Inside Sequoia's Investment Committee | How the SpaceX & Citadel Deals Went Down | Julien Bek

Everyone thinks that we're just waiting for the phone to ring for the next Anthropic to call us to invest. That's completely false. Everyone at Sequoia is a hunter. If you look at founders you like versus founders who make money as a 2x2 Matrix, your job is to figure out in which part of the quadrant we make money.

Now, I am so excited for the show today because I get to welcome one of my oldest friends. Yeah, he's a partner at Sequoia. He's also an incredible human being. This episode is a behind-the-scenes glimpse into what makes Sequoia so special: how they find great companies, how they win them, how they pick them.

This is Sequoia like you've never seen Sequoia before.

I thinkright now, if you're going to invest in a new Neo Lab, you're basically investing, you know, in the quora in the Stumble Upon when Facebook X came about. Credits to Sean when he brought in the SpaceX investment.

We vote on companies. I think someone voted a 1. The best investments in all the funds are always the companies where the sponsor had the highest conviction. We are only as good as our next investment.

Ready to go?

Dude, we have known each other. I was trying to think. I think it's been like 8, 10 years.

Almost 10 years, yeah. We were young back then, and now we're getting like.

I remember.

Aging.

Yeah, you were in Accel, and you were in their very nice offices. And I was just joined atomico, I think. And we were both like very young, and we were like, wow, it worked.

But I want to start because I think a lot of people will hear you now and think, wow, Sequoia partner, and wow. But there's something in particular about the relationship that you have with your parents and how you look after your father, which I think is an embodiment of what a great human you are.

So can you just tell me a little bit about that before we dive into all the intellectual nerdy shit? Because I want people to know you a little bit first.

Yeah, look, my dad suffers from a condition, a neurological condition that showed up in my early 20s. I have no siblings, so when it happened, you know, I started looking after him. He's very unusual, my dad. He comes from a family of four, grew up in rural France, stopped school when he was 13, and, you know, he did that to put money on the table for the rest of his family.

I saw him care for his parents when they were aging, and I just looked up to that. He's quite unusual. He's an astrologer. Yeah, not an astronomer, astrologer. So I always saw him kind of take a different path.

And when his disease started showing up, yeah, I was there for him. And I know you've done the same for your parents, so.

Do you know, I specialize in binary statements that get me, you know, either loved or hated. But I think one of the biggest pieces of bullshit advice is you've got to do it for you. Everyone who says that, I think, is just talking out their ass.

I do most of the things for my mother. Like, dude, you know I adore my mom. And I actually think you can achieve great things when you do it for someone else, and that should be hailed and lauded, not do it for yourself always.

My opinion is that if you have very clear values, everything else is easy. It might be painful in the moment to stick to them, but it's just that at least you have mental clarity about what you're doing, and it doesn't matter how much work you put in.

You just know you're doing it for theright reasons.

Absolutely. And the core value that we have is liquidity.

I don't think that's true in venture capital.

Dude, did you see? I tweeted the other day when Pat and Alfred were on TV, and they said they were asked about Shaun Maguire's tweets, and I said Alfred's comment was the best I've seen, which is, well, we look at the balance sheet of Shaun.

And I just thought, when summarizing someone, we look at the balance sheet of X is like the greatest way to discuss like that person. I got in a lot of trouble for that.

You did?

Yeah, yeah, yeah. Oh my gosh. Anyway, I want to dive into Sequoia a little bit. You joined from Accel. I want to know, what did you not know about Sequoia before joining that you now know, having been there for several years now?

Yeah. Yeah, I've been there three years. But I've been doing venture capital for 10. I think Sequoia operates really like a sports team. Maybe you've heard that story before. But this is my first day ever at Sequoia. I'm in California.

I've visited the office before, but I wake up early, jet lagged, and I show up to the office at maybe 4:30, 5:00 a.m., something ridiculous like that. I felt obviously very happy about myself. I slept in the office that day.

And as I approach the building, I see some light inside. And as I'm about to push the door, I see a man on the other side, and he looks at me, and with a deep voice, he goes, "What are you doing here so early?"

And I'm a little surprised, but with pride, I tell him, "I'm here to take my first call. What are you doing here so early?" And he's like, "I've already taken my first call, haha." And then he just walked off, and he was just so happy about it.

Still, you know, loves the game.

And that was Doug?

That was Doug. Yeah, of course it was.

Oh, Doug. Is that just like the Americans being built differently? Do you see everyone else at Sequoia do that and feel you have to do the same? Is that it?

I don't think so. We just hire people who are built like that. Doug is Italian.

He's European by roots and immigrated to the US when he was very young. And I've only known him for a couple of years, but I'm pretty sure he was always like that.

And I want to play dodgeball with him.

What does everyone think they know about Sequoia that they actually get wrong?

Everyone thinks that we're just waiting for the phone to ring for the next Anthropic to call us to invest. That's completely false. Everyone at Sequoia is a hunter. We're, you know, we were 11 people a couple of months back in the early team.

That's basically what a football team is. And everyone's just scoring on the field. It doesn't matter how long you've been there. Everyone expects you to perform. In fact, the younger you are, the more people expect experienced people to perform because you just need them more.

It's very competitive out there. And we think that people need to behave exceptionally well as individuals, but win as a team. And that's really important. I don't think that people understand that as much. I'll give you a story to illustrate it.

Constantin Buehler, my partner, helped us lead the investment in Citadel Securities, Ken Griffin's company. They had never taken outside capital. The reason we were able to invest is Constantin built a relationship with Ken since he was a student.

He had been his mentor for years and years. And Constantin never gave up and just kept asking, "Can we invest? Can we invest?" until Ken kindly said yes.

Can I ask you, in that case, what does that deal look like? I mean, that's not super seriously or glibly, but like does Constantin come to IC on Monday and be like, "I have a new startup for us.

It's called Citadel with Ken Griffin. I think we should put in a $250 million check"? Like, how does that actually go down?

Yeah, I wasn't there for the Citadel investment, but I've seen it happen with, well, more recently with Anthropic, with special companies like that.

Yeah, $2.5 billion. Do you know what I respect so much about that check is like, I think the hardest thing to do is to turn down a company and then be willing to have the mental flexibility to pay multiples of it later and get over your own ego about turning it down.

Do you know what I mean?

Yeah, we call that revisiting our priors. It's very important that you update your priors if the environment's changed. And I think it came from the realization that if AI is going to be so transformative, we are just on the foothill of this incredible exponential.

And now we're three years into AI, and we've seen that exponential starting to play out. And suddenly we realize the mental, like the human brain is just not very good at dealing with exponentials. We can think very well linearly, but not exponentially.

And in this case, I think we underestimated the company in the early days.

Dude, I think we all underestimated outcome sizes being what they are. Like Anthropic and OpenAI being a trillion dollars as quickly as they have been, I don't think anyone anticipated.

Do you remember when it was about chasing the billion-dollar company?

Oh my god.

10 years ago?

Which is amazing, by the way. I get chastised for this. I get chastised for everything. You talk about fucking cookie cafe. You're a hustle porn. It's a fucking cafe. Like, shoot me. I agree, which is why I say something which gives most people like shivers, which is a billion dollars could just be the new Series A.

If you think about it, we used to do a $50 million post at Series A hoping it would become a billion. Now you do a billion, and it becomes a $20 billion company. Same blunt multiple.

That's extrapolating the power law,right?

Well, you have to be in the ones that matter.

Exactly. And picking has never been harder because you have just so much more volume of companies.

Push you on that one. I think when you are at a billion dollars in valuation, say, and you're doing $50 million in revenue or $30 million in revenue, choose your number, you're significantly de-risked. You've got enterprise customers most often.

