.

I'd like to turn that around. And Ask If any founders come to mind who have had a large impact on you in any capacity.

And that doesn't need to mean, of course. True. financial magnitude. Of their outcomes.

Several I I think It's interesting, one of my partners actually pointed this out that when you first got into the business He had this impression that you should always maintain a delineation between your professional and your personal life and that you shouldn't mix the two. And that he found it interesting that I seem to be doing something different because I was very close to the founders I work with. And

I'd help them with a pediatrician recommendation, or have dinners with them on weekends, or sometimes travel with them for family vacations and things like that. And so Maybe it's just My style I've I've ended up Really enjoying the long term relationships I formed with founders. So we spoke about matter benefits earlier, the person I'd met in high school, he's become a very dear friend.

Given his background in genetics and what he's exposed to in the healthcare system. He's actually a volunteer hours and hours over the last twelve months helping me with a A close family member who has a medical uh situation. And um

War's my heart. To see somebody who's so busy running a company Make that kind of a sacrifice. I didn't even ask. He just volunteered. So

You know it's Through loyalty and being involved with people for long time that you can build those sort of relationships to me is deeply meaningful. The Harters who run Eventbrite and Kevin was the The founder of a company called Zoom with an X, not with a Z.

Yeah. We've invested in as well. They've become close personal friends and I don't know, just i it makes life so rich. When you can have these sort of relationships with your founders and that to me has been a Mm.

Big part of the job, honestly. I've enjoyed. Is that something that comes from your own family experience, your cultural upbringing? Is that something you made a point of doing in terms of fostering these types of relationships after arriving in the US? Where does that come from? Think is a talk I listened to from Esther Perell, I don't know if you know her.

I do. Uh-huh. I met her a couple of years ago and she talks about how You sometimes grow up in a society or in a family where this is the balance around relationships or transactions? You can imagine some cultures are very transactional and you've you're fearful and it's all you know.

You're out on your own, or you're in a society or in a family or a culture that is more nurturing and it's more about relationships. And I think I grew up with relationships. So I think it's part of the way I grew up. That I value those. So I think it's informed the way that I behave in business too. Let's zoom back for a minute.

This is as opportune a time as any. Am I correct that you did not grow up Speaking English. At home. Correct.

Okay. So for most people listening, I would imagine they don't have Much context. On Your home culture. Could you perhaps describe some of the

Defining characteristics. of the culture within which you grew up. In the same way that if someone said, Hey, you lived in Japan for a year, what are some of the defining characteristics? I could pull out a few things that I think Really characterize and and set it apart in a sense. How would you do that for the culture

In which you grew up. For the Afrikaner culture. That's right. Yeah. Uh so at a family level uh

I guess started off with a bump. My mom was sixteen when I was born, my dad was eighteen. So I doubt that was planned. She finished high school with me. And needless to say they were young and in love, but probably not compatible, so a couple of years later they got divorced and My mom moved back with her parents.

who by then were in their early forties, so I you know, they were in some sense also An extra set of parents for me. And they had a huge influence in in raising me. And my grandmother in particular was just an incredibly warm gregarious person, you know, th everybody knew who she was and maybe some of the the loyalty that I

Exhibit in the way that I operate came from her. Either genetically or through living with her. So it was a very warm family. It was a sort of family where If a friend or a A distant relative showed up.

On a random Thursday night, you just assume that You had enough food to cook for them and that you were gonna have a dinner together. There were always people around, always people visiting. But then my mom remarried and we moved to another town that was about a thousand miles away from Pretoria, where I had been born. Hence I needed to start to speak English'cause I moved to a city that was predominantly English, um, not having spoken it before.

But it meant that I grew up in a different place. And I was a bit of an outsider. I was prejudged. Especially in a community that viewed itself as more liberal, there was a sense in which my grandfather was viewed as being very conservative because he served the national government.

And so I faced an enormous amount of prejudice where Voice filters that people Judged me before taking the time to get to know me. That I had to earn their trust and and sort of show who I was over and over, and that was daunting in some respects. But I I definitely felt like a bit of an outsider. When I moved to a new city.

I went to an Africaans high school. And then I realised that if I wanted to live abroad eventually, I needed to improve my English. So I chose to go to an English university, the University of Cape Town, purposefully. And just to give you a sense of the challenge, I got a I remember in first year math I got a problem wrong Because I literally didn't know what the word isosceles meant. Because I done math

In Afrikaans, in high school. And we had a completely different word to describe an isosceles triangle. And I l I mean I could solve the problem, but I didn't know what the word meant. And th these are the sort of little things that you trip over when you try to switch your uh principle language. Now I remember you Mentioning

And I'm not gonna get this perhaps exactly right, but you want it to be top ten In the state. Or the province of the region. And then you want it to be Number one.

In College or university. Why'd you go from top 10 to number one, not number one to one number one? Did you start raising your sights or was it easier because the pool was smaller? I'm just um curious.

'Cause you seem like a You know, second place is first loser. Okay. kinda guy. Not to not not to project, you know, but I'm just curious how you went from top ten to to number one. So the end of high school you

Unlike the US where you write standard you know, SATs and A C Ts I'm now learning because I have kids that are Eventually h needing to go to college. So the all these new things I have to learn about. But in South Africa, you're right. standardized exams at the end of high school. So No, if you're doing math, everybody writes the same math paper and it gets graded by people that are not affiliated With your school for neutrality.

And so That was difficult'cause you I was doing English as a first language, even though I was an Africaan speaker and you know, so you've got languages, you've got I knew I could do well in math and science and things like that, but it was a bit of a crapshoot to know if you'd get number one. And they only published the top twenty.

But I thought I could make the top ten. So that I thought was realistic, honestly. When you get to university, you know, you could choose your subjects a little more purposefully, and I knew that, you know, within that cadre of studying actual science Maybe I knew who the individuals were and I became maybe I became too cocky, maybe it was dangerous, but I I thought I could be number one. So That was my goal.

