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

1. 0:00 – 0:52

   Intro

   1. RBRoelof Botha0:00

      when you're in my shoes as sort of part of the third generation to run the partnership, there's this enormous burden that Sequoia has been at the top of its game for a long time.

   2. JAJack Altman0:07

      Yeah.

   3. RBRoelof Botha0:07

      And we have these legendary companies that we've participated in. You know, something like thirty percent of the total value of the Nasdaq is comprised of companies we were investors in when they were private businesses.

   4. JAJack Altman0:16

      I still don't understand how that happened, but that's crazy, yeah.

   5. RBRoelof Botha0:18

      And so there's this expectation of, can you keep going? [upbeat music]

   6. JAJack Altman0:22

      I am super excited to be here with you today, and I was, um, just commenting to a friend that I was gonna mess up your name before we started. So I haven't done this before, but could you introduce yourself?

   7. RBRoelof Botha0:31

      My name is Roelof Botha.

   8. JAJack Altman0:33

      I'm not even gonna try, but, you know, I've been really looking forward to this. This was also probably the best pre-chat conversation I've had, where it turns out we both had a detached retina and this miserable surgery. So I, uh, I feel lucky to have gotten to, to bond with you over that.

   9. RBRoelof Botha0:46

      [chuckles]

   10. JAJack Altman0:46

       It was brutal. I hated it.

   11. RBRoelof Botha0:48

       Misery loves company, and we, we can certainly bond over that experience.

   12. JAJack Altman0:50

       Just like spikes in your eye. [chuckles]

2. 0:52 – 5:16

   Becoming the steward

   1. JAJack Altman0:52

      Okay, here's where I wanted to start. I was thinking about trying to put myself in your shoes, and you're running what I think is widely considered the best, strongest, most storied venture capital firm, and you've been running it for three years now. And the first place I wanted to start was, tell me about your mentality on day one when you became, you know, the, the head, the, the steward of Sequoia, and how has it evolved over three years, and what has updated for you in your mentality as, as the leader of the firm?

   2. RBRoelof Botha1:21

      Interesting. So Sequoia has a long history of generational transfer, and so we have a very interesting culture where we, um... hence the title stewardship. W- we are momentarily, uh, we have the privilege of working in Sequoia, and we have a duty to leave it for the next generation. And so even when I joined in two thousand and three, I had the sense that there were people ahead of me who were willing to invest in me and nurture me and train me in a mentorship fashion, and maybe down the road I'd be in a leadership position at Sequoia. So I think it says a lot about the culture that we have, and so we don't have a lot of discontinuities in our leadership. So when I joined and Michael Moritz and Doug Leone were running the partnership-

   3. JAJack Altman2:00

      Yeah.

   4. RBRoelof Botha2:01

      Don was still around. Don interviewed me.

   5. JAJack Altman2:03

      Mm.

   6. RBRoelof Botha2:03

      As the founder, he wasn't overbearing, but he was present, and he provided counsel without having to be in the room, and if there was a disagreement, he respected that. I became the steward, actually, of the US business in twenty seventeen. Uh, Jim Goetz and I had been running the US venture business since twenty ten, and in twenty seventeen, I took over all of, uh, the US business when Doug was our senior steward globally. And then, as you said, in twenty twenty-two, I became-

   7. JAJack Altman2:28

      Yeah

   8. RBRoelof Botha2:28

      ... senior steward, and then, um... But I think the point is that really, that there's a lot more continuity than you may think from the outside.

   9. JAJack Altman2:35

      Yeah.

   10. RBRoelof Botha2:36

       This week alone, I've spoken to both Doug and Jim, both of whom have been leaders here before, about interesting topics that I needed their input on or wanted their input on. Not because they have the right to it, but because I want their help, and that's the kind of spirit we have at Sequoia.

   11. JAJack Altman2:49

       When you think about sort of what that, uh, you know, that steward role means, it struck me when I was speaking with Peter at Benchmark, and one of the things I thought was really cool was there was this sense that it's, like, bigger than you. And when there's this thing that's been going for a long time and it's been passed from leader to leader, and you're thinking about the future, obviously, that's got some impact. But I'm curious how that shows up, like, day to day. Because, like, you know, maybe we can get into this, but take it at, like, the opposite extreme. Like, I just got started. Like, obviously, there's not-- Like, the steward concept makes no sense to me yet. Like, I'm just at the beginning.

   12. RBRoelof Botha3:24

       Well, congratulations, by the way-

   13. JAJack Altman3:25

       Thanks

   14. RBRoelof Botha3:25

       ... on your new fundraising.

   15. JAJack Altman3:26

       Yeah, um, so it was-

   16. RBRoelof Botha3:27

       Two hundred and seventy-five million?

   17. JAJack Altman3:28

       Yeah. That's nice. Yeah.

   18. RBRoelof Botha3:29

       Very nice.

   19. JAJack Altman3:29

       It's a start.

   20. RBRoelof Botha3:30

       Get another competitor?

   21. JAJack Altman3:31

       Absolutely. I'm a big one.

   22. RBRoelof Botha3:33

       [chuckles]

   23. JAJack Altman3:33

       Hundred percent.

   24. RBRoelof Botha3:34

       Collaborator-

   25. JAJack Altman3:34

       That's right.

   26. RBRoelof Botha3:35

       Hopefully.

   27. JAJack Altman3:36

       Yeah, exactly, for now, you know. But I think I'd imagine in your shoes that daily there is a sort of presence behind it of like, this thing is, this thing is big, and it's-- there's something before me, there's something after me. Does it impact the way you make decisions or how you operate?

   28. RBRoelof Botha3:51

       It comes with an enormous amount of pressure.

   29. JAJack Altman3:53

       Yeah. I would think-

   30. RBRoelof Botha3:55

       Um, you know, Don obviously made a wise decision to not call it Valentine Ventures, which was a pretty viable option at the time, and most people would have put the names of the founders on the door-
3. 5:16 – 9:26

   Keeping healthy paranoia

   1. RBRoelof Botha5:16

      And yet, we have to continue to innovate, because I think there's a real temptation for leaders in industries to end up resting on their laurels, and you end up with the innovator's dilemma, where they stand still, and they quickly become yesterday's winner. So if you-- Actually, I did this exercise when I joined. If you look at the top venture firms in Silicon Valley in nineteen ninety, the majority of them no longer exist. There's a long half-life in the venture business, but there's no guarantee that you will succeed long term. And so there's this insecurity that we have at Sequoia that really drives us, and it comes out in the sort of people we recruit-

   2. JAJack Altman5:46

      Yeah

   3. RBRoelof Botha5:47

      ... uh, the culture we have, the idea that we need to be both performance-focused but also innovative.