There's real data. I'd much rather do that than the Series A where you're $3, $4 million in revenue priced at $300 to $500 million.

Yeah, absolutely. I think the difference is that some of these billion-dollar rounds happen before there's anything else. Sometimes you have what the market wants you to pay, and then I think founders are also looking for company-building partners. So you can invest.

If you build trust with the founders, you can invest earlier.

Have you done any of the Neo Labs?

Personally, I haven't. We invest in a bunch of them. I thinkright now, if you're going to invest in the new Neo Lab, you're basically investing, you know, in the Quora, in the Stumble Upon when Facebook X came about.

That's my opinion. It's not shared, you know, with everyone, but that's the way I think about it. The only way you invest in a truly novel company is either if you back an N of one founder. You know, recently, we backed a company called Ineffable here in the UK with a large seed round, as you mentioned.

David Silver.

David Silver. And he's an N of one researcher going after

a very different type of architecture. So if it works, it's completely massive because they're not trying to do the exact same thing, but better. They're trying to be different. And that's the prerequisite now, I think, to be one of the successful Neo Labs.

Do you agree with me that Series A is the hardest place to be investing today, given price to progress and then competition?

I think that goalpost is moving. It depends in which sector you're investing. In hardware now, for instance, which is like the new thing,right, that's consensus, physical AI, the time to get validation is just a lot longer. And so you have to invest early, hoping that those companies can get through those phases of experimentation.

And so instead of measuring these companies of how quickly they get from zero to a million in AR, you have to look at how quickly they get to, you know, a working prototype. But you're moving atoms, not bits.

So it's just a lot harder. It takes more time. And they just need a bit more capital. So I actually think that we'll see more collaboration because of that. Funds will want to work with other capital partners to help those companies get to those milestones.

Are you less ownership-centric than you were before? You mentioned there the collaborative element. I find that we're able to work more with other people, given outcome sizes expanding. You don't need to have the 20% that you used to when it was a capped billion-dollar upside.

Yeah.

Are you less ownership-centric than you used to be?

No. No. No, I tell you why. It's simple. It's just the outcomes are growing. It's also more capital-intensive. But most importantly, it's your time. In your career, you can make 20 investments. Some people do more than that. That's just not my style.

I partner with two, three founders a year. And so in my career, I can expect to do basically be on the board of 20 companies. I'm not going to short myself. I'm going to work really hard for those founders.

What I pitch them is that I'm going to be basically their co-founder. They decide how to run the business, but I sit in the passenger seat and I help them close their first customers, close their top hires. Literally, I cannot do that with more than a handful of companies.

If you look at Rillet, we met with 17 public company CFOs since the start of the year. Some of them have become customers. How do you do that when you have, you know, 200 companies with 2% in each of them?

It just doesn't work. It's a different model.

It's a totally different model. I completely agree with you.

Yeah, we're very different, decent.

Harry's like, "I think I've got 175 investments." Dude, are you doing? And the last week I did like two. One was on Twitter DM. One was because Constantin messaged me.

There you go. Well, there's different paths to nirvana.

We sat at a dinner the other day, and this founder's like, "Hey, Harry." I'm like, "Hey, hi." And he's like, "You led my seed." And I was like, "I did, yeah. Remind me." "Which company?" Turns out they changed their name.

Exactly. Just blamed the name change.

I was like, "I don't know. You changed your name." There are many different personalities within Sequoia. Who is the best sourcer in the firm? Like finding companies. Do they need to pick them? Just who is the one who finds really interesting shit time and time again?

Time and time again, if I have to pick, I'll pick Dean Meyer, my partner who sits in Tel Aviv, but basically lives on a plane. He's just a phenomenal human being. He was a professional football player for multiple years.

So he has the competitive juices of Messi, but coupled with like the technical depth of someone who's been working in tech his whole career. And that's a very dangerous combo.

I don't know where that comes from, but he's just amazing at reading people. He's just got this ability to connect with founders, both like the very young, spiky people, but also some of the guys who sold companies for billions of dollars.

Yeah. And people like Dean, he's been very, very popular. I agree. Who's the best picker who, when they have it in front of them, is able to deconstruct companies best?

That one's easy. Luciano Lissandru, my partner who actually brought me into Sequoia. We worked together at Accell before, so I've worked with Luciano for most of my career now. She, you know, when I met her, she had just invested in DeLivreux.

Then she did Framer. Then she, you know, joined Sequoia, did PennyLane, Stark more recently. It's just banger after banger. And if you look at the pattern, there's no pattern. It's just across categories. She's just been able to reinvent herself across the different, you know, from consumer to software to physical AI and defense.

That would be my pick.

Does it get really tough when you're at Sequoia? Because the upside just needs to be bigger than other funds. Like, you know, Shaun is bringing out SpaceX and you're like, yeah, Nearos and like unbelievable companies. And you're like.

You know, it's really hard, but it's part of the job. It's not meant to be easy. Otherwise, everyone else would be doing it,right? Our partnership discussions are sometimes very fierce. We push each other like you have no idea.

Credits to Shaun. When he brought in the SpaceX investment, we vote on companies. I think someone voted a one. Yeah. I've seen fours, of course. I've seen threes, never seen a two. I didn't even know we could do one.

I didn't even know it was on the scale.

But what happened is after that proposition occurred, he didn't give up. He just kept pushing. He forced all the partnership to fly over to see it with their own eyes. We ended up doing a smaller investment that led to a big investment.

And now, a couple of years later, that's one of the best investments in the history of the firm. So the point is, it's all about conviction. Every offsite, we look at our fund returns dating back from, you know, decades ago.

And it's very intimidating. You're looking at this sheet with those phenomenal returns, and you think, how am I going to contribute to the same degree or more? And every time we try to be cute to look at the numbers, oh, maybe if we increase the ownership there and the dollars there.

But as we're always reminded, the best investments in all the funds are always the companies where the sponsor had the highest conviction. That's just the one thing that's been so that happened time and time again across funds.

Were the best deals controversial? When you look back across them, is it like, oh, actually, no, they were largely consensus or they were controversial?

Not all of them. I think the where you turn small dollars into big dollars, they have to be controversial. I wasn't there, but I heard the Airbnb story multiple times over where I think Brian Chesky had been turned down by most other firms.

And

he came to Sequoia, and Sequoia led a seed investment that was, I think, one of the highest money-on-money returns that we've made. It was controversial. Sleeping on air mattresses on people's floor in turned-endom marketplace sounded like a pretty bad idea.

But that turned out to be something very different. And actually having conviction, not just at the beginning, but to keep investing in those companies.

You know what? We're going to talk about unpacking founders. But one thing I read about Brian, I didn't know him, but one thing I read about him was that he actually became obsessed with like medieval lodgings and how people used to travel and stay in group stays.

And the historian that he is. And I actually found that fascinating. I find actually when you look at like the Collisons as well, they're real historians and truly great founders are often historians of their sector.

Yeah. I didn't know that story, but that doesn't surprise me.

Yeah. Listen, before we dive into a couple of lessons from each, I'm going to say two statements and you can discuss them with me. Sequoia just pays up for deals. Is that a wrong statement? Do you find yourself paying the most?

Do you get discounts? What do you think?

I was very surprised to hear that question.

You know, we try to partner with founders as early as possible. And in fact, what you find is because of this high bar, we partner with only so many companies every year. And when we do, what I see in practice is that there's often capital that's happy to pay premium to that valuation.

We're early investors, early stage investors at heart. And so for us, trying to partner as early as possible remains the priority. But there are, you know, other firms that may be investing in later stages that like to come in early that are willing to pay a premium.

