Pat Grady: Sequoia Partner on Investing Lessons from Doug Leone, Roelof Botha and Alfred Lin | E1174

Pat Grady 0:00 If you have Sequoia on your cap table, chances are your life just got a lot easier. There are kind of two things that I care most about when assessing founders. So one is founder market fit and two is the vector that describes them. The market determines how big a company can get. The founder determines how big the company will get. I'd say on sourcing, we are eight or nine out of 10. On picking, I think we're maybe a six out of 10. When a company is a wild success and you don't see us in the cap table, chances are at some point we screwed it up.

Harry Stebbings 0:31 Ready to go? (instrumental music plays) Pat, I am so excited for this, my friend. I mean, we've known each other for like nine years and-

Pat Grady 0:49 It's been a long time.

Harry Stebbings 0:49 ... we've never done this in person.

Pat Grady 0:51 Been a long time. It's good to be here.

Harry Stebbings 0:52 Thank you so much for coming. Now, I spoke to literally everyone on the team, I think, and I said to you before, everyone responded, which has never happened before, which is testament genuinely to you as a leader.

Pat Grady 1:04 (laughs)

Harry Stebbings 1:04 Really, it's amazing to see the culture that you've built.

Pat Grady 1:06 We have a great team.

Harry Stebbings 1:07 But I spoke to Sean McGuire and he said, "You got to just start with the upbringing." And Matt Miller said this too. He said like, you know, growing up in Wyoming, you know, doing roofs in the summer holidays?

Pat Grady 1:18 (laughs)

Harry Stebbings 1:18 Just talk to me about the childhood in terms of what do you think shaped you most? So you don't need to give a narrative on what-

Pat Grady 1:24 Yeah, yeah.

Harry Stebbings 1:24 But what shaped you most?

Pat Grady 1:26 I think my one-liner would be happy but desperate. And the word desperate-

Harry Stebbings 1:30 Sounds like my love life. (laughs)

Pat Grady 1:33 (laughs) The word, the word desperate is probably a bit too dramatic in the context of the first word, because it was, it was very happy. My parents were wonderful people. I got a great, great brother. You know, it was a very loving family. There was no trauma. There was no suffering in my childhood. But the, um, uh, but the desperate piece, I think like a lot of people who grow up in small towns, you just have this desperate need to figure out what else is out there. And when you're in a small town, even if it's a very nice town, and, and we lived in Gillette, Wyoming, which is in the northeastern part of the state, and it's coal mining country, but it's a really, it's a really nice place to grow up. Even when you're in a nice place like that, you just feel like the world is small and feel like there must be more out there. And you kind of have this desperate need to go figure out what that is. And so when I was in high school, I think the, my greatest fear was boredom. And I think now, that kind of translates into my greatest fear, which is probably irrelevance, just kind of feeling like you are living a life that is worthwhile.

Harry Stebbings 2:29 When you say your greatest fear is irrelevance, unpack that for me. Like, why is that the biggest fear for you now? And what does that mean?

Pat Grady 2:36 Well, I mean, we're gonna go, you're going pretty deep right off the bat here, right? So (laughs) -

Harry Stebbings 2:40 Well, you, you started it. I mean, that was, that was a great intro. My word.

Pat Grady 2:43 So different people have different answers to the question, you know, what is the meaning of life? I think the simplest and most straightforward answer would just be happiness, but then it's kind of a recursive question. Okay, well, how do you define happiness?

Harry Stebbings 2:55 Mm-hmm.

Pat Grady 2:56 And I think for some people, the greatest happiness comes from some feeling of productivity or some feeling that you've contributed something to the world around you. Right? And so when I say irrelevance is my greatest fear, it would be the point at which I am, I am not a good husband. I am not a good father. I am not a good partner. I am not contributing to the world around me because I think that's the thing that most people get the greatest sense of satisfaction or joy out of.

Harry Stebbings 3:21 Do you score yourself? Like do you measure that?

Pat Grady 3:24 Hmm. No, I don't. Should I?

Harry Stebbings 3:26 Yeah. I, I don't know if you know-

Pat Grady 3:28 How would you measure it?

Harry Stebbings 3:29 So Matthew McConaughey does it very well actually, and he basically, um, thinks about it in the red or in the black.

Pat Grady 3:34 Okay.

Harry Stebbings 3:35 And he plots his life in a quadrant, which is, it's friends, it's family, it's work, and it's marriage. And he basically puts a red or a green at the end of the week, I think it is-

Pat Grady 3:47 Okay.

Harry Stebbings 3:47 ... in each. And if consistently there's red in the same spot, he knows that he needs to rectify something in his life.

Pat Grady 3:54 Hmm. I do this annually. So I actually have a scorecard that I do once a year.

Harry Stebbings 3:58 Huh.

Pat Grady 3:58 And it has different buckets on it, and it's similarly red, yellow, green. And then I figure out what I can do better the next year.

Harry Stebbings 4:04 Do you consistently have the same reds?

Pat Grady 4:06 No, actually. Um-

Harry Stebbings 4:08 That's good. So then you do learn and improve.

Pat Grady 4:10 Theoretically, I would just get everything into the green and stay there. (laughs)

Harry Stebbings 4:13 (laughs)

Pat Grady 4:13 So it's not, it's not exactly continuous improvement, but yeah, I certainly try to learn and improve.

Harry Stebbings 4:18 Okay. So we have that. Can I ask, did you know that you would be successful? I know it sounds like a strange question.

Pat Grady 4:24 It makes me uncomfortable to hear the word successful. So, (laughs) so I will resist the temptation to debate that.

Harry Stebbings 4:30 Can I be just difficult and-

Pat Grady 4:31 Sure.

Harry Stebbings 4:31 ... as your adopted little brother for this session, I'm gonna push.

Pat Grady 4:34 Sure.

Harry Stebbings 4:35 Kind of, but you have to acknowledge at some point that when you invest in companies that turn into $200 billion in market cap, that is success in this field.

Pat Grady 4:43 Maybe, but you could also do the counterfactual litmus test of, let's say, you picked any random person off the street in March of 2007 and plop them down into Sequoia where they have, one, the greatest business card you could possibly hope for; two, the beginning of the cloud mobile transition; and three, you're about to head into the global financial crisis where all of a sudden every company trades at two times revenue. Those are pretty magical conditions to start with. And so the fact that I've been associated with some nice companies may not have much to do with me. It might have everything to do with the circumstances.

Harry Stebbings 5:18 I always remember something you said to me on a call, and you probably don't even remember it, but it always stuck with me. I said, "God, like you just, you just hit every winner, huh?"

Pat Grady 5:25 (laughs)

Harry Stebbings 5:25 And you, you said to me, "You know, every company that goes public that we're not on the cap table of, it's really a miss when you look at our multi-stage investing practice."

Pat Grady 5:34 Yeah.

Harry Stebbings 5:35 That really stuck with me.

Pat Grady 5:36 Yeah, that is the thing. People see the winners. What they don't see is we have a chance to get into business with pretty much any company out there. And so when a company is a wild success and you don't see us in the cap table, chances are at some point we screwed it up.

Harry Stebbings 5:51 Is it hard to inspire that humility in new joiners?

Pat Grady 5:54 I was talking with this guy named Ben Jacobs the other day who was, used to be the CIO of Viking, and he left to start his own firm four or five years ago. And one of the comments he made really stuck with me, which was when you work at a name brand place like a Viking or like a Sequoia-... you're attracting people who want to be part of something great, not people who want to build something great. That really stuck with me because one of the things that has allowed us to remain relevant for 50 plus years now is this sort of underdog mentality and this sense of desperation and this sense that tomorrow is not our birthright (laughs) . Like, we have to work to earn it today. And I do worry that we may have adverse selection when we try to find people because they're attracted to the name brand and they're attracted to a place that's already been built versus being attracted to a place where they feel like they can build. And I think we, I think we screen for that reasonably well, and I think if you look at our team, for the most part, they are hungry, ambitious, chip on the shoulder, overachiever types. And so I, I think we have pretty good DNA, but it is something I worry

Pat Grady 6:58 about.

Harry Stebbings 6:58 Does it hurt you when you have brand hits and when you have some of, of the challenges that we've seen over the last few years? Does that hurt you 'cause you bleed green -

Pat Grady 7:08 Does that... Oh, does that hurt me personally?

Harry Stebbings 7:09 Yeah. 'Cause you bleed green, and I...

Pat Grady 7:11 We-

Harry Stebbings 7:11 People said this in emails, you bleed green.

Pat Grady 7:13 The answer is nuanced. If the brand hit is fair, the fact that we're taking the brand hit doesn't hurt me. The fact that we screwed up and deserve the brand hit is what hurts me. If the brand hit is unfair, that hurts a little bit, but I tend to ignore it because I know that it's not reality. And so the thing that hurts me is not people talking about our mistakes. The thing that hurts me is when we actually make mistakes, particularly when they are self-inflicted wounds, they were avoidable, we should have known better. That's the stuff that's painful. And you can only have so many of those and continue to perform at eye level.

Harry Stebbings 7:49 What do you think is a fair versus unfair brand hit?

Pat Grady 7:52 The stuff that's unfair I think is just related to misunderstanding about how Sequoia works. And so a lot of what you read about leadership transitions and that sort of thing is out of date.

Harry Stebbings 8:05 Mm-hmm.

Pat Grady 8:05 You know, again, the leadership has been pretty stable in the US Europe business for the better part of a decade. Um, the stuff that is fair, anytime we have an investment that blows up, um, that is our responsibility. The reason limited partners trust us with their money is because they trust us to find the right investments, make the right decisions, do rigorous diligence, and there's always some other card that you could have turned over to produce a different conclusion. And so anytime an investment blows up and people give us flack for that, that, that's deserved. Like, that's our job. We're in the risk-taking business and so not every investment is gonna work, but at the end of the day, anytime an investment fails, that's

Pat Grady 8:44 on us.

