The Exchanges

Q Not at all, but I do want to kick off with some context. So tell me, how did you make your way from the world of operations to partner at the globally renowned Sequoia?

A I never expected to be in venture. It was not a career goal. It was never a thing that I aspired to. So it's, it's a little bit of an indirect story. So my freshman year roommate in college, who's one of my closest friends, started a company in 2009 after leaving Apple. Sequoia led the A, and Brian Schreier here joined the board. Separately, at about the same time, a good friend of mine who was my PM at Microsoft before I joined Facebook, also left Microsoft to start a company in 2009. And Sequoia led the A there, and Brian also joined the board there. And so I ended up with multiple connections to Brian. And both of them said, Brian's an amazing guy. You should get to know him. And so I got to know Brian a little bit. Then I got to know the rest of the firm. They invited me to join the scouts program at some point. So that was kind of the backdrop. And then in early, my wife and I had our first child and I took six or eight weeks off for paternity leave. And it happened to coincide. My son was born maybe a week before my eight year anniversary at Facebook. And so it felt like a good time to just reflect and figure out I'd been at Facebook for eight years. It's An amazing company, but to think about what I wanted to do next. And I really loved the early days of Facebook. It's probably the most stressful, but also the most fun part of my career. It was incredibly chaotic. It was…

AI assessment note: “They invited me to join the scouts program at some point.”

Q It's a great fact checker for sure. When we chatted before, also kind of in terms of that decision-making process, you said that one challenge is the terminal decisions in venture. What did you mean by this statement? And how does that maybe compare So day-to-day activity more on the operation side.

A Yeah. So I think of decisions as terminal and non-terminal. Some people sometimes talk about these as type one versus type two decisions, but you know, terminal decisions are effectively, once you make that decision, you can't reverse it. You can't go back. Whereas non-terminal are you make a decision, you do it for a while. If it was wrong, you just go back and change the decision. And in my experience, there are incredibly few decisions in an operational role that are terminal decisions. Like you can just do something and build it for a while. And if it was wrong, you can go back and do it again. Um, even with hiring decisions, if you want to hire someone and then you decide not to hire them and you realize there was a mistake, you can go back to them and try to hire them again, et cetera, et cetera. And so in operating, I really think what is most important is just tempo and feedback loop. Like sometimes I'll talk to founders that I work with and they will be racking their brain around whether they should build a, or they should build B. And on the one hand, I care deeply about product. I might have an opinion about A versus B. But on the other hand, I'm like, it doesn't matter. Just pick one and build it. Don't rule it out to everyone. We might rule it out to some people, measure it, figure out if it's working or not. And if it's not working, then just go back and build B. …

AI assessment note: “terminal decisions are effectively, once you make that decision, you can't reverse it.”

Q Can I ask, at what level do you think the incumbents need to be for this kind of consolidation to really take place in the industry?

A It's a good question. There are kind of two levels of it. One is there will probably end up being a handful of anchor products, maybe by vertical. You know, if you think about Adobe, for instance, they have historically really owned the creative community, or Salesforce has obviously owned CRM and sales. And so I can imagine a handful of players getting more and more weight in probably a particular functional vertical, and then either building the features of other SaaS apps and integrating them into their own offering, or just Developing enough market cap and cash flow to be able to acquire other things and integrate them together. But, you know, these things take time to play out. I think Salesforce is probably 15 to 20 years old at this point, and maybe only in the past five to eight years, I think, has been really adding more and more things to its portfolio.

AI assessment note: “Developing enough market cap and cash flow to be able to acquire other things”

Q Not at all, but I do want to kick off with some context. So tell me, how did you make your way from the world of operations to partner at the globally renowned Sequoia?