Interesting. Aligned to that. One of actually the founders that I backed, Brandon from McCall, he went like quite viral with this, which I thought was fucking brilliant for Sequoia marketing. And I don't know why you guys didn't do more with it.

Where basically he said like, oh, no one talks about, and I'm not dissing Brandon here. Like it's true. But like people don't talk enough about the tranche rounds that Sequoia keep doing where Sequoia get in at one price and then there's an inflection and there's like the next round done at the same price.

Like to me, that's just a phenomenal way to lock in ownership and money for the company. Is that how you guys see it? And you're like, yeah, we want to push that more?

First, I've only seen that happen a handful of times. And I think that's probably giving us too much credit. You know, in his case, Brandon's built a phenomenal business. We haven't had the chance to partner with him, but in some of the cases where we did invest, it's a supply and demand problem.

The founders are building a special company. Why would they not command premiums after someone has invested? Yeah.

By the way, I think this is a great thing. I would retweet it with like, yes, the power of brand if I was Sequoia. Because I've done like five deals with you where I'm either in the first round with you and I'm grateful, or I'm in the second round afterwards where I'm slightly less grateful, but I'm still happy to be in the company.

But I don't think it's like a bad thing.

Yeah. Look, I think the difference is also people are conflating different things that are happening.

There are multiple rounds that happen and, you know, we used to have seed and Series A, Series B. And I think the milestones to get from one to the other used to take you 18 months. Now you can move so fast with AI that things happen so quickly.

And so it's only normal that you command a much higher valuation in a short amount of time if you've proven yourself to beright.

Can I ask, is the triple, triple, double, double debt? You know, before we used to do one to three, three to nine, nine to 18, 18 to 36. And that was good. Now that's still great for a company and we're not at all belittling that.

But you have a Lovable, a Ligora, a you name it, and they go to 100 million in a year.

Yeah. Okay. So on that one, I have a strong view. I don't know if it'll be three years, maybe five, but this will come back. I tell you why. First, people are conflating again two things. Some are new markets and some are replacement markets.

In the case of, you know, a CRM company, they might be AI native, but they're still having to replace a core system of record for a business. And some of them are growing really quickly, but they still have to replace something.

Here, you're talking about companies that are in a complete greenfield market. Three years ago, there was nothing. And suddenly you have the capabilities that can replace basically what a human can do. And so naturally, those companies are growing vertically.

In a few years from now, most of the customers out there will have a solution and will hit a replacement market. And so you'll compare those companies with these other ones, apples to apples. Butright now it's apples and oranges.

And no one's really paying attention to them.

But our job is to play the game on the field and we can put money in one home or another home. And if we can put our money in a home which is much faster growing in a new market, we have an opportunity cost of that capital, which is why I want to put it there.

Wrong?

I disagree with that. I'll tell you why. The outcomes will be crystallized in 10 years on average, maybe more. The best companies tend to stay private longer. That's what the data suggests. But you're making a decision that will impact the business over the next three years.

So it may be true that they can attract more capital on the short term, but ultimately what matters to you is how much ownership you have and how big the company can get. And that will be true only when that investment crystallizes.

And I almost guarantee that will happen for the biggest outcomes in markets that are more mature as opposed to markets that are completely greenfield.

I get you. And I think this is actually the joy of venture, though, where we can be different. What I see is a more liquid secondary market than ever before, which is also extremely frothy. And because of my not being Sequoia, rare moment of humility from me, I can sell much more easily than you.

And so I can sell into a liquid secondary market at a very exuberant price, I think, in a way that you can't in a shorter timeframe.

That may be true, but you have 500 million fund. That's a lot of money to do secondaries that have been multiple. So I'll challenge you back on that.

My dear friend, we are just a humble podcast that also happens to partner with great founders.

Exactly. Exactly. That's not yet a good story.

Let's not let numbers ruin a good story. Final one before we touch on like founder reading and assessment. I do just want to go into like, there's so much mysticism, opacity on how a deal gets done. At Sequoia, you have a weekly IC meeting.

Is it global? Does everyone come? Is everyone invited? Is there a meeting for like just Pat and Alfred to like sit by a fireplace and pontificate or strategize? How does it actually work to get a deal done?

It's funny because, you know, we're well into it's our like fifth decade running. And probably for five decades, we've been doing Monday ICs in person or now on Zoom. We've been adapting the same recipe. What's interesting is that we're actually experimenting with new approaches.

We're trying to do things a bit more asynchronously. And well, first, yes, everyone is invited. But what's interesting is we're experimenting with a new approach where we actually each have to contribute asynchronously after a memo gets shared. And everyone can call up an IC if they want to get everyone's opinion.

The reason for that is an IC is a great format for

fast thinking. Speaking asynchronously is great for slow thinking. And so if you can get the benefit of both, you're hopefully going to make better decisions. And in an IC format, we're each contributing one after the other. It's kind of a sequential kind of rhythm.

Whereas, you know, in this case, we contribute each of us in a document. And at the end, we reach a decision altogether. You can call an IC, but that helps us get the best from the partnership.

Does every entrepreneur pitch the IC? How do you make sure that the partners have enough data to have an informed opinion?

Yeah, yeah, yeah. The founders still pitch. It's very important.

So they will still pitch the entire IC?

Yeah. But the entire IC.

That's why it's fucking nerve-wracking.

It sounds crazy, but I told you we're now 12 people in the early team about the same number in a growth team. So it's not that big.

So you'll say to an entrepreneur, "Hi, Nick, your pitch with the ICs at 6 p.m. You know, here to help beforehand. This is how I'd orient it." You give them the prep?

Yeah, I try not to prep them too much. You need to see the essence of the people. If you give them a script, no one's going to see what you're seeing.

Do you see a really wide variance in what you saw before versus the IC? In other words, do people get super nervous and change much? Do you see what I mean?

Yeah, sometimes we joke that maybe we should make decisions without the IC.

Yeah.

Yeah, it is true. It does change. But it also is, it's a signal. And then you decide as a sponsor what you do with that signal. Did you have questions about the founder being commercial, a good communicator? If you bombed the IC, maybe your questions were founded.

And so that IC then happens. And you said there about signal. Then we end call, like entrepreneur goes away, continues to build his business or her business. And then we've voted yes or a no. We give it a one to ten.

What happens now?

Well, first, we give feedback independently of the discussion so that we know before the discussion where people are, like the pulse. And so that's a vote. And then we have a discussion. After the discussion, everyone votes. And the sponsor is equipped to make the decision they want with that information.

So you can still do it.

You can still do it.

So Alfred votes one. Terrible. One of the worst presentations I've seen. And you can still press green?

Yeah, if you press green, it's a bad investment. We'll see how long yours sticks around.

You've got to have some serious conviction.

It better be a good investment.

Wow.

Yeah, but it's not an Alfred voted one thing. The reality is a bit different.

Do you know who voted what?

Yeah, yeah, you know. The reason, but that's super important. I tell you why. Because if you want to be a good company building partner, it can't be Harry's investment or Julien's investment. It needs to be a Sequoia investment in this case.

I need to be able to call up Luciana. I need to be calling up George or Stephanie to say, "Can you make that introduction to that amazing connection you have that, you know, is quite cherished? It's a big bullet for them."

They're going to make that introduction in a heartbeat.

Is there any politics? Like maybe I'm just, I mean, I am insecure and weak, but like.

You know, someone, okay, so someone said the term front stepping, which is the opposite of backstepping. And I love that. I think that's just the way you're being very direct with your partners.