This is gonna seem like a bizarre question, but since you brought up your kids I read that At some point they were raising South African silkworms. Now I d wasn't even aware that silkworms were a thing in South Africa. How did your kids end up raising South African silkworms? It's just not the first thing that comes to mind when I think of pet, not to malign

Uh South African silkworms as pets. They went to the African Silk. I mean I bought them here in the US. Okay. This is hilarious. Then I read whatever source I had had them done as South African Silk, and I'm like, wow, I had no idea. Okay, that makes more sense. Yeah, well last time I checked they came from Asia anyway. So I don't know who you know, I mean it was just secret in China, right? They had all these All these walled off gardeners'cause they didn't want uh Western traders to understand where silk actually came from. So it's true. It was a hidden secret from the West for a long time.

So I guess when I was a kid we had It's just one of the things you do is you learn about silquums and you buy a couple of eggs from somebody in primary school and There are enough mulberry trees around so you can feed them and you actually observe the the full life cycle and eventually they become moths and mate and lay their eggs and die and So anyway, I s I thought it'd be fun to do with them, except we um

In my My typical uh eyes bigger than my mouth fashion, we ended up with a complete Miss. Thousands of silkworms. To the point that the the the little s uh the little mulberry tree we had in our garden couldn't provide enough trees. So I was driving around the neighborhood in Los Altos

And I would try to find mulberry trees that had overreached the the boundaries or you know, people neighbor fences and I would go there with bags. Mommy, mommy, what's that strange man doing by the fence? Thanks. Venger capitalist caught stealing mulberry leaves. That is really funny. Oh man.

But but it was actually fun by the way my daughter ended up running experiments with them. So you know, you get white ones and you get zebra ones. We call them zebra ones. They they're white with little black stripes. And my daughter ended up running experiments with she segregated them to see how the the genetics would line up. So she was doing a little controlled experiment, which was probably a clue that she wanted to be in biology eventually. Well, you know, if Dad's reading the America's best nature and science writing On an annual basis. Well this leads me to want to ask about Questions about interests outside of Save venture capital.

Or investing. If you were invited to give a TED Talk on the main stage, but you could not talk about Investing. What topic?

Might you choose. Probably genetics. I'm really fascinated by what's happening in the field of genetic engineering. Please elaborate. I mean we happen to have a company in the space that's helping with

delivery of CRISPR. But I mean that's the point is not about investing, it's about Programmability of biology. And it's the reason I got interested in having us invested in a terror a long time ago, is I was starting to read about genetics not having studied biology at college. Because I went in a different direction.

But when the human genome project concluded, it really opened my eyes to what was possible with the information that we have in genetics. And so whether that's for diagnostic purposes, but no the ability to engineer to treat disease. And there was just a drug to prove today actually for treating bloodborne Cancer disease that is Reliant on genetic engineering. So this idea that we can treat human disease with Precision genetic engineering absolutely blows my mind.

So that's the field that I'd want to study if I had infinite time. What would the runner up be? Do you have any other Pet obsessions. former potential career tracks that you gave up on.

Or put aside. If you want to put it that way. Anything el anything else that would be runner up for I love rugby. Rugby.

I really love rugby. I think it's one of those because I grew up in South Africa, it's the Afrikaner sport of choice. Some I think when I moved to the United States it was one of those anchors back to the country for me. It was Something for me to talk about with my brothers and my dad and my grandfather's

gave me an excuse to keep in touch with the country and so It's an unnatural and unhealthy obsession, I realise, but I do love the sport. And I used to play until I got a pretty bad concussion. If you could see this little grey patch over here? Yeah. Is that really from the impact? No. Really?

Yeah, I I was playing for Stanford and I got a spear tackle. Right on the spot and I was not unconscious. Nine one one ambulance showed up. I woke up two hours later and I was inside a C T scanner and I had no idea where I was. And uh after three, four months of persistent headaches I realised that was the end of my non money making rugby playing days, but I am certainly an enthusiast as a spectator. Yeah, I will say I

for most of my life knew nothing about rugby and then in the process of doing research for The four hour bonnie, my second book, spent time in South Africa out the sports at the South African Sports Science Institute with A professor, I think he was a professor, at least a PHD name.

Tim Nooks, exactly right. Tim Noakes yeah, he's well known. Yeah, with Tim Nokes and did all sorts of tests and proved through muscle biopsy that effectively my enzyme levels are But in the process. I was able to watch the Springbok.

Sevens Team. warm up and train and I have to say Easily some of the most impressive athletes. I have

Ever witnessed in my life just in terms of Combination of strength, agility, speed, endurance. Absolutely.

Mind blowing. Yeah. And Still couldn't tell you how the game is played other than throwing the ball underhand. But beyond that maybe just to integration that for a second, that when I was A kid in primary school, I was starting to do well academically.

and playing chess and doing all these sort of things. And I had a teacher who pulled me aside and really encouraged me to play rugby. He was worried that I was going down a path of doing things that were very academic and individualistic. And he encouraged me to play rugby and You know, I played all the way through high school and grew to love the sport, but part of it was it was a way to bond with people from Every demographic in my school. I didn't go to an academic school. I went to a public school in South Africa and so we had people who are

But I can't really give it. But I'd I'd play with them, they'd be my teammates and I had very little in common with them if we weren't playing rugby, but it it enabled me to form relationships and bonds with people and the sport itself It's not about individual attribution. It's all about the team winning. No one cares who scored the try.

Everybody cares that the team won. And so it it it had a lot to do with my approach to business and the way that we think about managing our team at Sequoia as well. What are your Current Exercise or movement. Routines.

If any, I don't have much to report, so I I shouldn't uh say with full disclosure. No, I'm not fully sedentary, but I mean I I wouldn't say I'm exactly winning any Iron Man's any time soon. So I I'm just curious, as part of self care What types of Physical routines. Uh

important to you or or consistent for you. I exercise at least Four or five times a week. An hour or more each time. If I can on a weekend, especially if I'm watching a rugby match, I'll

I've burnt a thousand calories. Doing all sorts of different things. Which is very helpful, by the way, because if your team loses, you're too exhausted to be angry at the end of the workout. So wait, are you doing like jumping jacks and push ups while you're watching rugby? What does this look like? No, if I'm watching a game, I'll alternate between a treadmill, a rowing machine, and an assault bike, one of those airbikes. And I'll I'll spend twenty minutes on each and I'll just keep rotating. But you know, you're Yeah, you sort of sustained a heart rate at like one forty, one forty five, and you're just spent at the end of that.

