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Adapting to Endure – Sequoia Capital [pdf]

• hutch120 4y ago
  > "Who doesn't just survive but win?" A finite mindset? > "I want to take you back to early 2000 ..." Does the world still look like the early 2000s?
• zug_zug 4y ago
  It would be nice if it provided sources for any of these claims (e.g. the recession will be long) Economics is the biggest “bro science”
  • slavetosystem 4y ago
    • wrobbinz 4y ago
  • deleted 4y ago
    [deleted]
  • version_five 4y ago
    It's some kind of internal discussion deck of people giving ideas about what the future might hold based on their experience. It's almost certainly wrong, but in context it's almost certainly framed as advice and not a research project for publication.
• paulpauper 4y ago
  Just when the Nasdaq posts one of its biggest weeks in a long time. This is why I tend to tune this stuff out. The time to have made this presentation was 6+ months ago. Now too late. Still long, have not sold anything. Added more to my position last week.
  • eloff 4y ago
    Bear rallies are fierce. I do not think we've hit bottom yet. Notably this opinion is shared by Michael Burry, Jeremy Grantham, and Ray Dalio, among others.
    • paulpauper 4y ago
      bear markets tend to be much briefer than bull markets. Odds are if you try to time it you will end up selling too soon, buying back too late. How do you know if a bear market rally is the start of a new bull market? You don't, which is why I err on the side of not selling.
      • voisin 4y ago
        > bear markets tend to be much briefer than bull markets. Is this because governments are quick to drop rates and add QE but slow to do the opposite?
      • eloff 4y ago
        While this is true, bear markets usually last 12-18 months. We're just getting started. I think it's fine (but not optimal) not to sell if you're playing the long game. I'm all in cash and short positions right now. If my investing track record is anything to go by, that's a signal we've hit bottom. I'm betting otherwise, but what do I know.
  • newaccount2021 4y ago
  • onlyrealcuzzo 4y ago
    They're not telling people to sell their Nasdaq positions. They're telling their portfolio companies to shore up their balance sheets and extend their runways in case raising money at previous peak multiples continues to be difficult.
• maddynator 4y ago
  This is same deck that they had in 2008. That said, it’s still applicable
  • tyingq 4y ago
    Guessing you mean this one: https://www.dropbox.com/s/5db0iwb57zls7k7/RIP%20Good%20times.pdf?dl=0 https://www.dropbox.com/s/5db0iwb57zls7k7/RIP%20Good%20times... Similar "Recovery will be Long", "Survival of the Quickest", etc, themes.
  • ferdowsi 4y ago
    They predicted COVID in 2008?? Why didn't they warn anyone? (it isn't the same deck)
  • b_fiive 4y ago
    Just for others seeing this, the content of the deck is in fact new. I could totally see how the advice may be the same as a prior deck though.
• sshine 4y ago
  These slides feel surprisingly like a twitter-style blog sequence. . . Somehow, I feel like I’m being served ads. By a hedge fund. Walk away.
  • eloff 4y ago
    Technicality: Sequoia Capital is not a hedge fund. It's a private/venture capital firm.
    • rdxm 4y ago
• ThrowawayR2 4y ago
  Anyone have a link to the slides for the 4 breakout sessions mentioned at the end?
• deeptote 4y ago
  This is a return to business fundamentals; you no longer get to burn money and not deliver value. Cheap money has been a plague on tech. Even bucket shop crypto shitheads like Parcl were getting 10's of millions of dollars. The party is officially over for charlatans like them.
  • tyingq 4y ago
    The party was over in 2008 too, yet here we are.
    • missedthecue 4y ago
      It comes in cycles. I don't think anyone's saying that valuations are going to be low until the heat death of the universe.
    • ThrowawayR2 4y ago
      The 2008 recession lasted 18 months. On the other hand, the 2000 dot com bust technically resulted in only an 8 month recession but impacted tech hiring & spending for several years. Yeah, "here we are" but we may have to get through a very rough patch for a couple of years before getting to the next run up.
