20VC: Inside Sequoia's Investment Committee: Lessons from Don Valentine, Doug Leone and Alfred Lin | How the SpaceX and Citadel Deals Went Down | What Sequoia Specifically Looks for in Founders with Julien Bek

Transcript from https://podmenti.com/t/e4382f2b8e186ca0

Everyone thinks that we're just waiting for the phone to ring for the next anthropic to call us.
To invest.
That's completely false.
Everyone at Sequoia is a hunter.
If you look at founders you like versus founders who make money as a two by two matrix, your job is to figure out in which part of the quadrant we make money. The best investments in all the funds.
are always the companies where the sponsor had the highest conviction.
We are only as good as our next investment.
That's not an easy job.
You want an easy job, you go do something else.
Credits to Sean, when he brought in the SpaceX investment, we vote on companies.
I think someone voted a one.
I think right now if you're gonna invest in new Neolab, you're basically investing, you know, in the Cora
In the stumble upon when Facebook X came about. This is twenty VC with me, Harry Stabbings. Now I am so excited for the show today because I get to welcome one of my oldest friends to the show.
Yeah, he's a partner at Sequoia, which just raised ten billion dollars in new capital to bet on the next generation of winners in the AI wave. He's also an incredible human being. You'll hear more about why in the show.
But
This episode is incredible because it is a behind the scenes glimpse into what makes Sequoia so special. How they find great companies, how they win them, how they pick them. It is a
incredible view into what makes the great so good. This is Sequoia like you've never seen Sequoia before. And it was again one of the most special interviews for me to be able to sit down with one of my oldest friends.
But before we dive into the show today, founders face a different set of challenges at every stage of growth. For Sid Sheet,
Co-founder and CEO of D Matrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high-touch approach with supporting D Matrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets,
JP Morgan helps startups navigate complexity with real confidence, offering personalised guidance and deep sector expertise. Find out how JP Morgan helps founders at JPmorgan. com forward slash grow without limits. JP Morgan is the bank of the innovation economy.
While JP Morgan supports growth, Corgi protects it.
My word, what an arresting first line. Get your ask.
Covered with Corgi insurance, and I'll tell you why. If you're running a business right now, you already know this pain all too well. Getting insurance, it's really slow, it's confusing, and my word, it's full of paperwork. Well, that's exactly why Corgi is here to change the game. Corgi is the first and only insurance carrier designed specifically for tech companies, allowing you to get
Covered in minutes instead of days. Corgi provides essential coverages for all growth stages, such as DO, ENO liability, cyber, commercial, general liability, and more. Get your ass covered. I love the way we say ass with Corgi Insurance, alongside thousands of other startups at Corgi.com, Ford slash 20v.
VC today, that's Corgi.com forward slash 20 VC. You won't regret it. While Corgi covers risk, Flax gives you room to move. Business owners run their whole financial life on Flax. One platform, from business revenue to their personal spend, float every purchase for 60 days.
Tap capital that grows with your revenue and pay vendors in 170 countries across 32 currencies.
Plus the whole back office, bills, expenses, accounting, all in one place. So you spend less time reconciling and more time growing. That's why thousands of owners use Flex, named one of Fast Company's most innovative companies of 2026. Visit Flex.one.
That's F L E X dot O N E and use the code twenty V C.
You have now arrived at your destination.
Dude, we have known each other. I was trying to think, I think it's been like eight, ten years. Almost ten years, yeah.
You were young back then. I remember I aging. Yeah, you were in Excel and you were very nice officers. And I was just joined Atomic, I think. And we were both like very young and we were just like, wow, it worked.
But I want to start because I think a lot of people will hear you now and think, wow, so quite a partner and wow. But there's something in particular about the relationship that you have with your parents and how you look after your father, which I think is an embodiment of what a great human you are.
So can you just tell me a little bit about that before we dive into all the intellectual nerdy shit? Because I want people to know you a little bit first.
Yeah, look, um my um my dad suffers from a condition, theological condition
That showed up in my early twenties.
I have no siblings, so when it happened, I started looking after him.
He he's very unusual, my dad. He uh comes from a family of four, grew up in rural France.
Stop school when he was thirteen.
you know, he did that to put money on the table for the rest of his family. I saw him care for his parents when they were aging.
And I just looked up to that.
He's quite unusual. He's a a nostalgia.
Yeah, not an astronomer.
Mr Lager?
So I always saw him kind of take a different path than
When his disease starts showing up.
Yeah, I I was there for him.
And I know you've done the same for your parents, so Do you know I I uh I specialise in binary statements that get me, you know, either loved or hated. But I think one of the biggest pieces of bullshit advice is you've gotta do it for you.
Mm-hmm. Everyone who says that I think is just talking out of their ass. I do most of the things for my mother.
I did you know I adore my mum. And I actually think you can achieve great things when you do it for someone else. And that should be hailed and lauded, not
Do it for yourself always.
Yeah. My opinion is that
If you have very clear values, everything else is easy.
It might be painful in the moment to stick to them.
But it's just at least you have mental clarity about what you're doing.
And it doesn't matter how much work you put in.
You just know you're doing it for the right reasons.
Absolutely. The core value that we have is liquidity.
I don't think that's true. Did you see I tweeted the other day when uh Pat and Alfred were on TV and they said they were ask about Sean McGuire's tweets and I said Alfred's comment was the best I've seen, which is well, we look at the balance sheet of Sean and I just
thought when summarizing someone we look at the balance sheet of X is like the greatest way to discuss like that person. I got in a lot of trouble for that. You did? Yeah. Oh my gosh. Anyway, uh I want to dive into Secoi a little bit. You joined from Excel. I want to know what
Did you not know about Sequoia before joining, that you now know having been there for several years now?
Yeah, I've been there three years. And but I've been doing venture on capital for ten
I think Sequoia operates really like a sports team.
Maybe you've heard that story before, but this is my first day ever at Sequoia.
I'm in California. I've visited the office before, but
I wake up early jetlight and I show up to the office.
At maybe four thirty, five AM. Something ridiculous like that.
I felt obviously very happy about myself to the office that day. And as I approached the building
I see some light inside.
And as about about to push the door, I see a man on the other side.
And he looks at me.
And with a deep voice he goes, What are you doing here so early?
And I'm I'm a little surprised, but with pride I tell him, I'm here to take my first call. What are you doing here so early? And he's like, I've already taken my first call. And then he just walked off and he was just so happy about it. Still, you know, lost the game. And that was Doug? That was Doug.
Yeah. Of course it was. Oh Doug. Is that just like the Americans being built differently? Do you see everyone else at Sequoia do that and feel you have to do the same?
Is that it? I don't think so.
We just hire people who are built like that.
Doug's Italian.
He's European by Woots.
And
immigrated to the US when he was very young.
And I've only known him for a couple of years, but
I'm pretty sure he was always like that.

And then we want to play a dodgeball with him. Um What does everyone think they know about Sequoia?
That they actually get wrong.
Everyone thinks that we're just waiting for the phone to ring for the next anthropic to call us.
to invest.
That's completely false.
Everyone at Sequoia is a hunter. You were eleven people a couple of months back in the early team.
That's basically what a football team is.
And everyone's just scoring on the field. It doesn't matter how long you've been there.
Everyone expects you to perform.
Інфект до юнгарюар, демор.
People expect experienced people to perform because you just need them more.
It's very competitive out there. And we think that people need to behave exceptionally well as individuals.
But win as a team.
That's really important. I don't think that people will understand that as much.
I'll give you a story to illustrate it.
Constantine Bueller, my partner.
Helped us lead the investment in Citadel Securities, Ken Griffin's company.
They had never taken outside capital.
The reason we were able to invest is Constantine built a relationship with Ken since he was a student. He had been his mentor for years and years.
And Constantine never gave up.
And just kept asking.
Can we invest? Can we invest?
Until Ken.
Kindly said yes.
Can I ask you, in that case, what does that deal look like? I mean this not super seriously or glibly, but like does Constantine come to I see on Monday and be like, I have a new startup for us?