And drenched. Yeah. No more energy to to be angry. And then I will you know, part of the beauty, honestly, of what's happened with Covet, uh you know, obviously. Terrible humanitarian disaster, but the side effect has been that there are all these trainers that are available on Zoom now.

And so Yeah, I'll pop up. An iPad in the gym and Train with a trainer who just changes the work out routine and a lot of functional training as well. Yeah, things like balance and

Making sure you have good core strength and I love exercise. I absolutely love exercise. And I love snowboarding, by the way. Which is something I didn't know I had n not touched snow until I was twenty four. When I first came to the US. And a friend of mine at at business school convinced me to go up to Tahoe for a weekend. I went for five days thinking I would

figure it out in five days, but I was so sore that I couldn't go on days two and four. I could only go every other day, I was in pain. Uh, but now I I can get up to about sixty miles an hour on a snowboard, which is fun and dangerous. Braver man than I, that's for sure. And it's the only sport I dream about. It's fascinating. It just

And I I have to Just point out. that you stopped playing rugby because you had a concussion, but you're going sixty miles an hour of snowboard. I hope you're wearing a helmet. Oh yeah. Yeah. Yeah, and I love moving quickly on snow. I just have taken a little pause because I actually tore my right labrum snowboarding last winter. So it's feeling good. I'm gonna get back on the snow, but I'm gonna stick to the two sticks and probably keep on the skis for a bit before trying any any snowboarding again. I'd love to ask you a question that I think you ask

I wanna say founders reasonably frequently, and I'm sure I'm gonna get the phrasing wrong, but The question relates to key career. Decisions. And maybe you can

Tell me first how you actually ask it, but I would just love to know how you would answer the question of absolute key sort of watershed decisions. in your career. If one or two. Float to the top of the list.

We call them crucible moments at Sequoia. Principal moments. Perfect. My partner Jim Gates actually is the one who came up with that. I'm not gonna claim credit. He deserves credit for the the phrase And we apply it to business context, by the way.

It's I'll answer your question, but I think it's it's really important for companies to think about crucible moments, because Often they don't even identify them. Then they don't realise that they face a crucible decision. Whether it's Geographic expansion, product expansion. A key shift that the business must make and I'm not talking about pivots where, you know, what you try doesn't work. It's

It's something really different. At MongoDB the decision to go become a clous was a crucible decision. At Square the decision to build Cash App as a Personal Uh your individual product rather than an S and B product. That was a crucible decision. Very difficult to pull off within the company.

But these decisions end up having a huge bearing on the ultimate outcome of a company, and so do they with careers. And so when I interview somebody, for example, I don't focus on Tell me everything that happened while you were at this job. Tell me why you chose this job. How did you find this opportunity? What else were you thinking about? And what is it about this particular opportunity that attracted you? Why did you go to the school? And why did you not go to that school? Those are the more interesting questions.

They're also indisputable because it's what you actually did. You know, you can't tell me that what am I good at? Oh, I'm a perfectionist. Okay, great. You know, so it's just a a glib answer to the question. So for me, uh the crucible decisions one of them was to join McKinsey. When I qualified as an actuary I took a fifty percent pay cut. Relative to what I would have been earning as an actuary to John McKinsey? And I had to pay back the bursary that I'd gotten from the insurance company. So it was a double whammy financially.

And the bursary is effectively. Yeah, but you have to pay back if you don't go work for them. So the the deal was that they would pay for my tuition and I had to work for them for the same number of years that I studied. And if I didn't work for them I literally had to pay them back every penny. So I earned less and had the debt to pay off. I made the same decision when I joined PayPal. So I had a

McKinsey was paying for some of my tuition at Stanford and I had to pay them back. I still have my offer letter. Elon recruited me to to PayPal slash X dot com and I have the signed off letter still on my door. And uh I got eighty thousand dollars, that was my salary.

When I finished uh my my MBA in two thousand and it was less than McKinsey was gonna pay me, and I had to pay McKinsey back. And then the third one was joining Sequoia. And those are the three key career decisions. That was it.

How did you end up in Silicon Valley? It was a funny story. There was an American who'd come to University of Cape Town. When I was an undergrad. And he was a guest lecturer in economics. His name is Peter Baird. Um

It was fascinating to meet him. He had a wonderfully bubbly personality and he was just one of these larger than life people. I loved working for him. Well, I ended up working for him later, as I'll explain. He ended up Working in McKinsey coming to South Africa and I was staffed on a project with him where he was my engagement manager. And he convinced me that I should apply to business school'cause I've done a business undergraduate. What is an engagement manager? Just before we jump over that. What does that mean?

An engagement in McKinsey language was a project basically. So he was the project manager. They just needed to come up with fancy words to to merit the the exorbitant fees they were charging. Okay. Yeah. Got it. So sorry to interrupt.

Yeah, no problem. So he was the project manager, he convinced me I should apply to business school, which I didn't think was necessary because I'd done a business undergraduate as part of my actual science training. And he wrote one of my recommendation letters and strongly encouraged me to To think about coming to Stanford. And at that point this was in the late. Nineties, obviously Stanford or Silicon Valley in general looked like an interesting place.

The well of opportunity, so many companies were being formed. Instinctively it seemed like the place to be. And so that's how I got to Stanford in nineteen ninety eight. Nineteen ninety eight, you know, it's easy for me to forget how

young you are. I mean, for for me, right? It's looking at your bio and resume. It's crazy to think. You got there in ninety eight. I got there. Yeah. Two thousand? I need the end of ninety nine, two thousand. It would have been in two thousand, so not that long afterwards. And how old are you now?