   4. JAJack Altman5:52

      How do you keep the paranoia or the sense that, like, you know, we're only as good as what we did yesterday? Because I, what I observe is there's a lot of firms that are good but not Sequoia, where there is much more of a sense of-... you know, comfort and sort of maybe resting on laurels is too strong. I think like venture's-

   5. RBRoelof Botha6:09

      Mm

   6. JAJack Altman6:09

      - competitive in twenty twenty-five, and I think most people are working hard. But I would say Sequoia is, you know, if there's a quadrant of like how successful and long-standing the firm and how paranoid, like Sequoia somehow seems like it's really got both, which is weird.

   7. RBRoelof Botha6:24

      It's not always the easiest place to be, by the way.

   8. JAJack Altman6:26

      Sounds stressful, by the way.

   9. RBRoelof Botha6:27

      It is very. Actually, if you come upstairs to our office, where the investors go grab coffee and snacks, on the wall, wall to wall, in each individual's handwriting, we have printed the handwriting that says, "We are only as good as our next investment." And so every single day when I go grab a cup of coffee and I look at that wall, I see my own handwriting, and it's a reminder: we are only as good as our next investment. We cannot rest on our laurels. And so I think some of that is the sort of people you recruit, um, some of that is the culture that we hone at Sequoia. We care so deeply if we lose an investment. We are very diligent about looking at the coverage analysis of what our competitors invested in, and did we have a shot at that investment? Did we miss it? Did we not understand it? Uh, is there a category that's emerging that we're slow to, uh, identify? We obsess about that, so I think it's a cultural trait.

   10. JAJack Altman7:18

       Yeah.

   11. RBRoelof Botha7:18

       You have to nurture that.

   12. JAJack Altman7:19

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

   13. RBRoelof Botha7:23

       Yes.

   14. JAJack Altman7:24

       Yeah. [laughing] That's the only way.

   15. RBRoelof Botha7:26

       Yeah, but, you know, winning feels good.

   16. JAJack Altman7:27

       Yeah, of course. It's interesting where-- I, I, actually, I'm curious because, um, you know, if you're the Yankees, you expect to win. Is there any dynamic where it's like you become so deeply seeded that it, uh, that the pain of losing hurts more than the joy of winning? Or how do you basically keep culturally this paranoia and, you know, we've gotta stay there and keep it joyful, where it's not just the sadness of losing and a relief when we win, but like a joy?

   17. RBRoelof Botha7:56

       I think you'd find that most people who are very driven and competitive will say that there's an asymmetry and that the pain of a loss is far greater than the joy of a victory. I, I think you'll find that with most people that are driven and, and successful. And so I don't think you can wash that away or wave that away. I think it's a reality. We have tried over the last decade, especially, to do more to celebrate our victories. Um, one of my partners, Jim Goetz, used to talk about how, you know, we don't do celebration well at Sequoia. Uh, I think after the YouTube acquisition, we literally spent about fifteen minutes. We huddled around the reception area of our office, and we said, "Great," and then it was back to our desks.

   18. JAJack Altman8:33

       Yeah. [laughing] Yeah.

   19. RBRoelof Botha8:34

       And, and he was a little bit surprised that we don't more-- take more time to celebrate. So we've tried, uh, culturally to embrace celebration more and also to tell the stories. So one of the things I'm really proud of is every time there's a successful outcome... You know, most recently we had the Klarna IPO, the Figma IPO earlier this year, the Wiz acquisition, and we were early investors in all these companies. We would write an email internally, and we would celebrate not only the person who was then the board member but everybody else that had an influence in that success. The person on our talent team that recruited that key executive that made a difference, or, you know, the communications team that helped craft the narrative for the IPO story, or our legal team that spent endless hours figuring out, you know, some nuance around governance or how the company was structured. Sometimes the people who did diligence, who f-- or who found the company were not the people who were the board members by the time there was an exit. And so we celebrate everybody's contribution 'cause we also play a team

4. 9:26 – 11:17

   Drivers of joy as a leader

   1. RBRoelof Botha9:26

      sport here.

   2. JAJack Altman9:26

      What for you is, like, the most enjoyable part? Is it about the companies you're working with? Is it, like, something to do with the team? Is it, like, a purpose thing that's, like, greater than the day-to-day? Like, what drives your sort of satisfaction now?

   3. RBRoelof Botha9:41

      Interesting question. Um, there are a couple of answers to that. I mean, probably the most important one is leaving Sequoia in a phenomenal place. And, you know, I'd love nothing more than, you know, a decade after I'm, I'm long gone at Sequoia, being able to look at the team and see them flourish. That is probably the thing I think about most, and if the team flourished, there is a lot of, um, inputs to that. That means that we've maintained a certain culture while we've continued to innovate, and it means that we're serving our founders. It's the development of individuals that I get a, a tremendous amount of joy in. You know, whether it's a, a young person who joined our investing team, uh, and a decade later, I see how they're flourishing-

   4. JAJack Altman10:20

      This is my favorite part of running a company, and it's-

   5. RBRoelof Botha10:22

      With individuals, yes.

   6. JAJack Altman10:23

      Yeah, just getting to see your team grow. And, you know, you h-- you know, somebody joins when they're early in their career, and then you just see a completely different person five years later. It's very gratifying.

   7. RBRoelof Botha10:32

      Yes, and the same with founders. I, I mean, the founders I've worked with, with, like, think about MongoDB, when we were an early investor in twenty ten and, and what happened to them. I think about, um, Jack, when we first invested in Square fifteen years ago, and the kind of company it's evolved into and how Jack has developed as a phenomenal business leader. I look at some of the, the more recent investments we've made, 'cause, you know, I've h- helped us lead three investments this year in a variety of categories. Not all the investments are, um, publicized yet, but one of them is a, you know, is a young founder, s- uh, first-time company. He's a solo founder, and we had a fabulous thirty-minute conversation yesterday about some of the challenges that he's dealing with, and just having a sounding board of me being able to talk to him to help him navigate a tricky issue, so much gratification that comes from that, the ability to pay it forward.

   8. JAJack Altman11:16

      Totally.

5. 11:17 – 13:38

   Current venture playing field

   1. JAJack Altman11:17

      When you think about Sequoia and its position in, like, an evolving venture landscape, I'd be curious to hear, at sort of a zoomed-out level, how you're reading sort of the playing field today. And obviously, we've got, like, a bunch of dynamics happening at once. Like, you've got AI, obviously, is, like, the big tech wave that's going at the moment. There's others too, but, like, that's the dominant one. You've got, like, a bunch of firms that are really scaling capital. Some are, you know, new, some are older. Um, you've got firms that are institutional and sort of have been around for a long time. You've got sort of new, up-and-coming founder-led firms. I'm curious, when you think about that whole landscape, are you able to sort of give, like, a summary lay of the land of how you maybe, like, see things, or what's your framework for the venture world right now?

   2. RBRoelof Botha12:01

      So we have the benefit of seeing, seeing many cycles over fifty years plus at Sequoia.... uh, obviously, the scale of what technology impacts today is different from what it was a decade ago, two decades ago. Technology just affects far more of the world than I think we could have imagined. So the scale is different, but, you know, history doesn't repeat it rhymes, and I see echoes of nineteen ninety-nine, I see echoes of what happened in two thousand and eight. I see some echoes of what happened in twenty twenty-one.

