20VC: Inside Sequoia's Investment Committee: Lessons from Don Valentine, Doug Leone and Alfred Lin | How the SpaceX and Citadel Deals Went Down | What Sequoia Specifically Looks for in Founders with 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 2-by-2 matrix, your job is to figure out in which part of the quadrant we make money.

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. That's not an easy job. If you want an easy job, you go do something else. Credits to Sean when he brought in the SpaceX investment. We vote on companies. I think someone voted a 1.

I think right now, if you're gonna invest in new Neo Lamp, you're basically investing, you know, in the Quora, in the StumbleUpon, when Facebook X came about.

This is 20VC with me, Harry Stebbings. I am so excited for the show today because I get to welcome one of my oldest friends to the show. He's a partner at Sequoia, which just raised $10 billion in new capital to bet on the next generation of winners in the AI wave. He's also an incredible human being.

You'll hear more about why in the show, but this episode is incredible because it is a behind-the-scenes glimpse into what makes Sequoia so special: how they find great companies, how they win them, and how they pick them. It is an incredible view into what makes the great so good. This is Sequoia like you've never seen Sequoia before, and it was one of the most special interviews for me to be able to sit down with one of my oldest friends.

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

I remember.

Aging.

Yeah, you were at Accel and you were at their very nice offices. I had just joined Atomico, I think.

Mm-hmm.

We were both 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. Can you just tell me a little bit about that before we dive into all the intellectual, nerdy shit? I want people to know you a little bit first.

My dad suffers from a neurological condition that showed up in my early 20s. I have no siblings, so when it happened, I started looking after him. He's very unusual, my dad. He comes from a family of 4, grew up in rural France, and stopped school when he was 13. 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—not an astronomer, an astrologer. I always saw him take a different path, and when his disease started showing up, I was there for him. I know you've done the same for your parents.

I specialize in binary statements that get me 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. Dude, I adore my mom. 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 at least you have mental clarity about what you're doing. It doesn't matter how much work you put in; you just know you're doing it for the right reasons.

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

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

Did you see that I tweeted the other day when Pat and Alfred were on TV and were asked about Sean Maguire's tweets? I said Alfred's comment was the best I've seen: “Well, we look at the balance sheet of Shaun.” I just thought that, when summarizing someone, “We look at the balance sheet of X” is the greatest way to discuss that person. I got in a lot of trouble for that.

You did?

Yeah. Oh my gosh.

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

I've been there 3 years, but I've been doing venture capital for 10. I think Sequoia operates 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 visited the office before, but I wake up early, jet-lagged, and show up to the office at maybe 4:30 or 5:00 a.m., something ridiculous like that.

I felt obviously very happy about myself outside of the office that day. As I approached the building, I saw some light inside. 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, goes, “What are you doing here so early?”

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.” Then he just walked off, and he was so happy about it. He still loves the game.

And that was Doug?

That was Doug. Of course it was.

Oh, Doug. Is that just 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 U.S. when he was very young. 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. I fear that man is scary.

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 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. That's really important. I don't think people understand that as much.

I'll give you a story to illustrate it. Constantin Guler, 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 that Konstantine built a relationship with Ken when he was a student. Ken had been his mentor for years and years, and Konstantine never gave up. He 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 don't mean this super seriously or glibly, but does Konstantine come to IC on Monday and say, “I have a new startup for us”?

It’s called Citadel with Ken Griffin. I think we should put in a $250 million check.” 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.

Mm-hmm.

Do you know what I respect so much about that check? 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.

Yeah, we call that revisiting our priors. It’s very important that you update your priors if the environment has changed, and I think it came from the realization that if AI is going to be so transformative, we’re just at the foothill of this incredible exponential. Now we’re 3 years into AI, and we’ve seen that exponential starting to play out. Suddenly, we realize the human brain’s just not very good at dealing with exponentials. We can think very well linearly, but not exponentially. 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. I don’t think anyone anticipated Anthropic and OpenAI becoming $1 trillion companies as quickly as they have.

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 I do: a fucking Corgi café—“You’re a hustle porn.” It’s a fucking café. Shoot me. I agree, which is why I say something that gives most people shivers: $1 billion could just be the new Series A. 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. Picking has never been harder because you have so much more volume of companies.

Push you on that one. I think when you’re at a $1 billion 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 at $3 million to $4 million in revenue, priced at $300 million to $500 million.

Yeah, absolutely. 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 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 new AI labs?

Personally, I haven’t. We invest in a bunch of them. I think right now, if you’re going to invest in a new AI lab, you’re basically investing in the Quora, in the StumbleUpon, when Facebook came about. That’s my opinion. It’s not shared with everyone, but that’s the way I think about it.