    • this_user 4y ago
      In 2008 monetary and fiscal policy was not constrained by high inflation. Not it is. Anything that depends on inflows of cheap new capital will suffer. That concerns unprofitable companies as well as assets that generate no cash flows like anything crypto.
      • deeptote 4y ago
        Crypto is a fucking scam and I will die on this hill.
        • version_five 4y ago
          Yes, it's a scam. I don't see a downturn making people more wise about this though. Crypto shills have a plausible reason for a decline in value, and otherwise it's not like anything is happening to get the scammed (often just the greedy) to increase their sophistication so they can understand it's a scam. This is one of the rare times I'd say it, but I think legislation is needed. Crypto is a so-far-legal outlet for various financial schemes (ponzi, pump-and-dump, securities fraud, etc) that all are covered under existing laws. We just need to extend the law to these new instruments so people can't legally con others just by saying "blockchain"
• Panzer04 4y ago
  Of course, they have a vested interest in companies believing that this is going to be both an impactful and severe downturn, given they are capital providers. I'd take this with the appropriate grains of salt.
  • bloodyplonker22 4y ago
    I'd take your comment with a much larger grain of salt. Be aware that all of Sequoia's existing VC investments are getting marked down drastically as well. Private company valuations don't just magically stay at above market levels when the public markets go down.
  • greatpostman 4y ago
    Sequoia is the top of the top, I don’t think they think like this
  • tyrfing 4y ago
    Disagree. They want to maximize the number of portfolio companies that survive in an environment where a significant fraction will not. This is a message that the money faucet has turned off, and that there will be pain - a timely breakdown of the ongoing macro effects. Note how "raise more money" is at the very bottom of suggested actions (pg35). > Time to get your team's commitment for the path forward or... politely ask them to lighten the lifeboat That's a gem.
• polote 4y ago
  I really struggle to believe all this thing. We have some inflation because of covid stimulus and Ukraine war, sure. So the fed is going to increase the rate, sure. And everyone is panicking at the same time so markets are falling. Poor people have less money because they need to pay for more expensive food but all the others still have money to invest, so I don't understand what it changes for vc ( except for the money they lost investing in crypto)
  • JCM9 4y ago
    The market has cycles where is goes from loving startups that burn cash with the aim of “growing big” and then figuring out the business to absolutely despising these models and flushing them out of the system. We’re at that pivot point now in the cycle. Startups with cash on hand and generating cash from operations will have some bumps in the road and probably take a big hit to their valuation, but with make it through. Startups still trying to figure out how they’re going to “make money” and without a ton of cash on hand to give them a long runway likely won’t make it through the next 18 months.
  • baybal2 4y ago
  • twayt 4y ago
    On the outside, VC should theoretically be about value investing in the best startups that have sound fundamentals and can grow. Practically, when the market is optimistic and everyone wants to invest in high growth startups, the game can become about "passing the bag". Invest in a company at a low valuation in their seed or series A and wait for a later stage investor to come in and be the one left holding the bag. Ideally, the startup generates enough hype to IPO and then all the investors have a successful exit. You can see this trajectory with startups like WeWork. When the market is not that optimistic anymore and people are in conservation mode, there's no one to pass the bag to anymore so VCs have to appropriately adjust which businesses they are going to invest in and the valuation. This is why hype, signaling and FOMO plays such an important role in fundraising. It is about whether the startup can generate enough promise to convince others that they're a high growth investment vehicle and not as much about whether they are profitable in the short term.
• deleted 4y ago
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• neilv 4y ago
  What date was this deck presented, and to whom?
  • reducesuffering 4y ago
    It says May 2022 in the slides.
• ctvo 4y ago
  This presentation is a great example of why slides are a horrible format. It's either too much or too little information per slide, context is lost if you're not in the room, and it allows escape hatches for handwaving at the charts without the ability to dive deeper or question the data.
  • guiambros 4y ago
    I agree with you re: why slides are a terrible way to convey information, but in this case each slide has a page-long summary with their talking points. If you care to read, it's almost like being in the room with them.