A I never expected to be in venture. It was not a career goal. It was never a thing that I aspired to. So it's, it's a little bit of an indirect story. So my freshman year roommate in college, who's one of my closest friends, started a company in 2009 after leaving Apple. Sequoia led the A, and Brian Schreier here joined the board. Separately, at about the same time, a good friend of mine who was my PM at Microsoft before I joined Facebook, also left Microsoft to start a company in 2009. And Sequoia led the A there, and Brian also joined the board there. And so I ended up with multiple connections to Brian. And both of them said, Brian's an amazing guy. You should get to know him. And so I got to know Brian a little bit. Then I got to know the rest of the firm. They invited me to join the scouts program at some point. So that was kind of the backdrop. And then in early, my wife and I had our first child and I took six or eight weeks off for paternity leave. And it happened to coincide. My son was born maybe a week before my eight year anniversary at Facebook. And so it felt like a good time to just reflect and figure out I'd been at Facebook for eight years. It's An amazing company, but to think about what I wanted to do next. And I really loved the early days of Facebook. It's probably the most stressful, but also the most fun part of my career. It was incredibly chaotic. It was…

AI assessment note: “So it's, it's a little bit of an indirect story.”

Q Totally agreed with you on that. And when we kind of dive deeper and analyze these opportunities, a lot of them suggest kind of the presence of data modes. I'd love to hear from your perspective. How do you feel when someone says that they maybe have a data mode and do you really believe in their strengths?

A Uh, generally, no. You know, one of the core questions I think any company tries to wrestle with an answer is, what is your durable competitive advantage? And people often shorthand that as moats. And I think with the rise in prominence of AI and machine learning, there has been a convenient narrative that has propagated, which is, well, you know, we're an AI application, and our moat is based on the fact that We get some data, and then we label that data, and then we train our model, and then we give it to a customer, and then the customer corrects any errors, and we feed those new labels, those corrections back into the data set, and we get more data, and we create this virtuous cycle that makes our model better and better, and ergo, we have a data mode. And I think many people accept that as a thing. I personally am pretty skeptical. The reason is multifold. One is, I just think The technology and the research here is evolving so quickly that I think the number of data points you need to train a model is decreasing at, you know, some fixed efficiency level is dropping quite precipitously. I think, you know, there's a bunch of research around few shot or even sort of single shot learning techniques. I just think, sure, if the first mover collects a corpus of ten million, you know, labeled data points, I don't think that means that the next The next person who comes along also…

AI assessment note: “Uh, generally, no. You know, one of the core questions”

Q And then final one, Mike, tell me the most recent publicly announced investment, and why did you say yes and get excited?

A So we just partnered with a company called Verkata, which is a security camera company, and I'm incredibly excited about this company for a whole host of reasons, but I'll give you two. First is I think there's a lot of magic that can happen when you combine great hardware talent, great software talent, and people that are willing to sort of operate cloud services at scale. I think too often what happens is you have people who build hardware that write really crappy software, or you have people who write software that are scared of building hardware, and so try to build software across a wide range of devices, you end up with kind of the least common denominator. But I think if you're willing to do hardware and software and services together, you can build a really great experience. And I think that's what the Ricardo team has done.

AI assessment note: “we just partnered with a company called Verkata, which is a security camera company”

Q that we do have to engage with, more and more today that's in the world of SaaS, just in terms of sheer number of opportunities with the massive proliferation of SaaS apps that I think we probably both see. So this is an impossible question to ask, and I'm sorry for such a terrible question, but on a meta level, how do you evaluate this very proliferated SaaS landscape today?

A Yeah, I think it's very interesting. I mean, there's, depending on how much stats you read, companies will have 50, a hundred, a 152 hundred more different SaaS apps. I probably have a bunch of thoughts on this topic. I think the first is, there's a famous Barksdale quote where there's two ways to make money, bundling and unbundling. And I think for the past 10 years, there's kind of been an unbundling of on-premise software and V-one SaaS, and there's been this notion of best-of-breed, And I think you've ended up that sort of combined with the funding environment, which I think is prolific. You've ended up with, I think, just SaaS tools that are just nichier and nichier. And as a result, I meet companies and opportunities that I think are very clearly features of something larger. And there may be charging a dollar per employee per month or two dollars per employee per month or something like that. And so I think there will be a correction, like often in the early days of a market, you'll see this proliferation of different opportunities. And then as the market progresses, you'll see consolidation. So I think first and foremost, there will be a consolidation of many of these different SaaS apps. Two, I think there will be incumbents that see an opportunity to better integrate these things together and sort of have an all-in-one solution. A good example of this is Notion, which…

AI assessment note: “first and foremost, there will be a consolidation of many of these different SaaS apps”

Q I mean, it's super interesting in terms of how that landscape evolves and changes, because you said to me before also that the notion of SaaS as a construct will fade. What did you mean by that in terms of this ever-changing landscape Landscape and the perspective?

