 We love slush. We are so happy to be back here this year and we love the energy and the music and I am particularly honored to be here today with my partner dog and Introducing Doug in two minutes is an impossible task, but I will do my very best Doug started at Sequoia 30 years ago He was leader of the firm from 1996 until this year During this period Sequoia went from a California based and quite California focused early stage firm To what it is today a firm that's active in China in India in Europe We opened the office here a couple of years ago We invest in Latin America and we invest across stages today from seed series a growth public companies Doug also worked with some legendary companies and incredible founders Just to name a few service now I think even in this market. It's I don't think I checked even in this market. It's an 85 billion dollar publicly listed company New bank. It's the largest publicly listed new age fintech out there and Wiz which arguably is the fastest growing enterprise software company out there So that is quite an impressive list of founders and we are really excited to learn from Doug's experience today Doug let's go straight into it Slush this year is different from last year. It's a period of uncertainty The NASDAQ dropped 30% since the beginning of the year were energy crisis inflation How do you feel about today and is this period similar or different from 2001 and from 2008? So the first thing I want to say is thank you for being here at my age It's really an honor to be here in front of so many people that want to change the whole world. So I want to make sure You understand that this is a very genuine sentiment of my part We live in a moment in time think about the privilege of being front of so many people that do that So I'm a really heartfelt. Thank you to all of you Thank you so Unfortunately, and I'll give you the good news the situation here today I think is more difficult and more challenging than either 08 which was really a protective financial services crisis or 2000 which has a protected technology crisis Here we have a global crisis. We have interest rates around the world increasing consumers Globally are starting to run out of money. We have an energy crisis and then we have all the issues or geopolitical challenges and My forecast is that we're not going to get away with this very quickly If you turn back to the 70s there was a malaise of 16 years Even if you go back to 2000 a number of public companies didn't recover for 10 years So I think we have to be ready for a prolonged time Where we're going to find consumers running out of money? Large companies and most of the economies that we all work and live in our consumer driven economies in the US It's 70% consumer consumers running out of money demand decreasing Tech companies budgets being cut and so I think we should be prepared for a longer Period of challenges that we have faced in the past. How long who really knows but it will be not be 12 months It's not we're gonna hope for a 2024 recovery. That would be my forecast Doug we have a lot of founders in the audience What kind of companies do you think can win in this environment? a few things Companies that solve real problems companies that can justify a Hard ROI period not soft productivity gains productivity gains as a soft ROI But where you go for someone to be the controlling a budget Let me help you save real money or a green gene Let me help you make some real money and do so with a true mathematical argument Those and then companies that have strong leaders and what's a strong leaders a strong leader is somebody Not only that as a vision and can execute in good culture But in this market someone that can communicate clearly with their employee base someone that doesn't bullshit their employee base because at this time you want to bring your employees in and Ask them and tell them here's the challenges and by the way Google Facebook meta are laying off so it's not that we're an environment everybody can run away and just be honest with them and Communicate here's the challenges, but more importantly. Here's the plan because you got to get people to buy in And it's got to be a clear plan and then get everybody to all hands and said we're gonna go dominate Those are the kinds of companies in my opinions In my opinion that are gonna first survive and by the way survival in this market is half of the battle and Then Excel Let's talk about that a little bit I'm sure that you have a lot of advice for founders. You shared some of it already Do you have specific advice for very early stage founders? Let's say for seed stage founders or growth stage founders? Or not so blanket so the younger you go in a company The more immune you are to economic conditions think of it at the other extreme and the way we solve all math problems We look at the extremes if you're a public company You really are Targeted your pig to the public market environment if you're a seed stage company and you're a year and a half from product You know and revenue and maybe two years on profitability and seven years from exit You have nothing to do with with with the public market and so realize where you are in the continuum One but to me the more important segmentation is you have to figure out if you're weak or strong and The lesson for me for two weight and we always learn from you You have to realize we learn from you all the time Was if you can afford it do not take your foot off the product Accelerator even you're in tough times because tough times are going to be followed by good times And if you've had the ability to invest in product Which is really the core of the company and sales being on the outer rim You're going to come out with a much better offering when the time is right And so my advice is in product if you can afford it continue to invest in sales Don't go far out on the payback curve It's not time because your competitors are dying so there's no reason to push it if your payback curve was a year Now is the wrong time to go get customers with a two-year payback So product first revenue second and then if you're really really weak You did the best you can to hold on to product marginal improvement But if you're strong Attack on product attack on product and find the right balance for sales and revenues It sounds very straightforward, but I wonder dog How many founders really realize in the moment if they're in a position of strength or in a position of weakness? Well, look, it's not that tough. The only thing that's tough is Product market fit. It's the genius level you bring in product market fit each one is different Everything else I mentioned is mechanical mere mortals can figure that out. It's what we experience Business partners notice. I didn't use the word investor experiences partners in experience business partners can help you solve and Essentially what you're really doing is you're doing a SWAT analysis strength weaknesses challenges and Opportunities and you look at the market opportunity to figure out where you are you know in most cases your competitors are going to die and you're