It's called Citadel with Griffin. I think we should put in a two hundred and fifty million dollar check. How does that actually go down? Yeah. I I wasn't there for the Citadel investment, but I've seen it happen with well more recently with Anthropic with special companies like that. Yeah. Two and a half billion dollars. Do you know what I respect so much about that, Jack? Is like
I think the hardest thing to do is to turn down a company and then
be willing to have the mental flexibility to pay
multiples of it later and get over your own ego about turning it down.
Yeah, we call that revisiting our priors. It's very important that you update your priors if the environment's changed.
And I think it came from the realization that
If AI is gonna be so transformative, we are just on the foothill of this incredible exponential.
And now we're three years into AI and we've seen that exponential starting to play out.
And suddenly we realize the human brain's just not very good at
dealing with exponentials. We we can think very well linearly, but not exponentially. And in this case
I think we underestimate the company in the early days. Do I think we all underestimated outcome sizes being what they are?
Like Anthropic and OpenAI being a trillion dollars as quickly as they have been. I don't think anyone anticipated.
Do you remember when it was about chasing the billion dollar company? Oh my god. Years ago. Wh which which is amazing, by the way, I get chastised for this. I get chastised for everything. You're a hustle porner. Fine cafe. Like
Shoot me. I agree, which is why I say something which gives most people like shivers, which is a billion dollars could just be the new series A. If you think about it, we used to do a fifty million dollar post at Series A hoping it'll become a billion. Now you do a billion and it becomes a twenty billion dollar company. Same blunt multiple. That's extrapolating the power law.
Right.
You have to be in the ones that matter.
Exactly. And picking has never been harder because you have just so much more volume of companies.
Push you on that one. But I think when you are at a billion dollars in valuation, say, and you're doing 50 million in revenue or 30 million in revenue, choose your number, you're significantly derised. You've got enterprise customers most often. There's real data. I'd much rather do that than the series A.
Where you're three, four million in revenue priced at three to five hundred million. Yeah, absolutely. The difference is that some of these billion dollar rounds happen before there's there's anything else. Sometimes you have what the market
wants you to pay. And then I think founders are also looking for company building partners. So you can invest. If you build trust with the founders, you can invest early.
Personally I haven't. We invest in a bunch of them. I think right now if you're gonna invest in new Neo Lab, you're basically investing, you know, in the Cora
in the stumble upon when Facebook X came about.
That's my opinion. Uh it's not shared with everyone, but that's the way I think about it. The only way you invest in a truly novel company
Is either if you back
An N of one founder. You know, recently
We backed a company called Ineffable here in K was
A large seed round as as you mentioned. David Silver. David Silver.
And he's an N of one researcher going after a very different type of architecture. So if it works
It's completely massive because they're not trying to do the exact same thing but better. They're trying to be different. That's the prerequisite now.
I think to be
one of the successful neolabs. Do you agree with me that series A is the hardest place to be investing today?
given price to progress and then competition.
I think that that m goalpost is moving.
It depends on which sector you're investing.
In hardware now, for instance, which is like the new thing, right? That's consensus.
physical AI.
The time to get validation is just a lot longer.
And so you have to invest early.
hoping that those companies can get through those phases of experimentation. And so instead of measuring these companies of how quickly they get from zero to a million in AR, you have to look at how quickly they get to a working prototype. But you're you're moving atoms, not bits.
It's just a lot harder. It takes more time.
And they just need a bit more capital.
So I actually think that we'll see more collaboration because of that.
Funds will want to work with other
capital partners to help those companies get to those milestones. Are you less ownership centric than you were before?
You mentioned then the collaborative element. I find that we're able to work more with other people given outcome sizes expanding. You don't need to have the twenty percent that you used to when it was a capped billion dollar upside. Yeah.
Are you less ownership, Sandra, than you used to be?
No.
No. No, I tell you why. It's simple.
It it's just the the outcomes
Or growing.
It's also more capital intensive.
But most importantly, it's your time. In your career, you can make twenty investments. Some people do more than that. That's just not my style. I partner with two, three founders a year.
And so in my career I can expect to do
basically be on the board of twenty companies. I'm not gonna short myself. I'm gonna work really hard for those founders. What I pitched them is that I'm gonna be basically their co founder.
They decide how to run the business, but I'm I sit in the passenger seat then
I help them close their first customers, close their top hires. Literally I cannot do that with more than a handful of companies. If you look at Real It, we met with seventeen public company CFOs since the start of the year.
Some of them have become customers.
How do you do that when you have two hundred companies with two percent in each of them? It just doesn't work.
It's it's a different model.
It's a totally different model, I completely agree with you. There are many different personalities within Sequoia. Who is the best saucer in the film?
Like finding companies. They don't need to pick them, do you? Just who is the one who finds really interesting shit time and time again.
Time and time again. If I have to pick, I'll pick Dean Meyer.
My partner who sits in Telviv basically lives on Plain.
He's just a phenomenal
Human being.
He was a professional football player.
for multiple years. So he has the competitive juices of messy, but couple with like the technical depth of someone who's been working in tech his whole career. And that's a very dangerous combo.
I don't know where that comes from, but he's just amazing at reading people. He's just got this ability to connect with founders, both like the very young spiky people, but also some of the guys who sold companies for billions of dollars. You know, people like Dean, he's been very, very popular, I agree. Who's the best picker?
who, when they have it in front of them, is able to deconstruct companies best.
That one's easy. Luciana Lissandru.
my partner who actually brought me into Sequoia, we worked together at Excel before. So I've worked with Luciana for most of my career now. You know, when I met her, she had just invest in Delarue.
Then she did Framer, then she wants to call it Penny Lane, Stark more recently. It's just banger after banger. And if you look at the pattern, there's no pattern. It's just across categories. She's just been able to reinvent herself, you know, from consumer to software to physical AI and defense.
That would be my pick.
Does it get really tough when you're at Sequoia?
'Cause the upside just needs to be bigger than the other fans like you know, Sean is bringing like SpaceX and you're like, you know, Naros and like unbelievable companies and you're like
Y you know, it's really hard.
But
It's part of the job. It's not meant to be easy, otherwise everyone else would be doing it, right? Our partnership discussions are sometimes very fierce.
We push each other like you have no idea.
Credits to Sean when he brought in the SpaceX investment.
We vote on companies.
I think someone voted a one.
I've seen
Or seen threes.
Never seen a two.
I didn't even know we could do one, I didn't even know it was on the scale. But what happened is after
that proposition occurred. He didn't give up. He just kept pushing. He forced all the partnership to fly over to see it with their own eyes.
We ended up doing a smaller investment that led to a big investment. And now a couple of years later, that's one of the best investments in the history of the firm. So the point is it's all about conviction.
Every off site we look at our fund returns dating back
From you know, decades ago. And it's very intimidating. You're looking at this sheet with those
Phenomenal returns.
In you think how am I gonna contribute to the same degree or more?
And every time we try to be cute to look at the numbers, oh maybe if we increase the ownership there and the dollar is there, but as we're always reminded, the best investments
In all the funds.
are always the companies where the sponsor had the highest conviction.
That's just the the one thing that's been so that happened time and time again across funds. Were the best deals controversial? When you look back across them, is it like oh actually no, they were largely consensus or they were controversial.
Not all of them. I think where you turn small dollars into big dollars.
They have to be controversial.
I wasn't there, but I I heard the Airbnb story multiple times over where I think that Brian Chesky had been turned down by most other firms and
He came to Secroy and Secroix led.
A seed investment that
was I think one of the the highest money on money return that we've made. It was controversial.