Does anyone say it personally? Like, do you have to caveat it a bit? Like, I always try and say to our partners, like, "Hey, in the IC, there's no emotions." But when I say, "This is a," you know, like, they all have face sunk, take it personally.

How do you remove the emotion? Is there emotion? Do you have to call people up afterwards? I'm sorry.

We definitely have heated discussions. Yeah, for sure. People can violently disagree, but ultimately, again, I go back to this is all signal for the person who's sponsoring the investment to decide how much conviction they have in the investment they want to make.

And ultimately, you know, yes, the feedback may be tough, but that's not an easy job. If you want an easy job, you go do something else. And it's a feature. It's not a bug. You want people to come in with courage.

And if they don't have courage, they won't take risk and will have mediocre investments in the portfolio.

I think it's important that it shows that like representative and honest, but I don't ever want to do a founder bashing for sure. And so I like to do a founder praising on the flip side. So if you think of an IC where a founder's just come in and just crushed, what one comes to mind?

That happens. What we do in those cases, we find it weird. First, if everyone's a seven or eight, it's quite dangerous. Because look, founders know what we want to hear. The best founders are able to, you know, retrofit the narrative that they think is going to land with investors.

And that can be dangerous. So in those cases, we try to have a devil's advocate. So we ask someone to play the devil's advocate and say, "Okay, what is wrong about that investment?" Like, what are the things that if it goes wrong, we try to write the pre-mortem of that investment before we make it.

And we try to spar around that conversation because, you know, in a couple of years' time, one of us may have to deal with the, you know, consequences of that.

I want to go back a step though, because that's like assuming that a sponsor likes a deal enough to take it there. If you go back to like unpacking what makes a great founder and like founder reading, you've said before that reading founders is, well, to be fair, your partner said this, reading founders have quickly become a superpower.

What do you do, do you think, that makes you good at reading founders? Help me.

Well, first, you have to be vulnerable with founders. Otherwise, they won't open up. And that's all the signal you need. And you do that very well, actually. My job is in 30 minutes, I have to figure out what's special about this person and what might make them exceptional.

And I cannot make a mistake because this job is so unforgiving, not when you invest in the wrong company, but when you don't invest in theright companies. So it's, you know, omission mistakes, not commission mistakes. And basically, you have 30 minutes to figure out what's their spike.

And my way of doing this is to open up first. They all expect to be pitching Sequoia and they want to tell the story of their company. But what I want to hear is the story of the individual.

And for that, I start sharing about my story. I tell them how it was like growing up with parents who split up, where my mom was the successful businesswoman with a nice view over Lake Geneva, but I was doing a week there and then a week back with my dad where, you know, we slept on a mattress in a one-bedroom apartment and how it was fine.

You know, it was fine. I tell them how when my mom had cancer when I was six years old, I remember having to put myself to sleep because she was just too tired. But you know what? A year later, she beat the disease and kept running her business.

You know, all these things are just like, everyone has a story like that. I know you have many of them yourself. So I don't want to use that to weaponize it, but it's more that I think that's the beauty of the job.

Otherwise, you're just in a transaction all the time. Here, I'm just so curious to understand what makes that person who they are that I just want to ask all these questions.

So I completely agree. And I think you have to bring that vulnerability to expect it back. My question to you is, we're in such a transactional world where rounds and company momentum, it's also transparent thanks to podcasts like this.

People can game it. And I've said before about, what do I look for? I sound awful, but like, great gamers, often broken relationships with parents. How do you actually determine if it's kind of genuine or not?

You just have to ask why multiple times. I remember this year is the first year I uncovered a fraudulent founder. And it was very interesting because I remember in the first meeting, that person said, you know, our numbers are going from zero to seven of AR in basically six months in pretty hot category.

And, you know, in his introduction, he told us how he came from a small village and, you know, unfavorable country and how he got an offer to go study at Stanford and decided to turn it down to go study at another university.

And you just have to ask why. Why did you do that? It's amazing. You got the grades to get accepted in one of the most competitive programs on the planet. And yet you decide to leave it to do something else.

Why? And it may be very good reasons,right? But what's interesting is just seeing the body language, the tempo of the conversation accelerating, the founder being nervous. And just think, oh, okay, that's strange. So you just register, you don't end the call.

You give them the benefit of the doubt. But it turns out a couple of days later, that founder, my partner George and I are on our way to the airport at five in the morning to go see that founder.

And on the way to the airport, he tells us that he had something happen and he had a family emergency and he had to cancel our meeting. Later that day, we received messages from very respectable investors who were investors in the company who told us that he had come out as a fraud.

I remember that day I sent a message to all our competitors about that because I do think it's important that, you know, in those times where there's so much opportunity, you also have people who take advantage of it for the wrong reasons.

And that was for me a clear case, you know, and it's exactly what you said. They know what to expect. They know what you want to hear. And they're just going to say it to you in a very pragmatic way.

So that's why I ask why five times and you'll get to the bottom of it.

It is hard, especially when we are as open as we are about what we look for. So I totally get that. Is arrogance bad? It's one that I just, I'm not sure because you can just, this sounds awful, but sometimes the douches are actually really good.

Is it bad?

I'll go back to the Don Valentine quote. If you look at founders you like versus founders who make money as a two-by-two matrix, your job is to figure out in which part of the quadrant we make money. And he used to tell that to many of our partners.

And it's not because you don't like the founder that they won't make you money. And arrogance might not be something you like, but it might make them very good at what they do. It's maybe the cost of their spike.

But that's why you have to go back to their spike first. If there's no spike and you're using that to hide a weakness, that's the sign you want to look for.

Can you tell me about a founder misread that you have, which maybe changed how you think about founder reads? So like, I got introduced to Chris at Granola, the first ever investor that he met. And honestly, he wasn't that articulate and he wasn't a great salesperson.

And it was a loose idea. The references were the most unbelievable ever from working with him. But I just couldn't get behind something where it was very loose and there wasn't much of a sales presentation or charisma or anything.

I learned to focus more on references than almost anything else at Precede.

So first, I really agree with your last statement about references. We do that extensively. I'll come back to that in a second because I think there's an important point there.

Yeah.

On your question around a founder misread, I had lunch with Anton Osaka from Lovable before he founded the company. And I just didn't see it. And I'll tell you one thing that I learned from that is I didn't come to the meeting with a plan.

I just had lunch with him and it was three of us and him. And we were just chatting. And I was not intentional about asking theright questions to figure out what made him special. And I underestimated him at the time.

It's hard. You know what's also hard there, actually, which I think is important. He's Swedish and he's a thoughtful Swede. And what I mean by that is like Matt is at Legora. I know you're at Sequoia, but Team Harvey at Sequoia.

But Matt is like an aggressive Swede. He's like an American Swede. And Anton is a thoughtful Swede, a product-oriented Swede. And so he's less declarative in his opinions, but this was earlier. How does your read change for country?

French are not very good salespeople, generally speaking. They don't push with the same marketing showbiz of Americans. How does your read vary by country?

Yeah, I think that part is very important. I remember the first ever diligence I did at Sequoia was for a company called Tacto in our portfolio. And I called up a bunch of their customers who were what we call middle stand.

And those are, you know, small businesses that compose most of the company's economy,right? And we always ask the NPS question at the end on a scale of zero to ten, what do you think of the product? And they were just so consistently saying seven.

And I remember asking, oh, why not more? Because we can always do better. You know, very German. And I remember when the memo came out, one of my partners said, oh, why do you think the references are not more positive?

And I said, well, they're German customers. And basically, I remember telling my partners, if they're French or German, you add one or two points. If they're Americans, usually you want to retract one or two points on the other hand.