   3. JAJack Altman12:29

      Happening now.

   4. RBRoelof Botha12:30

      Happening now.

   5. JAJack Altman12:31

      Yeah.

   6. RBRoelof Botha12:31

      The claims that are gravity-defying, you know, this is different.

   7. JAJack Altman12:35

      Mm-hmm.

   8. RBRoelof Botha12:35

      You know, and I sort of go back to the principles of investing, and you think about the truisms of Benjamin Graham's teachings, I think those remain, and things got a little unhinged in ninety-nine, and it was different this time, and it wasn't. And then it was different in two thousand and eight, and then it wasn't. And so I, I just worry about that a little bit, that AI will have a tremendous impact and some of the other innovations that you mentioned, whether it's in robotics, whether it's happening with, uh, stable coins and how that might change financial services. There's a lot of innovation happening. I'm really excited about the future we're gonna build. We inevitably overestimate these in the short run-

   9. JAJack Altman13:07

      Yeah

   10. RBRoelof Botha13:07

       ... and underestimate them in the long run. You know, I'm reminded of the fact that it seemed pretty obvious in two thousand, two thousand and one that e-commerce was gonna be dominant, and yet y- here we are, twenty-five years later, and e-commerce is not even twenty percent of US purchases.

   11. JAJack Altman13:20

       It's crazy, yeah.

   12. RBRoelof Botha13:20

       It's incredible.

   13. JAJack Altman13:21

       Yeah.

   14. RBRoelof Botha13:21

       It's taken a long time. Think about, about how long it's taken us to do unbundling of cable.

   15. JAJack Altman13:26

       Mm.

   16. RBRoelof Botha13:26

       Didn't it seem obvious that media should go this way? And so I think human behavior changed a little more slowly than technology is, is presenting us with. So I, I sa-- I think it'll take a little bit more time. Um, I

6. 13:38 – 18:50

   Venture is not an asset class

   1. RBRoelof Botha13:38

      don't think venture is an asset class.

   2. JAJack Altman13:39

      Why not?

   3. RBRoelof Botha13:40

      It doesn't support the numbers. So there was a lot of analysis back in the nineteen seventies and eighties with, you know, the capital asset pricing model, and people figured out that there's this asset class that supposedly has uncorrelated returns, and a bunch of asset managers deem that they need to invest a certain percentage of their endowment or foundation or pension fund into this thing called venture capital. If you look at the data, there are basically twenty companies per year on average over the last twenty, thirty years, that have ended up being worth, in realized exits, a billion dollars or more, just twenty companies. Despite a lot more money plowing into, into venture capital, we haven't seen a material change in the number of companies that are outcomes that are that large. And I think part of that is that there's a lot more talent and really interesting ideas or interesting companies to be built, and I think we're spreading a lot of that talent, talent thin right now, similar to what happened in nineteen ninety-nine, by the way.

   4. JAJack Altman14:30

      Yeah.

   5. RBRoelof Botha14:31

      So when you look at the data, the amount of money going into venture capital right now in America is in the order of two hundred and fifty billion dollars a year. And the numbers, you know, these are all estimates. Let's just say it's two hundred and fifty billion dollars a year.

   6. JAJack Altman14:42

      Need a lot of exits.

   7. RBRoelof Botha14:43

      Well, let's just do some very simple arithmetic for a second. Two hundred and fifty billion dollars going in every single year. If you assume that the firms generate twelve percent IRRs net, net of fees and carry, which isn't that great, by the way. I mean, over the last three or four years, the Nasdaq has compounded at sixteen, seventeen percent.

   8. JAJack Altman14:59

      Right.

   9. RBRoelof Botha14:59

      Let's just say twelve percent. Not spectacular. You're basically just average performance. You'd need a three point seven x k-- roughly-

   10. JAJack Altman15:05

       On ten years

   11. RBRoelof Botha15:06

       ... on a seven-year exit horizon. So I'm being a little bit aggressive with it. I mean, maybe it won't even be that good. So three point seven x on two hundred and fifty billion, that approximates to a trillion dollars a year.

   12. JAJack Altman15:16

       Coming out.

   13. RBRoelof Botha15:17

       Coming out. By the way, that means, uh, and, and that's what the investors own. So let's say that the investors own two-thirds of the company to make the arithmetic simple. That's one point five trillion annually in company exit value.

   14. JAJack Altman15:27

       Yes.

   15. RBRoelof Botha15:28

       Just think about that for a second.

   16. JAJack Altman15:29

       Where is that coming from?

   17. RBRoelof Botha15:30

       Well, uh, Figma is worth what?

   18. JAJack Altman15:32

       It's a lot, but it's-

   19. RBRoelof Botha15:32

       Forty-ish billion. I mean, that's-

   20. JAJack Altman15:34

       Let's say it's worth, you know, point o- point o three trillion. So, you know, if you start thinking in trillions and Figma gets you point o three trillion-

   21. RBRoelof Botha15:41

       You need thirty, forty, fifty Figmas every year-

   22. JAJack Altman15:45

       Yeah

   23. RBRoelof Botha15:46

       ... to make that arithmetic work. It just-- I don't see that many companies of that scale every year, so the only thing breaks is the return assumption doesn't hold.

   24. JAJack Altman15:55

       Yeah.

   25. RBRoelof Botha15:55

       And so venture is a return-free risk.

   26. JAJack Altman15:58

       Mm.

   27. RBRoelof Botha16:00

       Not a risk-free return.

   28. JAJack Altman16:00

       That's terrible. [chuckles] Yeah.

   29. RBRoelof Botha16:02

       You are better off investing in the index or holding T-bil- T-bills, honestly. And so I don't think venture is an asset class. Asset classes scale if you add more money. You can build more real estate. There's a lot of equities. There are, you know, trillions and trillions of bonds to be purchased. Venture capital doesn't scale with more money.

   30. JAJack Altman16:18

       I agree with you, but just to take collective, uh, sort, sort, sort of just to take sort of like, what would the collective argument be that like, you know, the, um, that the herd is all betting is happening? I guess there could be two things. One argument would be these companies are gonna be bigger than ever. This is kind of roughly what Mark Andreessen said on the podcast, was something like: there's gonna be multi-trillion-dollar companies in a way that there haven't been in the past, and you look at OpenAI and SpaceX and Anthropic and Anduril and so on, and there's a lot more coming out than there ever has been before. That's argument one. I guess the other argument is, everybody thinks they're a better-than-average driver, everybody thinks they're a better-than-average allocator as an LP and a GP, and so, yes, the overall asset class isn't doing well, but I, as a particular LP, know how to pick the good ones, and so the top decile is gonna be great. Do you think that there is wiseness in the number of dollars going in and like where the, you know, overall industry is? Like, does it make sense, or is, is it collectively smart or collectively stupid?
7. 18:50 – 19:47

   Advice to new managers

   1. RBRoelof Botha18:50

      of this behavior.