Sleeping on air mattresses on people's floor and turn that in the marketplace sounded like a pretty bad idea. But that turned out to be something very different. In actually having conviction, not just at the beginning, but to keep investing in those companies. You know what we're gonna talk about like unpacking founders, but one thing I read about Brian, I didn't know him
But one thing I read about him was that he actually became obsessed with like medieval lodgings and how people used to travel and stay and group stays and the historian that he is. And I actually found that fascinating. I find actually when you look at like the Collisons as well, they're real historians and truly great
Founders are often historians of their sector. I did know that story, but that doesn't surprise me. Yeah. Listen, before we dive into a couple of lessons from each, I'm gonna say two statements and you can discuss them with me. So CWE just pays up for deals.
that a wrong statement do you find yourself paying the most
Do you get discounts? What do you think?
I was very uh surprised to hear that question. You know, we try to partner with founders as early as possible. And in fact what you find is because of this high bar, we partner with only so many companies every year. And when we do what I see in practice is that
There's often capital that's happy to pay a premium to that valuation.
were early stage investors at heart.
And so for us trying to partner as early as possible remains the priority, but there are other firms that may be investing later stages that like to come in early that are willing to pay a premium. Aligned to that.
One of my fans that I bat, Brandon from McCaw, he went like quite viral with this, which I thought was fucking brilliant for square marketing. And I don't know why you guys didn't do more with it. Where basically he said like oh no one talks about and I'm not listening Brandon here, like it's it's true.
But people don't talk enough about the trance rounds that the Sequoia keep doing where Sequoia get in at one price and then there's an inflection and there's like a next round done at the same price. Like to me, that's just a phenomenal way to lock in ownership and money for the company. Is that how you guys see it? And you're like, yeah, we want to push that more.
First I've only seen that happen a handful of times.
And I think that's probably giving us too much credit. In his case, Brendan's built a phenomenal business. We haven't had the chance to partner with him, but in some of the cases where we did invest
It's a supply and demand problem. The founders are building a special company. Why would they not commend premiums after
Someone has invested. I I by the way, I think this is a great thing. Like I I d I would retweet it with like yes, the power of brand if I was Sukoya.'Cause I've done like five deals with you where I'm either in the first round with you and I'm grateful, or I'm in the second round afterwards where I'm slightly less grateful, but I'm still happy to be in the company. But I don't think it's like a bad thing.
Yeah, look, I think the difference is also people are conflating different things are happening. There there are multiple rounds that happen and you know, we used to have C, then series A, series B and
I think the milestones to get from one to the other
used to take you eighteen months. Now you can move so fast with AI that things happen so quickly. And so it's only normal that you commend a much higher valuation in a short amount of time if you've
proven yourself to to be right.
It's the triple, triple, double, double dead. You know, before we used to do one to three, three to nine, nine to eighteen, eighteen to thirty six. Yeah. And that was good. Now that's still great for a company and we're not at all belittling that, but you have a a lovable, a Lagora, uh you name it, and they go to a hundred million in a year. Yeah.
Okay, so on that one I have a strong view. I don't know if it'll be three years, maybe five, but this will come back.
I tell you why.
First, people are conflating again two things. Some are new markets and some are replacement markets. In the case of a CRM company, they might be AI native, but they're still having to replace a core system of record for a business. And some of them are growing really quickly, but they still have to replace something.
Here you're talking about companies that are in a complete greenfield market.
Three years ago there was nothing, and suddenly you have the capabilities that can replace
Basically what a human can do. And so naturally those companies are growing vertically. In a few years from now, most of the customers out there.
We'll have a solution.
and will hit a replacement market. And so you'll compare those companies
With these other ones.
Apples to apples, but right now it's apples and oranges and no no one's really paying attention to that. But our job is to play the game on the field and we can put money in one home or another home. And if we can put our money in a home which is much faster growing in a new market, we have an opportunity cost of that capital, which is why I want to put it that.
Wrong. I disagree with that. I'll tell you why.
The outcomes will be crystallized in ten years, on average, maybe more.
The best companies tend to stay private longer. That's what the data suggests. But you're making a decision that will impact the business over the next three years.
So it may be true that they can attract more capital in the short term, but ultimately what matters is how much ownership you have in how big the company can get.
And that will be true only when that investment crystallizes in almost guarantee that will happen.
For the biggest outcomes in markets that are more mature.
As opposed to markets that are completely greenfield.
And I think this is actually the joy of Venture, though, where we can be different. What I see is a more liquid secondary market than ever before, which is also extremely frothy. And because of my not being Sequoia, rare moment of humility for me.
I can sell much more easily than you. Right. And so I can sell into a liquid secondary market at a very exuberant price. I think in a way that you can't in a shorter time frame.
That may be true. But you have you have five hundred million fun.
That's a lot of money to do secondaries multiples. So I'll challenge you back on that. My my dear friend, we are just uh a humble podcast that also happens to partner with great founders. Exactly. It's not just a good story either. Let's not let numbers ruin a good story. Um final one before we touch on like founder reading.
an assessment. I do just want to go into like, there's so much mysticism opacity on how a deal gets done. And it's sequoir.
You have a weekly IC meeting. Is it global? Does everyone come? Is everyone invited? Is there a meeting for like just Pat and Alfred to like sit by a fireplace and strategize? How does it actually work to get a deal done? It's funny because you know we're well into it's our like fifth decade running.
And probably for five decades we've been doing Monday I Cs in person or on now on Zoom.
We've been adapting the same recipe. What's interesting is that we're actually experimenting with new approaches. We're trying to do things a bit more asynchronously.
Well, first yes, everyone is invited, but what's interesting is
We're experimenting with a new approach where we actually each have to contribute asynchronously after a memo gets shared.
And everyone can call up an I C if they wanna
get everyone's opinion. The reason for that
is an I see as a great format.
Mm.
Best thinking.
Speaking asynchronously is great for slow thinking. And so if you can get the benefit of both, you're hopefully gonna make better decisions. In an IC format, we're each contributing one after the other, it's kind of a sequential kind of rhythm. Whereas, you know, in in this case we contribute
each of us in a document and at the end we reach a decision all together you can call an I C, but that helps us get the best from the partnership. Does every entrepreneur pitch the I C? How do you make sure that the partners have enough data to have an informed opinion?
Yeah, yeah. The founders store pitch.
Very important. So they will still pitch the entire IC. Yeah. Quite a fucking nerve wracking. It sounds crazy, but I told you we're we're now twelve people in the early team, about the same number in a growth team.
So
It's not that big.
So you'll say to an entrepreneur, Hi, Nick, your picture with the IC is at six PM, I hear to help beforehand, this is how I'd oriented. You give them the prep.
Yeah, I try not to prep them too much.
You need to see the essence of the people. If the if you give them a script, no one's gonna see what you're seeing. Do you see a really wide variance in what you saw before versus the IC? In other words, do people get super nervous and change much?
Do you do do you see what I mean? Yeah, yeah. Sometimes we joke, maybe maybe we should make decisions without the IC. Yeah, it it is true. It it does change. But it also is it's a signal and then you decide as a sponsor what you do with that signal.
Did you have questions about the founder being commercial, a good communicator? If you bombed the IC, maybe your questions were founded. And so that I see then happens. And you said that about signal. Then
We and cool entrepreneur goes away, continues to build his business or her business. And then we v vote a yes or a no, we give it a one to ten. Well what happens now? Yeah, well for first we uh we give feedb independently of the discussion so that we know before the discussion where people are, like the boss. And so that's the vote.
And then we have a discussion.
After the discussion, everyone votes.
And the sponsor is equipped to make the decision they want with that information. So you can still do it.
You can still do it.
So Alfred votes one terrible one of the worst presentations I've seen and you can still press green.
Yeah, if you press green, it's a bad investment. We'll see how long you're still.
You've gotta have some serious conviction. It better be it better be a good investment. Wow.
Yeah, but it's not an Alfred voted one thing. The reality is is a bit different. Do you know who voted what? Yeah, yeah, you know. The the reason but that's super important, I tell you why. Because
If you want to be a good company building partner, it can't be
Harry's investment or Julian's investment. It needs to be a Sequois investment in this case.
I need to be able to call up Luciana, I need to calling up George or Stephanie to say, can you make that introduction to that amazing connection you have?
that you know is quite cherish, it's big bullet for them.