And yeah, so that's also the beauty of investing here is that you just got to take the local nuances into account.

Do you find any commonalities in childhood? Again, maybe I have an unhealthy tailbent towards like childhood trauma, broken relationships with family, fat kids. I was a fat kid. Everyone loves Augustus Gloop.

You're ripped adult.

And do you have any preferences?

The problem is if you try to pattern match people, you will just not invest in theright people. That's what I found. Your job is just to figure out where does this person sit on the intercept and what is their future-looking trajectory.

If you meet a very young founder, you cannot compare them to an experienced operator. That's apples and oranges. And the best thing you can do to figure out their future trajectory is understand on what trajectory they're on. So going back to their past, if you stop just at their professional history, you, you know, in some of these cases, they've been working two years, but you have so much richness if you go back, you know, the first 15 or 20 years of their life.

And I'll give you an example. I met two founders, French founders, both went to Polytechnique, most competitive technical program in France. And, you know, I could have said, oh, these two guys are equally good. What was interesting is when I started digging into their childhood story, one of them was the son of private equity tycoon who had also gone to Polytechnique, while the other one had been abandoned by his parents when he was born and spent his childhood going from like one care home to the other.

That's terrible, but at the same time, it just shows you how much distance that person traveled to get where they are. And it doesn't mean that they'll continue on that path, but at least it tells you a lot about their existing trajectory.

And so your job is just to figure out if they're going to continue on that path or not.

I totally agree with you. Distance traveled and like the shit they have to go through to get to where they were today is materially just more. I totally agree with you. I always love it then when you check the kind of name of the library and you're like, oh, it's also your father's name on the library.

That helps usually.

I did think Joshua is that you were, you know, whatever. Okay. There's Doug Leone, there's Pat Grady, there's Alfred Lin, there's Shaun Maguire. I'm going to choose one lesson from each. Start with Doug. What's the one lesson you learned from Doug?

The one lesson from Doug is a question he asks in interviews. He starts by asking, who is your best reference and why? What's interesting there is usually founders tend to say, you know, there's this person and this person and they're very happy to share all the great things these people have to say about them.

And as they finish, you ask the counter question, which is, who would be your worst reference and why? And see their calls change.

Do people answer that honestly?

What's interesting is how they answer the question. I've had founders be very direct about who their worst references were. And what was amazing is then I called those people and you just get a lot of texture. I'm not looking for perfection.

I'm just looking for clarity.

Do you know who your worst reference would be?

I have so many.

That sounded so like the GFC goes, ah, ah. I think mine would be Niklas at Atomico.

Oh, really?

I think he'd say I was like useless. And I was, by the way, like when I was at Atomico.

You were also 17 years old.

I know, but I just couldn't understand, like, why am I on a call at midnight when it's not my firm? Like, this makes no sense to me.

Exactly. But you know, the worst employees make the best founders. You became a founder.

Which is why references are really hard.

Yeah.

Actually, for me. Okay, I love that. I'm going to steal that.

Just on the reference point. Well, actually, I can you, you know, you asked me about Shaun. He has this ELO methodology framework where if you've played chess, you know, ELO is the score you get attributed depending on how good you are.

And it's exponentially harder to get to a higher score because you have to beat better and better people to get there. And so his point is that if, you know, you're a 2400-rated player, which is, you know, extremely good outlier territory, you're much more likely to be able to judge who another outlier is.

And I think in the case of chess, in 10 moves, you can tell a 2400-rated player can tell another one. But if you ask someone who's a 2000-rated player will be unable to tell the difference. It's the same with references.

You want to ask exceptional people if someone is exceptional, not good enough people. And that's often the problem with references.

I get you, but I'm, again, I don't think these people will mind because I'm saying they're so exceptional. But like when I speak to Torsten at Helsink or Alan at Fuse, they're obviously two exceptional entrepreneurs. I've never met anyone they like.

They never, anyone where they're like, they're amazing. You have to do it. They're like, at best, yeah, they were okay. That's really hard. Like, do you not find that? Where like the best people just have, just, I don't know, I can't get it.

You have to untangle their personality from their accomplishments. And maybe in those cases, the personality got in the way of the accomplishments.

Okay.

Yeah.

Doug is great. Love that. What about Pat?

Oh, Pat has got this great framework. People are like vectors and vectors are the product of their direction and magnitude. Direction is why are you doing this? Why are you so motivated about that? Where are you going? And the magnitude is how ambitious that person is.

Are they going to go through the pain to keep doing what they're doing? And I find that framework just so simple, as always with Pat, because if you try to understand the person's direction and their magnitude, it's going to help you a lot just to predict where they're going next in their trajectory.

I really like that.

Yeah.

You know, one thing I always remember Pat telling me, he's like, people think that we're so great. Every single company that goes public, we have seen at some point in their journey. That just shows you how many we've missed.

We must always bring energy, bring preparation to every single company meeting we have. It's never enough. I just love that humility. Like this is, this fucking Pat Grady leads Sequoia now. To have that humility, I just thought it was awesome.

Again, my first day at Sequoia, we were all asked to write this one sentence. We are only as good as our next investment. And we have that printed on the wall now. It was very intimidating to write that the first day at Sequoia and very humbling.

So that's the focus. And I think you can just see it in the way people behave.

God, you'd be pissed if you're Shaun Maguire and you're just being like, I just did SpaceX. Come on, give me, give me a break. Come on.

He's definitely not on the break. Yeah.

Alfred Lin.

Alfred Lin, the latest piece of wisdom that I loved from Alfred was, do not mistake an outlier operator for an outlier founder. And that's very easy to make. You think someone did really well at this company. They've done so many things.

They've launched these new products. Everyone liked them. That might make them an outlier operator.

It might not make them an outlier founder.

Very difficult when the CV is as gold-plated as your OpenAI, your DeepMind. And I think we're all falling for the CV trap in a lot of ways today, especially with a lot of the heavy AI plays like that.

Final one, is Shaun the ELO one or is there another one?

Oh, the ELO one. Yeah, I'll give you another one from Shaun that I liked. Everyone thinks of people as either IQ or EQ. IQ is the intellectual horsepower. EQ is the emotional horsepower. He has these two other dimensions.

One is judgment, the other is political coefficient. And basically, if you think of judgment as how you're able to find solutions in complex systems, and same with PQ, it's the ability to navigate politically complex systems. And his argument is that judgment is actually more important than IQ and PQ is more important than EQ.

He's got amazing PQ.

I go back, the balance sheet of Shaun is relatively undeniable. Very funny. I love that. Which of those four is the best reader of founders?

Well, it depends on the founder. If it's a young technical founder, I would ask Alfred, Shaun. If it's a more commercial founder, I would actually ask Doug or Pat. But again, you mentioned those four names, but we have 11 people and actually think, for instance, like Boogomil might be, he's amazing at reading people.

So for some founders, I would definitely bring Boogomil. If it's a company in fintech, I would bring George because he just knows all of them. He's very calibrated.

I totally get that. Listen, we've covered a lot about Sequoia and what makes Sequoia, what it is. In terms of like where we invest, you said something to me before and I want to spend some time on it.

You said agents are the new customer. What does that fundamentally mean? What should we take away from agents being the new customer?

Yeah. I mean, we're three years into AI. We're already at parity in terms of agent traffic to human traffic. I think it was Cloudflare this morning said that in five years from now, we'll have 1,000 times the amount of agent traffic to human traffic.

Again, we're not good at thinking exponentials, but if we're on the foothill of the exponential, we better act as, you know, it will be. And my thesis is that on the, you know, on the demand side, you have a new customer that we're not treating as good as human customers as the agent.

