Sequoia Capital, read the way you read a tree. One ring a year since 1972, each set with the companies it planted that year.
Turn the section. Then scroll into it.
I
He didn’t put
his name
on the door.
Don Valentine sold chips at Fairchild and National Semiconductor before he backed anyone. When he set up on his own in 1972 he called the firm after a tree that outlives everyone who plants it.
“It conveyed the longevity and strength of the tallest of redwoods.”
Sequoia, remembering Don Valentine, 2019
II
Whocares?
Valentine’s test for every founder. Could they give a thoughtful answer about why their quest mattered, and to whom?
Sequoia, remembering Don Valentine, 2019
Into 1972.
2022
47 companies
Exe.Eyes Labs
Sequoia Capital Rings
1972
Growing the forest: one ring a year.
GPU…
Menlo Park, 1972
Move to look up
$3,000,000
The first fund, 1974: three million dollars, formed with the Capital Group. It planted two seeds. Atari in 1975. Apple in 1978.
Every tree from here on is a company Sequoia lists on its own website, planted in the year Sequoia says it partnered.
One tree for each company. Height is the years since Sequoia partnered. Gold at the foot: it listed. Pale: it was acquired.
The whole of the 1970s planted two trees. 2022 alone planted forty-seven. Venture grew up.
Sequoia
Fifty-four years.
Four hundred and
thirty-two trees.
Point at any tree for its name. Open it for its story, in Sequoia’s own words.
One ring
a year.
Apple
Ring widths here are drawn, not measured. The marked years are Sequoia’s.
IIIHow a fund works
Money comes in through the roots: limited partners commit it for years. Sequoia’s are mostly nonprofits and schools. The partners draw it up as they find companies, back the ones that grow, and send it back down when they list or are sold.
“For Sequoia, the 10-year fund cycle has become obsolete.”
Sequoia, announcing the Sequoia Capital Fund, 2021
IVThe J-curve
A fund’s money goes out before it comes back. Fees and calls come first; companies take years to grow; the cash returns late, if it returns. Year by year, the fund’s running total makes a J.
An illustrative ten-year fund. Not Sequoia’s figures.
VThe power law
6%of investments made about 60% of the returns.
Horsley Bridge data, funds backed since 1985, via Andreessen Horowitz, 2015
–
Each planting is an illustrative draw from a power law. Area is what a seed returned.
VIA company in rings
Each round adds a ring of new owners outside the old ones. The founders’ share of the trunk shrinks; the trunk itself grows far faster.
Illustrative rounds, stakes and values. Area is ownership.
VIIFirst meetingsA core, 1972 to 2026
As the story is told, that was Don Valentine to Regis McKenna after meeting a long-haired Steve Jobs in cut-offs and sandals. He sent Jobs on to Mike Markkula, Apple’s first major investor. In 1978 Sequoia invested $150,000.
Wilf Corrigan of LSI Logic rang Valentine and told him to back a young engineer named Jensen Huang. By Huang’s own telling the pitch went badly. Sequoia partnered with NVIDIA that year.
Sequoia and Kleiner Perkins led the round together; Michael Moritz and John Doerr joined the board. It was the first press release Google ever put out.
That was the upside in Sequoia’s investment memo. YouTube now serves five billion a day. Google bought it the following year.
Jim Goetz led an $8 million Series A; Sequoia was the only venture investor. Three years later Facebook paid $19 billion.
Sequoia’s partners came away amazed by how well Tony Xu understood the logistics of restaurant service. DoorDash listed in December 2020.
VIIIThe pitchTen headings
Sequoia publishes how it wants to be pitched: ten headings, in this order.
01
“Define your company in a single declarative sentence.”
Sequoia, “Writing a business plan”
IXGoing publicAirbnb, Inc., S-1, 16 November 2020
A company that lists first files an S-1 with the SEC and tells the world everything: the business, the risks, the numbers, who owns what. The draft that goes out on the roadshow carries a red legend down its cover, so bankers call it the red herring. This one is Airbnb’s, filed the month before it listed.
XThe bookAn illustrative offering of 20 million shares
Your price$64
Drag across the book to set the price
Every bar is demand: shares wanted, at a price, by one kind of investor. Price low and the book is covered many times over, the shares jump on the first day, and the company leaves money on the table. Price high and the book thins.
XIThe bellFirst prints, as reported
SnowflakeSeptember 2020
$120$245
DoorDash9 December 2020
$102$182
Airbnb10 December 2020
$68$146
Google19 August 2004, no book: a Dutch auction
$85
Priced, then opened. All four were Sequoia companies.
XIIBankers, and the saleAs a matter of record
Banks underwrite a listing and advise both sides of a sale. When a deal closed they announced it in the papers with a tombstone: a notice in plain type, set as a matter of record only.
XIIIPatient capital2021
“Investments will no longer have ‘expiration dates.’”
Sequoia, announcing the Sequoia Capital Fund, 26 October 2021
A fund that must return its money in ten years has to sell its trees at ten. In 2021 Sequoia rebuilt itself around one permanent fund, so it can keep holding the companies that keep growing.
Every ring is a year someone kept going.
Exe.Eyes Labs
A forest grown from 432 real companies, a fund’s mechanics drawn in wood, an order book you price yourself. In a browser. Imagine what we would build for yours.
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