Harry Stebbings 8:44 When an investment fails, Sequoia has an extremely high bar. How does that go down internally? 'Cause you want some accountability, but you also don't want a culture of fear.

Pat Grady 8:56 Yeah.

Harry Stebbings 8:57 It's something that I struggle with building a firm today, honestly.

Pat Grady 8:59 You will never see anybody at Sequoia reprimanded, fired, chastised for a failed investment. You will never see that. Similarly, you will never see anybody at Sequoia promoted, lauded, praised for a single great investment. And again, it's 'cause we're in the risk-taking business. And so if you have a string of bad investments, there's probably something wrong in your process. If you have a string of good investments, there's probably something right in your process. And so one data point doesn't make a trend. If somebody has a bad investment or a great investment, we're not gonna... We're not gonna react. Um, we do try to inspect the inputs as much as possible because we're in a long feedback cycle business, right? And so the, the activities that somebody is doing today may not produce tangible results for another five or 10 years. And so we try to inspect the activities. We try to inspect the behaviors. If the activities and the behaviors are good, but one of the outcomes happens to be bad, that's okay. If the activities and the behaviors are bad and one of the outcomes happens to be good, that's probably

Pat Grady 10:07 not okay.

Harry Stebbings 10:07 Can I ask you bluntly, what is your process today and how has that changed over time? I've always said this about you to everyone who will listen to me, uh, which is, you know, mostly my mother these days. Uh (laughs) -

Pat Grady 10:18 (laughs) .

Harry Stebbings 10:19 ... uh, but I think you are the most incredibly structured thinker I know.

Pat Grady 10:23 (laughs) .

Harry Stebbings 10:23 No, no, really, you take very complex things and you break them down into very cohesive structures that are understandable. And then everyone else on your team said the same, which made me feel vindicated. So, yes.

Pat Grady 10:34 (laughs) .

Harry Stebbings 10:35 (laughs) So my question to you is, like, what is the process for you and did it change over time?

Pat Grady 10:40 Conceptually, it's pretty straightforward. Conceptually, it's a process of crystallizing the thesis and then stress testing it to make sure that it's real. And that's it. But the crystallizing the thesis part of it, I think one mistake people make is they sort of launch into diligence on something before they really have figured out what they want to diligence. So the crystallizing the thesis part of it, that is the declarative statement, "We should invest because..." We should invest in Zoom because, A, spectacular founder, B, someday every room will be a Zoom room. That's it. It doesn't have to be a complicated thesis, but it does have to be a crystal clear thesis.

Harry Stebbings 11:24 Does it have to be a counter-narrative? Can it be a prevailing narrative, which is-

Pat Grady 11:27 Well-

Harry Stebbings 11:28 ... everyone sees it and we all agree, or does it have to be, like, a narrative violation?

Pat Grady 11:33 I don't think that there are any bonus points awarded for degree of difficulty. I think because there are a lot of very smart people in the world of venture capital, one currency is, "I'm going to be contrarian and right and then I get to be smarter than everybody else." I, I don't care whether we're contrarian or not. I just want us to help the daring build legendary (laughs) companies and generate exceptional net multiple money returns for our limited partners. And so some of the investments that I've been a part of... So for example, HubSpot back in the day, we led the series D in 2011. We would later find out that we were the only term sheet. Nobody else wanted-

Harry Stebbings 12:09 (laughs) .

Pat Grady 12:09 ... to invest. And even inside the partnership, it was controversial. Um, Okta back in-

Harry Stebbings 12:13 Why was it controversial?

Pat Grady 12:15 Um, it was controversial for a bunch of different reasons.... the numbers were okay. The product was okay. The storytelling was very good.

Harry Stebbings 12:24 Mm-hmm.

Pat Grady 12:25 And the thing that actually got it over the line, probably two things, and this is true of almost every investment, it always comes down to the founder and the market. Uh, hopefully I've gotten better over the years at trying to understand people. In 2011, I was good at understanding numbers, not so good at understanding people.

Harry Stebbings 12:39 Mm-hmm.

Pat Grady 12:39 Fortunately, Jim Goetz ... I was number two on the investment, Jim Goetz was number one. Fortunately, Jim Goetz has always had an amazing way of understanding people and when he saw Brian and Dharmesh, he saw something very special. And so that was part of what got it over the line. And then the second thing with the market, um, and this might be where I contributed a little bit, we had done a bunch of work around marketing, we were trying to understand the structural changes in the market, and HubSpot fit really well into the overall market thesis. So there's a little bit of a market thesis, a lot of Jim Goetz' magical (laughs) understanding of human beings, and then quite frankly, they ... the way that Brian and Dharmesh executed on that business is fabulous.

Harry Stebbings 13:18 Uh, I, I remember speaking to Brian when I had him on the show and-

Pat Grady 13:21 Yeah, yeah.

Harry Stebbings 13:21 ... him talking about your rigorous diligence process.

Pat Grady 13:24 (laughs)

Harry Stebbings 13:24 What do you do when you have an-

Pat Grady 13:25 Every time he tells that story, it gets longer.

Harry Stebbings 13:27 Oh, longer and longer.

Pat Grady 13:28 In, in, in reality, it might have been three weeks. (laughs)

Harry Stebbings 13:29 And then, "And it was two years and he took my house and ..."

Pat Grady 13:33 (laughs) .

Harry Stebbings 13:33 (laughs) Uh.

Pat Grady 13:34 Yeah.

Harry Stebbings 13:34 What happens when you don't like the market, but the founder is amazing? I laugh with our team, but I'm like, "We have a series of the most unattractive markets in our portfolio-"

Pat Grady 13:43 (laughs) .

Harry Stebbings 13:43 "... with the world's best founders." (laughs)

Pat Grady 13:45 My overall framing on this is the market determines how big a company can get. The founder determines how big the company will get. Meaning market, in some ways, establishes the ceiling on an opportunity and there are different orders of magnitudes in terms of the markets that you can go after. But you could have the biggest market in the world, if the founder's just not that good, you're not going to get anywhere. I will take a market of modest size being attacked by a spectacular founder over a market of gigantic size being attacked by an okay founder. I will, uh, you know, between the two variables, the founder variable is more important.

Harry Stebbings 14:24 I always say the difference between a $1 billion company and a $10 billion company is a truly exceptional founder.

Pat Grady 14:29 Yeah.

Harry Stebbings 14:29 They will find that second product, that second channel.

Pat Grady 14:31 Well, this is a big learning for me over the years because in the world of growth investing, everybody has the same basic inputs, everybody looks at the numbers, everybody talks to the customers, everybody spends time with the team, and then everybody builds the same basic financial model and it tends to end five years out and it tends to have decelerating growth rates and, you know, some reasonable margin assumptions and some reasonable multiple assumption. And if you just invest on the basis of that model, you're never gonna distinguish yourself as an investor, um, 'cause the key question is actually what happens after that model ends. So when you get five years out, has that founder grown even faster than the company and is that founder now attacking new markets with act two and act three in different products and different businesses? Or has that founder run out of gas and the company is grinding to a halt and eventually it's gonna go, you know, fire sale to a private equity firm? And so the founder variable ends up being the most important thing.

Harry Stebbings 15:26 Which founder that you've worked with most exemplifies or comes first in mind in out accelerating the company and-

Pat Grady 15:31 Oof.

Harry Stebbings 15:32 ... outperforming that five-year end of model mark?

Pat Grady 15:35 You know, there, there are a bunch. Um, (laughs) I've been, I've been lucky to work with some pretty excellent founders.

Harry Stebbings 15:40 I'm forcing you to choose your favorite, Charlie. (laughs)

Pat Grady 15:42 (laughs) Um, this is not, this is not a favorite, um, I have, I have lots of favorites.

Harry Stebbings 15:49 Mm-hmm.

Pat Grady 15:49 But, um, I will choose Brian Halligan again because I think if you look at ... So by comparison, if you look at Snowflake, amazing product in an amazing market.

Harry Stebbings 15:59 Mm-hmm.

Pat Grady 15:59 Right? If you look at Zoom, amazing product in an amazing market. If you look at Okta, amazing product in an amazing market. And so there, there were really powerful tailwinds for those products in those markets. If you look at HubSpot, mediocre product in a crappy market.

Harry Stebbings 16:17 (laughs)

Pat Grady 16:17 Uh, not today.

Harry Stebbings 16:18 Oh, shit. (laughs)

Pat Grady 16:19 Not today. Not today. Circa 2011, okay?

Harry Stebbings 16:21 (laughs)

Pat Grady 16:21 And th- and so the reason I say Brian is because one strategic decision after another, he and Dharmesh just absolutely nailed it. There was the decision to focus on the SMBs where all the math told you to go upmarket, and Brian and Dharmesh correctly concluded, "Well, everybody else is doing the same math. If we go upmarket, it's going to be a red ocean. If we stay down here, it's going to be a blue ocean. Someday we'll become the default and the unit economics will get better." That's exactly what happened. It was acquiring Performable back in 2011, a few, a few months after we got into business with them, because they wanted to build out this new part of the product which was sort of the middle of the funnel. HubSpot at the time was top of funnel, lead generation. Performable was middle of funnel, marketing automation. That ended up being a transformative acquisition because the engineering team there was excellent and one of the guys that they, um, brought in with that acquisition is still the CTO of HubSpot today. Um, one of the other guys they brought in with that acquisition was the chief product officer until a couple years ago. And so that was transformative 'cause that took them from good story, bad product to good story, great product. And then the other one was when they had kind of built out the full marketing suite and they said, "Okay, we got the full marketing suite. What's next?" Well, if you got marketing, the logical act two is gonna be sales. Traditional way to do that would have been to just build some mediocre sales product and hand it to your go-to-market organization and let them sell it. And they decided to put a hard constraint on it and say, "Look, nobody is allowed to touch the sales business. The sales business has to stand on its own two feet. Hey, sales team, or sales business, keep building stuff until you find something so good it sells itself." And so putting a hard constraint on it and saying, "Look, we don't wanna live with a three or four or five, you know, 5X LTV to CAC sort of business, we want to build something that can be 10X plus, something that can sell itself." And that was transformative to the business too. And so I think just one good strategic decision after another, they just nailed

Pat Grady 18:11 it.