You know, today we have agents delegating tasks, mostly out of convenience, but tomorrow as the AI gets smarter, it will be because they're just making better decisions. If you have a 500 IQ AI, of course they're going to make the decision on your behalf because that's just a rational thing to do.

And today we've basically built these interfaces, whether it's on desktop or mobile, that are in basically a layer that sits between your business and the customer intent. And you're trying to translate that customer intent into dollar for your business.

But if you abstract it, it's just a layer,right? What we've been extremely good at is optimizing that layer for 20 years. Andright now it's.

Better UI, better onboarding, better signup, better payments workflows, 100%.

And so you have, you end up with like a pixel perfect website that's amazing at converting humans. But now we need to think of like a bits perfect platform that's good at converting agents.

What changes then in that world? Like what, what should founders take from that? And what do we look for that changes? Like does UI become completely irrelevant then? How do we think about that?

Yeah, UI is obviously the first thing that people think about. But there's the thinking fast answer and then there's thinking slow answer. The thinking fast answer is UI is going to zero. Agents are able to swap your product in a minute and there will be no brand loyalty and it'll be a race to the bottom.

The thinking slow answer is quite different. Agents are very similar to humans. They have biases. They have biases in their pre-training based on what data they were, you know, was scraped. They have biases in their post-training because they were post-trained by humans who were annotating.

And so what you see is that the agents are already very biased. They go to Cloudflare and Vercel when they're looking for a hosting solution. In fact, you have hedge funds who are buying data to understand how agents are making decisions because that may influence the stock price of these companies.

And so we need to understand, just like we did for customers, what are those biases and how do agents make decisions and how that may differ across the different model providers, but also depending on what product or service you're trying to sell.

And we're just at the very beginning of that, of that transition. We have like, you know, in the portfolio, we have a company called Profound that's the answer to SEO for the modern marketer. They help you, they help you make your business visible to people who are using chat interfaces.

It's AEO, answer engine optimization.

Yeah.

Is there AE, so we have a business too, Peak AI in Europe. And my question to you is, is the AEO, answer engine optimization business, the same as agent to human in terms of traffic when you compare AEO to SEO?

Like will AEO be a significantly larger market than the SEO market?

Oh, I see. What I would say is just we have to consider that it's not just a new category, it's a new economy. You're just going to have a parallel economy for agents, just like you have a parallel economy for humans.

And in that new economy, you will have new categories created. AEO is one of them.

How do you determine what is in that new economy versus what is not? Because I would have traditionally said, well, a honeymoon for my wife would be in the, I'm going to keep it in the old economy. I don't know, dude.

I invested in Odysseia with you guys, with Constantine and Francis from Sonder. I don't think they're that far away from making an amazing agent experience that could do everything that I would want to do.

Yeah.

So how do you determine which is in which?

Yeah, you still have a human in the loop when you're booking your holiday. But very quickly, agents will just make their own decisions. You still want to decide where you're going on holiday. They might have made the best plan, but if you are the one who's going on that holiday, you want to have a say.

The difference isright now there's 80% of the databases are written by agents. So why would humans have a say as the AI has become so good that they can pick better than humans? So that's the distinction I would have.

Totally get that. So does that destroy software margins then? Like if everyone's able to switch super quickly and it could be a race to the bottom on price, agents are optimizing for a load of different preferences. Do we just lose margin as providers?

Like what happens there?

I don't think that's true because that's assuming that you can, you have no switching cost. And the reality is you may have no switching cost for very menial things like, okay, you might want to book different plane tickets that's easy to swap provider.

But if you've picked a database, you've been building in that database, there's data gravity, there's enterprise controls, there's all the things that enterprises care about. That will remain something you build with trust. And trust, you build it over time.

That will remain true no matter what.

When you look at like a Rillet, it sells to large enterprises, some of the biggest in the world, the way that they buy, is that really going to fundamentally change? And is it going to fundamentally change as quickly as we think?

You know, I'm always conscious of being, I'm not that young anymore, neither are you, sorry, mate. But like I'm always conscious of being exuberant and then I'm always reminded, you always, you know, overestimate what happens in a year and underestimate what happens in 10.

Enterprises won't move that fast. They don't buy as quickly as we think they do. Agents buying and no, no, no, just like they don't have slack mostly. How do you think about like agent willingness to engage in that new buying behavior?

Yeah, I mean, like everything in the adoption curve, this will sit somewhere else on that one. Right now what you're seeing is agents are very good at picking tools that are connected with coding because that's where agentic applications have really reached human parity.

But you haven't reached that level in other functions as much. And yeah, today I think that will be probably just further out the spectrum.

I'm going to be humble again. Maybe this is becoming a bad habit. I don't know in a lot of cases which is durable, which application provider will survive. It feels so transient. And I feel a lot more certainty when I invest in Fireworks, when I invest in McCaw, when I invest in ClickHouse, the infrastructure that I know whoever wins at the top layer in the app layer wins.

Yeah.

But they're going to use Fireworks, they're going to use ClickHouse, they're going to use McCaw to get there. Do you know what? Just sit around the table as a partnership and go, God, the infrastructure layer is much easier and better.

We want to be there.

We invest in both. I think the human brain is not very good with exponentials, but is also not very good at understanding that truth, that holding ideas in tension. You can hold opposing ideas in tension and still be correct because those truths will materialize at different times.

In the case of Fireworks, they're ripping. And they're ripping because we're just at the beginning of the AI revolution. They built the best product and they appeal to the best customers. So they're running away with the market. At the same time, you know, you mentioned Rillet before, they're signing up the next generation of software companies now outside of software.

And those companies will build their entire finance teams on top of Rillet. And a couple of years from now, this will compound into a very large and sticky business. And so do we invest in one or the other?

No, we invest in both because we think that both companies can be really big.

It's funny. One of the things that I love to see when I'm investing is the percentage of customer base that is non-startup or non-traditional, like tech oriented. Because when you have like Ford Motors in Idaho using it and you're like, wow, that's a weird one.

How did they find out about you? Huh, what's their usage like? It's a really, really good sign for me.

It's funny you say that because in the case of Rillet, we had a board meeting recently and they have this thing they called Project Iowa. And it's basically appealing to companies outside of tech. And we, this is the fastest growing segment in the business.

And we have car washes and, you know, regular auction companies signing up. So that was, that was a very interesting turning point in the company that they're both able to appeal in the tastemakers in AI, but also to the company that your uncle's running, you know, with his wife.

And that's really important because you want to participate in the real economy, just not just in the AI economy.

Do margins matter less today given the expansion of outcome sizes? Whether we look at Fireworks or Legora Harvey and putting them together, like Lovable, Rapplit, all the margins are lowerright now than they were traditionally in more mature software markets.

Do we just not mind because markets are bigger?

Yeah, so on that point, very important. We're in a transition phase where most of the human-facing applications still benefit from operating at the frontier. At some point, your customer support agent does not need a 200 IQ agent to change your plane ticket to Hawaii,right?

What will remain true is that machine-to-machine interactions still benefit from 500 IQ AIs. And as we shift from customer-facing applications to machine-facing applications, operating at the frontier will matter less and less for the first group and more and more for the second.

And I thinkright now everyone's wondering, what should we do with open weight models? For some of these applications where the frontier of what open source gives us is already good enough. And they should absolutely start thinking about that.

And we're encouraging portfolio companies to do that. For the ones where we're still not at human parity, you absolutely want to be operating on the frontier and it might be worth, you know, investing at even negative gross margins to earn the customer's trust and build a superior product to your competitor.