A Well, I think the initial term SaaS was intended to sort of distinguish it from on-premise software, and there was a time where it was perhaps novel that you would offer cloud-hosted software with a subscription revenue model, and every so often I will meet a company that is also offering an on-premise solution, and every so often, I mean, very, very rarely, but every so often I might meet a company that is only doing on-premise software. Usually it's for, like, the banking industry, but at this point, SaaS It's such the norm that I think it is effectively synonymous with software. And so mostly I just meant the SAS is software and software has been, you know, business software has existed for 40 years. And I think SAS at this point is just business software.

AI assessment note: “SAS at this point is just business software”

Q Totally agreed with you on that. And when we kind of dive deeper and analyze these opportunities, a lot of them suggest kind of the presence of data modes. I'd love to hear from your perspective. How do you feel when someone says that they maybe have a data mode and do you really believe in their strengths?

A Uh, generally, no. You know, one of the core questions I think any company tries to wrestle with an answer is, what is your durable competitive advantage? And people often shorthand that as moats. And I think with the rise in prominence of AI and machine learning, there has been a convenient narrative that has propagated, which is, well, you know, we're an AI application, and our moat is based on the fact that We get some data, and then we label that data, and then we train our model, and then we give it to a customer, and then the customer corrects any errors, and we feed those new labels, those corrections back into the data set, and we get more data, and we create this virtuous cycle that makes our model better and better, and ergo, we have a data mode. And I think many people accept that as a thing. I personally am pretty skeptical. The reason is multifold. One is, I just think The technology and the research here is evolving so quickly that I think the number of data points you need to train a model is decreasing at, you know, some fixed efficiency level is dropping quite precipitously. I think, you know, there's a bunch of research around few shot or even sort of single shot learning techniques. I just think, sure, if the first mover collects a corpus of ten million, you know, labeled data points, I don't think that means that the next The next person who comes along also…

AI assessment note: “Uh, generally, no.”

Q Can I ask? So I absolutely love that in terms of that kind of pattern matching on those core skills and execution abilities. How can you stress test that when you're meeting a founder for the first time and you really have quite a limited time to get to know them?

A So it's often, I think people who really understand their domain and really understand their strategy can often articulate it in just a handful of words. And I think that singular focus on, okay, there's one thing that matters. This is the thing that we're going to really focus on drove tremendous performance. I find a similar dynamic when I meet entrepreneurs, they can come in and explain the entirety of their business in three to five minutes. And then the rest of the time is deep diving, poking on the margin to just understand sort of the fringes of the basic plan, then that's an exceptional pitch. And I don't know if it sounds easy or not. It might sound easy. It might sound like, well, if I'm an entrepreneur, I pulled together 60 minutes of content. It would be way easier if I could just pull together five slides. But as it turns out, it's way easier to talk for 60 minutes than it is for five, as you're about to discover. But people who can distill it down to five minutes, And just leave you with the impression that this person understands the business an incredibly deep level and can explain it crisply. That's just incredibly powerful.

AI assessment note: “explain the entirety of their business in three to five minutes. And then the rest”

Q Oh, I guess the subsequent kind of obvious question is how do you find that balance? And is it a case of bringing external partners in early to really kind of Fat check your gut. How do you think about that solution to the balance?