They're gonna make that introduction in a heartbeat.
Is there any politics? Like m maybe I'm just I mean I am insecure and and weak, but like someone okay, so someone said the um the term front stabbing, which is the opposite of backstabbing. And I love that. I think that's just the way you're
Being very direct with your partners. Does anyone take it personally? Like do you have to caveat it a bit? Like I always try and say to our partners, like, Hey, in the I C there's no emotions. But when I say this is a da da like they all face sunk, uh take it personally. How do you remove the emotion? Is there emotion do you have to call people up afterwards I'm sorry.
We definitely have heated discussions, yeah, for sure. People can violently disagree, but ultimately again, I go back to this is all signal.
for the per person who's sponsoring the investment to decide how much conviction they have in the investment they want to make.
And ultimately, you know, yes, the feedback may be tough.
But that's not an easy jump.
If you want an easy job, you go do something else.
And it's a feature, it's not a bug. You want people to come in with courage. And if they don't have courage, they won't take risk and we'll have mediocre
investments in the portfolio. I I think it's important that it shows that like um representative and honest. But I don't ever want to do a a founder bashing for sure. And so I like to see like a founder praising on the flip side. So if you think of an I see where founders just come in and just crushed
What one comes to mind?
So that that happens
What we do in those cases, we find it weird first. If everyone's a seven or eight.
Quite dangerous.
Because look, founders know what we want to hear.
The best founders are able to retrofit the narrative that they think is going to land with investors, and that can be dangerous.
So in those cases we try to have a devil's advocate.
So we asked someone
You play the devil's advocate and say okay.
What is wrong about that investment? Like what are the things that
If it goes wrong, we try to write the premortem of that investment before before we make it.
And we try to spar around that conversation because in a couple of years' time we one of us may have to deal with the consequences of that. I wanna go back a step though, because that's like assuming that a sponsor likes a deal enough to take it there. If you go back to like unpacking what makes a great founder and like founder reading, you said before that reading founders has
Well to be fair, your partner said this. Reading founders has quickly become a superpower. What do you do, do you think, that makes you good at reading founders? Help me. Well, first you have to be vulnerable with founders.
Otherwise they won't open up.
And that's all the signal you need.
And you do that very well, actually.
My job is in thirty minutes, I have to figure out what's special about this person and what might make them exceptional. And I cannot make a mistake.
Because
This job is so unforgiving, not when you invest in the wrong company, but when you don't invest in the right companies. So it's, you know, omission mistakes, not commission mistakes. And basically you have thirty minutes to figure out
What's their spike? And my way of doing this is to open up first.
They all expect to be pitching Sequoia and they want to tell
The story of their company.
But what I wanna hear is the story of the individual. And for that I start sharing about my story. I tell them
How it was like
Growing up with
parents who split up, where my mom was the successful businesswoman with a nice view over Lake Geneva, but I was doing a week there and a week back with my dad, where, you know, we slept on a mattress in a one bedroom apartment. And how it was fine.
You know, it was fine. I tell them how when my mom
H
Cancer
When I was six years old.
I remember having to put myself to sleep'cause she was just too tired. But
You know what, a year later she beat the disease and kept running her business. You know, all these things are just like everyone has a story like that. I know you have many of them yourself, so I don't want to use that to weaponize it, but it's m more that
I think that's the beauty of the job. Otherwise you're just in a transaction all the time. Sure I'm just so curious to understand what makes that person
Who they are that I just want to ask all these questions. So I completely agree. And I think you you have to bring that vulnerability to expect it back. My question to you is we're in such a transactional world where rounds and company momentum it's also transparent thanks to podcasts like this. People can game it.
And I've said before about what do I look for? I sound awful, but like great gamers, often broken relationships with parents. How do you actually determine if it's kind of genuine or not?
You just have to ask why.
Multiple times.
I remember this year's the first year I uncovered a fraudulent founder.
It was very interesting'cause I remember in the first meeting, that person said
you know, our numbers are going from zero to seven of AR in basically six months in pretty hot category. You know, in his introduction, he told us how he came from a small village and
unfavorable country and how he got an offer to go study at Stanford and decide to
Turn it down to go study at another university.
And you just have to ask why.
Why did you do that?
It's amazing. You you got
the grades to
get accepted in one of the most competitive programs on
The planet.
And yet you decide to leave it.
To do something else.
Why? And and they may be very good reasons, right? But what's interesting is just seeing the body language, the tempo of the conversation accelerating, the fanner being nervous.
And just think, Oh, okay, that's that's strange. So you just register, you don't end the call. You give them b the benefit of the doubt. But it turns out a couple of days later that founder, my partner, George and I are uh on our way to the airport at uh five in the morning.
to go see that founder and on the way to the airport he tells that
he had something happen in he had a family emergency and he had to cancel our meeting. Later that day we received messages from very respectable investors who were investors in the company who told us that he had come out as a frond.
I remember that day I sent a message to all our competitors about that because I I do think it's important that
You know, in those times where where there's so much opportunity, you also have people who would take advantage of it for the wrong reasons. And uh that was for me a clear case, you know, and then it's exactly what you said, they know what to expect. They they know what you want to hear.
And they were just gonna say it to you in a very programmatic way, so that's why ask why five times and you'll get to the bottom of it. It i it is hard, especially when we are as open as we are about what what we look for. So I totally get that. Is arrogance bad?
It's one that I just I'm not sure,'cause you can just this sounds awful, but sometimes the douches are actually really good. Is it bad?
I'll go back to the Don Valentine quote.
If you look at founders you like
versus founders who make money as a two by two matrix. Your job is to figure out in which part of the quadrant we make money. And he he used to tell that to many of our partners. And it's not because you don't like the founder that they won't make you money. And arrogance might not be something you like, but it might make them very good at what they do. It's
maybe the cost of their spike.
But that's why you have to go back to their spike first. If there's no spike and you're using that to hide a weakness, that's the sign you want to look for. Can you tell me about a founder misread that you have, which maybe changed how you think about founder reads? So like I would introduce to Chris at Granola, first ever investor that he met.
And honestly
He wasn't that articulate and he wasn't a great salesperson and it was a loose idea. The references were the most unbelievable ever from working with him. But I just couldn't get behind something where it was very loose and there wasn't much of a sales presentation or charisma or anything. I learned to focus more on references than almost anything else at Preceed.
So first I really agree with your last statement about references. We do that extensively. I'll come back to that in a second because I think there's an important point there. Yeah.
On your question around a founder misread.
I had lunch.
with Anton Osaka from Lovable before he founded the company.
I just didn't see it.
I'll tell you one thing that I learned from that.
Is
I didn't come to the meeting with a plan.
I just had lunch with him and it was three of us and him.
We were just chatting and I was not intentional about asking the right questions to figure out what made made him special. And I underestimated him at the time.
It's hard. You know what's also hard though actually and which I think is important? He's Swedish. And he's a thoughtful Swede.
And what I mean by that is like Matt at Lagora. I know you're in Sequoia, so but Team Harvey in Sequoia. But Mice is like an aggressive suede. He's like an American Swede. And Anton is a thought suede, a product oriented suede. And see, he's less declarative in his opinions, but this was earlier.
How does your read change for country? French are not very
Good salespeople generally speaking, they don't push with the same marketing showbiz of Americans. How does your read vary by country?
I think that that part is very important. I remember the first ever diligence I did at Sequoia was for a company called Tacto in our portfolio. And
I called up a bunch of their customers who were
What we call middle stand.
Those are you know, small businesses that compose most of the company's economy, right? We always ask the NPS question at the end on a scale of
Zero to ten. What do you think of the product?
And if you were just so consistently saying seven, I remember asking, Oh, why not more?
Because we can always do better. Very German. And I remember when the the memo came out, um
one of my partners said, Oh, um why do you think the references are not more positive?
And I said
All their German customers. And basically I remember telling my partners if they're French or German, you add one or two points.