Speaking about kind of margins building superior products to competitors, you went viral, which is very exciting, Julien. You went viral for your post on like the services economy being the next trillion dollar economy. And you know, my dear friend, and I love you and I read it and thought, my word, what a load of word wank.

Which is just like, ah, power accountants with ChatGPT, make them more efficient. I'm like, well done. What am I missing? Like I love the way I have it written down in much more articulate ways. What am I missing when it's like services are the next trillion dollar economy that we should pay attention to?

Sure. Yeah. So the prediction was that the next trillion dollar company will be a software company that masquerades as a service business. It's very important the masquerading because they cannot be a service company.

Okay.

Does that make sense?

It does. So what would that look like?

Sure. We're in the third year of AI. The first wave was about co-pilots. So it's companies that are helping human workers be better at their job. And now the reason we started there is the models were just not good enough to do the entire job.

But as you've seen in coding this year, we're reaching human parity, if not more. And so the agents are able to complete tasks end to end. And so instead of selling a tool that can help you achieve an outcome, you can sell the outcome directly.

And that I think is very interesting. To go back to the accounting example, today you might buy a, you know, QuickBooks for 2K, but you spend, you know, 15K to close the books with your accountant. So what if you can just sell the outcome of the closed books instead of selling the software alone?

And I think that's really important because you have typically across the board a one to six dollar ratio between how much you spend on tool relative to how much you spend on the service. And the question I was asking is, how do we figure out the categories that will be able to capture the $6 where others are still focused and competing on the $1?

And the conclusion is there are some categories that are already getting there. People may not realize, but customer support is already in this phase. I call it the autopilot category. You have already a billion dollar in AR in this category where outcomes are solved.

And the way it works is, you know, we have a company called Sierra. They're an AI for customer support and customer experience. A typical way is they go see a customer who has X number of tickets to resolve an airline,right?

And they know that today they have human agents that are answering these tickets. And for every ticket resolved, they might spend, let's say, $50. Well, Sierra comes in and they say, well, we will resolve those tickets for, let's say, a fifth of the price.

And at the beginning, the customers may want to see how it's working. So it starts as a co-pilot, but very quickly it moves to an autopilot. And the beauty with that is effectively the AI is running the entire workflow end to end and is able to collect a fee from the outcome it's generating, not from the tool that it's selling.

Totally get that. I think it's very easy to do in customer support-based environments where there's very clear resolution or no resolution or TBD. What do you do in this ambiguity? Sales tools. That wasn't actually all marketing tools. That wasn't actually that touchpoint.

It was a different touchpoint. It's only really possible in super clear, definable markets, no?

Yeah, it's very hard. That's why

unfortunately we haven't seen many companies yet do that. And the combo is one, the models are still getting better and better. But two, as you said, there's still a lot of human judgment involved in those decisions. And so my framework is you have intelligence, which is what the models are really good at.

Things are verifiable. How much do we spend for this in that month? And then you have the human judgment. That's people call it taste. People call it the sum of the small experiences you have interviewing someone. You know, the body language they have, are they leaning back or into the chair?

That may lead you to ask a different question that you would have had in your preparation. That's something that's very hard for an AI to pick up because it was not in their training data,right? But today what's interesting is those tools that start as co-pilots, they're basically in the judgment loop.

And if they're building theright product, they will be able to harness that judgment so that the judgment of today is the intelligence of tomorrow.

When we say the one to six dollar spend, Microsoft, OpenAI, Anthropic, every fricking provider is putting a huge amount of money into like the services and implementation side of their business. Are we not actually just seeing traditional enterprises more than ever cry out for help to implement AI?

Yeah. It's interesting you say that because the stat is we've never seen so many system integrators and forward deployed engineers being hired in the workforce. And that's a direct correlation with the point we made, which is you still need human judgment and hands to do a lot of that work.

And in the case of ServiceNow, I think they've never hired so many system integrators. You and I are investors in a company called Auctor. That's an AI for software implementation. And they work with some of the largest software vendors where they basically help their employees supercharge their implementation team.

And it's just amazing how much leverage you can get. One person can do the job that 10 people were doing before, but you still have the human in the loop. And I think that point is very important because I think what people didn't understand from the article is that it's not because you go from co-pilot to autopilot that you remove the human completely.

What I'm just proposing is that we can build companies that will have software-like margins, even though there are still humans that are making the judgment calls. The difference is that you start with lots of humans, little AI, and you end up with lots of AI, little humans.

Simple frameworks, you know.

Incredibly reassuring for humanity. Do you buy the will-have smaller teams argument?

Oh, absolutely. Absolutely. But the thing that people also don't realize is there will be new jobs. You're just shifting the bottleneck somewhere else.

I do get you, but I do think the speed of transition is faster than it's ever been. Like when you see, you know, the agrarian revolution or the industrial revolution, it took 10, 20, 30 years to buy a train and then deploy machinery on farms in the middle of France.

When an update to, you know, Gemini can remove a whole generation of designers in terms of like movie posters. Fuck, that's worrying. When, you know, in six months, you know, Claude Code became from 20% of Andrej Karpathy's workload to 80%.

Speed is uncomfortable.

In practice, the data shows that we've never hired more software engineers.

That's true.

And so you see you have opposing ideas that can hold true at the same time. The realization is Jevons Paradox. You're making building much cheaper. And so it turns out that people have lots of ideas and, you know, we can't underestimate human creativity.

And in this case, people are just building more. And yeah, I find that exciting for you and I who are investing in those companies.

Will you invest in a services business that plans to turn into a software business? I know it sounds crazy, but it's like, hey, we're collecting the data, we're understanding workflows, we're clearly getting as close to our customer as possible to build the software product.

No?

So I always tell you when I have low, medium, and high conviction, what I'm saying, here I sit between a medium and a high. I will not invest in one of those companies for the following reason. I think you can make money in that business.

The reality is I've only seen it in my career. The best companies are able to concentrate talent. And you're just not going to get frontier talent wanting to work for an old service business that's kind of travesty into an AI company.

They might have data, but not necessarily the data because it's just really hard to harness theright data to make these businesses work. So I actually think you should just build it from first principles. The best founders always figure out how to get distribution.

They will have the talent. So if they can build the best product, customers will vote with their money and buy that product.

You sit in Europe, but you work with the US partnership in a lot of ways. Do you see the promiscuity of US employees in terms of their willingness to move? You said about people wanting to work at X or Y.

I find US employees incredibly promiscuous in terms of jumping hot company, hot company, hot company. In Europe, I think we're much more loyal.

It's certainly in the labs. I think there's a lot of jumping around in the labs. Yeah, people have very short tenures and yeah, we just don't have that in Europe as much.

It must be so confusing for your email.

Yeah.

Do you update your Netflix every time?

I think they probably keep the emails just in case because some of them come back.

Might come back. Can you keep Karen at OpenAI just in case? What the fuck? Is traditional private equity fucked?

I actually think they might do very well by investing in those companies that have the data and so on and won't be able to hire frontier talent, but they'll build very fine businesses. They just also they're not seeking the same outcomes that we seek.

We want to back the next trillion dollar company. I think it's unlikely that's a private equity backed company.

It's true. I think the only thing that will vary is just like, do they have the ability to

do more deals? Because so many of them underwater with shit deals.

Yeah. Yeah.

When you're dealing with five Titanics, are you really willing to like let another flower blossom?

Yeah.

Tough. Listen, dude, I want to do a quick fire with you. So I say a short statement, you give me your immediate thoughts.

Sure.

What's the most overfunded category?

Probably legal. I think there's, you know, there's just so many me toos in this category. Whereas I think that the winner is already in existence. I'm obviously biased, but I think Harvey is very well positioned because they have the widest distribution.

