The Wisdom Wall

“I would say generally founders who've had enormous, enormous success and exits come to the next opportunity with some degree of hubris. I, I, I speak about this personally. I sold my first business And I thought I could conquer anything. And they look at any vertical, and they, you kind of go, I'm going to disrupt…”

“I think that that's the momentum business, and I think knowing how and when to get out quickly with some of those really, really matters, and that's not really my business. So my business is value, is getting involved early, and trying to find value opportunities”

“the more embedded you are, like the more difficult you are to dispense because real time, Thousands, billions of orders are being run in your system, or like mission critical biotech research is being run in your system. The more embedded you are, I think the more overdone that saspocalypse may be. The less embedded,…”

“Even in your top names, sometimes taking 20% off the table, if you can return 25% of the fund, particularly if it's a newish fund, so if it's a, you know, if it's a twenty-twenty-four fund and you can give back 25%, like, why wouldn't you do that? And you're still long. You still own 80% of their company.”

“And I think overall we've done a little better on second time founders who didn't do that great up front. They didn't, they did okay, right? It's life changing. Like the first million dollars is so life changing. But they're really hungry. They've learned some lessons. They've got one or two people that will join them…”

“It may just be in, like, angels putting money all over the place, and some of those angels are going to know people that worked with them or for them, and they're going to, you know, I think you can bypass traditional venture to a great extent, and that's the challenge for us.”

“You know, you're in, you're in a world of hurt because someone that the world thought was, like, very, very serious and very smart about you just said no to you. Go try sell against that. I think it's very, very difficult.”

“fund returners, you need four or five good fund, good companies. If we sell four companies at two hundred fifty million dollars each, right, we can return a fund. If we sell 10 companies at a hundred million each, like, nobody cares about that, we can return a fund.”

“I think for entrepreneurs and for LPs, right, size of fund, check in company versus size of fund tells you everything. Everything.”

“if I look back, I go, like, never sell a single thing. If you, if you could, and, you know, people have to live and People have various desires, but if you could, never sell a share. And I know we've gone through the up and the down cycle, but great companies, companies with real moats, right? Like, you want to be in…”

“rearview mirror on this, you can't build a fund on this. Rearview mirror, you can think about that one that you missed, and they're, they're one or two in a generation. There are these generational companies, or maybe there is one a year, and if you're in that company, awesome. But can you build a fund strategy? I…”

“But I think it's the most unfair feature of capitalism, Harry, is the most you can lose is all your money. The most you can make is three, you know, 3000 X, right, or unlimited. If you just look at that, it is such an unfair feature of capitalism, and my LPs maybe go, I don't want to lose money for anyone, but I…”

“In fact, in an ideal situation when there's insane heat in something that we've gotten earlier, like that's a great moment to take secondary if you can.”

“Look at the check relative to the fund size will tell you pretty much everything you need to know. Are you going to be, if it's Sequoia investing less than today, a 50 or a hundred million or twenty million at early stage, it's probably not going to take you that seriously at the seed stage.”

“Well, look, everybody's AI, right? Like, it's almost like saying that you're not AI today is like, I'm not using the internet, right? It's like, why wouldn't you use the most contemporary tools? So everyone's AI.”

“The CTO at some point up to 50 people, you're golden. And then at some point you go, actually we could bring in better, better technical skills. And if you've got a good co-founding CTO, that person becomes like a Swiss army knife and is deployed in different ways.”

“the CEO being a good salesperson and being a real entrepreneur is actually more important because the CTO role can be fungible depending on how complicated it is.”

“I think pro rata is generally not great for entrepreneurs. It's a call option against you.”

“And we're working for DPI, and the bigger we make the fund, the tougher it is on the DPI.”

“if I'm on your board, I can't write a hundred K check. I can't write a 500 K check anymore because you need my time and you need my interest.”

“entrepreneurs who tried their asses off, raised money, and for some reason or another, it didn't work out. They come back hungrier. They come back, they want that, they want that prize. They want to prove. Chip on the shoulder. And if they can bring back the team somehow, so second time entrepreneurs where it's, where…”

“I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? So, I'd rather it happens early to me. It happens to everyone. But I'd rather it happens early to me than later on, because it was pretty clear that that individual was totally transactional.”

“By the way, I always say the first million dollars, like when the first million dollars makes, like, it's binary. It makes all the difference.”

“if you kick off and you own on a board, like, less than 15% of that company, I think it's problematic.”

“product market fit can come and go, but founder market fit, if you get it right, it always stays.”

“VCs have A huge portfolio and take financial risk all the time, but I always look at the folks who take human capital risk. It's what attracted me to pull back in the first place that Elliot Cohn, I knew had loads of options. He graduated well from MIT computer scientists. He could have done anything. The fact that…”

“The distributors, the drug distributors who control a lot of the markets don't take you that seriously. You don't get the financial breaks that much, much larger customers get unless you're reaching a certain scale. The PBMs certainly don't take you very seriously. Those are the pharmacy benefit managers unless you're…”

“if you're on piste for the last, I've been doing this for 18 years nearly, is, it was always expensive. It was always tough. But you find some of the best people off piste.”

“And the more junior, the, the principal at that big fund moves on. They start their own fund, they move to another fund, happens all the time, right? So the person who invested doesn't have mandate. They can't sit around with a partnership and say, look, let's just put another five to 10, like, let's turn over another…”

“The job is to be in there five years or 10 years ahead, and it's not where the momentum is. It never is.”

“there are folks who have been in these verticals since they were kids. He watched his uncle in this vertical. It's like, there was nothing else he was going to do. And I go, like, they have more edge, and they know what to do with.”

“There was an arbitrage. There was a real arbitrage because the risk premium at the seed stage was way overstated. That has changed completely.”

“But these founders get onto this treadmill, and it's just, it's almost impossible to slow this thing down. I think what they feel like is their, and their loyalty is to the team that they've put in place, their loyalty is to the last set of capital that still says go for it, and then the same thing that makes these…”

“And even in AI, Like, the teams have to get some kind of product market fit, some before, I think that can still be done reasonably capital efficiently.”

“When I look at it and I go, I fell in love with a what? Like, I fell in love with a what, but I really didn't love the entrepreneur at the beginning, and I wasn't, you know, the chemistry wasn't there, that's a mistake.”

“if you take, you know, less, 10% or less off the table, Nobody's gonna really mind too much.”

“I, by the way, I can't afford in my fund, if I've done my job right, and you are, you know, raising your next set of capital at three X or four X, I just can't afford to actually maintain my percentage ownership.”

“The, every great decision was never binary. It was always weighing up scales, and I think getting to conviction is confusing for people because they listen to this and they go, oh, you were binary about that. Like, you, you knew unequivocally, and the truth was, like, the biggest decisions, it was 51%.”

“when you hoist a flag and say, look, we're open to give capital at the earlier stage, if you're any good at it, the amount of opportunities that you see seem to go up a hundredfold.”

“I would say the toughest part of that transition for me was actually having a partner and having someone say, I think you're wrong, and really listening.”

“the fund sizes have gotten much bigger, so it's difficult to share, because you want to invest, you know, if prepared to invest half a million before, and the deal size was two million, now you want all of the two million. So that's made it tougher to share, for sure.”

“incumbency bias is real. The only way through it Is to have people around you who you feel more objective and less tainted, less biased than you.”

“Doing all of this on Zoom, in some ways, I would say there's this kind of convenience over connection. So if you like getting stuff done, it's very convenient. But if you miss people, the connection stuff's difficult. And wrestling stuff to the ground, which is in many respects the fun of the business, And not just the…”