If they're Americans, usually you wanna retract one or two points. Uh on the other hand. Yeah, so that that's also the beauty of investing here is that you just gotta take the local nuances into account.
Do you find any commonalities in childhood? Again, maybe I have a
Unhealthy tail bent towards like childhood trauma, broken relationships with family, fat kids. I was a fat kid. Uh everyone loves all of us gloop. Do you have any preferences? The problem is y if you try to pattern match people, you you will just
not invest in the right people. That's what I found.
Y your job is just to figure out
Where does this person sit?
On the intercept.
In what is their future looking trajectory?
If you meet a very young founder
You cannot compare them to an experienced operator. That's apples and oranges. And the best thing you can do to figure out their future trajectory is understand.
On what trajectory they're on. So going back to their past. If you stop just at their professional history, you, you know, in some of these cases, they've been working two years.
But you have so much richness if you go back, you know, the first fifteen or twenty years of their life.
And I'll I'll give you an example. I met two founders.
French founders both went to polytechnique.
most competitive technical program in France.
And you know, I could have said oh these two guys are equally good.
What was interesting is when I start digging into their childhood story
One of them was the son of private equity Tycoon.
Who also gone to Polytechnique.
While the other one had been abandoned by his parents when he was born.
And spend
His childhood going from like one care home to the other.
That's terrible, but at the same time it just shows you how much distance that person traveled to get where they are.
And it doesn't mean that they'll continue on that path, but at least it tells you a lot about their existing trajectory.
And so your job is just to figure out if they're gonna continue on that path or not.
I totally agree with you. Distance travelled and like the shit they have to go through to get to where they were today.

materially just more.
Yeah, totally agree with you. I always love it then when you check the kind of name of the library and you're like, Oh, it's also your father's name on the library. That that helps usually. I did think Shard said you uh were you know, whatever. Okay. There's Doug Leone, there's Pat Grady, there's Alfred Lynn there's Sean McGuire.
I'm gonna choose one lesson from each.
Start with Doug.
What's the one lesson you learned from Doug?
The one lesson from Doug.
is a question he asked in interviews.
He starts by asking
Who is your best reference?
And why?
What's interesting there is
Usually
Founders tend to say
There's this person and this person and they're they're very happy to share
all the great things these people have to say about them.
And as they finish, you ask the counter question, which is
Who would be your worst reference?
And why?
And see their calls change.
People answer that honestly. Honestly.
What's interesting is how they answer the question. I've had founders be very direct about who their worst references were. And what was amazing is then I called those people.
And you just get a law of texture. I'm not looking for perfection, I'm just looking for clarity.
Do you know who your worst reference would be?
Yeah.
That sounded so like um the GFC goes Ah I think mine would be Nicklas Atomico. Oh really? I think you'd say I was like useless.
Uh-huh. And I was, by the way, like when I was a toy. You were also seventeen years old. I know, but I just couldn't understand like why am I on a call at midnight
When it's not my firm.
This makes no sense to me.
Exactly. But you know the the worst employees make the best founders. You became a founder. Which is why references are really hard. Actually.
For me. Okay, I love that. I'm gonna steal that. Just on the reference point, you know, you asked me about Sean.
He has this Elo methodology framework.
where if you've played chess, Elo is the score you get attributed, depending on how good you are.
And
It's exponentially harder to get to a higher score because you have to beat better and better people to get there.
And so his point is that
If you know you're a twenty four hundred rated player, which is extremely good outlier territory,
You're much more likely to be able to judge

outlier is. And I think in the case of chess in ten moves, a twenty four hundred rated player can tell another one.
But if you ask someone who's a two thousand rated player
will be unable to tell the difference. It's the same with references. You want to ask
exceptional people if someone is exceptional
not good enough people.
And that's often the problem with references. I get you, but I'm I again I didn't think these people will mind because I'm saying they're so exceptional. But like when I speak to Torsten at Helsing or Alan at Fuse
U obvious two exceptional entrepreneurs.
I've never met anyone they like.
They never anyone where they're like they're amazing, you have to do it. They're like at best
Yeah. They were okay.
That's really hard. Like do you not find that? Where like the best people just have s I don't know, I I can't get it.
You have to entangle their personality from their accomplishments.
And maybe in those cases the personality got in the way of the accomplishments.
Okay. Yeah. Doug is great, love that. What about Pat?
Oh Pat's got this great framework.
People are like vectors.
And vectors are the product of their direction and magnitude.
Direction is
Why are you doing this?
Why are you so motivated about that? Where are you going?
The magnitude is
how ambitious that person is. Are they gonna go through the pain to keep doing what they're doing?
I find that framework just so simple, as always with Path, because if you try to understand the person's direction and their magnitude, it's gonna help you a lot.
Just to predict where they're going next in their trajectory.
Yeah, one thing I always remember Pat telling me.
Is that people think that we're so great.
Every single company that goes public.
We have seen at some point in their journey. Mm-hmm.
That just shows you how many we've missed. We must always bring energy, bring preparation to every single company meeting we have.
It's never enough.
I I just love that humility. Like this is this fucking Pat Grady.
I think it needs to go on now. To have that humility, I just thought it was awesome.
Again, my first day at Secroyo.
We were all asked to write this one sentence.
We are only as good as our next investment.
And we have that printed on the wall now.
It was very intimidating to write that the first day at Sequoia. Very humbling. So th that's the focus. And I th I think you can just see it then the way people behave.
God, you'd be pissed if you're Sean McGuire and you're just being like, I just did space acts. Come on, give me give me a break. Come on. He's definitely not the break. Uh Alfred Lynn.
Alfred Lynn.
The latest piece of wisdom that I loved from Alfred.
was do not mistake an outlier operator.
For an outlier founder.
That's very easy to make.
You think someone did really well at this company, they've done s so many things.
They've launched these new products.
Everyone liked them.
That might make them an outlier operator.
It might not make them an outlier founder.
very difficult when the C V is as gold plated as your open AI, your deep mind, and I think we're all falling for the C V trap in a lot of ways today, especially with a lot of the heavy AI players.
Final one, is Sean the ELO one, or is there another one?
Oh the either one. Yeah, yeah, I'll give you another one from Sean that I liked.
Everyone thinks of people as either IQ or EQ.
IQ is the
Intellectual horsepower, EQ is the emotional horsepower. He has these two other dimensions. One is judgment.
the other's political coefficient. And basically
If you think of judgment as how you're able to find solutions in complex systems.
And same with PQ, it's the ability to navigate politically complex systems.
His
Argument is that judgment is actually more important than IQ.
And PQ is more important than
E you.
He's got amazing PQ. I go back the balance sheet of Sean is relatively undeniable. Very funny. Which of those four?
Is the best reader of founders.
Well it depends on the founder. If it's a young technical founder
I would ask Alfred Sean
If it's
A more commercial founder, I would actually ask
Dog or a pet.
But again, I think.
You you mentioned those four names, but we have eleven people in
actually think, for instance, like Bogomil, he's amazing at reading people. So for some founders, I would definitely bring Bogomil. If it's a company in FinTech, I would bring George, because he just knows all of them. He's very calibrated.
Listen, we've covered a lot about Sequoia and what makes Sequoia what it is. In terms of like where we invest, you said something to me before, and I want to spend some time on it. You said agents are the new customer.
What does that fundamentally mean? What should we take away from agents being the new customer?
Yeah.
We're three years into AI and
we're already at parity in terms of agent traffic to human traffic. I think it was Cloudflare this morning said that
In five years from now, we'll have one thousand times the amount of agent traffic.
Too few in traffic.
Again, we're not good at thinking exponentials.
Well
It formed a foothill.
We better
act as you know, it will be. My thesis is that, you know, on the demand side, you have a new customer that we're not treating as good as human customers as the agent.
You know, today we have agents delegating tasks mostly out of convenience, but tomorrow as the AI gets smarter, it will be because they're just making better decisions. If you have a five hundred IQ AI,
Of course they're gonna make the decision on your behalf because that's just a rational thing to do. And today we've basically built these
Interfaces, whether it's on
desktop or mobile.