A Well, one of the things we talk about here is the importance of the conviction of what we call the sponsor, the person who is proposing the investment. I think you can get feedback and hard questions and the like from your partners and from the rest of the partnership. I think that's really important, but I think the thing that I am discovering is even more important is really your internal conviction about an opportunity and I don't have a great way of quantifying that, but I think two things that I have found are one, whether or not you've really fallen in love with the company, and whether you've fallen in love with the founding team, and this is something that you want to work on, kind of regardless of outcome. I think if it is a great investment, and you're not excited about working on the problem space, or with a team, or something like that, then that's a very strong signal you should probably take. And then I think another litmus test is just Would you want to quit and go work at the company? And I think both of those tend to get to some intangible instinct as opposed to something that is maybe more quantified or rational. But at least for me, I keep trying to, as I make investments, think if I were not at Sequoia, would I go and join this company?

AI assessment note: “I think you can get feedback and hard questions and the like from your partners”

Q that we do have to engage with, more and more today that's in the world of SaaS, just in terms of sheer number of opportunities with the massive proliferation of SaaS apps that I think we probably both see. So this is an impossible question to ask, and I'm sorry for such a terrible question, but on a meta level, how do you evaluate this very proliferated SaaS landscape today?

A Yeah, I think it's very interesting. I mean, there's, depending on how much stats you read, companies will have 50, a hundred, a 152 hundred more different SaaS apps. I probably have a bunch of thoughts on this topic. I think the first is, there's a famous Barksdale quote where there's two ways to make money, bundling and unbundling. And I think for the past 10 years, there's kind of been an unbundling of on-premise software and V-one SaaS, and there's been this notion of best-of-breed, And I think you've ended up that sort of combined with the funding environment, which I think is prolific. You've ended up with, I think, just SaaS tools that are just nichier and nichier. And as a result, I meet companies and opportunities that I think are very clearly features of something larger. And there may be charging a dollar per employee per month or two dollars per employee per month or something like that. And so I think there will be a correction, like often in the early days of a market, you'll see this proliferation of different opportunities. And then as the market progresses, you'll see consolidation. So I think first and foremost, there will be a consolidation of many of these different SaaS apps. Two, I think there will be incumbents that see an opportunity to better integrate these things together and sort of have an all-in-one solution. A good example of this is Notion, which…

AI assessment note: “I think there's kind of been an unbundling of on-premise software”

Q of challenges on the other side of the table, being on the venture side of the table. Now, when we chatted before, you said that potentially one challenge is overthinking investments and is potentially kind of a challenge and a mistake that maybe you've made and maybe others in the industry make. I'd love to hear what did you mean by And how does that actually play out in reality?

A Yeah, one of the good and bad things about venture is the feedback cycle. So the bad part about it is it's a very long feedback cycle. It takes eight to 10 years to really understand if a company is going to be great and enduring or not. But on the good side, the decision-making process, since it's the most important thing, tends to be fairly objective and well-documented. Write maybe a short memo, maybe you'll write a longer memo if you want to pose an investment, and you can always go back and sort of read through them. And so in my case, I've only been here for a few years, so it's early to have categorical data about which things are misses or not, but I have my own internal scorecard of things that might end up being misses, and the interesting thing about most of them is I have yet to meet a company once, think it wasn't interesting, and then have it actually be very interesting. For the, the handful of companies where I think I'm probably made a miss I thought it was pretty interesting. I usually invited more people to meet it, and then I started thinking and writing and trying to play out the future, understand how the market was going to play out, understand the terminal market structure, etc, etc. And in each case, I started by being instinctually really interested in the company, and then as I rationalized it, I rationalized the way why this might work, but it probab…

AI assessment note: “as I rationalized it, I rationalized the way why this might work”

Q It's a great fact checker for sure. When we chatted before, also kind of in terms of that decision-making process, you said that one challenge is the terminal decisions in venture. What did you mean by this statement? And how does that maybe compare So day-to-day activity more on the operation side.