I may ask? Forty eight. Forty eight, man. Overachiever. Okay, so you get to Silicon Valley. Now

Up to that point. Your decisions seem to be very methodical. You're thinking about preserving optionality. and mitigating certain risks. As you explained earlier.

With the political climate. Changes taking place. Choice of McKinsey. Was the intention from the get go to go to business school and join a startup before you even got to the West Coast? Nope.

Okay. How do we go from that? To Speculative. Of course. 'Cause they all are speculative startups.

You need to change your mind. If we talk about mentors, by the way, I have a specific anecdote about one of them that really hammered this into me, but Mm-hmm. So right before I came to business school I was doing a master's degree which I didn't complete At the University of Cape Town on

Long term option pricing using stochastic simulation techniques. You too? No kidding. Just kidding. Sorry, I screwed up the flow, my apologies. It's what one does on the weekend, you know, you run these Monte Carlo simulations on your little compact laptop. I was fascinated by finance, serious finance, and I thought I'd end up in Wall Street and work in the derivatives

group somewhere and when I was a first year at business school actually I was doing advanced topics and derivatives and Ended up taking all the finance classes and I thought that would be where I could shine'cause you know Mathematical skills, it I thought it was interesting, it was fascinating. I actually spent my summer working in London at Goldman Sachs. When I was

Business school, I thought, you know, is Europe interesting? I didn't know. Is banking interesting? I didn't know. And I've got a no on both of those, by the way. So try to realize that you got a no, meaning you gave it a you you gave it a shot and got rejected. Is that what you mean by a no? Yeah, I got

I realised that that was not the right calling. Going back to Europe at that point to me felt like going back to the past as opposed to the future. And the West Coast was the future. Okay, because the the figuring out those were not the right paths is very critical, right? I don't wanna gloss over that, so Could you Expand on that? Was was Europe, as you said, felt like going to the past instead of the future, and that's how you arrived at a no for that option?

Yep. Okay. And for me as a South African, it was more there are many South Africans that live in the UK It's same time zone essentially as South Africa. And so it was closer to home. I mean California is about as far as you can get from where I grew up and my family, and I was very close to my family. And so I was wondering if that made sense and So I tried it, I got enough information to realise that was not My destiny and so

I came back for second year. One of my classmates Mate Elon. Before he came to business school when Elon ran zip too and this friend of mine was at City Search. And introduce me to Elon.

And I thought the intersection of financial services and technology was interesting. And he made me a job offer. And I couldn't Quit because I didn't have a work permit. I was here on a student visa.

And so You know, we kept in touch and I started to learn more about PayPal. I was really intrigued when Paper and X dot com came together'cause I love the business model that that had and At that point when he made me another offer and the opportunity was

Actually to report to Peter. Peter Till. That seemed like something I shouldn't turn down. So I accepted the offer and I was So delighted they took a chance on me. Why

Did it seem like something you shouldn't turn down? Because you know, Elon and Peter were not the Elon and Peter in all Marquee lights. Of today. No, no, no, just the earlier, obviously. Uh I love the business model and let me be clear, I still vacillate it because You know, I had to pay back an enormous amount of student debt. I didn't have any money. I'd run out of money actually in second year of business school and was living off borrowed funds from friends of mine.

And it was struggling to make rent. Did your family know this? They did, they didn't have money. My m I didn't grow up with wealth. Understood, which I'm wondering what your family Assuming you were in contact with them, what did they say about this? How did how did those conversations go?

Were they worried about you? Yeah, they were worried. Of course they were worried, but they I mean, they didn't have the means. To be able to you know Peter, the person who is my man Peter Baird, the person who I work for McKinsey, he lent me some money. My best friend who was working in London at that point was my

Best man when I got married. He lent me some money, my now wife who was a classmate. We were dating already, she lent me some money, it was embarrassing at some level, but I'm you know, I had I had to get through. And so I was struggling with the decision because it was an expensive decision to walk away from going back to McKinsey or maybe joining Goldman and so I struggle. With those two choices and the choice to go to a start up and My wife actually studied

computer engineering at Canigie Mellon, who's also an immigrant from Singapore. She and I had long conversations and she really encouraged me to take the startup route. And she'd worked at startups before she came to business school. We were classmates, we'd met there. And so she was a huge influence. I made that decision. I like the business that they were building. It was clear that the payments piece was a a way to make

A very Uh There was a clear path to turning it into a revenue business. I thought that the combination of X and PayPal would really dominate the P to P payment space. And I fell in love with the business and the people.

Was there ever a moment? In the first handful of years. Were you second guest? That decision do any particular moments.

Two weeks later. My offer letter was signed on March thirtieth. Two thousand. April twelfth, the Nasdaq has a massive correction. L I mean literally two weeks later. Then I go to a class. Where Meg Whitman was a guest lecturer, she was a guest speaker in one of the classes I was taking at Stanford. I'd already accepted my offer to join. And she came into this classroom, she says, Well we own this payment service called Bull Point.

And we're gonna crush this annoying little startup in Palo Alto called PayPal. Don't say that. It's like a who the work there. I thought we play nice in Silicon Valley. What's going on here? So and the th then we had the fraud challenges. Then the our burn rate was fourteen million dollars. In June two thousand. Before we started to charge for payments, and our burn rate was accelerating.

Could you explain the the fraud challenges just so people don't uh misinterpret what that means? So First Paper wasn't generating revenue yet, so whenever somebody Accepted a transaction on PayPal. Like just says a hundred dollar transaction. Roughly speaking, two and a half percent was the fee that goes back to the credit card associations and the issuer of the credit card. So

We were paying that two dollars fifty for every single transaction that was happening on PayPal and never charging the recipient, the merchant. for the transaction. So our losses were growing very very quickly. And then we were dealing with two types of fraud. The first is unauthorized fraud. This is where somebody stole your credit card number, enters it at Onto the PayPal website at that time. Charges a hundred dollars. And withdraws the money and runs away. And then you get your credit card statement at the end of the month and go I didn't authorise this transaction, you file a charge back.