Harry Stebbings 18:11 I, I couldn't agree with you more. I think the CRM story is incredible. You mentioned Jim Goetz having the superpower of, like, founder evaluation.

Pat Grady 18:18 Yeah, yeah.

Harry Stebbings 18:19 I had spoke to Julian back before and he actually said that you had a superpower of founder evaluation today.

Pat Grady 18:25 (laughs)

Harry Stebbings 18:25 But you said you have a framework for it, and maybe it differs between early in growth. Can you talk to me about that framework, and how does it differ?

Pat Grady 18:33 My framework is ... There are kinda two things that I care most about when assessing founders. So one is founder market fit, and two is the vector that describes them. And so for founder market fit, people tend to co-mingle two distinct variables in here. There's the problem variable and there's the solution variable. The problem variable is, do you understand what problem you're solving? And a lot of times that means, do you have somebody who comes from this domain? And so one example, we're in business with this company Harvey, which is doing AI for legal services. Winston comes from the world of law, so he understands the problem. The other variable is solution. You may understand the problem. Do you actually know how to build the solution? Well, Winston doesn't know anything about AI. I mean, he does now. Two years ago, he didn't. Fortunately, his co-founder, Gabe, comes from the world of AI research and so Gabe understands how to build the solution. So you put those two things together, you have both the problem and the solution accounted for, that's pretty good founder market fit. The second thing that I mentioned, which was the vector that describes the person, you know, vectors have both direction and magnitude. The magnitude component people tend to refer to as, you know, the spike around a founder. Uh, I don't necessarily need it to be a singular identifiable spike. If it's just a track record of consistent performance, that might count, right? But I need to believe that there's some exceptional magnitude on some dimension that matters. And then for direction, this kind of comes down to the motivation, like why are they doing this? Billing a startup is insanely hard, as you know. (laughs)

Harry Stebbings 20:09 (laughs)

Pat Grady 20:10 And, and it's, it's not for the faint of heart. Being a CEO might be even worse, right? (laughs)

Harry Stebbings 20:15 (laughs)

Pat Grady 20:15 And so you need to have some serious motivation or you're just not gonna stick with it to the, to the degree that you need to, to build something that matters. And so try and understand that is important too.

Harry Stebbings 20:25 Do you spend much time on the backstory?

Pat Grady 20:27 Yeah, yeah.

Harry Stebbings 20:28 That I really care about how they first made money, but actually insecurities in childhood, uh, uh, you know, one of the most clear signs to me of an exceptional entrepreneur is they always start early. They always sold Nokia mobile phones on eBay, a lemonade stand at school, you know, uh, whatever that may be.

Pat Grady 20:44 Yeah.

Harry Stebbings 20:45 You never came out of McCa- McKinsey or Bain and made your first entrepreneurial project.

Pat Grady 20:49 Absolutely. So like for example, you know, Eric Yuan, as the legend goes, it was his ninth visa application that finally got him into the US, right?

Harry Stebbings 20:59 (laughs)

Pat Grady 20:59 Like, he was seeking out a better opportunity for himself and he stuck with it because he really wanted to see it through. There are lots of little tidbits like that in the founders

Pat Grady 21:07 we work with.

Harry Stebbings 21:07 I have made many mistakes in terms of founder assessments. (laughs)

Pat Grady 21:12 (laughs)

Harry Stebbings 21:12 Many. Uh, when you look back on yours, what did you not see that with the benefit of hindsight you should have seen?

Pat Grady 21:19 Founders that we did not get into business with, that we should have gotten into business with.

Harry Stebbings 21:22 Sure.

Pat Grady 21:24 Or vice versa.

Harry Stebbings 21:25 Could be either.

Pat Grady 21:25 (laughs)

Harry Stebbings 21:26 You can choose.

Pat Grady 21:27 There is one thing, um, and there are a couple of founders that I'm thinking about and a mistake that I've made. So Peter Reinhard of Segment would be one of them. And then, um, oh god, I'm blanking.

Harry Stebbings 21:38 What did you, what did you-

Pat Grady 21:39 Revolut. Founder CEO of Revolut.

Harry Stebbings 21:40 Well, you sh- well let's start on Peter. What did you not see that you wish you'd seen?

Pat Grady 21:43 Um, you gotta tell me the name though, because I've blonk- blanked on his name.

Harry Stebbings 21:46 Nikolai Staronski.

Pat Grady 21:47 Yes. There you go. Thank you, Nick. The thing that was common to both of those ... So I met both of those for series As. How I ended up meeting them, I don't remember necessarily, but I met both of them at the series A, and both of them told me the entire story in like five or ten minutes. And it was super clear. And at the end of the five or ten minutes, I couldn't think of any questions to ask, 'cause they had already answered any question that I would have wanted to ask. And then they just kind of looked at me and said, "So do you want to invest or what?" I didn't know what to do. (laughs)

Harry Stebbings 22:23 (laughs)

Pat Grady 22:23 And so, (laughs) and so, you know, I went off and tried to do some homework and tried to come up with an answer, and it was almost, it was almost too simple. Because it was so simple, for whatever reason, I didn't have the conviction to lean in and we ended up passing on both of those.

Harry Stebbings 22:38 (sighs)

Pat Grady 22:38 And in retrospect, both of those were terrible decisions. And, and so I think maybe the lesson is, sometimes it really is just that simple. Like sometimes the very best founders can articulate things in a complete and compelling way in five or ten minutes, and that's all you need

Pat Grady 22:54 to hear.

Harry Stebbings 22:54 When I think about Nick there in particular, with respect to him, I think about actually something Peter Fenton told me, which is like, "The best founders should make you feel a little bit uncomfortable."

Pat Grady 23:02 Yeah.

Harry Stebbings 23:03 "They won't make you feel at ease."

Pat Grady 23:05 Yeah.

Harry Stebbings 23:05 And I remember asking Nick, "Nick, what's your favorite book?" And he goes, "I don't read book. I do PDF."

Pat Grady 23:11 (laughs) All right. What's your favorite PDF?

Harry Stebbings 23:14 And it was Ray Dalio's Principles. (laughs)

Pat Grady 23:16 Ah. Yeah, yeah. That makes sense.

Harry Stebbings 23:18 Um, but, but I love that. Um, okay, I get that people have the feeling that s- you mentioned there, "I don't know how I saw them, but I saw them." Pe- (laughs)

Pat Grady 23:28 (laughs)

Harry Stebbings 23:28 People have the perception that Sequoia just see everything. Is that true?

Pat Grady 23:33 It's not literally true but (laughs) but it's effectively true.

Harry Stebbings 23:37 (laughs)

Pat Grady 23:37 So, so if I were, if I were going to decompose our value chain, and let's say there's sourcing, picking, winning, building, harvesting. So...

Harry Stebbings 23:45 Harvesting is selling.

Pat Grady 23:47 Harvesting is actually generating returns.

Harry Stebbings 23:49 Yeah.

Pat Grady 23:49 Um, so sourcing, are we getting in front of interesting stuff? Picking, are we doing a good job of selecting? Winning, are we able to invest in the companies we want to invest in? Building, are we actually helping founders build market leading companies? And then harvesting, are we eventually turning that into returns for our limited partners? If I were to go across the value chain, I'd say on sourcing we are eight or nine out of ten. I mean, I think we're, we're not perfect, particularly at the very earliest stages, it's really hard to have complete coverage because founders can come out of anywhere, but I think for the most part, we're in front of good stuff and we're in front of it early enough to have a real point of view. So I think on sourcing, we're probably an eight or nine out of ten. On picking, different people may disagree.... I think we're maybe a six out of 10. I actually think we're ... Because there's so much uncertainty in this business, it is incredibly hard to make these decisions. I think we're probably as good at it as anybody, but it's just really hard.

Harry Stebbings 24:54 Which firm do you think is a better picker if you had to choose one?

Pat Grady 24:57 Not necessarily willing to say that he's better, uh, but somebody who I really admire is Mamoon at Kleiner. I think Mamoon has an exceptional track record of investing in companies that are not at all obvious at the time, and I think about the series being Figma, which is a round that we looked at and passed on. I think about the whatever round it was in Slack, when it had just become Slack.

Harry Stebbings 25:16 Rippling.

Pat Grady 25:17 Uh, yeah, Rippling's a good point. So I, so I think Mamoon, if you look at his track record, it seems like he's a pretty exceptional picker.

Harry Stebbings 25:24 I, I, I, I totally agree with you. Okay, so we have that, picking-

Pat Grady 25:26 So we have picking and then-

Harry Stebbings 25:27 ... what, what could you do to be better then? If you're six.

Pat Grady 25:29 Oh, we spend, we spend every off-site on this topic.

Harry Stebbings 25:33 Okay. What are, what is the outcome?

Pat Grady 25:34 Um, I think the answer is to be true to the nature of this as an apprenticeship business. So, the answer on getting better at picking is not to erect a bunch of scaffolding around people to try to help them make better decisions, because this is not a manufacturing plant, right? We're in the outlier business. You can't design a system that's gonna systematically identify outliers because each outlier is gonna be different. They're gonna be one of one if they're a true outlier. So whatever system you design and back test, it's gonna miss the next one because the next one's gonna break the mold. And so the way you solve for that is, again, be true to this as an apprenticeship business, have experienced investors in the field doing the work alongside the people who are earlier in their career so that they can see how it works, and they can see from a variety of people. You know, one of the benefits I had when I joined Sequoia, I wasn't assigned to a particular partner. I got to work with everybody, so I got to make investments alongside Doug Leone and Jim Goetz and Roelof Botha and Michael Moritz and all these other people who really knew what they were doing. And through all those repetitions, I got to kind of figure out, how does Jim think about investment? How does Doug think about investment? How do I want to think about an investment? And I think that's

Pat Grady 26:45 the best thing you can do.