A Yeah. So I think of decisions as terminal and non-terminal. Some people sometimes talk about these as type one versus type two decisions, but you know, terminal decisions are effectively, once you make that decision, you can't reverse it. You can't go back. Whereas non-terminal are you make a decision, you do it for a while. If it was wrong, you just go back and change the decision. And in my experience, there are incredibly few decisions in an operational role that are terminal decisions. Like you can just do something and build it for a while. And if it was wrong, you can go back and do it again. Um, even with hiring decisions, if you want to hire someone and then you decide not to hire them and you realize there was a mistake, you can go back to them and try to hire them again, et cetera, et cetera. And so in operating, I really think what is most important is just tempo and feedback loop. Like sometimes I'll talk to founders that I work with and they will be racking their brain around whether they should build a, or they should build B. And on the one hand, I care deeply about product. I might have an opinion about A versus B. But on the other hand, I'm like, it doesn't matter. Just pick one and build it. Don't rule it out to everyone. We might rule it out to some people, measure it, figure out if it's working or not. And if it's not working, then just go back and build B. …

AI assessment note: “terminal decisions are effectively, once you make that decision, you can't reverse it.”

Q Can I ask, at what level do you think the incumbents need to be for this kind of consolidation to really take place in the industry?

A It's a good question. There are kind of two levels of it. One is there will probably end up being a handful of anchor products, maybe by vertical. You know, if you think about Adobe, for instance, they have historically really owned the creative community, or Salesforce has obviously owned CRM and sales. And so I can imagine a handful of players getting more and more weight in probably a particular functional vertical, and then either building the features of other SaaS apps and integrating them into their own offering, or just Developing enough market cap and cash flow to be able to acquire other things and integrate them together. But, you know, these things take time to play out. I think Salesforce is probably 15 to 20 years old at this point, and maybe only in the past five to eight years, I think, has been really adding more and more things to its portfolio.

AI assessment note: “there will probably end up being a handful of anchor products, maybe by vertical”

Q been? But I titled this segment, Three Years the Review. So I'd love to kick off today with kind of a little bit of a deep dive into the kind of eight years at Facebook there, and kind of seeing that hyper-growth. I do just have to ask, what were the biggest takeaways from seeing the hyper-growth of Facebook? And How do you think that impacted your investing mindset today?

A Yeah, I mean, there's a lot to be written, and probably a lot that still remains to be written about Facebook, but I think the most core thing that I learned there is, and it sounds a little bit trite, but execution matters. Execution matters, tempo matters, focus matters. I think what I see in a lot of companies, both big and small, is kind of general amorphous forward progress, People doing good things, but I rarely see people that are really dialed in, really understand what are we trying to accomplish? What is the goal? How are we measuring our progress towards the goal? I could do A or B, which one is actually going to be more impactful? I think that ethos started with the growth team at Facebook. There were a lot of very high quality and executionally excellent people at Facebook, but I think the growth team really sort of helped to define this notion of Focus and extreme clarity around what are you actually trying to accomplish? Should you do A or B? Will A or B be more, be more impactful towards that goal? You know, as I meet companies today, like the ones that I think are just really head and shoulders above the rest are typically the ones that are just amazing at focus, have incredible clarity of thought about what are we trying to accomplish? What are the steps we need to take there? Have tremendous focus on only doing the stuff that is actually important and critica…

AI assessment note: “the most core thing that I learned there is... execution matters, tempo matters, focus matters.”

Q been? But I titled this segment, Three Years the Review. So I'd love to kick off today with kind of a little bit of a deep dive into the kind of eight years at Facebook there, and kind of seeing that hyper-growth. I do just have to ask, what were the biggest takeaways from seeing the hyper-growth of Facebook? And How do you think that impacted your investing mindset today?

A Yeah, I mean, there's a lot to be written, and probably a lot that still remains to be written about Facebook, but I think the most core thing that I learned there is, and it sounds a little bit trite, but execution matters. Execution matters, tempo matters, focus matters. I think what I see in a lot of companies, both big and small, is kind of general amorphous forward progress, People doing good things, but I rarely see people that are really dialed in, really understand what are we trying to accomplish? What is the goal? How are we measuring our progress towards the goal? I could do A or B, which one is actually going to be more impactful? I think that ethos started with the growth team at Facebook. There were a lot of very high quality and executionally excellent people at Facebook, but I think the growth team really sort of helped to define this notion of Focus and extreme clarity around what are you actually trying to accomplish? Should you do A or B? Will A or B be more, be more impactful towards that goal? You know, as I meet companies today, like the ones that I think are just really head and shoulders above the rest are typically the ones that are just amazing at focus, have incredible clarity of thought about what are we trying to accomplish? What are the steps we need to take there? Have tremendous focus on only doing the stuff that is actually important and critica…

AI assessment note: “most core thing that I learned there is, and it sounds a little bit trite, but execution matters.”