PayPal wasn't the hook to pay you back your hundred dollars. So we had to protect against this unauthorised fraud use case. And then there's merchant fraud, which is No, the person said they'd ship you something, it never arrived, it arrived damage, it didn't look the way it did on the But you know, on the website, things like that.

Mm. So you have Was it a crisis of faith or were you like, Hmm, not sure about this? Like how severe? Was the Second guessing.

Well, I never thought about quitting, by the way. It was more just I'm not sure we're gonna make it. I might have to Row a boat back to South Africa.

Okay. It's uh Why never consider Quitting. This is interesting to me. Not saying you should have quit, clearly it worked out. But

Why The stick to it. Despite All of the challenges. The massive Nasdaq correction.

Why never thought of quitting? I don't know. We were I felt like we were in it together as a team. We have incredible spirit and camaraderie within the building. I felt like we had each other's backs. We became good friends.

I mean it's part of the reason I think the paper mafia was as successful as it was, is we formed incredibly strong bonds. Then I don't know, we just rallied as a team and we've sort of felt We're gonna build this and if we don't build it, we're gonna you know, we'll go done with the ship. Rather than abandoned ship. It was just a sentiment. So we just kept trying, you know, problem after problem

Whether it was fraud, whether it was eBay trying to kill us, whether it was regulators, whether it was Visa We just kept fighting. I don't know, maybe we were too naive to understand that it was foolish. Well, I mean I think that Goes for a lot of

founders who end up doing very well. There are people with creative projects. I mean, you hear it all the time. It's kinda cliched at this point, I guess, but if they if if they had known what was involved at the outset, they never would have done it, right? But they did it. Also. So We're talking about PayPal. Clearly all's well that ends well.

And I'd like to try to flesh You out a little bit as a a human. As opposed to Someone who

Steps up and hits home runs nonstop. Which you've had a lot of home runs, to be clear, but Do you have or could you describe a meaningful or favorite failure. And by that I mean Anything that seemed like a failure at the time or was a failure.

That was particularly valuable. for you looking back. Or that set you up in some fashion for Later success. Does anything come to mind?

Did you say favorite failure? Did you say that? Those are the words I used, yes. A failing sucks.

It's painful, I mean it's I don't know if I'd use the word favourite, but I'm not going to be able to Most of insightful. Yes. Okay. Yes, we can we can definitely we can definitely re label it however you like. No I say that whimsically partly because

I really hate losing. Okay. Also something common for uh quite a few members of the PayPal Mafia. Yeah.

Yeah, which, you know, has its downsides, obviously. So One of the things we talk about in our partnership is the sense of commission and the sense of omission. And the sense of commission is we made an investment we shouldn't have. And the sins of o mission are the ones you didn't but should have. And

I've Probably made Six, seven investments in my career already that literally went to zero. And I don't think I should really highlight any of them because we made a good try, the founders were great, didn't quite work out, and it was valiant. We did what we we could.

I will tell you that the first time I had an investment that went Two zero. Was a ten million dollar complete write off. I literally cry in my partner meeting. Because I had

Such an immense Sense of shame. And guilt for having failed. And for having lost money for unlimited partners. And It was an important moment partly because my

The senior partners at Sok I think part of what we do well as a team, part of our longevity is the way that we help each other. And so senior partners who had gone through this themselves were there to support me and to You know, guide me through this. 'Cause the danger in the business is if you've had an experience like that is you recoil. And you become very

Careful. And you'll never Get back to the glory days. Maybe like an athlete who has a severe injury and they never want to test that knee again. You know,'cause they had a bad knee injury or something, but they'll never attain what they had in the past. So So that to me was a very painful experience.

But the ones that that really sting are the ones we should have made. And I think back to meeting Jack when he was Mm. Twitter.

Made him And is And we had an opportunity to invest in the series A Twitter. This is in two thousand seven. So this is before the iPhone was released, there was no Twitter app, this was text messaging

Different business. And I just didn't dream enough. I failed to imagine what might happen with a service like this. And That was incredibly painful for me.

And we missed the A? We missed the B. And we missed the C. And that was a huge lesson for me. And I you know, sometimes you can explain away an investment you didn't make. By saying well ex ante with those same facts. Would you make the same decision today or not?

'Cause obviously X post you should have made the investment, but X Ante, you know, sometimes things just you know, they're weird twists and turns in the on the road to company building. And so maybe you could justify that the series A was A bit more random because it took a lot from there to where they were in say twenty ten. But by twenty ten we should have looked at it and reevaluated our decision. And that I feel really guilty for. That was

Terrible. I really, really messed up. For not revisiting assumptions. What did you learn from that in terms of things that you discounted that you shouldn't have, things that were invisible that you should have made visible? I'm wondering what you carry forward.

From that. The two things are imagination. Dreaming. Sitting back for a second and saying and my partner Mark Moritz often hammers this home for us in our partner meetings when he was part of the team full time was What if it goes right?

You know, we're in the business of investing, we're in the business of not investing. So assume for a second it goes right. What could you imagine this being? Just imagine for a second, instead of you know, it's the preparade exercise in some sense, just Put on your thinking caps. I remember being in a meeting with Mike.

And Max Lefchin and Jeremy Stoppelman. When Yelp was an idea. An idea. In two thousand and five? And Mike in a meeting said.

I imagine a future where there are Yelp stickers outside restaurants. I mean that was an amazing insight, an amazing vision for the future, which came to be true. And so I'm always reminded about the need for imagination in our business. The the need to be naive at some level. If you become a curmudjan in the venture business, you're done. You need to be naive, you need to dream.

So that's the one. The second one is learning a little bit from behavioral economics of the need to revisit your assumptions. So I was really stuck in a some cost fallacy where I'd made a decision to you know, my recommendation was for us to not invest, wrong decision. So let's Take my head into the ground and hide.

And just keep saying we shouldn't invest, we shouldn't invest,'cause why admit that I was wrong? And so you need to be able to revisit your decision and admit you were wrong. So We got the series A at Square Wrong. And we corrected it. And we paid up for the series B and I helped lead the investment and I had to swallow my pride.