dealing with a stodgy public companies that are not going to be innovating and Just do a clear SWAT analysis figure out where you are because every strategy you do and every tactic your employee Has to do not from the inside out, but from the outside in it's a response to the market a large So do a clear no holds bar analysis with your trusted business partners Figure out where you are and then take action really not more much more complicated than that like everything else in life The easiest solution is probably the best solution We talk a lot at sequela about crucible moments these moments that can really change the course of a company and As an industry perhaps we're going through a crucible moment now When you make all the decisions you just talked about are there any particular Is there any particular advice for founders from mentality perspective? Is there anything that you've learned from the founders that you work with that really helped them or that you use an as an example So I'm going to try not to be self-serving and really be helpful to you think of what happened in the last two or three years Whatever you did was rewarded by some investor because of the plethora of capital You were rewarded no matter what you made a shit decision a crap decision. You got money You made a good decision. You got money, which is a lousy way for you to learn your craft All that is gone the healthy balance between Founder and business partner is now in place and What you're going to learn now is The best lessons you're ever gonna learn even in our business Imagine an investing associate that joined us two years ago everything the investors went up into the right They actually thought that you were they were doing, but what a terrific training time And so I would view this as a cleansing period. I would view this an incredible opportunity This is a crucible moment, but not in the way you think I think this is a crucible moment for you to undo some of the bad habits and Become business people true business people to invest your precious capital In the things that really have paid back and let's face it if you have 10 million dollars in a bank and can do one thing Versus 45 million dollars that can do three things. Where do you think the better decision is going to be made? What do you think the better decisions be made when you are? Loose or when you're desperate and you really have to focus so this is a crucible moment for you But in my way of viewing it It is a terrific crucible moment to shed some of the things you've heard before let me remind you I have to be a unicorn God forbid if I don't raise money at a high price and the morale of the employees Oh, that's gone Communicate your employees if you need the capital don't think about oh, it's a hundred million dollar less The only question you should ask yourself is this how do we make our company? Not my company our company the strongest possible company three to five years from now That is the only question that matters when we hold your shares and we figure out what to do now you're public We don't ask ourselves my look out the stock went up ten points Maybe we should sell or distribute the only question we ask ourselves is what can this company be three or five years from now? Because every wonderful company has always has the crazy buyout offer The only that matters is the future We all have the possibility of playing long term of looking the long term Which is really what our business is all about? Crucible moment to take advantage of the situation Not so much to survive but to figure out how to get stronger in a world where fewer companies are getting started The major companies of layoffs you have a chance to upgrade you have a chance to get stronger if you play your cards, right? It almost sounds like you're saying that the last few years were less good than today to start a company Like everything else you know what one of the things I learned in life is the truth is often the opposite of what you think The last two or three years seemed like wonderful boon time But look Talon was diluted many look alike companies got invested a whole bunch of Investors came in that absolutely had no clue what they were doing think about it now fewer competition fewer competitive companies more talent The investors who were weak are frozen. This is a much healthier time for you and us So I would view this as an amazing time the two times I love most are boon times and times like these boon times you exit you sell Terrific time like this is you invest it can be a good time to buy and sell at the same time This is a time to buy to invest to develop great habits And so out of this gloom that's in the air I would encourage you shed all that gloom and really be aggressive and really think Right now in terms how to dominate you have a chance to and dominate my partner Ravi reminded me 10 minutes ago the Aitin Center line It is tough to pass more than one car in the sunny day when you're racing But you can pass 10 cars on a rainy day think about that. I like the the positive The positive attitude and I'll build on that in 2001 sequa invested in two companies that are generational Google and PayPal of course We also invested in many many companies that are no longer here Was it obvious from the early days that PayPal and a Google would create something special would survive that period would even thrive in that Period is there anything those founders did that our founders and the audience can learn from you know very interesting Google a lay market entrant and there's a great line By a Google investor who I won't name that three years after the investment said We've never paid so much for so little Google was a company that was a walk in the woods There are many roads to heaven as my partner Shalender in India says very philosophical in India There's no one way and Google is a company that took a long time as many of your companies will And so that was not as obvious PayPal was more interesting because it was a Conglomeration of an incredible amount of talent. In fact, if you look at all the people that left PayPal They started many many companies and so PayPal was more obvious there the issue of PayPal was the gun to the head that eBay said being the most of the revenues from PayPal where from eBay and the fact that We wanted to hold on for a long time and there was one of the situations not unlike YouTube that was sold 353 days After we made the investment where the offer seemed so extravagant Think of YouTube think of PayPal think of Instagram sold for a billion dollars which actually saved Facebook and so Many lessons there the lessons there is great companies have started during dark times Don't accept what looks to be a terrific offer I gave you the question you want to ask a few years from now and there are many roads to heaven in a case of PayPal and YouTube more of a direct line both In a case of YouTube lay market entrance in a case of PayPal early market entrance And in the case of YouTube a bit of a walk in the woods So there is no singular way to get to heaven You just have to find your way and