The only way you invest in a truly novel company is if you back an N-of-1 founder. Recently, we backed a company called Ineffable here in the UK.

Yeah.

It was a large seed round, as you mentioned.

David Silva.

David Silver, and he’s an N-of-1 researcher going after a very different type of architecture. 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. That’s the prerequisite now, I think, to be one of the successful new AI 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 on which sector you’re investing in. In hardware now, for instance, which is 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.

Instead of measuring these companies by how quickly they get from zero to $1 million in ARR, you have to look at how quickly they get to a working prototype. But you’re moving atoms, not bits. This is just a lot harder. It takes more time, and they 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 the collaborative element.

Mm-hmm.

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

Yeah.

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

No. No. No. I’ll tell you why. It’s simple. 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 2 or 3 founders a year, and so in my career, I can expect to 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 and close their top hires. Literally, I cannot do that with more than a handful of companies.

If you look at Relet, 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 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. There are many different personalities within Sequoia. Who is the best sourcer in the firm—finding companies? They don’t 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 and basically lives on planes. He’s just a phenomenal human being. He was a professional football player for multiple years, so he has the competitive juices of Messi coupled with 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 got this ability to connect with founders, both the very young, spiky people and some of the guys who sold companies for billions of dollars.

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: Luciana Lisandru, my partner who actually brought me into Sequoia. We worked together at Accel before, so I’ve worked with Luciana for most of my career now. When I met her, she had just invested in Deliveroo. Then she did Framer. Then she joined Sequoia and did Pennylane, Stark more recently. It’s just banger after banger.

If you look at the pattern, there’s no pattern. It’s just across categories. She’s been able to reinvent herself 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 at other funds? Sean Maguire is bringing out SpaceX, and you’re like, yeah, Nerost, and 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.

Credit to Shaun when he brought in the SpaceX investment. We vote on companies. I think someone voted a 1. I’ve seen 4s, of course. I’ve seen 3s. Never seen a 2. I didn’t even know we could do 1. I didn’t even know it was on the scale.

What happened is, after that proposition, he didn’t give up. He just kept pushing. He forced the whole 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.

The point is, it’s all about conviction. At every offsite, we look at our fund returns dating back decades, 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?”

Every time we try to be cute and look at the numbers—maybe if we increase the ownership there and the dollars there—we’re always reminded that 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 happened time and time again across funds.

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

Not all of them. I think where you turn small dollars into big dollars, they have to be controversial. I wasn’t there, but I’ve heard the Airbnb story multiple times. 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 we've made. It was controversial. Sleeping on air mattresses on people's floors and turning that into a 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 continuing to invest in those companies, was important.

We're going to talk about unpacking founders.

Yeah.

One thing I read about Brian—I don't know him—was that he actually became obsessed with medieval lodgings, how people used to travel, and how they stayed in group accommodations.

Yeah.

And the historian that he is...

Mm.

I actually found that fascinating. When you look at the Collisons as well, they're real historians, and truly great founders are often historians of their sector.

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

Listen, before we dive into a couple of lessons from each, I'm going to say 2 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. We try to partner with founders as early as possible, and in fact, what you find is that because of this high bar, we partner with only so many companies every year. When we do, what I see in practice is that there's often capital that's happy to pay a premium to that valuation. We're early-stage investors at heart, and so for us, trying to partner as early as possible remains the priority, but there are other firms that may be investing at later stages that like to come in early and are willing to pay a premium.

Aligned with that, one founder I back is Brandon from McCool[?]—

Uh-huh.

—he went quite viral with this, which I thought was fucking brilliant for Sequoia's marketing, and I don't know why you guys didn't do more with it. He basically said, “Oh, no one talks about...” I'm not dissing Brandon here; it's true. People don't talk enough about the tranche rounds that Sequoia keeps doing, where Sequoia gets in at one price, then there's an inflection, and a next round is done at the same price. To me, that's just a phenomenal way to lock in ownership and money for the company. Is that how you guys see it? Are you 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. 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 a premium after someone has invested?

I think this is a great thing. I would retweet it with, “Yes, the power of brand”—if I were Sequoia. I've done 5 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.

Right.

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

Yeah. Look, I think the difference is also that people are conflating different things that are happening. There are multiple rounds that happen, and we used to have Seed, then Series A, Series B. I think the milestones to get from one to the other used to take 18 months. Now you can move so fast with AI that things happen so quickly. It's only normal that you command a much higher valuation in a short amount of time if you've proven yourself to be right.

It's the triple, triple, double, double. Before, we used to do 1 to 3, 3 to 9, 9 to 18, 18 to 36.

Yeah.

