Doug Leone, former managing partner at Sequoia Capital, explains the three core heuristics he uses to filter prospective venture investments.
Insight
Leone: Parents must inject misery into kids' lives to preserve their hunger
“I think you have to inject some misery in your kids' lives so they have that hunger. It can be fake because they know it, but you can't give them everything because otherwise they won't be hungry.”
Assertion Not checkable as stated
Grady and Lin asked Leone back 30 days after taking over Sequoia
“It turned out the rule of step down, Pat and Alfred took over. They weren't the kings I chose, and 30 days into it, they came to my house, and they said, would you like to come back?”
Insight
Leone: Boards must honor signed term sheets over higher late offers
“A term sheet is not worth the paper it's written on, but once you sign it, Both sides, I think you have to honor it. You know, many times we're out, we're, I'm on the board of a company, and we signed a term sheet with an investor, and then three days later, s…”
Opinion
Leone estimates that only 20% to 30% of VCs are competent
“Out of 10 venture folks, and I've said this, and I've taken Shifford, maybe 30% are incompetent. They don't know what they're doing. Another 40% I call them no ups, no damage, no anything. They nod, you know, they nod with a group and maybe 30% of fewer, maybe…”
Assertion Not checkable as stated
Leone saw a startup with no product try to raise at $10B
“I came back from vacation over the weekend. I saw a memo. I won't tell you the name of a startup company that wants to raise money without anything at ten billion pre.”
Assertion Not checkable as stated
Sequoia's investment in SpaceX has a shot at a $20B gain
“Yeah, it's SpaceX. Now, we haven't cashed out yet or whatever, but, you know, there's a shot of a twenty billion dollar gain or more, and so he ruined it for all of us.”