I'm sorry, team, I should have recommended it nine months ago. My bad. Now we're paying a high price for the investment, but I still believe in it and I think there's huge upside. And psychologically that's a very difficult thing for people to do. And so we want to create that kind of safety for us in in our investment team. We're gonna come back to changing your mind. And before we get to that though, I just want to read something that I think

is uh profound, which I'd never really thought of before. This is from Don Valentine. And I am paraphrasing here, but I understand that he said to you at some point Maybe in the interview process. That's

Successful people join venture capital only to have to face the fact that good investing means taking risks in startups that are more likely than not to fail. you know, coming to grips with being wrong not five percent of the time, but thirty percent of the time, forty percent of the time, really eats at your self confidence. I think that's a quote from you actually. So You had this Experience of crying in the partner meeting. Did it continue to be

Difficult. I suppose I'm wondering if there was a a moment Particular company. when you can identify that you became more comfortable. with some of your portfolio companies going to zero.

Is there anything that helped with that? Aside from the support of the partner say in that particular meeting. It wasn't the support of the partners just in that meeting. In general, I think we started to have conversations about not doing post mortems. 'Cause at one point we had an exercise of doing post mortems on investments. You know, we got this one wrong. Let's hammer into each other while we got it wrong.

And what does that breed? That breeds a culture where people are gonna be scared. Mm. Scared to take chances. And if you're dealing in a powerful business with asymmetric upside Why cry over the yet another one that fails? You need to focus on the ones that really succeed. That's where the business is won.

Novus C If all you do is you make a dozen Investments that don't work out then you Probably need to go do something else with your time. So you need to give enough ones that are good, obviously to survive. So that was part of it. If we stopped doing post mortems, we s and we supported each other. It was clear to me that my partners weren't judging me and that my head wasn't on the block. For the next failure. I felt secure enough that I could make decisions and knew that I was part of the team. It wasn't as though

Maybe if you want to use a sports analogy if you if you go for a crazy shot. Are you gonna be cut from the starting team next game? No, because you took a rational shot. It maybe didn't drop that time and there Probably a million Michael Jordan quotes you can use that make that point. So that was one piece. The other one was at some point you have enough success where you realize Well I made an investment that made us five hundred million dollars. That excuses

Three of those failed five million dollar investments many times over. You have to get over it. You just psychologically have to accept that you just have to move on from that failure and not have it encumber you. Learn from it. Don't dismiss it. But y you just rationally have to look at the math and go, Well, okay. Next.

And so part of what helped me, by the way, I was in the doldrums in two thousand and nine. I actually thought about quitting the business. You know, YouTube was a a great success early on in my career. It was a I was incredibly fortunate to have had such a big success. Within my first three years as a venture investor. And then I had a pretty lean backlog. And I I wasn't sure I was cut out for it, you know.

And then, you know, I kept added and I realised there's there's always another red bat in our industry. So in two thousand and nine After I thought about it, after My partner Doug and Mike and Jim really pulled me out of my doldrums. We ended up investing in Unity and Eventbrite and Square and MongoDB.

And uh you know, list the companies and it was just this purple patch of investing and so Just reminded me you don't give up, keep going. How did they pull you out of your doldrums? What did they say? Do you remember anything specific, even if it's paraphrased or A rough guesstimate. What did they actually say to you?

But there's a balance that we have of I've not Learned. Since I've been there long enough to recognize when other people go through this as well. And

You know, you can't coddle You can't be there with Making it too safe, too many boundaries, too many guardrails. People actually have to walk through a little bit of the valley of just despair on their own and wrestle with it. Mm

At one point Jim realized that I was going too far and he would take me for walks around the office. I don't remember the specifics of what he talked about, but I remember him spending a lot of time and investing in And then Doug Leonie showed up at my house one day. With home made pesto. And he was knocking on the door on a set that I I honestly didn't feel like opening the door.

Leave me. I wanna be miserable by myself And you know, Doug Knoct and he had literally from basil that he grew in his own garden, he brought this little jar of pesto for me, which was delicious, but it was the the sign that he was there for me. I knew what I was going through and that It was

Memorable. And had a big impact. So mentors. You mentioned changing your mind is important and you said let's come back If you like.

to mentors because you have one in mind. Do you still have that thread? If so, would you like to Pick up on that. Peter Till. Peter came back as a

CEO I if you've read any of the PayPal books and know the story, you know. We as a team rally to get him back as CEO. It was difficult because the board wasn't fully supportive and we had to keep as a team we had to keep interviewing other candidates and we get feeling no but Peter Peter We're a team and Peter's Peter's our man and we want Peter to be our leader and our CEO and so Peter had an incredible ability to change his mind. Peter would say we're turning left, we're turning left and then.

You know, we weren't sure we'd go analyze, bring him data, we'd show him the results, and he'd say, Yep. I've just looked at it returning right. And he would just turn like that on a dime, and he had no qualms about this. And I think most people get so stuck in escalation of commitment where I need to remain Consistent with the person you thought I was yesterday, otherwise I'm gonna be viewed as irrational. And there's a whole branch of psychology that talks about this.

Right. To some extent people view flip floppers negatively, especially in politics and things like that, but in business it's incredibly valuable if you're just rational. And Peter did that to a T and made him an incredible CEO. Do you think that's just Peter out of the box? Different motherboard, different programming, or is that something that he cultivated? And if you think there's a component of it.

That is cultivated. How do you think he did that, or how would you help someone to develop? That ability. So I don't know if Because that may obviously didn't

Know him growing up. I You know, met him in the paper context. So I mean Peter's just so supremely smart and rational that I My guess is it. innate in him and he just he doesn't suffer that kind of baggage, if you will.

And he thinks for himself, I think be you know There are lotta people that are so worried about what others think of them. And Peter just doesn't seem encumbered by that. Not that he's indifferent to it, but I just don't think he spends his whole life worrying about what others think about him. He just does what he thinks is right.