they have the conviction to stick with it. I'll ask you an unfair question People talk often about those cases where a founder and a team had a great offer on the table And it was really hard to say no But they said no and then went on to build even bigger companies that are became Legendary I think service now. Maybe it's an example. I'm not this first time founders a second time for regardless. Yes There are also stories that don't get told as often where founders reject a great offer and then don't find success I know it's an unfair question because I'm asking you to generalize How do you know? Look there are many investors We're not that smart But we you have to assume through real logic that after 50 years We've learned something and what we've learned is when the flywheel starts going It surprises us With you as a founder the first time you see it you go. Oh my god. I can be worth X In our case we haven't gotten too many of those wrong mostly because really pattern recognition And experience what we often recommend to founders and that founders in a series a they get bribe by new investors You haven't done anything you've written three lines of code How about if you take 10 million off the table and you get us as investor? That's called bribery. It should be legal People should go to jail for that But if you're a founder that's built a business you've got revenue I would suggest the following take 10% of you holding off the table 20% max Take the pressure off which really then De-risks you maybe your partner in life and so on and gives you The courage and maybe even the business alignment to go for to go for it for the long term I think the answer to your question is Make sure you align yourself to the business partner and I want to say a word about that I'm so tired of hearing founders saying That I got a term sheet Whoa, I got a term sheet to me and I'm gonna speak out of school is like saying I went to a bar and The first person male or female depending on you are spoke to me. I got married. That's what it sounds to me like Think about how you architect your product most of your technical you spend time Architecting your product. Why don't you architect your cap table exactly the same way and yet that doesn't occur to you We hear I got a term sheet. Oh, he was first. So what? Be very careful and who you choose as your business partners Do careful reference checks not only even the companies that work We all have companies that work But ask give me a list of three companies that didn't work show me your character is when a Seal was struggling. What did you do? And those are the great references you want to ask out of your business financial partners How about mistakes are there really obvious mistakes that founders should avoid in this part of the cycle Yeah, don't get caught up in a mania the next round. Oh, I've got to do last round's post or the morale of my company Be pragmatic play long-term if you've got to raise 50 million dollars in your last round was 500 and this round that's 350 first of all the 500 has what is called weighted average Dilution that you're not going to pay very much and then explain to your employees that you're way better off with another 50 million at a reduced price your 49 a will come down Your next set of employees are gonna have slightly lower price share, which is an advantage and And go for it explain to them that now you have the firepower to win in the long term To me, that's the greatest error. I'm seeing right now trying to protect some artificial last rounds price for all the bad reasons one of the reasons is that there has been so much press around startups and Back in my day, I'm joking, but let's say five six seven years ago in Europe At least startups did not use to announce their valuations when they raised money and today it became quite common What's your general advice on? Startups relationships with the press should they try to be front and center build a brand should they stay stealth for as long as possible Startups at two advantage stealth and speed Why would you ever give up any one of them? So my advice as a board member is shut the hell up unless there's a reason To be loud and what are the reasons customers? I don't think a customer cares whether you raise money at 350 650 or a 50 Recruiting or fundraising I don't think a press release helps in recruiting either it is the sales skills of CEO of a founder and so most cases when you're small and weak why announce there's so many Announcement week just lay low and be like the restaurant that doesn't post their phone number and yet does a line out the door There are times you have revenue have 42 sales people you want a little marketing air cover That's when it's time to speak you are here before the IPO. You want to create a buzz? That's the time to speak but at most time speaking only provides you with cocktail Kind of a material so you can show your friends. How are you doing? That's a bunch of crap resist that notion One of the things that many of us appreciate about you is that you're very direct and speaking about the press Sequoia has been in the press a lot for the past couple of weeks What should we have done differently? So first of all, I'm not going to mention any acronyms And you must appreciate that we don't know what's going to happen But I'll forecast for you regulators investigators are going to come so I'm not going to comment there I'm going to make general comments We are in the dream business with you Would you like us to Lose that trait now I can tell you that after the last week for the next three to six months That we're going to dream a little less But like having a child you forget the pain of having that child three months later a year later We want to be in the dream business with you. I can tell you we've done careful due diligence But what you see at the end of the quarter in a due diligence statement Doesn't reflect what someone may have done in the middle of the quarter. We've looked at it there's nothing much we could have done any differently and We do not want to lose our virginity our true belief to line ourselves with you and to dream with you I think we lose that and we're out of business Thank you for sharing that dog any Parting words of wisdom for our founders in the audience and the general audience Don't listen to all the stuff you read You have a great opportunity in front of you if you play your cards, right? You have an opportunity to pass ten cars Do not waste a good recession that would be my parting advice Doug we love hearing from you. We love having you in Europe. Thank you so much for coming from California to Helsinki and I want to thank everyone in the audience And we love meeting founders so much that we organize the an open Coffee get together with all the sequela partners who are here. I think it's six of us So, please if you're free at 130 join us I tweeted the details, but we're going to be in the first floor lobby and just ask us if you can find then We're excited to say hello to you in a bit. Thank you and thank you for listening. Thank you very much. Thank you Thank you, Doug