   2. JAJack Altman18:50

      Let's say you were like, you know, on my board at AltCap Italy, what would you be pushing for me if you were, like, trying to give me advice or trying to push on the thing that a new manager, you know, getting started, needs to do to be successful if you wanna build something that lasts? What would you be harping on?

   3. RBRoelof Botha19:06

      The network you build, the tributaries you develop for getting access to interesting emerging investment opportunities. This is not a business that you do sitting at a desk. Right? You need to get out there. You need to be able to, uh, meet people and understand where interesting new founders are thinking about building businesses, and part of that is being smart, where they wanna have a conversation with you, so you need to, uh, you know, study up. If it's not your field necessarily, can you study up on the categories that they're innovating on so that you can have interesting conversations that are memorable to them? Because it is a competitive business. And then you need to be congenial. People want to do business with people.

   4. JAJack Altman19:46

      Yeah.

8. 19:47 – 30:11

   Decision making at Sequoia

   1. JAJack Altman19:47

      When you think about, mm, the best investments that you've made over the last, I don't know, let's say, five years or something, do you feel like more of them are deals that were controversial at the time, and you picked something that was hard to pick as a firm, or do you think it was deals that were clearly good and competitive, and you won them through relationships and effort and all the rest?

   2. RBRoelof Botha20:08

      A bit of both. [chuckles]

   3. JAJack Altman20:09

      Yeah. Yeah.

   4. RBRoelof Botha20:10

      Actually. [chuckles]

   5. JAJack Altman20:10

      Like, if you had to, like, bucket them, do you feel like it's, like, a good mix?

   6. RBRoelof Botha20:14

      It is a good mix. I mean, Zoom, uh, with a Z [chuckles] -

   7. JAJack Altman20:17

      Yeah

   8. RBRoelof Botha20:17

      ... uh, or Zed, as I s- I grew up saying, was one of those investments that was not controversial. We all thought it was spectacular. The company was already generating cash. Eric had built a truly differentiated product in video conferencing and sort of belied all the naysayers that that was a, a tough category, and the challenge was-

   9. JAJack Altman20:36

      Winning

   10. RBRoelof Botha20:36

       ... winning the investment, and we were able to win that investment, and that was, that was a case where we were all above the line, so to speak, in, in our internal voting system. And then there are other ones that are maybe a little more controversial, where it's, you know, it's a little more fuzzy. Um, we had one actually last year. It's in the, um... It's a company called Aspera. They provide, um, non-resident Indian remittance services, and they're built on stablecoin infrastructure, so they're, they're really reinventing the whole process and not dealing with the interbank system that's expensive and cumbersome and slow and non-transparent. And honestly, that was a case where I didn't quite get it. I was the one person who listened to the presentation, and I really liked the f- the founder, Parth. I thought he was super dynamic, and I was a little bit worried that there were a lot of risks in the business. And then I looked at the, the assessment from the rest of the team, and I figured out, "I'm the one who doesn't quite get it today. Maybe I-- Maybe I didn't sleep well, maybe I got out of the wrong side of the bed this morning." And so we looked at the vote distribution, and I said, "Despite my inclination, we should absolutely make this investment." We did, and when we did the first portfolio review, um, I'm, I was relieved [chuckles] -

   11. JAJack Altman21:40

       Yeah

   12. RBRoelof Botha21:40

       ... that we did make the investment, 'cause the company's absolutely flourishing, and I'm glad I, I didn't block it.

   13. JAJack Altman21:45

       Which is actually re- probably super important as a firm leader, to be like, you've got, you know, things about, you know, your vantage point that are gonna help, but trusting the team in those kind of cases, obviously that's a good, good reminder.

   14. RBRoelof Botha21:55

       Yeah, and I think the, uh-- Thank you for saying that. The, the, the, the one thing we've realized, um, when there are controversial decisions, you, you sometimes have one or two people who don't quite get it.

   15. JAJack Altman22:05

       Mm-hmm.

   16. RBRoelof Botha22:05

       And we make consensus investment decisions at Sequoia. Actually, when I joined Sequoia, it blew my mind that that was the case. It sort of... I thought that committees were the, you know, this is exactly where bad ideas happen. And then I understood that Sequoia has this approach to teamwork, which means that every time we make an investment, it's our investment. It's not your investment, it's our investment. That then means that six months down the road, when you need help hiring somebody or you have a strategic question, I'm helping you. I'm, I'm not gonna brush it off and say, "It's your problem. You, you made that investment over my objection." So I understood the power of us making investments as a team, but that means that sometimes you have a controversial investment where one person is a negative and everybody else sees it, and Airbnb was a little like this. When the three founders came in, it was... I mean, it was Air Bed and Breakfast at the time.

   17. JAJack Altman22:47

       Yeah.

   18. RBRoelof Botha22:48

       It was just the three founders. It was a nascent company, and there were a few people in the partnership who ha- who struggled with this idea that, "Really, strangers are gonna stay in each other's rooms? I mean, is that gonna happen?" Those people were willing to go with the conviction of the sponsors and gave the full support after we had the conversation and didn't block it. So I think we've tried to harness that kind of decision process. You, you still have a forthright conversation, but we empower those who have conviction.

   19. JAJack Altman23:13

       Do you need to ultimately get a unanimous yes from some, like, as part of the deal there, that, like, there's a sponsor, and they have to convince other people? Or can you get through somebody who's like: "I still think we shouldn't do this"?

   20. RBRoelof Botha23:23

       What we've done with our vetting distribution, um, as we discuss investment opportunities is f- we wanna have a full-throated, full-contact conversation, as we call it, and it has to be about the merits of the investment, by the way. It's nothing personal. As soon as you walk out of the room, it's as though nothing had happened-

   21. JAJack Altman23:38

       Yeah

   22. RBRoelof Botha23:39

       ... 'cause it's very important from that point.

   23. JAJack Altman23:40

       It's so hard to have that dynamic. It's so powerful when you have it. It requires a lot of... I mean, maybe you could do it when people don't like each other, but I feel like you have to like each other and you have to trust each other.

   24. RBRoelof Botha23:48

       The key is to trust each other, by the way, and then one of the things we do, when we have our offsites, we do these check-ins with each other-

   25. JAJack Altman23:54

       Yeah

   26. RBRoelof Botha23:54

       ... and almost every time we do a check-in, somebody cries. At least one person cries.

   27. JAJack Altman23:59

       Hmm.