That are basically a layer.
That sits between your business
And the customer intent.
And you're trying to translate that customer intent into dollar for your business, but if you abstract it, it's just a layer, right?
What we've been extremely good at is optimizing that layer for twenty years. Better UI, better onboarding, better sign up, better payments workflows. Hundred percent. And so you end up with like a pixel perfect website.
That's amazing at converting humans.
But now we need to think of like a bit's perfect.
platform that's good at converting agents.
What changes then in that world? What should founders take from that?
And what what do we look for that changes? Like does UI become completely irrelevant then? How do we think about that? Yeah, UI is obviously the first thing that people think about.
But there's the thinking fast answer and then the thinking slow answer.
The thinking fast answer is UI is going to zero.
Agents are able to swap your product in a minute.
And there will be no brand loyalty.
And it'll be erase to the bottom. The thing in slow answer is quite different. Agents are very similar to humans. They have biases.
They have biases in their pre training based on what data they were you know, was scraped.
They have biases in their post training because they were post trained by humans who were annotating
And so what you see is that the agents are already very biased. They go to Cloudflare and Vercell when they're looking for a hosting solution. In fact, you have hedge funds who are buying data.
to understand
how agents are making decisions because that may influence the stock price of these companies. And so
We need to understand, just like we did for customers, what are those biases and how do agents make decisions and how that may differ across the different model providers, but also depending on what product or service you're you're trying to sell.
And we're just at the very beginning of that of that transition.
We have like, you know, in the portfolio we have a company called Profound that's the answer to SEO for the modern marketer. They help you make your business visible to people who are using chat interfaces. It's AEO answer engine optimization. Yeah. Is the AE so we have a business too, peak AI in Europe.
And
My question to you is is the AEO answer engine optimization business the same as agent to human in terms of traffic when you compare AEO to SEO?
But will AEO be a significantly larger market than the SEO market?
that it's not just uh a new category it's a new economy.
you're you're just gonna have a a parallel economy for agents.
Just like you have a parallel economy for humans.
In in that new economy you will have new categories created. A yo is one of them. How do you determine what is
in that new economy versus what is not. Because I would have traditionally said, well a honeymoon for my my wife would be in the I'm gonna keep it in the old economy. I don't know, dude. I invest in Audacia with you guys with Constantine and Francis from Sonder. I don't think they're that far away from making an amazing agent experience that could do everything
that I would want to do. Yeah. So how do you determine which is in which
Yeah, you still have a human in a loop.
When you're booking your holiday?
But very quickly agents will just make their own decisions. You still want to decide where you're going on holiday. They might have made the best plan, but if you are the one who's going on that holiday, you want to have a say. The difference is right now there's 80% of the databases are written by agents.
So why would humans have a say?
as the AIs become so good that they can pick better than humans. So th that's the distinction I would have.
So does that destroy software margins then? If everyone's able to switch super quickly and it could be uh race to the bottom on price, agents are optimizing for a load of different preferences.
Do we just lose
Margin as provided. So
What happens there?
I don't think that's true because that's assuming that you have no switching cost.
the reality is you may have no switching calls for very menial things like okay, you might want to book different plane tickets that that's easy to swap provider. But if you've picked a database you're you've been building in that database, there's data gravity, there's
enterprise controls, there's all the things that enterprises care about. That will remain something you build with trust and trust you build it over time, that will remain true no matter what.
when you look at like a a Rillet and it sells to large enterprises, some of the biggest in the world, the way that they buy
Is that really gonna fundamentally change? And is it gonna fundamentally change as quickly as we think? You know, I'm always conscious of being I'm not that young anymore, neither are you, sorry, mate. Uh but like I'm always conscious of being exuberant and then I'm always reminded you always, you know, overestimate what happens in a year and underestimate what happens in ten.
Enterprises won't move that fast. They don't buy as quickly as we think they do. Yeah. Agents buying and no no no just like they don't have Slack mostly. How do you think about like agent willingness to engage in that new buying behavior?
Yeah, I mean like everything in the adoption curve, this will sit somewhere else on on that one.
Right now what you're seeing is agents are very good at picking
tools that are connected with coding because that's where
agentic applications have really reached human parity, but you haven't reached that level in other functions as much. And
Yeah, to today I think that will be probably just further help the spectrum. Can I be a uh I I'm gonna be humble.
Again, maybe day is day this is this is becoming a bad bad habit. I don't know.
in a lot of cases, which is durable, which application provider will survive. It feels so transient. And I feel a lot more certainty when I invest in fireworks. When I invest in McCor, when I invest in Click House, the infrastructure that I know whoever wins at the top layer in the app layer wins. But they're gonna use fireworks.
They're gonna use Click House, they're gonna use McCourt to get there.
Do you not just sit around the table as a partnership and go, God, the infrastructure is much easier and better. We wanna be there.
We we invest in both. I think the human brain
It's not very good with exponentials, but it is also
not very good at understanding that holding ideas and tension. You can hold opposing ideas in tension and still be correct.
Because those truths will materialize at different times. In the case of
fireworks, they're ripping. And they're ripping because we're just at the beginning of the AI revolution. They bought the best product and they appeal to the best customers. So they're running away with the market. At the same time
you know, you mentioned Real It before, they're signing up the next generation of software companies now outside of software. And those companies will build their entire
A finance team's on top of Relates.
in a couple of years from now this will compound into
a very large and sticky business. And so do we invest in one or the other? No, we invest in both because we think that both companies can be really big.
It's funny, one of the things that I love to see when I'm investing
is the percentage of customer base that is non-start up.
or non traditional, like tech oriented. Cause when you have like Ford motors in Idaho using it and you're like, wow, that's a weird one. How did they find out about you? Yeah. Huh, what's their usage like? It's a really, really good sign for me. It's funny you say that because in the case of Rillet, we had the board meeting recently and uh they have this
thing they called Project Iowa.
And it's basically appealing to companies outside of tech. And we this is the fastest growing segment in the business. And
We have car washes and regular auction companies signing up. So that was that was a very interesting turning point in the company. They're both able to appeal in the taste makers in AI, but also to the company that your uncle's running.
you know, with his wife in that's really important because you want to participate in the real economy, just not just in the AI economy. Do margins matter less today given the expansion of outcome sizes, whether we look at fireworks or Lagora Harvey and putting them together, lovable Raplet or the margins are lower right now.
Than they were traditionally in more mature software markets. Do we just not mind because markets are bigger?
So on that point, very important. We're in trench in phase.
Where most of the human facing applications
still benefit from operating at the frontier?
At some point, your customer support agent does not need a 200 IQ agent to change your plane tickets to Hawaii, right? What will remain true is that machine to machine interactions still benefit from 500 IQ AIs. And as we shift from
customer facing applications to machine facing applications, operating at the frontier will matter less and less for the first group and more and more for the the second. And I think right now everyone's wondering what should we do with open weight models.
For some of these applications were the frontier
Of what open source gives us is already good enough.
And they should absolutely
start thinking about that and we're encouraging portfolio companies to do that. Or the ones where we're still not at human parity.
you absolutely wanna be operating on the frontier and it might be worth
investing at n even negative gross margins to ear the customers trust in build the superior product to your competitor.
Speaking about kind of margins building superior products to competitors, y you went viral.
Which which is very exciting, GD. Uh you went viral for your post on like the services economy being in the next trillion dollar economy. And you're my dear friend and I love you and I read it and thought, My word, what a load of word wank. Um
We're just just like oh power counters which are G B T make them more efficient and like well done. Yeah. What am I missing? Like I love the way I have it written down in much more articulate ways. What am I missing when it's like services of the next trillion dollar economy that we should pay attention to? Sure.
Yeah, so the prediction was that the next trillion dollar company will be a software company that masquerades as a service business. It's very important the masquerading because they cannot be a service company. Does that make sense? It does. So what would that look like? Sure.
We're in the third year of AI. The first wave was about co pilots.