    • ctvo 4y ago
      My comment about too much vs. too little information includes the bullet points outlining what the presenter said. For example, here's the entire slide on Adaptability: "Adaptability" > 1. Must be adaptable. “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” It's too much information in some cases, that we assume will be verbally given (and then later members of the audience are expected to cross reference to dig deeper on), mixed with filler.
• motohagiography 4y ago
  Whenever I read these things I think I should have been a CEO, as I would be up against people whose main stakeholder/shareholder thinks they need to be advised to be authentic. I have the impression that the thing people live to regret most is fear, and while surivor bias is indeed probably a factor in that, I still believe this all only gets as bad as we let it. The economic limit is not on the availability of capital, it is on productive assets to put capital into. e.g. This isn't a water shortage, it's a bucket shortage. The maximalist view of returning the most to shareholders at the cost of becoming completely unmoored from reality is the direct consequence of a board installing a their rep at the helm to pump and dump the asset for them, and said rep writing a self justifying book moralizing their role in the experience afterwards. It's a critical and necessary role, but managers are not builders, they are extractors, and in a deluge, it's not the people with the promises who prevail, it's the ones building the rafts. Anyone who has thought seriously about what this downturn is and what is causing it also knows that there are technology solutions that can and will turn it around. No company with product market fit will ever go down for lack of capital, it needs you more than you need it. The most volatile and powerful force on earth is human desire, and beautifully, right now it is suppressed by a small cadre of people who think they can subdue, contain, and manage it. There has been no greater opportunity to disrupt and bring down mammoths since the the holocene era. The FAANGs growth period is behind them, which means they have peaked and they arguably now more defensive of their market share than they are innovative, which leaves a huge gap open. Nobody likes them anymore, to where blowing off their recruiters doesn't even merit a quip on personal slack channels. They're disco. Bets against the dominance and longevity of the platforms has become optimism for the human spirit, and that's a precarious place for them to be. Their whole strategy is to be short customer satisfaction, but without the regualtory monopoly holds that other predatory companies with terrible service have (credit agencies, HMOs, retail banks, cable and wireless operators, etc). The reason the platforms want moderation and censorship is because in exchange it consolidates their market share via regulatory backing under the pretext of safety, so no new competitor can come to market unless they can meet the moderation requirements. That's how much they know their product sucks, that they are willing to get into bed with government to mandate that nobody can use anything else. That's the opportunity. To invent ice cream in a market full of shit sandwiches. Pessimism is predicated on a zero sum model where you tell stories about a change in its balance, and given change is constant everywhere, all predictions of change in zero sum models are necessarily solipsisms. They aren't wrong it's just misleading and lame. (I do it myself a lot, optimism is a muscle that needs training.) Anyway, this is to say my own plan is to listen to people, build tools for them, ship products, and iterate. Our greatest risks come from when we take our eyes off the road to worry about the fuel gauge. That slide deck provoked me anyway. Kind of them to share it, as it's really amazing to see their insights, but also to know for sure that mine really are way better.
• jonahbenton 4y ago
  Not a finance person, just an adjacent technogist, but from having lived/worked through Black Monday, the 90s recession, the 2000 bust, the lean early oughts, and then the world ending 2008- for whatever reason this one feels like much-ado-about-nothing. If capital is not again issuing- not gushing, just issuing- in solid flows- by fall, I will be very surprised. Sure, some people were swimming in the deep water with no shorts on. But there are too many things to do, too many real opportunities, and too much real powder sitting around. We've all seen this all before, and know what happens next, and know how to get their faster. This is definitely not investment advice.
  • TwoNineFive 4y ago
    I'm not quite old enough to remember Black Monday, but I remember all the rest. I have the exact same feeling. The 20% correction is already done. When I saw that CryptoLand video last year I immediately through of the E-Trade monkey superbowl commercial. However, there is still risk that could make this current situation last longer and be more painful than I think we anticipate. If corporations start laying off workers and/or if the general public gets spooked enough to stop spending, that could actually induce a deeper recession than I think you and I are currently expecting. No doubt there is some short-term negative news coming out this summer. The question is what the sentiment will be like come early fall. I think that's when we will know how bad this is going to be. It might be over by then. Hopefully.