   28. RBRoelof Botha23:59

       And people talk about what's happening with family health issues. They talk about, um, challenges they're having with one of their portfolio companies. Whatever it is, we have an incredibly transparent conversation with each other, and it's-- we've done all these other things to build trust-

   29. JAJack Altman24:12

       Yeah

   30. RBRoelof Botha24:12

       ... 'cause that's what you need. You need that, that well of trust if you're gonna have these kind of investment conversations.
9. 30:11 – 37:12

   Investing across stages

   1. JAJack Altman30:11

      point about what's coming out, there's not that many companies that are gonna drive all of the returns, and so you shouldn't need that many people to find your way into those over time, I would think, particularly when you can invest at many stages. I mean, the caveat here would be at early, it seems extremely hard to catch everything. Um-... one of the things that I'm jealous of that you have as a multi-stage is you can miss things at Seed and the A, and you can track it, and then you can go lead the B and the C if you want to. And that does seem like a powerful thing. Obviously, you know, the earlier, the better, and we chatted for a little bit before about how, like, you kind of always need to be in the business of early, I believe, which I, I strongly believe that. But it does seem like you have the advantages where like on some level, I imagine if I'm, you know, in your seat, I would be like, "I need to, no matter when I enter, I need to be in every important company at some point," roughly speaking.

   2. RBRoelof Botha30:59

      Yes.

   3. JAJack Altman30:59

      Is that kind of how you think about it? I mean, except for-

   4. RBRoelof Botha31:02

      At the right price. I mean, we don't wanna-- Sequoia we're not in the business of buying posters. Um, we wanna be business partners to founders that make a difference and build great long-term companies. And in almost every single case, we are on the boards of these companies by the invitation of the founder, who wants us at their side as they navigate, you know, tricky issues in their business. Um, Alfred is still on the board at DoorDash, years after it's gone public, helping them think through their international expansion strategy-

   5. JAJack Altman31:27

      Yeah

   6. RBRoelof Botha31:27

      ... and becoming a, the last mile of commerce in general. I'm still on the board of Mongo and Square, which were investments from, uh, you know, more than a decade ago, because the founders still want me on the boards. So I think we, we want that association. You're right that it's convenient in some level that you might catch them later, but that's also risky because it means that you... there's a risk of complacency.

   7. JAJack Altman31:47

      Yes.

   8. RBRoelof Botha31:47

      It's like, "Oh, I don't have to make the seed investment. If, if it works out, I'll catch them in twelve months, or I'll catch them, you know, for the B." And so we obsess about making the right decision at every single stage.

   9. JAJack Altman31:58

      Just never let yourself off the hook.

   10. RBRoelof Botha31:59

       You can't. I mean, that's... And by the way, part of the joy is being able, uh, to participate in the company building journey from the get-go-

   11. JAJack Altman32:06

       For sure

   12. RBRoelof Botha32:06

       ... helping those founders from, from that initial idea before a line of code was written.

   13. JAJack Altman32:09

       It's totally a different relationship.

   14. RBRoelof Botha32:11

       And navigating all the tricky issues along. I mean, there's so much-- By the way, just from a fun point of view, how enjoyable is it?

   15. JAJack Altman32:15

       Those are the times. That's the formative time.

   16. RBRoelof Botha32:17

       It's so much fun to be part of the company-

   17. JAJack Altman32:19

       Yeah

   18. RBRoelof Botha32:19

       ... you know, from those early stages.

   19. JAJack Altman32:20

       Yeah.

   20. RBRoelof Botha32:20

       And so we love that, and we love doubling down on companies when, you know, um-

   21. JAJack Altman32:24

       I mean, I do think when you join at a Series B or C, and you've got special people, you know, like, I know, like Pat Grady or Radhika Gupta or Andrew, you know, it's like there's people who can still become kind of the partner of record, even at the B or the C-

   22. RBRoelof Botha32:38

       Oh, absolutely

   23. JAJack Altman32:38

       ... even as a great A member. So, you know, it's not so late that the, all the, like, glue is dry or something like that.

   24. RBRoelof Botha32:43

       Oh, absolutely. There's a tremendous amount-- I mean, that's part of why we remain on boards of companies sometimes-

   25. JAJack Altman32:47

       Yeah

   26. RBRoelof Botha32:47

       ... after they go public, because-

   27. JAJack Altman32:47

       There's still a lot to do from there.

   28. RBRoelof Botha32:48

       There's a long runway, and that's why we created the Sequoia Capital Fund in twenty twenty-two, because we believe so much of the upside can be in these companies long after they go public.

   29. JAJack Altman32:56

       Yeah.

   30. RBRoelof Botha32:56

       I mean, just to give you a sense, um, ServiceNow, HubSpot, MongoDB, all in recent memory, Palo Alto Networks, these are all companies that had ten X returns after the IPO. So we believe there's a lot of money to be made for LPs after the IPO, but there's also a lot of fun company building to be done. So you're absolutely right that there's a lot of company building all along the way, but it's so much fun to be part of it from inception. And so we can't rest on our laurels. We just can't take comfort in the fact that we might catch them later. I mean, you know, Figma is an example of a company that, where Andrew helped us lead the investment from our growth fund. Uh, we led the Series C, and boy, the early team, you know, we're kicking ourselves. You know, at the time that we first met Dylan-
10. 37:12 – 46:57

    Component of cost

    1. JAJack Altman37:12

       curious to talk to you about the other side of it, which is, like, the cost structure. I know you've spoken about this, you know, in other places, but I find it very interesting and kind of under-discussed. Before getting into how it applies in, like, AI times, which I think is, like, new, interesting dynamics, how do you think about the component of cost for a start-up building a company, its product, its go-to-market, everything?

    2. RBRoelof Botha37:33

       It's a very unsexy thing to talk about, you know, uh, 'cause what, certainly what most journalists wanna wri- write about is the snazzy new product innovation and the features that are so cool and whizzbang. And then I tell people, "Cost is the secret of Silicon Valley," and they look at me very puzzled. And I unpack it for them slowly, which is, I think relentless cost reduction is actually a far bigger ingredient to Silicon Valley's success than most people realize. And some of that makes technology available to many more people, and it democratizes access, if you wanna think about it that way, whether it's the little Square Reader that turned every mobile phone into a credit card terminal, whether it was the way that SpaceX reduced the cost of travel to space by an order of magnitude, or Google's innovation in its data centers. If you just look at industry after industry, um, cost reduction has enabled technology's ubiquity, and so I think people ne- need to obsess about that. There are two pieces to it. One is the gross margin that goes into the cost of your particular product, and the other one is the fixed cost of running your business. I think today, partly because of cloud infrastructure, mobile technology, and now AI, the basic cost of, of running a business is lower than it's ever been. I think it's a continuum, by the way. So, um, twenty-five years ago, when I was the CFO at PayPal, we would cut checks to Oracle for databases and Sun for servers. Five years later, when YouTube came around, we were using MySQL, Memcache, a bunch of really good open-source software, and we were starting to use the beginning of cloud infrastructure. We didn't actually have to stand up a colo facility. We could use commodity servers. Google obviously took that to another extreme. When YouTube was acquired, it had about fifty people in the company. I think when WhatsApp was acquired by Facebook, they had about thirty-odd employees. When Instagram got acquired, another company we invested in early on, Kevin and Mike, uh, that company had about twenty people, roughly speaking, at the time it got acquired. And I think there's this potential that you're gonna end up with a company that has literally single digits of employees and is worth a billion dollars.

    3. JAJack Altman39:31

       Definitely.

