Roelof Botha - Sequoia’s Crucible Moment

Principles & Lessons:

• Longer investment horizons can unlock greater value. Roelof points to Square's IPO journey, in which “it took five years to get from zero to three [billion dollars],” but the majority of returns happened after going public. He adds that Sequoia’s shift to “a single open-ended permanent structure,” the Sequoia Fund, ensures they can hold onto key investments longer instead of distributing shares prematurely, which he believes can produce better outcomes for entrepreneurs and LPs.
• Founders often benefit more from patient partners than just quick capital. While “there’s been incredible amounts of transactional capital,” Roelof stresses that “part of the beauty of competition is it makes us innovate.” He adds that picking the right partner is a “recruiting decision,” not simply about funding, because a strong board member or investor can be “the trusted business partner” as the company tackles “crucible moments” over the long term.
• Compounding returns require active decisions to hold rather than distribute. Roelof cites the example of Square, where Sequoia’s “IPO price was $9,” but the firm eventually distributed “between $80 and $90 about three to four years later,” achieving a 90x instead of a 9x return. He highlights that such results depend on the “judgment on holding onto some of these very good businesses for longer,” not defaulting to selling shares once a company lists publicly.
• Mission-driven founders persevere, while ‘mercenary’ founders tend to waver. When asked about common deal-breakers, Roelof focuses on “whether the founders come across as mercenary rather than missionary.” He sees entrepreneurs who have “encountered a problem that they sincerely are passionate about solving” as better equipped to “persist in the face of adversity” and build something enduring.
• Openness and ecosystem thinking can encourage broader innovation. Reflecting on Unity and the “metaverse,” Roelof distinguishes closed systems from open ones. He believes closed platforms risk stifling ideas because “monopolies don’t need to innovate,” while an open ecosystem invites multiple contributors. He notes that Unity’s real-time 3D approach works on “iOS, Android, macOS, Windows, PlayStation,” and beyond, enabling creators to “take advantage of the creativity of everybody out there.”
• Great boards spot ‘crucible moments’ that force pivotal decisions. Roelof describes how companies might face “one to two crucible moment decisions a year” and the challenge is “identifying that it is actually a crucible moment.” He cites MongoDB’s pivot to a cloud product (Atlas) as an example where the board helped highlight a pivotal shift in business strategy, which then demanded rethinking sales incentives and product priorities.
• Clarity and conviction matter more than thoroughness for investment memos. Referring to the best memos he’s seen at Sequoia, Roelof says, “You need imagination, but the most important thing is curiosity.” He also emphasizes that truly strong memos must “explain complicated topics” in a way anyone can understand, and “take a stand” rather than just listing pros and cons.
• Sustained success requires institutional adaptability and collaboration. Roelof highlights Don Valentine’s decision to name the firm ‘Sequoia’ rather than ‘Valentine Capital,’ aiming to create a legacy that outlasts any single partner. He says, “We want to build a partnership in perpetuity” with partners acting as stewards, always innovating. He points out that “the world around us is changing, so we better adapt very quickly” to ensure that founders, limited partners, and the firm continue to thrive together.

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