And interesting. Yeah, I think it's innate. I think in terms of cultivating it, just calling it for what it is. In an organization creating a culture, we're willing to stand up to new information and change your mind and then praising people for changing their mind on things.

I said no to this decision, I've reevaluated Well, I walked into the partner meeting thinking we shouldn't make this investment. And I've been swayed by your arguments. Or recognizing that somebody else changed their mind and praising them for doing that. I think y you need to cultivate that kind of uh culture. I find it so

Fascinating. I'm gonna sit with this. Because it makes perfect sense, although I have some misgivings, so let's come back to it. The not doing post mortems. Psychologically. it makes a lot of sense to me that if you

Overemphasize. Postmortems. You could breed fear in those who you want to take risks and therefore it's self defeating. But I suppose there's some

post mortem required to then, at least on an individual level, to change your mind about a company that you said no to. Where there's a revision of your thinking. That needs to take place. How did you if if any companies come to mind, or it doesn't need to be a specific company, but What is the process that you have gone through?

Two. Change your mind to kind of revisit assumptions. For any of those investments where you turn down C to the series A and then you end up paying up on a series B or Series C.

It takes work, by the way. I I don't pretend that it's easy and that it just comes naturally. I think we've evolved With all these heuristics? And they may be served as well. Two hundred thousand years ago when we first evolved as a species, but it it hampers us today. So I

I have to fight it the whole time. We'll start discussing a company that I remember meeting nine months prior, and I I can just feel my instincts like No, I didn't like it then. Why should I like it now? Why do I have to work and think about it again? I mean the lazy part of me just wanted to say, no, like I already made the decision, move on, right? And so

It takes effort. It really takes effort. But that's part of why heuristics are valuable, right? The shortcuts. And for many things in life, shortcuts are great, but if you want to make important decisions, maybe shortcuts are a curse. And so anyway, so I I I don't make it sound like I'm It just comes naturally. By the way, we do do lightweight post mortems on the things that failed that where we made an investment. It was just that we used to have this exercise which is the sponsor has to go write a memo and you know may a culpa and there is a punishment.

Or maybe not punishment. That might be too dramatic, but there was a Dire consequence. It was just too much. We have to learn from them, you know so. We got the space right, but we picked the wrong team. Why did we pick the wrong team? Oh, they had better technology, but they didn't have the right go to market capabilities, or they aimed at the wrong part of the value chain like you know we try to learn from those because it informs future decisions. So so I don't make it sound like we're oblivious to the mistakes of the past. But it's then re-looking at a company.

We analyzed recently that Many of the best investments that had happened in a particular I can't remember when we did this particular analysis, but many of the best investments that happen in a particular window of time Well companies that we had previously met. We'd already met them before.

We should have been prepared. We should have had a we should be even better prepared to make a a good decision now. Why do we not do that? And so we've tried to think about Do we ensure that the people who were there before meet them again? Because they have a sense of continuity and how far they've progressed. But do we also inject some fresh pair of eyes? To help guard against the individual who maybe is jaded by their past experience. Sometimes we have to switch who the point person is because some of the

The chemistry is just between a founder and an investor. That's a personal relationship. You're joining somebody's board. And so sometimes the person who met the company and and Google is a case in point where the person who found Google for Sequoia was Doug Leone. The person who became the board member was Mike Moretz. Mike had the right. Chemistry with the founders, the right experience because of Yahoo and that made sense for us. And so we we we always try to think about what's the right match, do we have the right group of people in the room? And at the end of the day, back to the rugby analogy, we have to win as a team.

We have to win as a team, which is why things like the Midest list are a little bit insidious from our point of view culturally, because it tries to create individual attribution. When we have a success at Sequoia, when there's a company that goes public or gets acquired, we actually write an email internally And we enumerate all the people that contributed to the success of the company. Not just the person whose name is normally attached to it as the board member. I love that.

Sebastian Mallaby, Power Law or The Power Law, I don't know if there's a definite article on the book title. What did he Leave out. What did he not cover? Right. What if if he said, You know what, Rolof, I'd love for you To write. An appendix or an after word.

Or a sidebar. Anything at all just to make this More complete or more compelling. What would you do? Maybe because of the time period that it covers, I think the professionalization of the industry that's happening right now is something that's

Not fully captured in the book. Could you just for people who don't have a familiarity with the venture capital world. What would be some of the components of that? Professionalization. So

If you go back twenty five years, the Typical venture firm had Eight to twelve investors. Just factually they were probably white men at the time. That obviously is changing very quickly in our industry, appropriately.

You had a handful of people sitting around a table making investments. The total organization size was maybe Twenty five? you know, they had some assistants, some receptionists, maybe a finance person, maybe they were outsourcing everything. And there was very little offered in the way of services to portfolio companies to help them.

I was just small professional services organizations at some level that were investors. And today Our team at Sequoia US and Europe is about a hundred and eighty. And Like I mentioned earlier, the investing team is still pretty small. We we have twenty five ish investors in our business, but

We have marketing capabilities, we have data science, we have engineering. Yeah, product. We obviously offer talent services to our portfolio companies. We have a big finance organization now that you know manages all the complexity of all of this. And so we've just changed as a business. to be able to serve founders. You know the business has gotten more competitive and so

It can't just be money. As you pointed out earlier, there's just so many people who are willing to write checks. You know, that is not a differentiator. What is it that I'm offering an entrepreneur that makes him or her choose to work with me because they think that I have a disproportionate impact on their chance of success? Right, and that's partly me, my experience, my partners and what we bring As a team. And what are the other services around our partnership that we can deliver to help you succeed?

So Completely agree. Just w having watched from the cheap seats where I can you know keyboard quarterback Yeah. Just having observed I think that would be a really important addition. In your

Appendix. Epilogue to Sebastian Maliby's book. Now let's say the editor comes back and says, Okay This is great. However.

We'd love One example Uh the professionalization really working if there's kind of a specific example.

And then we'd love for you to include A counter example. If such exists. And the reason I ask, I've been kind of out of this world for a while. But I do remember.