    4. RBRoelof Botha39:31

       I think that's around the corner, and it's this incredible, um, availability of infrastructure for scaling, and, you know, it, it, it's a magic time to be a founder. So that's on the fixed cost, but you still need to think about your marginal cost, and I think the, the founders that really succeed, in my mind, are obsessed with understanding how they drive down the cost to serve their customers, and they end up with very high gross margins.

    5. JAJack Altman39:55

       Why is it so important to have high gross margins? I mean, I... Like, on some level, you could be like, oh, well, you wanna make-- you want more money to drop to bottom line, but I think it's deeper than that. So I'm curious, like, why does this rise to the level of, like, a secret of Silicon Valley?

    6. RBRoelof Botha40:07

       I think there's a misunderstanding where people often think that price is a competitive advantage. "What's the secret to your company's success?" "Well, I'm gonna price lower." Like, well, that's not an advantage. Cost is an advantage. If you have a fundamental cost advantage over a competitor, you might price the same and just end up with gr-- high gross margins. Maybe you price a little lower. Maybe you have the same gross margin percentage as your competitor, but you can price below them and gain market share because your costs are fundamentally lower. And so I think the reason I obsess about cost is it gives you the degrees of freedom to choose how to play the game. And when you think about being powerful in business, when you dictate the rules, that's how you can end up succeeding.

    7. JAJack Altman40:44

       Yeah. If you're talking to a founder about this, and they say, "I don't have higher c-- I don't have lower costs right now, but I will, and in the interim, I can raise a ton of money because of XYZ," does that argument land for you, or do you say, "That is... Like, that's just, like, a hope and a dream, and we don't, we don't think about it that way?"

    8. RBRoelof Botha41:01

       The question there is, what is the logic train, and is there evidence to support the hypothesis? So when we were an early investor in DoorDash, we led the Series A. Tony showed us the unit economics that he had at a city level, and there was a point in time when the company needed to raise expansion capital, where the burn rate was increasing. And so if you looked at the company financially superficially, you might have concluded that it, you know, it isn't building a viable business. But if you peel the onion and you went down to a basic unit level and you actually understood the profitability in a particular town, town by town, you saw that the business was working, and the reason it was burning more money is they were expanding and building new markets, but they'd perfected the playbook.

    9. JAJack Altman41:39

       Yeah.

    10. RBRoelof Botha41:39

        And I think that's the kind of diligence that you need to understand. So that's why we doubled down on DoorDash through the early conversation, and we're delighted we did because Tony understood the unit econom- econom- economics of his business.

    11. JAJack Altman41:51

        Yeah.

    12. RBRoelof Botha41:51

        And he has a detailed understanding of his business, which is unrivaled.

    13. JAJack Altman41:55

        I also think, um, in the long term, this margin question is, to me, it basically tells you what you can afford to spend building your company. One day, you wanna make money as a company, so let's just say you wanna be profitable. You've got, like, a hundred percent of your revenue that you can spend on everything. If you've got eighty percent of that left for R&D, go-to-market, everything else, like, that, like, affords a certain envelope, versus if you've got twenty percent left, it's like, okay, how many companies have a really good R&D org that's six percent of revenue? Like, not many. Like, most of the great ones-

    14. RBRoelof Botha42:25

        Yeah

    15. JAJack Altman42:25

        ... for whatever reason, like, the R&D orgs seem to be a lot higher than that, and maybe that'll change over time. But I also think of it as this, like, offense, where it lets you spend a bunch more on product marketing.

    16. RBRoelof Botha42:35

        Profits are power.... profits are power, that's what you wanna focus on. So, and that gives you the-- the interesting thing about empires, by the way, relative to, to just regions or countries or nations, empires have flexible borders and relentless ambition. And I think about the great companies have those two characteristics. Flexible borders means they keep on innovating and pushing the boundaries on interesting new innovations. They expand into categories-

    17. JAJack Altman42:59

        Yeah

    18. RBRoelof Botha42:59

        ... that maybe were unanticipated and novel, you know, uh, unexpected, and they're relentless.

    19. JAJack Altman43:05

        Yeah.

    20. RBRoelof Botha43:06

        And that ambition is part of why you create these great companies, but you need profits to fuel that.

    21. JAJack Altman43:11

        I wanna just connect really quickly to the, like, cost structure in AI world, because-

    22. RBRoelof Botha43:16

        Sure

    23. JAJack Altman43:17

        ... obviously, margins on a, like, if SaaS companies before AI were often eighty percent, a lot are lower now. They're not, like, zero, s- some are zero, but a lot are sixty or four, you know, whatever, but, like, there are these costs in there, and then everybody's kind of collectively assuming that, like, the price of intelligence will go down at, like, a certain rate, and so you can kind of capture market at a, you know, certain speed. And, you know, these markets are blue ocean right now, but they won't be for long. And so, like, when you're triangulating and reasoning through these dynamics right now, how do you look at this when you see a company that's a SaaS company with a forty percent margin because they're using a lot of compute?

    24. RBRoelof Botha43:53

        So I think this is a really good question. It's a contemporary question 'cause a lot of people are looking at the current margin structure of these, uh, especially AI application companies, and wondering if it's a sustainable or a good business, given the margin structure. A- and there's so many parallels to think about. Um, in general, in business, there's this idea of an experience cost curve, that as you increase production in a particular industry, production, you know, conceptually, you end up with a very predictable curve in how costs decrease. And there's an economist and a British economist, uh, right back, I think, in the nineteenth century, who originally coined this and actually, uh, modeled it very accurately. If you go back to what happened in the photovoltaic industry, solar today is less expensive than we thought it would be fifteen years ago, and solar is actually producing more electricity today than we had predicted fifteen years ago. Y- you don't read about this often. People often think that, you know, solar was overhyped fifteen years. It was actually underhyped.

    25. JAJack Altman44:45

        Mm.

    26. RBRoelof Botha44:46

        We failed to understand how it compounds, and a, a lot of people have written about, you know, humans don't intuit compound interest. Anthropologically, you know, understanding compounding didn't benefit us in, you know, when we were hunter-gatherers or whatever the case is-

    27. JAJack Altman44:58

        Yeah

    28. RBRoelof Botha44:58

        ... and so we don't quite anticipate that. And so I remember in the early days of cloud infrastructure, people were dismissive. I remember at MongoDB, when we went from being a on-prem software company to building Atlas, our cloud database as a service, initially, our gross margins were basically zero, and people were wondering, "Well, are you gonna build a real business, you know, being a cloud database as a service because the cost is so high?" But we had confidence that you would drive this cost down. There was such a clear curve that you could walk down, and today the company has fabulous gross margins. The same is gonna happen in AI. I think, you know, if a company has product market fit today, the cost of tokens is gonna keep on coming down very aggressively. I think the algorithms are gonna improve, the scale is gonna increase. You have open-source models that are gonna compete against some of the c- the proprietary models, and I wouldn't not invest or not believe that the company isn't gonna be able to improve its gross margins. I would bet on that all day long.

