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What Sequoia Capital Was Thinking
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In fact, it’s difficult to say which has been a greater source of VC market discussion: The actual presentation or its leaking. A conventional wisdom has emerged whereby Sequoia itself sent the presentation to reporters (via proxies), although the reason varies from theorist to theorist. Some argue that Sequoia was giving its portfolio companies PR cover from impending layoffs. Others think Sequoia was trying to secure later-stage funding for its existing investments (“Get Sequoia companies now, while you can…”) while a third group believes that it was a brazen attempt to scare other VCs out of the market entirely. All of this seems vaguely amusing to Michael Goguen, a Sequoia managing partner who was among my panelists during this past Saturday’s MIT Venture Capital Conference. In a conversation that spanned both backstage and on-stage, Goguen said that Sequoia has no role in leaking the presentation, and that it was distressed when copies began appearing online. Goguen says that the entire presentation was the outgrowth of a Sequoia partners meeting with Eric Upin, the former Stanford University investment chief who joined Sequoia earlier this year to launch an asset management organization (think a smaller version of Makena Capital). Upin laid out such a startling economic forecast that Sequoia’s venture capitalists felt their portfolio companies needed to be informed ASAP. This was particularly true for companies that had experienced strong third quarters, and thus were unconvinced that the recession would have much immediate impact on their businesses. So Sequoia asked all of its portfolio company CEOs to attend the presentation, but it was impossible for many to get to Silicon Valley on such short notice. Those who couldn’t attend in person “attended” via technology provided by Sequoia portfolio companies like TokBox. It was apparently via some of these remote users, Goguen says, that the slideshow was initially downloaded and disbursed outside of the Sequoia ecosystem. I asked if he felt the overall experience had been a positive or negative, and Goguen believes it was mostly positive. Not only for Sequoia’s own portfolio companies – to whom to firm wanted to impart its message – but also for the startup market at large. Most of Goguen’s fellow panelists at the MIT conference agreed, although it’s possible they were just being nice given present company. After all, I had moderated a similar panel just a few weeks earlier, which did not include a Sequoia presence. The response of those VCs was far less complimentary… |
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December 8th, 2008 at 3:37 pm
So, people are saying it took the hiring of Upin to actually realize things are going to get tough and perhaps it would be a good idea to mention as much to their portfolio companies? Was everyone else literally living on an island prior to bringing him on or something?
December 8th, 2008 at 10:57 pm
[...] story behind the Sequoia “Graveyard Presentation”… Tagged: sequoia, vc, [...]
December 9th, 2008 at 3:11 pm
If you have ever had anyone from Sequoia on your board, you will know that, in the best of times, they are relentless on costs that are not clearly, absolutely, without question, warranted.
The Grave Yard presentation that I viewed, I suspect, was nothing more than a matter-of-fact-communication to those companies CEO’s relying on Sequoia’s wisdom as investors and, more important, as competent “value adding” board members. (Note: few of you VC actually add value; sorry. Advent adds value too.)
The benefit to any non SEquoia related company CEO that may have stumbled across the very valuable advice cannot be measured. Just do as instructed. Fast. Generally, everyone running any business would do well to find a way to access this wisdom and listen very carefully to everything suggested by Sequoia.
My problem was that, as CEO, I refused to listen while there was still time to act. Instead, I chose the enter the “death spiral”. (By the way, that’s a bad place you end up without having a clue as to how you got there.) I wish I had listened to the early warnings from one young Sequoia board member / deal maker (MM) in 1989. My deal began to crater & I was canned, justiably, 8.25.90. 1PM The most valuable busienss lesson was learned.
Quit whining & go cut costs.
December 11th, 2008 at 3:49 am
[...] that Sequoia’s venture capitalists felt their portfolio companies needed to be informed ASAP. peHUB has the full story. Tags: co:Apple, co:CBS, co:CNET, co:crain’s, co:Mozilla, co:MySpace, co:wordpress, co:yahoo, [...]