Harry Stebbings 26:46 You have to understand, as a venture nerd, this conversation just makes me so happy. (laughs) Uh, uh, who's the best sourcer in Sequoia?

Pat Grady 26:54 Oh, the best sourcer. Everybody has very different methods, so it's hard to say. The first name that comes to mind is David Khan. David joined us about a year ago. He is an absolute force of nature. Um, I get into the office pretty early. He's always in there on a Zoom when I get in. Um, he's always in there when I leave. Dave- David is just a total force of nature. I think his ... Some people are high volume, some people are high quality. He's both, so he's right up there. I think Sonia's done a really good job of making a name for herself in the world of AI-

Harry Stebbings 27:25 Mm-hmm.

Pat Grady 27:25 ... and creating magnets in the form of, uh, in the form of blogs, in the form of a, a podcast that we're releasing soon. I think Sonia's done a really good job putting herself in that position. Yeah.

Harry Stebbings 27:35 Who's the, who's the best picker?

Pat Grady 27:36 A lot of people are really good pickers. I'll, I'll keep it on the growth team 'cause that's, that's where I'm better versed. Um, I probably have to say Andrew Reid. If you look at Andrew's portfolio, very few false positives, very few false negatives. Most of the stuff in there is very good, and a lot of it wasn't obvious at the time.

Harry Stebbings 27:57 Mm-hmm.

Pat Grady 27:58 So the series C in Figma when Figma had, I think, 4.6 million of ARR, that was not at all obvious, but Andrew had spent three years studying the design market and had a real point of view.

Harry Stebbings 28:08 I remember when he did that and it was, uh, I think it was close to $400 million price.

Pat Grady 28:12 Yeah.

Harry Stebbings 28:12 And everyone was like, "Nuts."

Pat Grady 28:14 Yeah.

Harry Stebbings 28:14 "100x ARR." And it was like, seriously-

Pat Grady 28:17 Yeah, yeah.

Harry Stebbings 28:17 ... this, this is just crazy.

Pat Grady 28:19 Yeah, and Andrew, Andrew's also got range though. I mean, you mentioned Vanta. He led our series A in Vanta. There's a big company over here in Europe called Bolt. He led our investment in Bolt, you know, which is the ride, uh, the ride sharing business. He led our investment in Robin Hood. I mean, he's got pretty good range.

Harry Stebbings 28:34 Winning.

Pat Grady 28:35 Yeah.

Harry Stebbings 28:36 Does Qu- always win? What percentage of the time do you lose?

Pat Grady 28:39 We do track this. I think it's 100% in the last 12 months. Actually, I take it back. There was one situation where an existing portfolio company was raising a series B and they chose somebody else, and to be fair, we didn't make an offer. But had we made an offer, we probably would not have won, so I would count that one against us.

Harry Stebbings 29:01 Would you give yourself a 10 out of 10 for winning then?

Pat Grady 29:03 We don't give 10 out of 10s, but I'd probably give us a nine out of 10 for winning. I think some people want to believe that because we have this nice brand, we can just waltz in and founders will hand us shares in their company, and that is far from true. Like, it is an absolute knife fight every time, and we try to have a team and a culture where even if your business card meant nothing and nobody had ever heard of the name Sequoia, you could still be put in a position to win, because you've built the sort of relationship with the founder that just makes them want to be in business with you independent of, you know, what firm

Pat Grady 29:39 you're from.

Harry Stebbings 29:39 What's your favorite winning story, Pat? You've been at Sequoia now for 17 years?

Pat Grady 29:43 In sales parlance, people talk about the difference between making something happen and order taking, right? And the venture business in the last several years has turned into a business of order taking, and it's a business of order taking in the sense that a lot of companies are raising money, rounds are happening frequently, and when the round comes along, you raise your hand and say, "Okay, well, we'd like some, please." That is very different than the way that it often worked 10+ years ago where companies may not have been raising another round. They might have been generating cash. They might have had no need for money, right? And it was a business of figuring out if there was some reason that they would be better off if they had you as a shareholder, articulating that to them in a compelling way, and getting the opportunity to be shareholders. And one that I think of is in 2009 when, um, Fred Luddy was building ServiceNow down in San Diego, and nobody had really heard of it, and it was just a SaaS company that happened to be working, and, um...It was generating cash, and so there was no need to raise any money. There was no round planned.

Harry Stebbings 30:48 What sort of cash was it doing? Just ballparking.

Pat Grady 30:51 This is actually funny because we didn't have a full set of financials from them, so we didn't know literally until the last slide in the presentation in the partner meeting on the day that we were going to make the decision when Fred was presenting. The very last slide (laughs) showed that they were generating 20 million of free cash flow, and that was on 25 million of ARR because they were getting paid in advance for two and three-year contracts.

Harry Stebbings 31:13 Wow.

Pat Grady 31:13 So they were unbelievably cash generative, right? Obviously, didn't need to raise any money. The reason that they decided to get into business with us, Doug and I went down to visit Fred in San Diego, and we were sitting with him, and Doug has this amazing discovery process where he kind of teases out everything that might not be going so well with the company, which is not the stuff they want to tell you about and so-

Harry Stebbings 31:35 How does he do that?

Pat Grady 31:36 He asks a gazillion questions. I can't tell you exactly how his brain works, but somewhere in there, he is constructing a model of the human being and of the company. And so the questions don't go in a logical flow where you can kind of trace them from A to B to C to D. They kind of go all over the place, but by the time he's done, he has this very clear picture of who is this person and what is this company. And anyway, with ServiceNow, he teased out that they were having issues kind of with the backend of the business, and so this is 2009. People weren't building companies on AWS. You were doing managed hosting or you were using some sort of data center co-location, but you were basically responsible for your own technical operations as opposed to effectively outsourcing it to the public cloud. And because the product for ServiceNow was getting pulled into these huge enterprise deployments, it was sort of outpacing the ability of the backend of the business to keep up, and that was showing up in terms of latency and in terms of downtime, and that was kind of the main pain in the business. It was one of these pains caused by success. But we were sitting there and Doug took out his phone, looked up a phone number, and while Fred is telling him this, he says, "You need to call Marty Abbott." And Marty Abbott was a guy who used to run technical ops for eBay. He's also somebody who helped us when YouTube started taking off. You know, 2005, we got in business with YouTube and all of a sudden the thing starts running. They had the same issue where they had to keep their servers up. So anyway, Fred calls Marty Abbott, Marty Abbott comes in, helps him out, solves the problem, and, um, and we had a couple more of those. And eventually Fred was like, "Okay, I guess it'd be nice to have you guys around." And so he created an opportunity for us to invest, even though there was no need for money in the company.

Harry Stebbings 33:15 How much ownership did you get then?

Pat Grady 33:16 We invested 52 million for 20%.

Harry Stebbings 33:21 (gasps) (laughs)

Pat Grady 33:22 (laughs) And for anybody keeping track, that is 260 post on 25 million of ARR, generating 20 billion in cash.

Harry Stebbings 33:29 Do you not try and market caps? No?

Pat Grady 33:32 I honestly don't look at public stocks, even the ones that I'm-

Harry Stebbings 33:35 That you own?

Pat Grady 33:35 ... responsible for.

Harry Stebbings 33:36 (laughs)

Pat Grady 33:36 We still own a bunch of Snowflake. We own a bunch of Amplitude.Um, we actually own a bunch of Datadog. I really don't check day to day.

Harry Stebbings 33:43 To what extent is it such a secret weapon having Doug come into Founders? I remember talking to Christian Hecker at Trade Republic, uh, about his meeting with Doug in COVID on a terrace in Germany in the cold, and he just said, like, "It was another level."

Pat Grady 33:59 (laughs)

Harry Stebbings 34:00 And I guess I just think, uh, I think about if you've got Marc Andreessen and Ben Horowitz doing the hard fucking sell, and then you have Doug Leone doing the hard fucking sell. No, I mean, I, I'm obviously green, right?

Pat Grady 34:12 (laughs)

Harry Stebbings 34:12 Doug's gonna win all day.

Pat Grady 34:14 (laughs)

Harry Stebbings 34:14 But when Doug starts pulling away, how does one think about losing a weapon?

Pat Grady 34:19 I don't think people have gotten to see what made, made Doug so effective 10 or 15 years ago because the thing that made him so effective 10 or 15 years ago was he was the tip of the spear. He wasn't the guy who got parachuted in later to play the role of senior big dog, right, and impress upon the founders how important they are because, hey, the big dog is here, right? That's more what he's been asked to do recently. 10 or 15 years ago, he was the tip of the spear. He was in the first meeting. He was leading the charge. He was asking the questions. He was doing the work. And in that capacity, he was the best there's ever been 'cause he would fully, fully, fully commit to being present, understand that person to a degree that nobody else has ever understood them, understood their business to a degree that nobody else could possibly achieve in 45 minutes. And by the time that conversation was over, there was no question that they wanted to be in business with him. Doesn't matter who else comes into the room. Could be anybody. But like, nobody could beat Doug at that point.

Harry Stebbings 35:31 I remember meeting him for the first time. I met him at a hotel for breakfast at the Connaught in London.

Pat Grady 35:36 Yeah, yeah.