So it's companies that are helping human workers be better at their job.
The reason we started there is the models were just not good enough to do the entire job.
But as you've seen encoding this year.
We're reaching human parity, if not more. And so the agents are able to complete tests end to end.
And so instead of selling a tool that can help you achieve an outcome, you can sell
the outcome directly and that I think is very interesting to go back to the accounting example.
Чуде
You might buy an you know QuickBooks for
Two K.
But you spend
Fifteen K.
to close the books with your accountant.
So what if you can just sell the outcome of the closed books instead of selling the software alone? And I think that's really important because you have
Typically across the board a one to six dollar ratio.
between how much you spend on tool relative to how much you spend on the service.
in the question I was asking is
How do we figure out the categories that we'll be able to capture the$6 where you know others are still focused in competing on the$1? The conclusion is.
There are some categories that are already getting there.
People may not realize, but customer support is already in this phase. I call it the autopilot category. You have already a billion dollar in AR in this category where outcomes are solved. And the way it works is, you know, we have a company called Sierra.
They're an AI for customer support and customer experience. A typical way is they go see a customer who has
X number of tickets to resolve an airline. And they know that today they have human agents that are answering these tickets. And for every ticket resolved, they might spend, let's say, fifty dollars. While Sarah comes in and they say, Well we will resolve those tickets for
Let's say a fifth of the price. At the beginning, the customers may want to see how it's working. So it starts as a co pilot, but very quickly it moves to an autopilot. The beauty with that is effectively the AI is running the entire workflow.
N to end.
and is able to collect a fee from the outcome it's generating, not from the tool that it's selling.
Totally get that. I think it's very easy to do in customer support based environments where there's very clear resolution or no resolution or TBD. What do you do when there's ambiguity?
Sales tools.
It wasn't actually all marketing tools. I wasn't actually that touch point. It was a different touch point. It's only really
possible in super clear definable markets, no? Yeah, it's it's very hard. That's why
Unfortunately, we haven't seen many companies yet do that.
And the combo is one
The models are still getting better and better.
But two, as you said.
There's still a lot of human judgment involved in those decisions.
And so my framework is you have intelligence, which is what the models are really good at.
Things are verifiable.
How much did we spend for this in that month?
And then you have the human judgment, people call it taste, people call it the sum of the small experiences you have interviewing someone.
the body language they have, are they leaning back or into the chair that may lead you to ask a different question.
that you would have had in your preparation. That's something that's very hard for an AI to pick up because it was not in their training data.
But today what's interesting is those tools that starts co pilots
they're basically in the judgment loop. And if they're building the right product, they will be able to harness that judgment so that the judgment of today is the intelligence of tomorrow.
When we say the one to six dollars spent,
Microsoft, OpenAI anthropic, every frickin' provider is putting a huge amount of money into like the services and implementation side of their business. And we're not actually just seeing traditional enterprises more than ever cry out for help.
To implement AI.
It's interesting you say that because the stat is we've never seen so many system integrators and four deployed engineers being hired in the workforce. And that's a direct correlation with the point we made, which is you still need human judgment and hands to do a lot of that work. And in the case of service now,
I think they're they've never hired so many system integrators. You and I are investors in a company called Octor, that's an AI for software implementation. They work with some of the largest software vendors where they basically
Help their employees.
supercharge their implementation team and it's just amazing how how much leverage you can get
one person can do the job that 10 person were doing before, but you still have the human in the loop. And I think that point is very important. I think what people didn't understand from the article is that it's not because you go from co pilot to autopilot that you remove the human completely.
What I'm just proposing is that
We can build
companies that will have software like margins, even though they're still humans that are making the judgment calls. The difference is that you start with lots of humans, little AI.
And you end up with lots of AI little humans.
Simple frameworks, you know. Incredibly reassuring for humanity. Do you buy the we'll have smaller teams argument. Oh, absolutely. But but the the thing that people also don't realize is
There will be new jobs.
You're just shifting the bottleneck somewhere else.
I do get you, but I do think the speed of transition is fast as it's ever been. Like when you see, you know, the agrarian revolution or the industrial revolution, it took ten, twenty, thirty years to buy, train, and then deploy machinery on farms in the middle of France. Yeah, when an update to you know Gemini can remove a whole generation of designers.
In terms of like movie posters. That's worrying. In six months called code became from twenty percent of
Andre Capathy's workload to eighty percent.
In practice.
The data shows that we've never hired more software engineers.
That's true. And so
You see you have opposing ideas that
can hold true at the same time.
the the realization is Jevin's paradox. You're making building much cheaper. And so it turns out that people have lots of ideas and you know, we can't underestimate human creativity. And in this case people are just building more.
Yeah, I find that exciting for you and I who are investing in those companies. Will you invest in a services business that plans to turn into a software business? I know it sounds crazy, but it's like, hey, we're collecting the data, we're understanding workflows, we're clearly getting as close to our customer as possible to build the software product.
No.
So I always tell you when I have low, medium and high conviction what I'm saying.
you're I between a medium and a high. I will not invest in one of those companies.
For the following reason.
I think you can make money in that business. The reality is
I've only seen it in my career.
the best companies are able to concentrate talent.
And you're just not gonna get frontier talent wanting to work for an old service business.
That's kind of
travesty into an AI company, they might have data, but not necessarily the data because it's just really hard to harness the right data to make these businesses work. So I actually think you should just build it from first principles. The best founders always figure out how to get distribution. They will have the talent. So if they can build the best product
customers will vote with their money in buy that product.
You sit in Europe.
But you work with a US partnership in a lot of ways. Do you see the promiscuity of US employees in terms of their willingness to move? You said about people wanting to work at X or Y. I find US employees incredibly promiscuous.
in terms of jumping hot hot company, hot company, hot company. In Europe I think we're much more loyal.
Surely in the labs, I think there's a lot of jumping around in the labs.
Yeah, people have very short tenures.
And yeah, we we just don't have that in Europe as much.
It must be so confusing for your email.
Yeah. Do would you update your Netflix every time? I I think they probably keep the emails just in case because some of them come back. Can you keep Caron at OpenAI just in case? What the fuck? Exactly. Is traditional private equity fucked.
I actually think they m might do very well by investing
in those companies that have the data and so on and
won't be able to hire a frontier talent, but they'll build very fine businesses. They just also they're not seeking the same outcomes that we seek.
We want to back the next trillion dollar company. I think it's unlikely that's a private equity backed company.
It's true. I think the only thing that will vary is just like, do they have the ability to do more deals?
'Cause so many of them underwater with shit deals. Yeah. Yeah. Yeah. When you're dealing with five t Titanics, are you really willing to like let another flower blossom?
Yeah. Tough. Listen, dude, I want to do a quick fire with you. So I say a short statement, you give me your immediate thoughts. What's the most overfunded category?
Probably legal. I think there're just so many me to's in this category, whereas I think that the winner is already in existence. I'm obviously biased, but I think Harvey is very well positioned because they have the widest distribution and
Yeah, I I just don't understand investors' willingness to invest in the Nth competitor.
Uh I will naturally say I think McGau is obviously gonna win. But I think uh going back to your point, I think slope is what's in important. I do agree with you on the overfundedness. But I kind of don't in a way actually do, because I think illegal is a very horizontal broad market. We're in a business called solve intelligence.
It's IP law, very specific for patent lawyers. Yeah. That is so different to a lot of what Harvey and Lagora do, to the extent that both Harvey and Lagora founders are invested in it. Do you see what I'm saying? Yeah, yeah. And so I I really think it's actually you will see the unbundling of law. Now will it solve be as big as Harvey or Lagora?
No.
But still multi billion. Really interesting. Underfunded category that should be funded more.
They call it BCI brain computer interfaces.
That's where all the smart kids are going, so
I'm a big believer that you should just follow where the smartest people are going.
Ten years ago, the smartest people were going to M L N A I
Ten years from now we'll see those companies probably blossom. That's the next frontier. The best agent company outside of Sequoia.
So the best agent company outside Secroya is probably Cursor.