Back in the day, this was probably let's call it two thousand eight, two thousand nine. Which was a great time. I mean, I really lucked lucked out with that time period. So if I'd started this ten years later, uh uh things would look very different. But I remember Steve Anderson of Baseline Ventures always impressing me just because he seemed to do so much with so little just in terms of Actual

Boots on the ground. So if there's sort of a specific example that you could give of the professionalization really working. I'd love to to see and by the way, just one or two more questions. I know we've gone pretty long, so I appreciate your time. But one example of it really working, and then if there are any counterexamples. Kind of throwbacks.

Or Kinda lean and mean. operations that you admire and think do A good job. So when I say what I did it doesn't mean that other models don't work.

I think f for us it's What works repeatedly? Mm-hmm. Right. Right. And even in our own business, there are examples where an individual partner has an idea, forms a connection with a particular team, and can bring that entire opportunity home.

And then that partner probably is most of the interface for that company. In terms of company building, board building and things like that. So I mean And and we want to encourage that. And actually at Sequoia, one of our cultural frameworks is maintaining tension between individualism and teamwork. It's not either or, it's and. We want both.

You need to stick your neck out, you need to do exceptional work, you need to be accountable for what you do, but you also need to be supportive as a team member because that's Part of what we've been able to endure as a partnership. It's it's both. So Can you do incredibly well as an individual or a collection of individuals? Absolutely. But it's

The cultural consistency for us inside our organization is we need that. For us to to consistently Do well. So Yeah, to give you an example, I mean the we've built internal systems now for us to track companies, so we have

If you give me a company name, I could look it up and I can tell you Have we made it? Who made it? What are the notes? What did they think of the company? I have data science signals that tell me, you know, how this company is doing. The proprietary. To give me a sense of whether or not it's worth pursuing.

So these are things that didn't exist in our industry fifteen years ago. And and Jim actually Jim Gates was one of the first ones to help us pioneer with this. He built a system Called Early Bird, which is part of how we identified WhatsApp. Oh wow. Outside America were charging people on a per SMS basis. And in the US we had all you can eat plans.

And so WhatsApp is growing, our data science effort showed it. And no one in America was paying attention to it because no one in Silicon Valley or the US was using WhatsApp. And so we connected with Jan, he'd worked at Yahoo and so we were able to use our historical Yahoo connection to make sure we can get to him. But that is a glimmer into the sort of data science capabilities that that we've now Honed a decade later.

That give us an unfair advantage. So that to me is a concrete example of how a business is better for it. It doesn't substitute for the The inside the grit. The salesmanship that an individual partner has in actually landing an entrepreneur. I have two more questions. Second to last question is

The billboard question, which I ask a fair amount, and if it's a dead end, it's a dead end. Sometimes it is, and I take the blame for that. But If you could put a message something on a billboard. That would reach. Billions.

More millions. You pick. Could be question, could be an image, could be anything non commercial.

And this is a A metaphor. What might you put on that billboard? Since

I was Aware that this was a potential question, I had some time to think about it beforehand. Perfect. Mm. So my answer would be dare to dream. Mm-hmm.

And the reason I say that is uh uh actually when I when I interviewed at At PayPal and uh Peter interviewed me. Part of what he talked about is the People's failure to understand repeat games. So if I told you to take a chance on your career with one roll of the dice proverbially.

Pretty dicey to do that. Pun intended. But if if instead I told you look you you have one shot and if it doesn't work out there's another one and another one and another one. By the way, you know, we have many at bats, so to speak. You have many different opportunities for different companies and over your career. We to take a chance on something that has a low probability of success and that's fun along the way.

Yeah, sure you would. And so I saw so many of my classmates, I've seen so many people over the years make safe decisions, played safe. They make these conservative decisions, Oh, I can't take a chance on this thing, what if this company fails? And so And they just end up getting in a rut and then, you know, before you know it, they're in their forties, they have a midlife crisis, they feel that they've wasted their lives. And so Bear to dream, take a chance.

Just do something interesting and just think if it doesn't work out then there's something else. There's something else. Just keep taking more chances. I love that and it's good advice for me right now. I have something very absurd cooking with a very low probability of success. So I'm gonna take that as an an endorsement of my path. Absolutely. I mean The most boring thing is a life left unexamined, right? I mean it's it's fun. Who cares?

Yeah, they're all you've had so much success. I mean, And no one remembers you for your failures, by the way. Can you enumerate the six companies, seven companies that I invested in that were complete write offs? Probably not, but you remember the ones that made it, right? Yeah. Good point.

Get over it. Go do it. Get over it and go do it. Uh well, Roloff, this has been A lot of fun. I've really enjoyed this conversation. Is there anything else that you would like to mention? Anything you'd like to draw attention to? Closing comments. or requests of my audience in any capacity. Is there anything else you would like to say? And of course people can find you online on Twitter and Instagram at Roll of Botha on LinkedIn. The same will include all of these links in the show notes for people who want to find those directly in the show notes. But is there anything else that you would like to add before we

Come to a close. I'll just reiterate the day to dream. Carpe DM sees the day. Make the most of the opportunities in front of you. Alright, well that's a perfect place.

To end And uh thank you once again. For the time. This was really fun. Really enjoyed it. Took a ton of notes. You You certainly saw me scribbling. People who watch the video will see me scribbling. Lots and lots of notes. And that's given me a lot to think about, which is great. I'm really

Excited to pursue this absurd idea that I have and if it fails nobody will remember in three years anyway, so it's fine. And uh for everybody who is interested in resources, everything we've talked about will be in the show notes. Links to everything you can imagine, including all the books and people and so on, at Tim.blog slash podcasts. And until next time. Be just a little kinder than necessary. And Follow the advice. Dare.

The dream. Get after it. Get it done. Thanks folks. Hey guys, this is Tim again, just one more thing before you take off, and that is Five Bullet Friday. Would you enjoy getting a short email from me every Friday that provides a little fun before the weekend? Between one and a half and two million people subscribe to my free newsletter, my super short newsletter called Five Bullet Friday. Easy to sign up, easy to cancel. It is basically a half page that I send out.

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