5 ms·

Sequoia Capital’s 56 Slide Presentation Of Doom

79 points by jasonlbaptiste 18y ago

alaskamiller 18y ago
How many souls of Sequoia interns went into this?!?!?
- Sam_Odio 18y ago
  I'm pretty sure sequoia doesn't have internships. Or, at least, they're not easy to get.
  - fallentimes 18y ago
    Agreed. But they have lots of secretaries. Lots of hot, smiling secretaries. I need to schedule another appointment soon.
    - stcredzero 18y ago
      Having lots of young, nubile women around is a primitive Homo sapiens dominance signal. Gartner group pulls out this sort of stuff for their junkets.
      - fallentimes 18y ago
        Tongue in cheek.
        nostrademons 18y ago
        Your cheek or hers? ;-)
jedc 18y ago
That's a great summary of the macroeconomics that led to the current situation. I'm a bit surprised Sequoia went into that much detail, but they've got some great advice for their CEO's at the end. (Get cash-flow positive!!)
JoelSutherland 18y ago
I find it fascinating that just a couple of slides have data for this year. Should this financial mess be a "surprise" at all? Just the chart of home values should have been a clue: http://www.1stmillionat33.com/posts/06-09-12/house_his.gif http://www.1stmillionat33.com/posts/06-09-12/house_his.gif
- SwellJoe 18y ago
  While that graph is interesting (and I've seen it referenced a number of times in a number of places), I've always found the scale misleading. Almost the whole bottom of it (0-50) is chopped off...so what looks like a logarithmic leap, is really merely doubling. While doubling is dramatic, and certainly a sign of something amiss (either tremendous inflation, or something else that is distorting value), it's not the astronomical rise the chart feels like when you first see it.
apstuff 18y ago
Doom? Looks more like a countdown to something. While most major corrections since 1929 have occurred on 4/1, 7/1 or 10/1, this one dropped out on 10/09/08. Hmmm, let me guess, the Dow's bottom is at 7,654. We are currently at T minus 8 and holding . . . our breath.
rgrieselhuber 18y ago
I find it difficult to believe that these guys didn't see this coming at least a year ago; their own data from a year ago certainly points in that direction. So, why are they presenting the doom deck now? The VCs I have met were talking about a serious downturn over 16 months ago and I've known for at least 4 years that the real estate bubble was going to cause a lot of problems. I think lots of people saw this coming. So, why did we have to get to this point before getting such sober advice? Seems odd to me.
- alexandros 18y ago
  have you read the black swan? graphs can be made to explain everything. after the fact.
  - alecco 18y ago
    You don't need to read Taleb to know that. "Lies, damn lies, and statistics" :) About Taleb, "when all you know is the hammer..." He is no renowned economist. MBA and Phd. in management. Oh, and he teaches risk. Try Roubini, it's even more dramatic.
- Retric 18y ago
  There is an old quote that the market can stay irrational far longer than you can stay solvent. I keep hearing "Doom" but for the most part the stock market seems to be at a fairly rational level right now. Most stable companies P/E is back around 10, and companies in unstable market's or those that lack real profits are taking a beating. As an example the P/E on DryShip's is has a P/E of 1 right now but it's a risky market and it's unlikely they will be anywhere near as profitable this year as last year. It's still I reasonable long term buy but who knows. On the other hand Pepsi and IBM are both extremely stable both on the business side and in their stock price.
- josefresco 18y ago
  Monday morning quarterback always knows what's best. They simply did not know (no matter what they say now) and were too busy cashing out at the height of the boom. Now, they want to buy up assets and it benefits them to push valuations lower.
biohacker42 18y ago
Anyone here lived through the Japan depression care to share their experiences with us?
- hugh 18y ago
  It was terrible. People were forced to eat raw fish for sustenance. They couldn't get full-sized electronics, so they were forced to make tiny ones. Unable to afford proper entertainment, folks would make do by taking turns to get up and sing songs.
  - ojbyrne 18y ago
    And they couldn't find beer or proper mix for their drinks. So they drank scotch.
anamax 18y ago
Supposedly one of (Sequoia partner) Doug Lenone's slides was "If the product is ready, cut the number of engineers." That’s going to make it tough for to get and keep engineers. When hiring, there will be increased resistance to four year vesting and one year cliffs, especially when a product is close to "ready". The engineers that they have will be more likely to leave a 3/4 to "ready"product for another company/product that is only 1/4 to "ready". “Cut engineers when ready" makes sense only for companies only have one product and it’s "done" at some point. Companies that work that way shouldn’t employ engineers - they should contract out.
- liuliu 18y ago
  I think that is necessary to cut down engineers. Let's face the truth, not all engineers you hire is so talent that you can never find another one on the market. Cut down the salaries you pay to the not-so-talented engineers or let them go.
  - anamax 18y ago
    I'm not saying that they won't be able to hire engineers. I'm saying that it's going to be more expensive to do so. Sequoia has increased the perceived risk of being an engineer for at their companies and arguably most tech startups. When the risk of an activity increases, either the reward goes up and/or the activity goes down.
    - skmurphy 18y ago
      They have also decreased the demand, so salaries and/or total compensation may go down.
      - anamax 18y ago
        > They have also decreased the demand, so salaries and/or total compensation may go down. They've decreased demand only if they've reduced the number of products and/or reduced the amount of engineering required for those products. Since they gave folks an incentive to leave near the end of a product, they've probably increased the amount of engineering for their products.
sunilbhargava 18y ago
These slides seem to suggest that the exits will be smaller for while. They are missing one critical slide - one that tells entrepreneurs to look at their cap table and terms and if they don't make sense at a small exit, get recapitalized or go home (take off the suit, put on some jeans and apply for the next YC session)
- prakash 18y ago
  good point :-)
josefresco 18y ago
This is one of those threads that just never dies.