    29. JAJack Altman45:48

        Do you think that we, uh, in some sense, need the rate of progress of frontier models to slow? Because the faster that they're progressing, the more people are willing to pay for the frontier, and then the margin improvements never come. Or do you think they'll come even if the models keep getting better and better for the next twenty years?

    30. RBRoelof Botha46:05

        Oh, I think they'll keep coming because the, the application space is varying. I've, uh... I spoke to, uh, one of our founders, Max, who runs a company called FAIR, and he described to me how they're using a, an ensemble of different models for different use cases in the company.
11. 46:57 – 50:48

    Conflicting investments

    1. JAJack Altman46:57

       back to something you said earlier, um, that I thought was interesting, that, you know, empires are relentless ambition and open borders.

    2. RBRoelof Botha47:03

       Flex- flexible borders.

    3. JAJack Altman47:04

       Flexible borders.

    4. RBRoelof Botha47:05

       Not open borders. [chuckles]

    5. JAJack Altman47:06

       Not open borders. [chuckles] Let's cut that from the tape. I'm just kidding. We can keep that. There's companies that are like that, too-

    6. RBRoelof Botha47:11

       Yeah

    7. JAJack Altman47:11

       ... which presents an interesting problem, which is conflicts that the founder feels, that the VC doesn't feel. You know, a company thinks that a space that they're not in today is one that they may or may not be in in the future, and they'd really prefer that you don't stamp, you know, the nice green Sequoia logo on that company because it might be on their roadmap in a few years. Please don't do it. What do you say? Like, how do you handle this situation? Because I think, like, um, I think going back to limiting factors for venture to scale, conflicts present another one, which is when you're deep enough with the founder, it is-- feels treasonous to invest in a competitor, but those borders are, are fuzzy when companies are empires.

    8. RBRoelof Botha47:48

       And I think we at Sequoia have a distinct challenge when it comes to this because we're your business partner. I think if, um, I think sometimes if you're an early seed investor, uh, I think seed investors can maybe invest in several companies in a category-

    9. JAJack Altman48:02

       Yeah

    10. RBRoelof Botha48:02

        ... uh, but they're not-

    11. JAJack Altman48:03

        So can the super growth investors.

    12. RBRoelof Botha48:05

        So can the super growth investors, 'cause they often aren't taking board seats and not involved with helping with the strategic guidance of a company, and so I think it's, it's a firm like ours that's in the middle, where we really are your business partner of choice-

    13. JAJack Altman48:16

        Mm-hmm

    14. RBRoelof Botha48:16

        ... where-... but you've chosen me, and, you know, I'm, you know, you are the-- my thought partner to help me figure out how to-

    15. JAJack Altman48:23

        Yeah

    16. RBRoelof Botha48:23

        -achieve world dominance. [chuckles]

    17. JAJack Altman48:24

        Yeah, exactly.

    18. RBRoelof Botha48:25

        Uh, I don't wanna share you with anybody else.

    19. JAJack Altman48:26

        Yeah.

    20. RBRoelof Botha48:27

        And so we feel that pain probably more than most. Um, in some situations, we've invested in companies that subsequently became competitive. So we invested very early in both Stripe and Square. Uh, and so, you know, John and Patrick at, uh, at Stripe, at some point realized that they had ambitions to move into spaces that Square was competing in, and Jack, over time, realized that he wanted to compete in some areas that Stripe is competitive in. I think, candidly, the companies have more in common and can work together very well. And-

    21. JAJack Altman48:55

        Yeah

    22. RBRoelof Botha48:55

        ... uh, I've introduced them to each other, and, uh, I think there's more partnership opportunity now, but there was a time where the, the two viewed each other as competitive. And so when John and Patrick would give the partnership an update, I would actually not join the meeting.

    23. JAJack Altman49:06

        Mm.

    24. RBRoelof Botha49:07

        Uh, and I was not allowed to read the investment memo, and I, uh, in our internal systems, I actually couldn't access any of the information about Stripe because we wanted to make sure that we preserved the sanctity of their information, distinct from anybody who was working with who they deemed to be a competitor. So sometimes it happens that co-- you know-

    25. JAJack Altman49:22

        Yeah

    26. RBRoelof Botha49:23

        ... subsequent to our investment, 'cause we were, um, early investors in both, they converge. So this happens to us frequently. I think the, the real challenge is-

    27. JAJack Altman49:31

        The con-

    28. RBRoelof Botha49:32

        -at, at entry point.

    29. JAJack Altman49:33

        Yeah-

    30. RBRoelof Botha49:33

        Um
12. 50:48 – 59:30

    The next trillion dollar markets

    1. JAJack Altman50:48

       couple of the podcast guests I've had have sort of walked out, you know, like Vinod Khosla, for example, have, like, walked out these articulations where I left being like, "This is the next trillion-dollar market for sure." I'm curious where you think about a market like that, where it seemed like it could be a, you know, expensive, ubiquitous, completely new type of product. How much time do you spend on something like that?

    2. RBRoelof Botha51:09

       Vinod and I agree on many things. [chuckles] Uh, we've worked on a, on a few companies together, uh, and on this one, I agree with him, too. I'm very optimistic about the future of robotics. Some of that is enabled by AI. Uh, you know, we made an early investment in Deepak and Abhinav, who are the founders of Skilled. They're building a foundation model for robotics out of CMU, and it's incredible to see what they're able to do with commodity hardware and infusing, uh, it with the knowledge and the systems that they have. You get these off-the-shelf robots that are imbued with the ability to just walk stairs, climb stairs, navigate new environments they've never seen, open doors, uh, do dishes, you know, do housecleaning work, all the sort of things you'd expect from a future of robotics. So whether it's that, uh, uh, Roman, who's the founder of Robco in, uh, Germany, you know, he's building automation for, you know, small, medium-sized enterprises. Often, they're struggling to hire people, and so robotics is a fantastic solution for them. And I have two examples, like, immediate recent examples in our portfolio, where we partnered early with these founders, and I'm seeing the results. You know, Cobot is another example. Brad Porter, who built most of the robotics at Amazon, uh, we backed that company. They're seeing traction with their business, too.

    3. JAJack Altman52:20

       Is it kinda-

    4. RBRoelof Botha52:20

       It's here.

    5. JAJack Altman52:21

       Is it like self-driving cars, where, like, there's gonna be, you know, some large number of years between, "Oh, my goodness, the tech works," to, like, "Oh, wow, we're what, riding Waymos around?" Like, are we-- is it that kind of ramp?

    6. RBRoelof Botha52:32

       No, I think it's a little bit different. Uh, the, the challenge with autonomous vehicles is the, the risk of-

    7. JAJack Altman52:37

       Fatality

    8. RBRoelof Botha52:37

       ... fatal crashes.

    9. JAJack Altman52:37

       Yeah.

    10. RBRoelof Botha52:38

        Which is part of why we don't see Waymos on freeways just yet.