And that was good. That's still great for a company, and we're not at all belittling that, but you have a Lovable, a Ligora—you name it—and they go to 100 million in a year.

Okay, so on that one, I have a strong view. I don't know if it'll be 3 years, maybe 5, but this will come back. I'll tell you why. First, people are conflating 2 things again. Some are new markets, and some are replacement markets. In the case of a CRM company, they might be AI-native, but they're still having to replace a core system of record for a business. 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. 3 years ago, there was nothing, and suddenly you have capabilities that can replace basically what a human can do, so naturally those companies are growing vertically. In a few years, most of the customers out there will have a solution and will hit a replacement market. You'll compare those companies with these other ones apples to apples, but right now it's apples and oranges, and no one's really paying attention to that.

But our job is to play the game on the field. We can put money in one home or another home, and if we can put our money in a home that's much faster-growing in a new market, we have an opportunity cost of that capital, which is why I want to put it there. Am I 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 3 years. So it may be true that they can attract more capital in the short term, but ultimately what matters to you is how much ownership you have and how big the company can get. That will be true only when that investment crystallizes, and it's almost guaranteed that this will happen for the biggest outcomes in markets that are more mature, as opposed to markets that are completely greenfield.

I think this is actually the joy of venture, though: we can be different. What I see is a more liquid secondary market than ever before—

Mm-hmm.

—which is also extremely frothy. Because I'm not Sequoia—a rare moment of humility from me—I can sell much more easily than you.

Right.

And so I can sell into a liquid secondary market at a very exuberant price—

Mm.

—in a way that you can't in a shorter timeframe.

That may be true. But you have a $500 million fund. That's a lot of money to do secondaries that have multiples, 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. Let's not get a good story in the way—

Yeah, exactly—

—of the truth, friend.

Let's not let numbers ruin a good story.

Yes.

Final one before we touch on founder reading and assessment. I do want to go into the mysticism and opacity around 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 just Pat and Alfred to sit by a fireplace and strategize? How does it actually work to get a deal done?

It's funny because we're well into our fifth decade running, and probably for 5 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.

First, yes, everyone is invited, but what's interesting is that we're experimenting with a new approach where we each have to contribute asynchronously after a memo gets shared, and everyone can call an IC if they want to get everyone's opinion. The reason for that is that an IC is a great format for fast thinking. Speaking asynchronously is great for slow thinking, and if you can get the benefit of both, you're hopefully going to make better decisions.

In an IC format, we're each contributing one after the other. It's a sequential rhythm, whereas in this case, we each contribute in a document, and at the end we reach a decision all together. 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. The founders still pitch. It's very important.

So they will still—

Yeah.

—pitch the entire IC?

Yeah. And—

Quite fucking nerve-wracking, man.

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

So you'll say to an entrepreneur, “Hi, Nick. Your pitch with the IC is at 6:00 p.m. I'm 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 between what you saw before and the IC? In other words, do people get super nervous and change much? Do you—do you see what I mean?

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

Yeah, it is true. It does change. But it also is 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 well-founded.

And so that IC then happens—

Yeah.

And you said there about signal. Then our entrepreneur goes away, continues to build his business or her business, and then we vote yes or no. We give it a 1 to 10. What happens now?

Yeah. First, we give feedback independently of the discussion so that we know before the discussion where people are—the pulse—and so that's the vote. Then we have the 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 1—terrible, one of the worst presentations I've seen—and you can still press green?

Yeah. If you press green and it's a bad investment, we'll see how long you stick around.

Oh. You've got to have some serious conviction.

It better be a good investment.

Wow.

Yeah, but it's not an “Alfred voted 1” thing. The reality is a bit different.

Do you know who voted what?

Yeah, you know.

Oof.

But that's super important, and I'll 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 call up George or Stephanie and say, “Can you make that introduction to that amazing connection you have that's quite cherished?” It's a big bullet for them. They're going to make that introduction in a heartbeat.

Is there any politics? Maybe I'm just—I mean, I am insecure and weak, but—

Yeah. Someone said the term “front-stabbing,” which is the opposite of backstabbing.

Yeah.

I love that. I think that's just a way of being very direct with your partners.

Does anyone take it personally? Do you have to caveat it a bit? I always try and say to our partners, “Hey, in the IC, there's no emotion,” but when I say something, their faces sink as if they take it personally.

Uh-huh.

How do you remove the emotion? Is there emotion? Do you have to call people up afterwards and say, “I'm sorry”?

We definitely have heated discussions. People can violently disagree, but ultimately, again, I go back to this being all signal for the person who's sponsoring the investment to decide how much conviction they have in the investment they want to make. Ultimately, yes, the feedback may be tough, but that's not an easy job. If you want an easy job, you go do something else. It's a feature, not a bug. You want people to come in with courage. If they don't have courage, they won't take risks, and we'll have mediocre investments in the portfolio.