How many souls of Sequoia interns went into this?!?!?

Sam_Odio 18y ago
I'm pretty sure sequoia doesn't have internships. Or, at least, they're not easy to get.
- fallentimes 18y ago
  Agreed. But they have lots of secretaries. Lots of hot, smiling secretaries. I need to schedule another appointment soon.
  - stcredzero 18y ago
    Having lots of young, nubile women around is a primitive Homo sapiens dominance signal. Gartner group pulls out this sort of stuff for their junkets.
    - fallentimes 18y ago
      Tongue in cheek.
      - nostrademons 18y ago
        Your cheek or hers? ;-)

jedc 18y ago

That's a great summary of the macroeconomics that led to the current situation. I'm a bit surprised Sequoia went into that much detail, but they've got some great advice for their CEO's at the end. (Get cash-flow positive!!)

JoelSutherland 18y ago

I find it fascinating that just a couple of slides have data for this year. Should this financial mess be a "surprise" at all? Just the chart of home values should have been a clue: http://www.1stmillionat33.com/posts/06-09-12/house_his.gif http://www.1stmillionat33.com/posts/06-09-12/house_his.gif

SwellJoe 18y ago
While that graph is interesting (and I've seen it referenced a number of times in a number of places), I've always found the scale misleading. Almost the whole bottom of it (0-50) is chopped off...so what looks like a logarithmic leap, is really merely doubling. While doubling is dramatic, and certainly a sign of something amiss (either tremendous inflation, or something else that is distorting value), it's not the astronomical rise the chart feels like when you first see it.

apstuff 18y ago

Doom? Looks more like a countdown to something. While most major corrections since 1929 have occurred on 4/1, 7/1 or 10/1, this one dropped out on 10/09/08. Hmmm, let me guess, the Dow's bottom is at 7,654. We are currently at T minus 8 and holding . . . our breath.

rgrieselhuber 18y ago

I find it difficult to believe that these guys didn't see this coming at least a year ago; their own data from a year ago certainly points in that direction. So, why are they presenting the doom deck now? The VCs I have met were talking about a serious downturn over 16 months ago and I've known for at least 4 years that the real estate bubble was going to cause a lot of problems. I think lots of people saw this coming. So, why did we have to get to this point before getting such sober advice? Seems odd to me.

alexandros 18y ago
have you read the black swan? graphs can be made to explain everything. after the fact.
- alecco 18y ago
  You don't need to read Taleb to know that. "Lies, damn lies, and statistics" :) About Taleb, "when all you know is the hammer..." He is no renowned economist. MBA and Phd. in management. Oh, and he teaches risk. Try Roubini, it's even more dramatic.
Retric 18y ago
There is an old quote that the market can stay irrational far longer than you can stay solvent. I keep hearing "Doom" but for the most part the stock market seems to be at a fairly rational level right now. Most stable companies P/E is back around 10, and companies in unstable market's or those that lack real profits are taking a beating. As an example the P/E on DryShip's is has a P/E of 1 right now but it's a risky market and it's unlikely they will be anywhere near as profitable this year as last year. It's still I reasonable long term buy but who knows. On the other hand Pepsi and IBM are both extremely stable both on the business side and in their stock price.
josefresco 18y ago
Monday morning quarterback always knows what's best. They simply did not know (no matter what they say now) and were too busy cashing out at the height of the boom. Now, they want to buy up assets and it benefits them to push valuations lower.

biohacker42 18y ago

Anyone here lived through the Japan depression care to share their experiences with us?

hugh 18y ago
It was terrible. People were forced to eat raw fish for sustenance. They couldn't get full-sized electronics, so they were forced to make tiny ones. Unable to afford proper entertainment, folks would make do by taking turns to get up and sing songs.
- ojbyrne 18y ago
  And they couldn't find beer or proper mix for their drinks. So they drank scotch.

anamax 18y ago

Supposedly one of (Sequoia partner) Doug Lenone's slides was "If the product is ready, cut the number of engineers." That’s going to make it tough for to get and keep engineers. When hiring, there will be increased resistance to four year vesting and one year cliffs, especially when a product is close to "ready". The engineers that they have will be more likely to leave a 3/4 to "ready"product for another company/product that is only 1/4 to "ready". “Cut engineers when ready" makes sense only for companies only have one product and it’s "done" at some point. Companies that work that way shouldn’t employ engineers - they should contract out.

liuliu 18y ago
I think that is necessary to cut down engineers. Let's face the truth, not all engineers you hire is so talent that you can never find another one on the market. Cut down the salaries you pay to the not-so-talented engineers or let them go.
- anamax 18y ago
  I'm not saying that they won't be able to hire engineers. I'm saying that it's going to be more expensive to do so. Sequoia has increased the perceived risk of being an engineer for at their companies and arguably most tech startups. When the risk of an activity increases, either the reward goes up and/or the activity goes down.
  - skmurphy 18y ago
    They have also decreased the demand, so salaries and/or total compensation may go down.
    - anamax 18y ago
      > They have also decreased the demand, so salaries and/or total compensation may go down. They've decreased demand only if they've reduced the number of products and/or reduced the amount of engineering required for those products. Since they gave folks an incentive to leave near the end of a product, they've probably increased the amount of engineering for their products.

sunilbhargava 18y ago

These slides seem to suggest that the exits will be smaller for while. They are missing one critical slide - one that tells entrepreneurs to look at their cap table and terms and if they don't make sense at a small exit, get recapitalized or go home (take off the suit, put on some jeans and apply for the next YC session)

prakash 18y ago
good point :-)

josefresco 18y ago

This is one of those threads that just never dies.