Harry Stebbings 35:36 And he ordered the most incredibly specific breakfast-

Pat Grady 35:39 (laughs)

Harry Stebbings 35:39 ... that took about five minutes to describe the kind of beauty of this kind of-

Pat Grady 35:44 Six, six egg whites, no butter, no oil.

Harry Stebbings 35:45 E- e- exactly. And afterwards I said, "Oh, he's having..." (laughs)

Pat Grady 35:48 (laughs)

Harry Stebbings 35:48 "He's clearly been here before." (laughs)

Pat Grady 35:50 Yeah.

Harry Stebbings 35:50 He's like, "Good choice." (laughs)

Pat Grady 35:52 Yeah.

Harry Stebbings 35:52 Um...

Pat Grady 35:53 It's funny, I actually, I actually learned to eat faster because I used to travel with Doug so much, and we would try to squeeze in food in between meetings-

Harry Stebbings 36:02 (laughs)

Pat Grady 36:02 ... and he'd be done in 30 seconds and I'd still be sitting there. (laughs) And so I actually, actually trained myself to eat faster so I could keep up with Doug when

Pat Grady 36:09 we were on the road.

Harry Stebbings 36:09 When we go along the life cycle of like fund investing, the next is like actually helping companies be great.

Pat Grady 36:15 Yeah.

Harry Stebbings 36:16 Sequoia has big, big teams now. And then I have the alternative, which is your Founders Funds of the world that say, "The best founders, they make great companies." And so my question is, to what extent does the investor really move the needle in enterprise value creation, do you think?

Pat Grady 36:33 Well, first off, on big teams, you know, when I joined 17 years ago, we had 14 investors. Today we have 27. And so that's less than a 2X over-

Harry Stebbings 36:41 Sure.

Pat Grady 36:42 ... you know, 17 years. So our team is, I think-... fairly small, relative to our market presence. The thing that has changed a bunch is, when I joined we had two people, uh, that I would call kind of front office operators. Um, so not compliance, finance, all that good stuff. But two people, one in marketing and one in talent, um, who were there to amplify the efforts of investors and serve the portfolio. That number two has grown to almost 60 today. And so that's where we've really invested, and the reason we've done that is largely a reflection of the market. So one of the nice things about technology, it's kind of this democratizing force, right? Like, any founder, a founder could come from anywhere in the world and focus on any vertical. And so the, the venture capital market is subject to something that people used to, used to use in relation to the big data world 10 years ago when that was a thing, which is the three V's: volume, variety, and velocity. There is a higher volume of founders coming from more places, coming at us faster than ever before. And we have to react to that as a business. One way to react is to staff up the investment team, right?

Harry Stebbings 37:49 Mm-hmm.

Pat Grady 37:49 We could have 100 investors. We chose not to do that because what we want to do is concentrate the experience, concentrate the knowledge in the smallest possible number of people so that when one of those people happens to stumble across the next Fred Luddy, the next Todd McKinnon, the next Brian Halligan, they're gonna give that founder the sort of outlier experience they deserve. So we wanted to keep the team as small as possible. The thing that we can scale is the platform, so those front office operators that I mentioned. Um, and that platform, it amplifies our efforts as investors. It also is an opportunity to build advantages that can compound over time, and the most obvious instantiation of this is the, is the technology platform and the data science system that we built, which has signals that get better and better over time.

Harry Stebbings 38:34 How much of your investing role is impacted by the data signals that you get?

Pat Grady 38:38 A lot.

Harry Stebbings 38:38 I had Chandra, I had Chandra on the show, who I think was part of that team.

Pat Grady 38:40 Yeah, yeah. Chandra, yeah.

Harry Stebbings 38:41 Yeah.

Pat Grady 38:42 Yeah, yeah.

Harry Stebbings 38:42 People don't really talk about Sequoia's data platform.

Pat Grady 38:45 Well, it's not, it's not exposed externally.

Harry Stebbings 38:47 Yeah.

Pat Grady 38:47 It's just something that exists inside the building. Occasionally we'll use it to help out founders, but for the most part it is an internal tool that makes us more efficient. So one of the, um, we don't want to get to the point where the technology platform is, like, pumping out buy signals, right? We don't want it to make the final investment decision. We do want it to get to the point where it can tell us whether or not we should meet a company, and it got to that point a year or two ago.

Harry Stebbings 39:12 To what extent do you think that's reliable? When you think about it can predict which companies we should meet, are the biggest outcomes not purely anomalous? When you look at Daniel Ek at Spotify, I mean, ri- I'm, I'm sure he'll says that. He said it publicly. At the series A, he was going around asking series A ambassadors not only for the round, but also if they knew a good CEO that would like to replace him.

Pat Grady 39:30 Yeah, yeah. (laughs) Yeah.

Harry Stebbings 39:31 Like, they're so anomalous in every way.

Pat Grady 39:34 It's a lot better for growth than it is for early.

Harry Stebbings 39:36 Mm-hmm.

Pat Grady 39:36 It's a lot harder to get those signals out early, which is why we have the Arc program, right? We're now getting thousands of applications every time we have a new batch for Arc, which we're now doing a couple times a year. Right?

Harry Stebbings 39:46 Do you think Arc's been successful?

Pat Grady 39:47 I think Arc has been a wild success. I mean, the original... There are only two things that matter. Number one, do founders like it? Number two, does it make money for our limited partners? On point number one, do founders like it, overwhelming success. The NPS of the last batch was quite literally 100. Um, and so the NPS on this thing has been very good. We're getting a lot of referrals. If we go through and say, "Okay, well, are they the right kind of founders who are applying to this?" There are a lot of great founders. We've run into a lot of companies later at the series A or the series B that we're hunting, and then we go back and look, and it turns out they applied to Arc two, three years ago. And so we're actually attracting really good founders, and they're getting a lot of value out of the program, so that's huge. The one-liner that, that they've said, which is my favorite way to encapsulate it, is other incubators or other accelerator programs teach us how to raise our series A. Sequoia teaches us how to build a business. That's the words of our founders, not the words out of our mouths. But I think that's a pretty nice brand or reputation to have in the market. So that's kind of point number one, founders like it. Point number two, is it going to make any money for LPs? The truth matter is time will tell. There are some really good companies that are starting to come out of Arc, and so I'm optimistic that it will also make money for LPs.

Harry Stebbings 41:03 When I spoke to Danny Rimer a couple of weeks ago, he said the reason the index has been successful, I'm kind of bastardizing it, but you know, that's kind of my job, uh ...

Pat Grady 41:09 (laughs)

Harry Stebbings 41:10 (laughs) ... uh, is that they've been very, very good at keeping the main thing, the main thing. And I guess the question that I have for you is when you look at, like, the ecosystem fund, when you look at Arc, when you look at Scout Funds, when you look at the operated talent platform, there's a question of how do we think about keeping the main thing, the main thing? Is, is that flying in the face of it?

Pat Grady 41:31 It is absolutely the right question to be asking.

Harry Stebbings 41:34 (laughs)

Pat Grady 41:34 And, uh, I'm a big fan of fewer better things. I think it is good to experiment, because if you don't experiment, you're not gonna be on the bleeding edge.

Harry Stebbings 41:46 Mm-hmm.

Pat Grady 41:46 And you're not gonna be the ones defining the future. You're gonna be getting dragged into the future by somebody else who's defined it for you. So I think it is good to experiment, and I think that we've experimented aggressively, and I'm a big fan of that. I also think it's really important that the default for any given experiment is that it gets killed. The burden of proof is on the experiment, right? (laughs)

Harry Stebbings 42:09 (laughs)

Pat Grady 42:09 Unless it is a wild success, shut it down. Most companies say, "Well, unless it's an abject failure, we'll just keep going." No. Unless it's a wild success, shut it down. That doesn't mean it's gonna be a home run right out of the gates. None of the experiments that we've done were home runs right out of the gates. But you could find something in there that allowed you to, you know, craft your thesis for why it was on the track to being a wild success, and I think that's important. So anyway, to directly answer the question-

Harry Stebbings 42:36 What did you let run for too long that you should have shut down?

Pat Grady 42:39 In 2005, when we got into India and China, we did so with the thesis that the world was getting smaller. When we parted ways in 2023, it was because that thesis, in some ways, had been invalidated.And so, I think maybe we could have done that a few years sooner.

Harry Stebbings 42:58 You don't think the world is getting smaller again?

Pat Grady 43:00 I think what we're seeing is technology ecosystems that are more geographically isolated than we might have expected, and there's a lot of interconnectivity, but it's not just a single global technology market.

Harry Stebbings 43:12 I completely agree with that.

Pat Grady 43:13 Yeah. To be clear, like, I think our partners in those regions did a fabulous job of building their respective businesses and it was an honor and a privilege to be in business with them for as long as we were. But I think the, you know, reaching the conclusion that these are going to be isolated technology markets, we probably could have reached that conclusion sooner than we did. We just wanted to make sure that for a decision of that magnitude, we were getting it right versus being reactive.

Harry Stebbings 43:39 You know, I spoke to Andrew and Julien about this in particular. We've mentioned the team, the platform build. But on the investing team build, you're apparently one of the best hirers of investing talent there is in the business, they said. (laughs)

Pat Grady 43:54 (laughs)

Harry Stebbings 43:55 But they actually would do, wouldn't they? (laughs)

Pat Grady 43:57 I mean-

Harry Stebbings 43:58 Uh-

Pat Grady 43:58 You're talking about people I hired, so... (laughs)

Harry Stebbings 44:00 So slightly biased. (laughs)

Pat Grady 44:01 (laughs)

Harry Stebbings 44:01 It's quite right. What a shift up.

Pat Grady 44:03 Andrew, Pat's so good at finding 23-year-old analysts from Goldman Sachs.

Harry Stebbings 44:06 (laughs)

Pat Grady 44:06 He's really good at that.

