Sequoia Capital is one of the largest venture firms in the world. The firm has a 50-year-old history and has made early bets on Apple, Cisco Systems, and Atari. Its partners include Greg McAdoo, Mike Moritz, and Leone Valentine. They make between two and three investments per year.
But there’s been a resurgence in venture investment in the past few years. The firm is known for its sweeping memos that warn founders of upcoming economic downturns. In 2008, it published “R.I.P. Good Times” and in 2010, it warned that “The Good Times are Over”. That was the start of the downturn, but the company still backed a number of companies, including Facebook, Skype, and Apple. Now, in a presentation that Fortune viewed, Sequoia’s executives urged founders to “buckle up” and adapt.
One of Sequoia’s most recent investments was in worldnewsfact Nubank, a financial services startup in Sao Paulo. The firm invested a million dollars when it first partnered with the company. However, after a period of growing pains, the firm eventually closed its Sao Paulo office.
The real economy
This time, Sequoia was concerned that deal flow was slowing. It was also displeased by corporate governance issues at the firm. At the same time, it was having trouble raising funds, particularly in the public markets. And, it was worried that the rising costs of money would harm the real economy.
But despite the downturn, Sequoia believes the current environment is a crucible moment for the world. It’s a “pandemic” they believe will last for several years. According to the memo, the slowdown forces founders to cut their expenses. Other advice from the firm included cutting research and development, marketing, and project spending.
Geopolitical crisis in Europe
It’s a warning that many venture capitalists have travelnowworld given in tough times in the past. Sequoia has also issued a number of memos that warn about changing market dynamics and the risk of a long downturn. Most recently, it echoed the sentiments of other venture firms, saying that an economic downturn could continue for a long period of time due to a geopolitical crisis in Europe.
For this presentation, Sequoia put together a 52-page slide show that warned of the current downturn and recommended avoiding panic. It also highlighted the importance of spending more judiciously, extending runway, and considering extension rounds.
Sequoia’s presentation was followed by a string of similar guidance travellworldnow from other venture firms. Venture capitalists have repeatedly advised founders to “move fast” and “look for opportunities to overtake competitors”. These messages were repeated in a presentation by Jess Lee, Managing Director of Sequoia Capital Growth Fund III, L.P., and a breakout session focused on leadership in a crisis.
The economy struggle
As the economy continues to struggle, Sequoia Capital is working with a wide array of startups to help them adapt to the downturn. Recent Sequoia investments have included Threads, Thumbtack, Stripe, Ethos, and Clever. Founders of Sequoia Capital have gone on to work at other firms.
During the presentation, Sequoia Capital warned that the current downturn will last for several years. During that time, the firm believes that the current economic situation will cause a lot of layoffs. It also suggested that the founders of Sequoia portfolio companies should cut their expenses and conserve cash.