One, they're in one of the most important markets, but second were there was a lot of chatter around AI wrappers. They were the first company to really understand that you could post train models and actually go deeper into the stack.
When that sixty billion dollar deal happens, do you guys sit around the table and go, Oh?
Well, they join their portfolio company, so
Um that helped.
Yeah.
Best angel who doesn't get enough credit. Gloria from Puzzle, I think deserves a lot of credit.
She's got a incredible nose and works extremely hard for her founders.
What miss haun you most?
I think probably Trade Republic.
So w we're in business with Trade Republic, but I looked at the seed before I joined Sequoia. I remember
Telling the founder Christian
I don't think you're gonna succeed because Revolute is going to smoke you. The point is like it turns out that
They barely compete and they're both building building amazing businesses. I fail to understand
It was not a winner take soul market.
I underestimate the size of the category.
You know, one of the most B S reasons to miss a great company is uh well people will use you at the start, but then when they become bigger, they'll just build their own.
The classic stripe or search APIs or whatever. Yeah, for infrastructure in particular. It's just painful. Why would I do that? Exactly. Um what founder trait do you refuse to compromise on?
Intensity.
Intensity is important. It's too hard to build a big business. You need intensity.
Which fund when you here are competing?
Do you go, Oh shit, we need to bring out a game.
I don't think we can be condescending and say we don't bring our A game.
No matter who the competitor is.
But I know you want names. Can I answer with a story? Yeah. So
I never lost a deal, uh, an investment in my time at Sequoia, but I've lost investments before. I lost my first investment two weeks into the job when I started an venture.
long time ago, and their company was Revolute.
Incredible, incredibly painful.
I think Index and Balderton did that round, if I remember correctly. But basically the story is I'm two weeks into venture like you, I'm like twenty years old. I don't know anyone. And I call up the one person and no Inventure Capital C from Seat Camp.
And he tells me you should come to that pitch. We have ten companies. And I thought, Oh, great, ten companies, that's amazing. That was the only criteria that I was uh given. And I show up to this run down place in East London on a basement, and there's ten founders pitching. One of them is Nikolai
From Revolute.
Another one of them is Daniel Dines from UiPath.
Th think about the concentration of EV that was just in that that that day. And they're both raising their seed in series A.
I think Nikolai was the most obvious founder call.
I've had in my career it was just so obvious how intense he was, and I proceeded to camp out of his office.
And Canary Wharf?
And I just tried to identify him in the crowd every day because he wouldn't respond to my emails. My colleague and I ended up having a meeting with Vlad, his co founder.
And after trying to convince them to invest.
They said that they would go with a competitor.
And
I was I was really crushed. I remember thinking this could be bigger than PayPal.
we'll see, time will tell, but it's I think a fantastic business. But at that time I tried my chances and I said, Can I invest personally in a company? And they begrudgingly pointed me to an SPV, but
I was pay I was penniless at the time, and even though I had the opportunity, I didn't know how to fund the commitment. So I remember calling my mom on the way back.
Like your mom, she's uh she's always been there for me for business decisions. And uh she said, That sounds like a pretty good idea.
How about I give you the money, but we'll do fifty fifty.
Ten years later.
I've only kept buying shares in the business. I haven't sold one, but my mom just sold most of her shares and she just retired at seventy four years old.
And so I always joke with my partners that they could only hire the second best investor in the Beck family because my mom went all in on Revolute at the series A. What multiple is that? I'm not asking for money, but just like
Well it depends on which valuation, but we entered at two hundred no one and
eighty two hundred million. I think the latest valuation is over a hundred billion.
Just how your mom to have one line on her track record. Yeah. Exactly. Revolution, part, might draw. Exactly. Exactly. Well done, Mom. Now it's not about who finds it, it's about who gets the cash at the end of the day. Exactly. That's unbelievable. Do you know what though I'm I'm s this is why I'll be forever unhappy. Do you want to.

I need up to double my track size. Exactly. That's amazing. I love the thing. Well I earned thirty K at the time, so you know, it was uh it was really bad. Actually at the time I I I I work for this guy, Ollie Samura, who was the founder of Rocket Internet, and he's amazing for so many things, but everyone knows he's a very tough negotiator.
And so when I I join his company, I said
That I wanted more than thirty K and he refused.
And so I actually was able to negotiate that I was going to be able to invest in the companies in order to make m enough money to survive from the investments. And actually
You know, s those angel checks are
You know, pretty pretty healthy these days. Pre C the Nature.
Albert Revolute. Yeah, but my my mom still has the the best track record. She missed all the bad ones. That is that that is fantastic. What do you believe that about Venture Capital that most of the Sequoia partnership would disagree with?
Oh, the funny thing is people love to say Secoy believes X and Y.
But we actually have very different opinions. There's no house view on AI. You know, I can post this article about services being the new software, while simultaneously you'll have David Khan talking about the
six hundred billion dollar question and simultaneously
Pat and Sonia saying this is AGI, you know? Does that make it hard then? Because I'd be annoyed if I believe in the services element and then another one of my partners puts out a piece saying something very different and opposing. I'd worry that the founders that I'm trying to attract with mine are reading theirs going, Well, we're not gonna go to them.
Yeah, but at the same time, you know, you you cannot be blind. You you want people to seek you out for who you are and
It's what people forget about a brand, which is like the best brands make you feel something.
Exactly.
For or against, Nike or Adidas, Apple or Windows, you feel something.
We're trying to invest in spiky people, so we have to be spiky ourselves.
Final one, what are you most excited for?
about the next five years of AI, about what will change, what will happen.
Again, I think it's what I told you before. We're still in this phase where AI
is maybe a hundred and twenty IQ with the latest test, but when we get to five hundred IQ AIs
Will you know maybe find cures for
your mom or my dad's disease will find things are just so transformative to humanity that it will make all these things we worry about today sound completely insignificant. So I'm actually I'm not from the world of science, but I'm I'm very excited about
companies that are helping push the frontier of life sciences, biology
And the great thing is actually in London we have
a lot of focus on that. You know, just saw Demis' post and it's great to have these big brains focusing on these problems. So I'm actually really excited about that.
I couldn't agree with you more in terms of what it could do for chronic conditions. Dude, I've so enjoyed this. I I so appreciate the friendship that we have. It's like
Again, almost ten years, which is terrifying. And it doesn't feel very old, but you've been an amazing friend to me and I really appreciate you. You're my brother. Thank you, sir.
But before we leave you today.
Founders face a different set of challenges at every stage of growth.
For Sid Shaid, co founder and CEO of D Matrix.
JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high touch approach with supporting D Matrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence.
Offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at JPMorgan.com forward slash grow without limits. JPMorgan is the bank of the innovation economy. While JP Morgan supports growth, Corgi protects it.
My word, what an arresting first line. Get your
Ass covered with Corgi insurance, and I'll tell you why. If you're running a business right now, you already know this pain all too well. Getting insurance, it's really slow, it's confusing, and my word, it's full of paperwork. Well, that's exactly why Corgi is here to change the game. Corgi is the first and only insurance carrier designed specifically for tech companies, allowing
You to get covered in minutes instead of days. Corgi provides essential coverages for all growth stages, such as DO, EO liability, cyber, commercial, general liability, and more. Get your ass covered. I love the way we say ass with Corgi Insurance, alongside thousands of other startups at Corgi.com forward slash two.
Two zero VC today, that's Corgi.com forward slash two zero VC. You won't regret it. While Corgi covers risk, Flex gives you room to move. Business owners run their whole financial life on Flax. One platform from business revenue to their personal spend.
Float every purchase for sixty days, tap capital that grows with your revenue, and pay vendors in 170 countries across thirty-two currencies.
Plus the whole back office, bills, expenses, accounting, all in one place.
So you spend less time reconciling and more time growing. That's why thousands of owners use FLAX, named one of Fast Company's most innovative companies of twenty twenty six. Visit Flex.one that's F-L-E-X.On E and use the code twenty V C.