Harry Stebbings 44:08 But, but, uh, you know, Andrew told me about you hiring him and Matt Huang and you, apparently, they hire, they started-

Pat Grady 44:13 So it was a good

Pat Grady 44:14 process.

Harry Stebbings 44:14 On the same day.

Pat Grady 44:14 Yeah.

Harry Stebbings 44:15 Yeah. And like both of them obviously have turned into, uh, very, very sh-

Pat Grady 44:17 (clears throat)

Harry Stebbings 44:17 ... brilliant investors. When you reflect back on your hiring process for hiring investors for the team, what have you learned? What do you do well?

Pat Grady 44:24 Andrew Reid and Matt Huang both started on our team in February of 2014. And so the process that led to them was conducted over the back half of 2013 and it was about the most rigorous hiring process we've ever had. Um, like top of funnel was 9,000 and what came out the bottom of the funnel was Andrew Reid and Matt Huang which is pretty spectacular couple of outputs. So I think one lesson in hiring is, it is a process like any other and y- yes, there's some art to it in terms of trying to really understand people, but there's also a lot of kind of science process management aspects to it. You know, just set it up to be a very efficient process so that you can... If you maximize top of funnel, that is one of the best ways to make sure that you're going to be happy with whatever comes out the other end of the funnel, right? So I think that's probably one big point. The second big point, which is around the kind of art piece of it, is... And this goes back to what we were saying earlier about how I've been trying to get better at sort of understanding people. Most of the time when you go into a hiring process, you have this list of things that you want and you know that you're supposed to keep it short, but you end up with 17 things on the list because everybody has their pet rocks that they want to include, and you go into the hiring process and you come up with a candidate and you're about to make a final decision on the candidate and then somebody says, "But wait, but wait, ugh, they don't have a CS degree." And you go check your list and it turns out that none of the 17 things says CS degree, but somebody thinks that's really important, you know, and they didn't get to put together the list and so now they're going to block the candidate. So on the art side of it, you need to figure out what are the few things that are absolutely essential and make sure that the person absolutely nails those things and everything else is a nice to have.

Harry Stebbings 46:11 Does it change for each role?

Pat Grady 46:13 It depends on whether you are looking for more of a DNA hire or more of an experience hire.

Harry Stebbings 46:18 So Andrew Reid is a DNA hire and then-

Pat Grady 46:20 Mm.

Harry Stebbings 46:20 ... David Cohn is an experience hire?

Pat Grady 46:22 Both DNA hires.

Harry Stebbings 46:23 Hmm.

Pat Grady 46:24 Andrew, uh, David had more experience than Andrew, but they're both DNA hires. Primarily DNA hires. It's not either or, it's what's sort of primary, right? So for example, Karl Eschenbach or Brian Halligan for that matter, they were more experienced hires, but the reason they work is because of their DNA. Both Karl and Brian have resumes that are kind of one and one, right? Like Karl ran VMware from 40 million to 7 billion of revenue, now he runs Workday. Brian built a company from zero to 2 billion of revenue, you know, all the way from PLG up to the enterprise, act one, act two, act three. A lot of good strategic decisions. Those guys are amazing based only on their experience. The thing that separates them from other people who have similarly amazing experience is their DNA. They're just very special human beings. The way that they interact with founders, that is the thing that makes them so effective, which I don't think people necessarily appreciate.

Harry Stebbings 47:14 How do they interact with founders differently?

Pat Grady 47:16 Do you know Brian Long at Attentive?

Harry Stebbings 47:18 Yeah, I th-

Pat Grady 47:19 So I remember Brian, Brian's the founder of, uh, of Attentive, which is a marketing software company. And I remember one time he was saying, "Hey, I think there are kind of two types of executives out there who'd like to get involved with, you know, venture capital backed companies. There are the kind who view it as their job to tell the founder what to do, and there are the kind who view it as their job to be in service to the founder." The thing that makes both Brian and Karl so great is that they view their job as being in service to the founder. And what that means is they don't show up and just pontificate about all the things they did right when they were operators. They show up and they listen and they ask questions and they're very direct with their feedback, but they're direct in a loving sort of way. It's the unbelievable lack of ego, the humility, the curiosity, the genuine care, and the genuine desire to help the founder. That is the thing that makes them so special and

Pat Grady 48:14 makes them so effective.

Harry Stebbings 48:15 I want to say I think them both. Also, Halligan is fun.

Pat Grady 48:17 Halligan's amazing.

Harry Stebbings 48:18 He's really fun.

Pat Grady 48:19 He's amazing.

Harry Stebbings 48:20 Yeah, really love doing that show. The final element was the harvesting. Um, what have been the biggest lessons in terms of generating value from sales? Because you have the question of when do I sell? Do I hold? What have been some of the biggest lessons there?

Pat Grady 48:36 It's really hard.

Harry Stebbings 48:39 (laughs)

Pat Grady 48:39 Um, there are companies that we sold way too soon. And when I say we, the founders, you know, ultimately we are in support of the founders, but YouTube is a canonical example. PayPal is a canonical example. You know, so there are companies that have been sold way too soon. There are also companies that we hold on to, held on to for too long.There's one in our portfolio now that I'm not gonna name that we had an offer from somebody to buy the company for almost $5 billion. We own just north of 20%. That would have been a huge home run. Now the company looks like it is, uh, kind of not headed in a very good direction.

Harry Stebbings 49:14 Oh, I know this company.

Pat Grady 49:15 And so-

Harry Stebbings 49:15 Yeah.

Pat Grady 49:16 You might.

Harry Stebbings 49:16 Yeah.

Pat Grady 49:16 But there are companies you can sell too soon, and there are companies you can hold onto for too long. Similarly, in the public markets, you know, we were talking about ServiceNow, if we'd held ServiceNow through to today, it'd be a, I don't know, $30 billion gain, right? (laughs) Um, but we didn't. We distributed it a year or so after the IPO because it was the first billion-dollar gain-

Harry Stebbings 49:38 All of it?

Pat Grady 49:39 Over time, not all at once, but it was within the first couple of years because it was the first billion-dollar gain that we had ever had in the growth business. The growth business for Sequoia was kind of this fledgling, you know, second-class citizen.

Harry Stebbings 49:52 Did you need to do that? You're Sequoia. You don't need to prove yourself.

Pat Grady 49:56 We didn't need to, and nobody was putting pressure on us to do it. But we looked at it and said, "Okay, this is pretty good." You know, "Let's go ahead and call it a win." I think today, we'd be a lot more patient. We'd probably hang onto it for a lot longer. It's not always the right decision. We held onto a lot of stuff in 2021 that's worth less today than it was then.

Harry Stebbings 50:15 My question is, though, like when you think about that, what is the takeaway? Is the takeaway to be prudent and take 33% off the table in increments over a, a nine-year period, three years at a time? Is there a takeaway from that? Or is it just as hard?

Pat Grady 50:28 I... Yeah, I think there are a couple takeaways, and there's sort of a high-level choice to be made, and the choice to be made is how much energy do you want to put into the harvesting? And...

Harry Stebbings 50:41 How much energy is needed is the question.

Pat Grady 50:42 Well, that's, that's it, and so there are some firms that say, "Look, we are venture capital investors, not public market investors. We are not going to try to outsmart the public markets and figure out exactly when to distribute our positions. We're just gonna do it programmatically." And I think that's a totally viable answer. Maybe say, "Okay, we're gonna distribute a little bit as soon as the lockup comes off, a little bit more six months later, a little bit more six months after that." Whatever your algorithm is, I think that's a totally okay way to do it. The way that we have chosen to do it is to try to be really good at it, which doesn't necessarily mean outsmarting the public markets. It does mean having a point of view so that when a company goes public, it's not just programmatic. You know, there's real work that happens to try to figure out where the company has a chance to go from here and the result of that, when it works, is companies like Square, where at IPO it was a, I don't know, maybe a couple hundred million dollar gain, and by the time we distributed five years later, it was a multibillion-dollar gain. Or companies like Mongo, which have compounded close to 40% in the public markets that we held onto for many years after the IPO. Or Palo Alto Networks, where we went into that IPO with the exact same ownership position as one of our co-investors. We ended up generating more than a billion dollars more than them because we were more patient. And so sometimes it really pays off.

Harry Stebbings 52:02 God, Nikesh is a beast.

Pat Grady 52:04 Nikesh is a total beast.

Harry Stebbings 52:05 Yeah, (laughs) absolutely. I did a show with him recently, and it was at the end of a 36-hour fast, and so I was just incredibly moody-

Pat Grady 52:12 You were fasting or he was fasting?

Harry Stebbings 52:13 No, I was fasting.

Pat Grady 52:13 Okay. (laughs)

Harry Stebbings 52:14 And I was just incredibly moody.

Pat Grady 52:16 (laughs)

Harry Stebbings 52:16 (laughs) And I just took it out on him.

Pat Grady 52:18 Did he put you in place?

Harry Stebbings 52:19 Yeah, yeah and then... No, no he didn't. This was the point. And then I got loads of messages afterwards like, "Dude, you're the only person in 20 years who's like argued back with him."

Pat Grady 52:26 (laughs)

Harry Stebbings 52:26 And I'm like, "Oh my God, what did I say?" Uh, that was, that was an interesting one.

Pat Grady 52:31 Nikesh has been incredible. That, that Palo Alto Networks has been interesting 'cause Mark McLaughlin was perfect for that like hundred million to billion revenue leg of the journey, and then Nikesh has been perfect for the billion to six billion or whatever it is now leg of the journey. So that's been, that's been a great, uh, great story.

Harry Stebbings 52:50 When you review the life cycle that we've just gone through, where are you weakest?

Pat Grady 52:55 Personally or as a partnership?

Harry Stebbings 52:56 First you and then as a partnership.

Pat Grady 52:59 (laughs) Um, you know, it's funny. Ironically, I'm probably weakest now where I was strongest 10 or 15 years ago, which is on the sourcing piece.

