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Sequoia’s Roelof Botha on “Crucible Moments” and the state of VC | E1804

This Week in Startups

Thu Sep 07 2023



State of VC:

  • Roelof Botha discusses the current state of the Silicon Valley ecosystem and how it has been affected by the global pandemic and loose monetary policy.
  • He mentions that during a period where the cost of capital was essentially zero, there was a lot of investment and speculation. However, with the normalization of interest rates, companies are now focusing more on disciplined spending and profitability.

Crucible Moments and their significance:

  • Botha explains Sequoia's new series called "Crucible Moments," which explores pivotal decisions that entrepreneurs face that have an enormous impact on their ultimate outcome.
  • He highlights both responsive and proactive crucible moments and emphasizes the importance of making thoughtful decisions by harnessing insights from various sources and understanding potential consequences.

Pre-IPO vs. Post-IPO market values:

  • Botha talks about the differences in market values between pre-IPO and post-IPO stages for high-value companies like Google (98%) and MongoDB (95%).
  • He points out that while a majority of market cap accrues after IPOs, more than 50% of tech IPOs never recover their post-lockup expiry prices. This underscores the need to identify companies with breakout potential.

Founder ambition and mistakes made during Crucible Moments:

  • Botha emphasizes the importance of ambitious founders who continue reaching for higher levels of success rather than settling for good enough.
  • He acknowledges that mistakes are often made during crucial moments but views them as opportunities for growth and learning.

The importance of founders starting narrow and what makes a great VC in tech:

  • Botha believes that starting with a narrow focus allows companies to compete effectively against larger incumbents with more resources.
  • He shares his perspective on what makes a great venture capitalist, emphasizing qualities such as strategic thinking, deep domain expertise, and strong decision-making skills.

Commonalities between AI boom and crypto boom:

  • Botha draws parallels between previous technology booms like AI and the current boom in cryptocurrency.
  • He points out that similar skill sets and deep technical backgrounds attract people to both fields, but widespread adoption is hindered by the lack of use cases and usability challenges in the crypto space.

US frameworks regarding crypto:

  • Botha discusses the need for proper guardrails and regulatory oversight in the crypto space to prevent fraud and manipulation while fostering innovation.
  • He suggests finding a balance between regulation and embracing valid use cases to protect consumers while allowing for continued growth and innovation.

The milestone-based reward system in venture capital:

  • Botha delves into the milestone-based reward system used in venture capital investments, where rewards are based on achieving predetermined milestones.
  • He emphasizes the importance of companies having sustainable advantages and potential to be leaders in their market category.

Taking over as head steward at Sequoia Capital:

  • Botha shares his role as the new head steward of Sequoia Capital, with a focus on leaving the firm better than before and setting up future generations for success.
  • He highlights the importance of overlapping generations within Sequoia, enabling knowledge sharing and drawing on experiences from different cycles.

Crucible Moments at Sequoia:

  • Botha reveals some pivotal crucible moments at Sequoia, including launching an integrated growth business alongside venture, creating post-IPO investment opportunities through the Sequoia Capital Fund, and implementing the Arc program for teaching company building during seed stage investments.

Maintaining consistency in life and venture:

  • Botha reflects on maintaining consistency by focusing on principles such as understanding what can go right rather than fixating on potential failures.