Q Oh, I guess the subsequent kind of obvious question is how do you find that balance? And is it a case of bringing external partners in early to really kind of Fat check your gut. How do you think about that solution to the balance?

A Well, one of the things we talk about here is the importance of the conviction of what we call the sponsor, the person who is proposing the investment. I think you can get feedback and hard questions and the like from your partners and from the rest of the partnership. I think that's really important, but I think the thing that I am discovering is even more important is really your internal conviction about an opportunity and I don't have a great way of quantifying that, but I think two things that I have found are one, whether or not you've really fallen in love with the company, and whether you've fallen in love with the founding team, and this is something that you want to work on, kind of regardless of outcome. I think if it is a great investment, and you're not excited about working on the problem space, or with a team, or something like that, then that's a very strong signal you should probably take. And then I think another litmus test is just Would you want to quit and go work at the company? And I think both of those tend to get to some intangible instinct as opposed to something that is maybe more quantified or rational. But at least for me, I keep trying to, as I make investments, think if I were not at Sequoia, would I go and join this company?

AI assessment note: “Would you want to quit and go work at the company?”

Q of challenges on the other side of the table, being on the venture side of the table. Now, when we chatted before, you said that potentially one challenge is overthinking investments and is potentially kind of a challenge and a mistake that maybe you've made and maybe others in the industry make. I'd love to hear what did you mean by And how does that actually play out in reality?

A Yeah, one of the good and bad things about venture is the feedback cycle. So the bad part about it is it's a very long feedback cycle. It takes eight to 10 years to really understand if a company is going to be great and enduring or not. But on the good side, the decision-making process, since it's the most important thing, tends to be fairly objective and well-documented. Write maybe a short memo, maybe you'll write a longer memo if you want to pose an investment, and you can always go back and sort of read through them. And so in my case, I've only been here for a few years, so it's early to have categorical data about which things are misses or not, but I have my own internal scorecard of things that might end up being misses, and the interesting thing about most of them is I have yet to meet a company once, think it wasn't interesting, and then have it actually be very interesting. For the, the handful of companies where I think I'm probably made a miss I thought it was pretty interesting. I usually invited more people to meet it, and then I started thinking and writing and trying to play out the future, understand how the market was going to play out, understand the terminal market structure, etc, etc. And in each case, I started by being instinctually really interested in the company, and then as I rationalized it, I rationalized the way why this might work, but it probab…

AI assessment note: “I started by being instinctually really interested in the company, and then as I rationalized”

Q Can I ask? So I absolutely love that in terms of that kind of pattern matching on those core skills and execution abilities. How can you stress test that when you're meeting a founder for the first time and you really have quite a limited time to get to know them?

A So it's often, I think people who really understand their domain and really understand their strategy can often articulate it in just a handful of words. And I think that singular focus on, okay, there's one thing that matters. This is the thing that we're going to really focus on drove tremendous performance. I find a similar dynamic when I meet entrepreneurs, they can come in and explain the entirety of their business in three to five minutes. And then the rest of the time is deep diving, poking on the margin to just understand sort of the fringes of the basic plan, then that's an exceptional pitch. And I don't know if it sounds easy or not. It might sound easy. It might sound like, well, if I'm an entrepreneur, I pulled together 60 minutes of content. It would be way easier if I could just pull together five slides. But as it turns out, it's way easier to talk for 60 minutes than it is for five, as you're about to discover. But people who can distill it down to five minutes, And just leave you with the impression that this person understands the business an incredibly deep level and can explain it crisply. That's just incredibly powerful.

AI assessment note: “explain the entirety of their business in three to five minutes. And then the rest of the time is deep diving”