Harry Stebbings 53:06 Hm.

Pat Grady 53:07 Um, that was the only way that I could distinguish myself at Sequoia in the early days was to just try to go find interesting stuff, try to find companies worthy of Doug Leone's attention. Um-

Harry Stebbings 53:19 Is venture a young person's game?

Pat Grady 53:21 It really depends. I think if you go across the value chain, sourcing in some ways might be a young person's business. I think picking really benefits. So the problem with picking, here's the tricky thing. The more experience you have, that experience compounds, the knowledge compounds, your, your picking algorithm gets better, right? So you would say, "Okay, the more experience you have, the better off you're gonna be at picking." The problem is we're in a details business. If you're just trying to separate good from bad, you don't necessarily need to be into details. If you're trying to separate good from great and great from exceptional, truly exceptional, like the one out of every couple thousand companies that's really gonna matter, you gotta be in the details because the 10 or 15 that all look about the same from a distance are gonna look very different when you get up close. And so picking, you need to have the attitude and the work ethic and the tenacity of somebody who's earlier in their career and trying to prove themselves coupled with the experience and the knowledge of somebody who's actually been around and seen a little bit of that, which is why I think a lot of times, the sort of mid-career investors can be the, can be the best because they have both the right attitude and the right experience. And that's what we... One of the things that we try to do, that we try to distinguish ourselves on is to not have the more experienced people check out and get into administrative management roles.

Harry Stebbings 54:44 (laughs)

Pat Grady 54:44 Like we should be in the field making investments, meeting companies, doing the work, really trying to understand the details. And if we can do that, then hopefully we end up at a better place

Pat Grady 54:55 on the picking.

Harry Stebbings 54:55 When you think about the benefits of having Sequoia as a line on your cap table as well, I think one of the biggest lies we tell startups is startups die of indigestion, not of starvation. I think anyone who actually has any reality in the real world knows that most companies actually run out of money in the real world, not in a foie-grating venture world, um, which does happen too, but the proportion is wildly to those that run out of money.

Pat Grady 55:17 Yeah.

Harry Stebbings 55:18 Uh-... and speed is everything, and finding product market fit is everything, when you have Sequoia on your cap table, and I'm sorry for making assumptions here, your ability to raise a next round from someone, it may not be a tier one, but from someone, is very, very high. And therefore, you get a far extended amount of time to find said product market fit-

Pat Grady 55:41 Yeah.

Harry Stebbings 55:41 ... and that ideal customer and that revenue. Do you... which means you have an inherently lower mortality rate. Do you agree?

Pat Grady 55:49 Yeah. I absolutely agree. There's, um... One of the things that our competitors try to use to sell against us is what they call signaling risk.

Harry Stebbings 55:59 Mm.

Pat Grady 55:59 "Oh, no, no, you shouldn't take Sequoia at this round, because then if they don't need the next round, you're toast."

Harry Stebbings 56:04 I just used your dodgy choice of shirt (laughs) but... (laughs)

Pat Grady 56:07 (laughs) Appreciate you. Um...

Harry Stebbings 56:09 You're like, "I prefer you on Zoom." (laughs)

Pat Grady 56:12 (laughs) But if you, but if you look at the, if you look at the data, it's actually not s- signaling risk, it's signaling advantage. And it's signaling advantage in the sense that the average valuation, average valuation, for the round that you raise after your Sequoia round, so if you raise a seed from Sequoia, it'd be your series A, if you raise a series A from Sequoia, it'd be your series B.

Harry Stebbings 56:32 Mm.

Pat Grady 56:33 The average valuation for that next round is 4X greater than the average valuation for that round without Sequoia in your cap table. And so, if you have Sequoia on your cap table, chances are, your life just got a lot easier for the sake of future fundraising, and the dilution that you're going to get from future fundraising just went down a bunch, because it is the easiest algorithm in the world as a venture investor somewhere else to say, "Okay, I'm gonna hunt the Sequoia seed investments, I'm gonna hunt the Sequoia series As, I'm gonna hunt the Sequoia series Bs." And so if you have us in your cap table, chances are your life just got a lot easier.

Harry Stebbings 57:14 Does Sequoia have pricing power?

Pat Grady 57:15 I think similarly in our business, if you're way up the funnel at the moment of company inception, the difference between starting a S- company with Sequoia and starting a company without Sequoia can be pretty big.

Harry Stebbings 57:26 Huge. Huge.

Pat Grady 57:27 And so most founders at the very early stages are, are willing to, you know, if you think of us as a premium product, you pay something different for a premium product than you pay for a normal product, and, and they pay for our premium product in the form of their equity, right? And so I think, I think seed series As, we, we have pretty decent pricing power, so to speak, there. And then the later stage that the company gets, you know, the, the more the company itself has already been established, and having Sequoia in the cap table is not going to be a company-making moment. It might be nice, you know, hopefully it can help them more over time, but we're not likely to get any sort of huge discount at the later stages.

Harry Stebbings 58:03 When you have fund sizes at the sizes you have now and the capital you have, with recent fundraisers, uh, and we've talked about this before, but like, a billion dollars isn't enough. You need to see a pathway to $10 billion. But sometimes that can impede your decision to invest in what could be a great company, and you have to kind of turn over the next card to see that next flip.

Pat Grady 58:25 Yeah.

Harry Stebbings 58:25 How do you think about that? And that inhibiting your ability, your decision to invest in a great company.

Pat Grady 58:30 The, you know, we were talking about this earlier, the tiebreaker always comes down to the founder.

Harry Stebbings 58:34 Yeah.

Pat Grady 58:35 If I'm not sure about the market, but the founder just seems like dynamite, I'll probably lean in on that, um, because to your point, you mentioned this earlier, the best founders are gonna surprise you by finding more TAM. So, we don't necessarily have to see... W- we don't have to see a clear line of sight to 10 billion or 100 billion or some grandiose figure. We do need to see a clear line of sight to good returns with an exceptional founder who could maybe find some upside

Pat Grady 59:02 from there.

Harry Stebbings 59:02 What do you think the hardest thing of your job is today?

Pat Grady 59:04 See, inside the building and outside the building.

Harry Stebbings 59:06 Yeah.

Pat Grady 59:07 Um, inside the building, I feel like... You may not be familiar with this analogy, but do you watch basketball?

Harry Stebbings 59:18 No, no, I don't think so.

Pat Grady 59:19 Okay. Okay, great. So, (laughs) so the Bay Area team is the Warriors-

Harry Stebbings 59:23 Mm-hmm.

Pat Grady 59:23 ... and several years ago, the Warriors had two players who were both just A+ superstars, Steph Curry and Kevin Durant.

Harry Stebbings 59:32 Mm-hmm.

Pat Grady 59:32 And they managed to keep them together for several years, um, and win championships and all that good stuff. But eventually, Kevin Durant, you know, left to go somewhere else. And so one of the things that I think about inside the building is, I feel like we don't just have two superstars, we have a dozen superstars. Like, when I look at our team, any one of our partners could be a total star somewhere else. And so the thing that I always think about is, how do we, how do we keep so many superstars together in one place and get everybody to work as a team and try to keep, you know, egos in balance and all that good stuff? And I think we're lucky to come from-

Harry Stebbings 1:00:22 I would say Sequoia's like an iPhone. (laughs)

Pat Grady 1:00:25 (laughs)

Harry Stebbings 1:00:25 Which is like, once you have an iPhone, it's like, "I'm not gonna go to an Android, am I?" (laughs)

Pat Grady 1:00:29 (laughs)

Harry Stebbings 1:00:29 Right? Do you know what I mean? It's like, and there's-

Pat Grady 1:00:30 There we go.

Harry Stebbings 1:00:31 ... there's nothing else.

Pat Grady 1:00:32 But, and-

Harry Stebbings 1:00:32 And, and so it's kind of, that's why I'm almost like, you know, "Don't peak too soon." I think I said this to Jude and Alice, like, just so you know, once you get there, it's like you just have to accept that, like-

Pat Grady 1:00:41 (laughs)

Harry Stebbings 1:00:41 ... there's no, like, up. Like-

Pat Grady 1:00:43 Yeah. (laughs)

Harry Stebbings 1:00:43 ... you're there (laughs) do you know what I mean?

Pat Grady 1:00:45 Yeah. Well, and that's, I, I genuinely believe that being a partner at Sequoia is the best job in the world, and we try to make sure that that's true for the very best people so that we can have a team of people who are sort of individually exceptional.

Harry Stebbings 1:00:57 Uh, we do postmortems on why a company isn't m- successful ahead of time, try and predict what could be harmful.

Pat Grady 1:01:04 Yeah.

Harry Stebbings 1:01:04 If you had to do a postmortem on Sequoia 10 years out, of what is the reason why it may be challenged, what would it be?

Pat Grady 1:01:11 I, I do this exercise every year. Um, and we do it as a team, m- not every year, but every few years at offsites. Um, it's always the same reason. We have every advantage in the world. I'll tell you one thing that I've heard Doug say.... um, to his kids or about his kids, which is, "I can give my children anything in the world except for the one thing that made me who I am, which is my sense of desperation." And I think similarly, being part of Sequoia, we have every advantage in the world except for the one thing that made us who we are, which is a sense of desperation. And so the pre-mortem for Sequoia has nothing to do with the financial markets or technology platform shifts or competitive dynamics out in the market. And it has everything to do with staying hungry, staying humble, and pretending like, to use the Amazon terminology, you know, behaving as if it is day one every single day. And that the default is if we don't go out there and earn it, tomorrow we are irrelevant. I think that is true, and I think as long as everybody inside the building believes that is true and everybody inside the building behaves accordingly, we'll probably be okay. But I think every pre-mortem begins with arrogance, complacency, you know, taking it for granted that we get to be Sequoia tomorrow because we were Sequoia yesterday.