    11. JAJack Altman52:41

        Mm-hmm.

    12. RBRoelof Botha52:41

        Um, the challenge in robotics is a little different. Most of the robotics, until recently... I mean, obviously, robotics is a massive, massive industry, but they're typically very large machines that are relatively dangerous, and they're cordoned off-

    13. JAJack Altman52:52

        Yeah

    14. RBRoelof Botha52:52

        ... from humans. Like, if-- I don't know if you've visited a Tesla factory.

    15. JAJack Altman52:54

        Yeah.

    16. RBRoelof Botha52:54

        It's actually-- When I bought my first Tesla, it was such a fun thing to go see the Tesla factory, and you see all these robots. You're like, "Wow, this is so cool!" But because of the risk of harm to humans, they had to be kept separate. I think the beauty of this age is when you get computer vision in these robots, and they can interact with us in our normal environment-

    17. JAJack Altman53:11

        Mm

    18. RBRoelof Botha53:11

        ... that unlocks so much more possibility. And if you can get them into a form factor that is not likely to cause human harm, I just think it unlocks possibilities. Look, at some level, we already have robots. I mean, you have Roombas running around, cleaning floors, and things like that. I mean, at a small scale-

    19. JAJack Altman53:25

        Yeah

    20. RBRoelof Botha53:25

        ... we already have some of the early influence, and I think we're gonna stairstep our way into this.

    21. JAJack Altman53:29

        I mean, if it gets to something generalizable in the home, it should be truly enormous, I would think.

    22. RBRoelof Botha53:34

        You're right about that, but both Skilled and Robco... Well, all three of them, Skilled, Robco, Cobot, all of them have revenue today, actually serving customers in a variety of different use cases, whether it's hospital systems, whether it's airport security, whether it's, uh, small manufacturing firms that need robotic assistance to help them scale. All these companies have revenue. They're actually up and running today, and so I don't think this is a, a lab experiment, where you see the demos, but who knows if it's real.

    23. JAJack Altman54:01

        Like, it works, it just has to get everywhere.

    24. RBRoelof Botha54:03

        It works, and it's slowly progressing into more and more areas, where the cost benefit of, of it makes sense. And a lot of it comes down to the cost of human labor, by the way.

    25. JAJack Altman54:10

        Yeah.

    26. RBRoelof Botha54:11

        Now, part of the reason Japan is, uh, roboticized so much more than other countries is because the cost of labor got very high.

    27. JAJack Altman54:16

        Mm-hmm.

    28. RBRoelof Botha54:17

        And so it made economic sense for them to do so.

    29. JAJack Altman54:19

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

    30. RBRoelof Botha54:20

        And that's part of what's changing, is the cost of labor in America is changing, and that necessitates that. So if you think about, you know, the way that minimum wages have gone for, um, the restaurant industry in California, for example, it's driving many more restaurant chains in California to try to figure out solutions for automation, because otherwise, their business models don't work anymore. It's actually one of the favorite books I read this summer was, um, How Economics Explains the History of the World.
13. 59:30 – 1:03:00

    Team building

    1. JAJack Altman59:30

       As a final sort of topic, what I wanted to ask you about was your team and how you think about building the team, the composition, who you want to attract, what values and activities you want to sort of promote or dissuade. My first guest on Uncapped was Sean Maguire, who I love. I think he's awesome. Um, and he's also, like, a polarizing figure. He says a lot of stuff online that I'm like, "Go, Sean," and a lot of people are frustrated. Um, and on first glance, it could seem like Sequoia is this extremely professional, not like, overly sort of bombastic place. But Sean, you know, says what he feels online and is an important member of the firm and is a great investor. And so I guess my first question is, is that a sort of tolerated edge of the center of Sequoia's culture, or is that in some ways, like, the heart of it?

    2. RBRoelof Botha1:00:21

       I think it's the heart of it, and it actually goes back all the way to Don and his own streak of irreverence. Uh, Don told me a story when I joined, where he was going for an interview at IBM, and he was sitting in the waiting room for this interview, and he noticed how everybody was wearing the same navy blazer. And he just thought, "Wow, this is a place of conformity." And he realized then that he needed to move to the West Coast and break out on his own. And I think that streak of irreverence actually runs very deep in Sequoia. It's part of why Don backed the sort of founders he did. When he backed Steve Jobs, who at the time, I believe, wasn't wearing shoes and maybe had just come back from a trip to India and was not-... bathing regularly, maybe didn't smell that great. Don saw through that, and so we've always had this view at Sequoia that we're backing the underdogs, the unknown, the defiant. Uh, you know, our founder prototype is somebody who's a little unusual. These people wanna change the world. The audacity to change the world, and the will to do it, and we need to refle- reflect that on our own team. And so we have always had a band of kind of quirky people. My partner, Doug, always said, "We wanna recruit people to Sequoia who wanna be pirates, not people who wanna join the Navy." And to me, Sean is like that. We, we wanna have a band of pirates at Sequoia, and that's how we think about our team composition.

    3. JAJack Altman1:01:34

       Yeah. It's really hard to build something outlier as a founder, I think, if you yourself don't have some outlier or out-of-distribution traits.

    4. RBRoelof Botha1:01:43

       Absolutely, and, and by the way, an outlier is not one standard deviation from the mean.

    5. JAJack Altman1:01:47

       Yeah.

    6. RBRoelof Botha1:01:48

       You know, Alfred, my partner, talks about this. An outlier is, you know, not two, not three, probably four standard deviations from the mean, and these people are crazy enough to start companies, and they actually wanna change the world.

    7. JAJack Altman1:01:59

       Yeah.

    8. RBRoelof Botha1:02:00

       Uh, the other thing I'd say about Sean, and as it applies to the rest of us, and this is my partner, Pat Grady, who I think you've spoken to... He had a great way of saying this, which is, "We look for people who are hypercompetitive but who have a heart of gold." 'Cause you can sometimes get people who are hypercompetitive, who are individual contributors, don't wanna play a team sport, uh, and don't necessarily look out for the others, and we need people who have a heart of gold at Sequoia. Uh, people who bleed Sequoia green, people who go do whatever is necessary to help a founder succeed but also look after the well-being of their own teammates, and anybody who's actually had an opportunity to speak to Sean would know that, too.

    9. JAJack Altman1:02:36

       Somebody recently used a term to describe a sort of similar type of person as a killer teddy bear, and it really stuck with me, that it's somebody who, uh, is ultimately very high integrity, high caring, but they're, like, playing to win-

    10. RBRoelof Botha1:02:48

        Yes

    11. JAJack Altman1:02:48

        ... and they're gonna do what it takes.

    12. RBRoelof Botha1:02:50

        I love that. Yeah.

    13. JAJack Altman1:02:50

        Yeah. All right, this was extremely fun, and I, uh... It means a lot that you took the time for this, so I, uh, wanna say thanks, and, uh, really enjoyed it.

    14. RBRoelof Botha1:02:56

        Thank you. [upbeat music]

Episode duration: 1:03:00