The Trump administration began to take direct equity stakes in American companies, not as a temporary crisis measure, in 2008, but as a permanent industrial policy.
Interesting movement of questions, including what happens when the white house appears at the closing table.
In TechCrunch blamed in San Francisco last week, SEquoia Capital Botha, and his response attracted attention from the most dangerous house: ‘I am from the government, and I will help.’ “
Botha, who describes himself as a “libertarian type, a free market thinker by nature,” said industrial policy exists when the national interest is demanded. “The reason only the US is included in this is because we have other countries saying who is involved with the industrial sector for more and better industrial policy and maybe in the US.” In other words, China is playing the game, so the US must play along.
Still, the uneasiness with the government is an irreversible consvestor in its appearance. And that unity extends beyond Washington. In fact, Botha sees a pandemic-era fund rumble in the market today, although he stopped short of using the word “bubble” on stage. “I think at the time it’s speeding up tremendously,” he said further, while also warning of price inflation.
He told the audience that, very early in the morning, Sequoia had been debating about portfolio companies worth about $150 million to $61 million during 2021, only to crash back to earth. “The challenge that you have inside the company for the founders and the team, (is that) you feel that you are successful, but you will be as successful as you want at one point.”
It is tempting to increase the money to keep the momentum, he continues, but the increase is more and more escapes, which climbs faster, and nothing stops the team in sight.
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His advice to those who navigate the waters of this froth is twofold: If you do not have to raise at least twelve months of age, do not. “You may be better off building because your company will be worth more 12 months from now,” he said. On the other hand, he added, if you don’t need capital for six months, increase it now when the money is flowing, because the market is such that it cannot be underestimated quickly.
Being the kind of guy who studied Latin in high school (his words), Botha reaches for classical mythology to drive home. “I read the story about Daedalus and Ibarus in Latin. And the thing that stuck with me was this idea that if you rush, you can lose your wings.”
When founders listen to the opinions of the market, they must pay attention, and understand. The company’s portfolio includes early bets on Nvidia, Apple, Google, and Palo Alto networks. Botha also kicked off a disturbing appearance with the news about Sequoia two latest investment vehicles: A new seed and venture fund that offers more than $950 million to invest and “the same size as the six launched funds,” said Botha Onstage.
Although Sequoia change the fund structure In 2021 in order to hold the common stock for a longer period of time, Botha made sure that there are still many stage stores inside the core. He said that in the past twelve months, Sequoia has invested in 20 seed-stage companies, nine of them combined. “There is nothing better than co-pastors with founders in the beginning.” Sequoia is “more mammalian than Reptilian,” he said. “We don’t use 100 eggs and see what happens. We have some small offspring, like mammals, and then you have to pay a lot of attention.”
It’s a strategy rooted in experience, he said. “In the last 20-25 years, 50% of the time that we have made seed or venture investments, we have failed to fully recover the capital, which has been modest.” After writing the full text, Botha said he cried out at the pair’s meeting out of embarrassment and shame. “But unfortunately, that’s part of what we have to do to get bigger people.”
Is your SEquoia account successful? After all, many companies invest in stage companies. Botha is considered to be able to create a decision-making process that even surprised him when he joined twenty years ago: Every investment requires the agreement of a partner with the same meaning or title.
Every Monday, he explains, he really kicks off the partner meeting with an anonymous poll to surface his opinion on the material he is asked to digest over the weekend. Side chat is verboten. “Answer: The last thing we want is a meeting to form,” said Botha. “Our goal is a big investment decision.”
The process can test patience — both once waited six months for a lobbying partner on a single growth investment — but he believes it’s important. “No one who doesn’t have it can force investment through partnership.”
Despite Sequoia’s success, or perhaps because of it, Botha’s provocative position is that venture capital is not really an asset class or, therefore, cannot be considered one. “If you take 20 or more of the venture companies out of the industry’s results, we (as an industry) are actually underinvesting in the index,” he said. He pointed to the company’s 3,000 businesses now operating in America alone, which included three in number when Botha joined Sequoia. “The answer is more to Silicon Valley doesn’t produce bigger companies,” he said. “It’s really been overlooked for sure. It’s really made it more difficult to get some specialized companies to thrive.”
The solution, in his view, is: stay small, stay focused, and remember that “there are many companies that matter.” It’s a philosophy that has served Sequoia for decades. And at a time when Uncle Sam wants to be on the cover table and VCS is spending money on anything that moves, it might be the most advice.