Harry Stebbings 1:02:39 Well, I wanna go a little bit off schedule now. (laughs)

Pat Grady 1:02:43 (laughs) Yes, 'cause everything's been so scripted.

Harry Stebbings 1:02:45 Yeah, yeah. Uh, but I, uh, I, I do wanna do a quick fire round. And that was a wonderful, like, uh-

Pat Grady 1:02:49 (laughs)

Harry Stebbings 1:02:49 ... God, the artistry of that interview, which is like, it went, irrelevance kind of circles back, that-

Pat Grady 1:02:54 I don't think you asked any of these questions.

Harry Stebbings 1:02:55 I did. They're really ridiculous. You just didn't know.

Pat Grady 1:02:57 (laughs)

Harry Stebbings 1:02:57 It's such an encap- you know, enchanting interview style. Um... (laughs)

Pat Grady 1:03:02 You really are the best in the business.

Harry Stebbings 1:03:03 Foundation models? (laughs)

Pat Grady 1:03:05 (laughs)

Harry Stebbings 1:03:05 Yeah, well... (laughs) That one's for afterwards.

Pat Grady 1:03:10 (laughs)

Harry Stebbings 1:03:11 Um, on the quick fire round, tell me, what do you believe that most around you disbelieve, Pat?

Pat Grady 1:03:16 One area where I'm probably most often different than others is around this concept of fewer, better things. Most of the time when a company that we're involved with wants to go do a bunch of new things, it seems to me that the better use of resources is to make the thing you already do better. The thing that you already do, unless it is absolutely heads and shoulders above any of the alternatives out there in the market, you're probably gonna get more juice outta making that thing better than you are outta doing more stuff. So that's probably a place where I generally disagree with people.

Harry Stebbings 1:03:51 When you review investment decisions internally at Sequoia, in terms of like the voting process and the process to get it done, are the unanimous ones generally the best outcomes or are the contrarian ones the best outcomes?

Pat Grady 1:04:03 So we have, we have actual data on this going back to 2014 where we s- we started recording the votes numerically on every single investment, so we have about 10 years worth. Which believe it or not is not conclusive because there are so few outliers that have emerged even in the last 10 years. Best we can tell, whether something is consensus or contentious actually doesn't matter.

Harry Stebbings 1:04:27 Hm.

Pat Grady 1:04:27 The thing that matters is presence of conviction. So there could be investments where everybody's a six and the voting is zero to 10, no fives. So six is above the line. Six is lukewarm enthusiasm. There could be an investment where everybody's a six, and then compare that to an investment where one person's a nine, two people are eights, and then some people hate it. There are some twos and threes.

Harry Stebbings 1:04:47 Do you let people be a six?

Pat Grady 1:04:49 Yeah. Numbers that are further away from five are more clear in terms of your point of view, but a lot of times people are commingling bravado with conviction. If you vote a nine just because you feel like you need to vote a nine to, you know, show your conviction, that's probably not a good reason to do it. If you vote a nine 'cause you're actually a nine and you're probably not a nine more than once in a blue moon, that's great.

Harry Stebbings 1:05:09 Do you worry about political voting? I'd always do a six if I wasn't sure.

Pat Grady 1:05:12 (laughs) Well... (laughs)

Harry Stebbings 1:05:13 'Cause I'm a yes, but I'm a weak yes.

Pat Grady 1:05:16 (laughs)

Harry Stebbings 1:05:16 If it turns into, you know, a mongo, I said yes. And if it's a dog, I'm, it was a weak yes.

Pat Grady 1:05:21 (laughs)

Harry Stebbings 1:05:21 Oh, I like this one. This was from Alfred, "Which venture investor do you most respect and learn from outside of Sequoia?"

Pat Grady 1:05:27 Sarah Gouach.

Harry Stebbings 1:05:29 (laughs) Oh, come on. (laughs)

Pat Grady 1:05:30 It's an easy one.

Harry Stebbings 1:05:32 How did you get Sarah as your wife? (laughs)

Pat Grady 1:05:35 (laughs) Now, that, that, that is...

Harry Stebbings 1:05:36 (laughs)

Pat Grady 1:05:36 That is a good question.

Harry Stebbings 1:05:38 Uh, tell me, what's the most memorable first founder meeting you've had?

Pat Grady 1:05:41 Two of them come to mind. One, one was Eric Yuan just because he was in this terrible office. Um, but he was so full of joy and energy and enthusiasm because of this product that he was building. And it just reinforced focusing on the things that actually matter. So that was one that was pretty memorable. The other one was in the summer of 2007. So I joined Sequoia in March of 2007. In the summer of 2007, Jim Goetz and I come over here to London to look at an investment that we were contemplating at the time. And I convinced him to take a day trip with me to Sweden. So we flew into Copenhagen, then we drove across the bridge to Malmo or whatever's over there, and there's this thing called the Lund or Lund Technology Park that had a whole bunch of startups in it. Goetz was very skeptical about this trip to Southern Sweden, and that was reinforced when we got lost on the way to this technology park. We took the wrong exit off the freeway and were just lost in the middle of farmland, stuck behind a tractor. Like literally there's a tractor in front of us taking up the whole road. And Jim and I are sitting there behind the tractor and he turns to me and he's like, "There's a technology company around here?"

Harry Stebbings 1:06:55 (laughs)

Pat Grady 1:06:55 Um, and then anyway, uh, the, the g- the, it was this company called ClickTec run by this guy named Måns Hultman. And it actually turned out to be a great business. It ended up going public. It was worth several billion dollars. Um, but when we were lost in a farm field in Southern Sweden, I was sweating bullets.

Harry Stebbings 1:07:11 What's your biggest lesson from Jim?

Pat Grady 1:07:13 I think Jim's two superpowers, one is his ability to see the future, and two is his ability to figure out people and what motivates them and how to put people together into teams and how to motivate those teams.But the lesson that I probably learned from him, I learned a bunch of lessons from him. The one that probably sticks out the most is on that first part, which is seeing the future, because I remember back in 2007 when I first joined Sequoia, and we were using... We'd just started using salesforce.com. Prior to that, I was using an on-prem Siebel system at Summit Partners and salesforce.com circa 2007 was garbage-

Harry Stebbings 1:07:51 (laughs)

Pat Grady 1:07:51 ... compared to on-prem Siebel system. And so, I was not particularly positive on the whole idea of SaaS in 2007, and un- fortunately, I, I learned.

Harry Stebbings 1:08:01 (laughs)

Pat Grady 1:08:02 Uh, but, but at that point I wasn't. And, uh, and I remember Jim with just full conviction was explaining to me one day, we were looking at some cloud company and I was poo-pooing it, and Jim was telling me why he liked it, and he just, with 100% conviction, he was like, "Grady," he's like, "Don't you get it? Everything is going to the cloud." I was like, "Jim, what are you talking about? Like, this software is crap. You know, like, why is everything going to cloud?" He's like, "No, no, no. Trust me. Everything is going to the cloud." And he had that point of view in 2007, way before, way before that was at all obvious. And so the lesson for me from that was a little bit of, like, trust your instincts or maybe a little bit of dare to dream, 'cause I think Jim had picked up enough clues to have a real point of view on the direction the world was going even if the data at that time didn't necessarily support it.

Harry Stebbings 1:08:54 Which futuristic point of view do you have which the data does not support today that you can share with me?

Pat Grady 1:09:00 I don't know if the data supports this or not, but I think that even if you were to freeze the capability set of the current foundation models and turn all of your attention to optimization and tuning and developer ecosystem, it would revolutionize trillions of dollars worth of industries and create trillions if not tens of trillions of dollars worth of market cap. And so I think that the, the race is still on for advancing the capabilities of these foundation models. I think the current capabilities are powerful beyond anything people have figured out how to do with them yet.

Harry Stebbings 1:09:44 Final one. One of the kindest things that anyone has ever done to me is, is give me their support and mentorship. You met me so many years ago when I, I literally was like a 19-year-old.

Pat Grady 1:10:00 (laughs)

Harry Stebbings 1:10:00 And you have family. You are now head of Sequoia. You have so much constraints on your time. Why were you so kind to me? I've never asked you that, but I've often thought it, and we still have regular calls, and I know how busy you are. Why, why, why did you do it? (laughs)

Pat Grady 1:10:16 So, Ravi, who you know, was sharing this concept one time of there are a lot of people who are sorta like auditioning for their lives versus just living their lives, meaning they are doing the things that they think they're supposed to do and jumping through the hoops that people have told them to jump through, but they haven't really figured out what it is they want to be, what it is they want to do, and what it is they want out of life. And so, I mention this in relation to your question because most of the people I encounter who are earlier in their career are sort of auditioning for their lives. They haven't really figured out what it is they want, how they want to get there, and they might be working hard, but they're kinda going through the motions. And I think when I first met you, it was very different, and it was clear that you were not auditioning for your life. You were living your life, and you had decided what you wanted, and you had come up with a way to go get it. And you were very genuine, very earnest. You're not very earnest anymore.

Harry Stebbings 1:11:36 (laughs)

Pat Grady 1:11:36 You were very earnest then.

Harry Stebbings 1:11:37 (laughs)

Pat Grady 1:11:37 You were very genuine, very earnest, extremely hardworking, very curious, um, all of the attributes that you would want out of somebody that you could be friends with or be partners with or have a long-term relationship with. And so, you made it very easy for me to be kind to you because you're the sort of person that I wanted to be in business with.

Harry Stebbings 1:12:00 Honestly, our relationship means so much to me. I have loved doing this. I'm so glad that we had this very detailed schedule-

Pat Grady 1:12:07 (laughs)

Harry Stebbings 1:12:07 ... we could work off of. And above everything, thank you for being my friend.

Pat Grady 1:12:11 Thank you.