And yeah, I just don't understand investors' willingness to invest in the nth competitor.

So naive. No, I will naturally say I think McGore is obviously going to win. But I think going back to your point, I think slope is what's important. I do agree with you on the overfundedness, but I kind of don't in a way actually do because I think legal is a very horizontal, broad market.

We're in a business called Solve Intelligence. It's IP law, very specific for patent lawyers and the IP market. That is so different to a lot of what Harvey and Legora do to the extent that both Harvey and Legora founders are invested in it.

Do you see what I'm saying?

Yeah, yeah.

And so I really think it's actually you will see the unbundling of law. Now, will Solve be as big as Harvey or Legora? No, but still multi-billion. Really interesting. Underfunded category that should be funded more?

They call it BCI, Brain-Computer Interfaces. That's where all the smart kids are going. So I'm a big believer that you should just follow where the smartest people are going. You know, 10 years ago, the smartest people were going to ML and AI.

10 years from now, we'll see those companies probably blossom. That's the next frontier.

The best agent company outside of Sequoia.

So the best company agent company outside Sequoia is probably Cursor. One, they're in one of the most important markets. But second, where there was a lot of chatter around AI wrappers, they were the first company to really understand that you could post-train models and actually go deeper into the stack.

When that $60 billion deal happens, do you guys sit around the table and go, oh, fuck it?

Well, they joined their portfolio company, so

that helped. Yeah.

Best angel who doesn't get enough credit.

Gloria from Puzzle, I think deserves a lot of credit. She's got an incredible nose and works extremely hard for her founders.

What myth haunts you most?

I think probably Trade Republic. So we're in business with Trade Republic, but I looked at the seed before I joined Sequoia. And I remember telling the founder, Christian, I don't think you're going to succeed because Revolut is going to smoke you.

The point is like, it turns out that they barely compete and they're both building amazing businesses.

I think I was I failed to understand that it was not a winner-takes-all market and I underestimate the size of the category.

You know, one of the most BS reasons to miss a great company is, oh, well, people will use you at the start, but then when they become bigger, they'll just build their own. It's like the classic Stripe or search APIs or whatever.

They just never happen.

They don't. Yeah. Infrastructure in particular is just painful.

Why would I do that? What founder trait do you refuse to compromise on?

Intensity. Yeah. Intensity is important. It's too hard to build a big business. You need intensity.

Which fund, when you hear are competing, do you go, oh shit, we need to bring our A game?

I don't think we can be condescending and say we don't bring our A game no matter who the competitor is. But I know you want names. Can I answer with a story?

Yeah.

So

I never lost a deal, an investment in my time at Sequoia, but I've lost investments before. I lost my first investment two weeks into the job when I started in venture a long time ago. And that company was Revolut.

Incredible, incredibly painful. I think Index and Bolderton did that round, if I remember correctly. But basically the story is, I'm two weeks into venture, like you, I'm like 20 years old. I don't know anyone. And I call up the one person I know in venture capital, CF from Seedcamp.

And he tells me, you should come to that pitch. We have 10 companies. And I thought, oh, great, 10 companies. That's amazing. That was the only criteria that I was given. And I show up to this run-down place in East London in a basement, and there's 10 founders pitching.

One of them is Nikolai from Revolut. Another one of them is Daniel Dines from UiPath. Think about the concentration of EV that was just in that day. And they're both raising their seed in Series A.

I think Nikolai was the most obvious founder call I've had in my career. It was just so obvious how intense he was. And I proceeded to camp out of his office in Canary Wharf. And I just tried to identify him in the crowd every day because he wouldn't respond to my emails.

My colleague and I ended up having a meeting with Vlad, his co-founder. And after trying to convince them to invest, they said that they would go with a competitor. And I was really crushed. I remember thinking this could be bigger than PayPal.

And, you know, we'll see, time will tell, but it's, I think, a fantastic business. But at that time, I tried my chances and I said, can I invest personally in the company? And they, you know, begrudgingly pointed me to an SPV.

But I was penny less at the time. And even though I had the opportunity, I didn't know how to fund the commitment. So I remember calling my mom on the way back, you know, like your mom, she's always been there for me for business decisions.

And she said, that sounds like a pretty good idea. How about I give you the money, but we'll do 50-50? And, you know, 10 years later, I've only kept buying shares in the business. I haven't sold one, but my mom just sold most of her shares and she just retired at 74 years old.

And so I always joke with my partners that they could only hire the second best investor in the Beck family because my mom went all in on Revolut at the Series A.

What multiple was that? I'm not asking for money, but just like.

Well, it depends on which valuation, but we entered at 200, no, 180, 200 million. And I think the latest valuation is over 100 billion.

Just tell your mom to have one line on her track record.

Yeah, exactly.

Revolut part might drop.

Exactly.

Well done, mom. You know what? It's not about who finds it. It's about who gets the cash at the end of the day.

Exactly.

That's unbelievable.

Yeah.

Do you know what though? This is why I'll be forever unhappy. You know what I always think in those situations? I need to put double my check size.

Exactly.

That's amazing. I love that.

Well, I earned 30K at the time, so, you know, it was really bad. Actually, at the time, I worked for this guy, Ollie Samuel, who was the founder of Rocket Internet. And, you know, he's amazing for so many things, but everyone knows he's a very tough negotiator.

And so when I joined his company, I said that I wanted more than 30K and he refused. And so I actually was able to negotiate that I was going to be able to invest in the companies in order to make enough money to survive from the investments.

And actually, you know, those angel checks are, you know, pretty healthy these days. Preceding Attio, Albert, Revolut. Yeah, but my mom still has the best track record. She missed all the bad ones.

That is fantastic. What do you believe that about venture capital that most of the Sequoia partnership would disagree with?

Oh, you know what? The funny thing is people love to say Sequoia believes X and Y, but we actually have very different opinions. There's no house view on AI. You can have, you know, I can post this article about services being the new software, while simultaneously you'll have David Kahn talking about the $600 billion question and simultaneously Pat and Sonia saying, this is AGI, you know?

Does that make it hard then? Because I'd be annoyed if I believe in the services element and then another one of my partners puts out a piece saying something very different and opposing. I'd worry that the founders that I'm trying to attract with mine are reading theirs going, well, we're not going to go to them.

Yeah, but at the same time, you know, you cannot be bland. You want people to seek you out for who you are.

It's what people forget about a brand, which is like the best brands make you feel something.

Exactly.

The worst is, eh, for or against Nike or Adidas, Apple or Mac, Apple or Windows. You feel something.

We're trying to invest in spiky people, so we have to be spiky ourselves.

Final one. What are you most excited for about the next five years of AI? About what will change, what will happen?

Again, I think it's what I told you before. We're still in this phase where AI is maybe 120 IQ with the latest tests, but when we get to 500 IQ AIs, we'll, you know, maybe find cures for your mom or my dad's disease.

We'll find things that are just so transformative to humanity that it will make, you know, all these things we worry about today sound completely insignificant. So I'm actually, I'm not from the world of science, but I'm very excited about companies that are, you know, helping push the frontier of life sciences, biology.

And the great thing is actually in London, we have a lot of focus on that. You know, we just saw Demis' post. And it's great to have these big brains focusing on these problems. So I'm actually really excited about that.

I couldn't agree with you more in terms of what it could do for chronic conditions. Dude, I've so enjoyed this. I so appreciate the friendship that we have. It's like, again, almost 10 years, which is terrifying. I know it's a little rail, but you've been an amazing friend to me and I really appreciate you.

You're my brother. Thank you, sir.