I think it's important that it shows that we're representative and honest, but I don't ever want to do founder bashing, for sure, so I like to see founder praise on the flip side.

Mm-hmm.

If you think of an IC where founders just come in and crush it, what one comes to mind?

That happens. What we do in those cases is find it weird at first. If everyone's a 7 or an 8, it's quite dangerous. Founders know what we want to hear. The best founders are able to retrofit the narrative that they think is going to land with investors, and that can be dangerous. In those cases, we try to have a devil's advocate. We ask someone to play the devil's advocate and say, “Okay, what is wrong about that investment? What are the things that, if it goes wrong—” We try to write the pre-mortem of that investment before we make it. We try to spar around that conversation because in a couple of years' time, one of us may have to deal with the consequences of that.

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

Mm-hmm.

What do you think you do 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. You do that very well, actually. My job is that, in 30 minutes, I have to figure out what's special about this person and what might make them exceptional. 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 the right companies. So it's omission mistakes, not commission mistakes.

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. For that, I start sharing my story. I tell them what 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 would spend a week there and then a week back with my dad, where we slept on a mattress in a one-bedroom apartment, and how it was fine. It was fine. I tell them how, when my mom had cancer when I was 6 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. All these things are just—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. I'm just so curious to understand what makes that person who they are that I just want to ask all these questions.

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 are also transparent, thanks to podcasts like this. People can game it, and I've said before, “What do I look for?” That sounds awful, but great gamers, often broken relationships with parents. How do you actually determine if it's genuine or not?

You just have to ask why multiple times. I remember this year was the first year I uncovered a fraudulent founder. It was very interesting because I remember in the first meeting that person said, “Our numbers are going from 0 to 7M of ARR in basically 6 months in a pretty hot category.” In his introduction, he told us how he came from a small village in an unfavorable country and how he got an offer to go study at Stanford, then decided to turn it down to go study at another university.

You just have to ask why. Why did you do that? It's amazing. You got the grades to get accepted into one of the most competitive programs on the planet, and yet you decided to leave it to do something else. Why? It may be for very good reasons, right? But what's interesting is seeing the body language, the tempo of the conversation accelerating, the founder being nervous, and just thinking, “Okay, that's strange.” You just register it. You don't end the call. You give them the benefit of the doubt.

It turns out that a couple of days later, my partner George and I are on our way to the airport at 5:00 in the morning to go see that founder, and on the way to the airport, he tells us that something had happened, that he had a family emergency, and that he had to cancel our meeting. Later that day, we received messages from very respectable 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, in those times when there's so much opportunity, you also have people who take advantage of it for the wrong reasons.

That was, for me, a clear case. 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 programmatic way. That's why you ask why 5 times, and you'll get to the bottom of it.

It is hard.

Yeah.

Especially when we're as open as we are about what we look for. I totally get that. Is arrogance bad? It's one that I'm just not sure about because 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 2-by-2 matrix, your job is to figure out in which part of the quadrant we make money. He used to tell that to many of our partners. It's not because you don't like the founder that they won't make you money.

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 they're using that to hide a weakness, that's the sign you want to look for.

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

Yeah.

It was a loose idea. The references were the most unbelievable ever, from people who had worked with him, but I just couldn't get behind something where it was very loose and there wasn't much of a sales presentation, charisma, or anything. I learned to focus more on references than almost anything else at pre-seed.

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 Osika from Lovable before he founded the company. I just didn't see it. I'll tell you one thing that I learned from that: I didn't come to the meeting with a plan. I just had lunch with him, and it was 3 of us and him.

We were just chatting, and I was not intentional about asking the right questions to figure out what made him special. I underestimated him at the time.

It's hard. You know what's also hard, though, and which I think is important? He's Swedish, and he's a thoughtful Swede.

Yeah.

What I mean by that is, Matt is at Legora. I know you're at Sequoia, but Team Harvey at Sequoia.

Uh-huh.

But Matt is just an aggressive Swede. He's like an American Swede.

Mm-hmm.

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 by country?

Mm.

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?

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. I called up a bunch of their customers who were what we call Mittelstand. Those are small businesses that compose most of the company's economy, right?

We always ask the NPS question at the end: "On a scale of 0 to 10, what do you think of the product?" They were just so consistently saying 7. I remember asking, "Oh, why not more?" "Because we can always do better." Very German.

I remember when the memo came out, one of my partners said, "Why do you think the references are not more positive?" And I said, "Well, they're German customers." I remember telling my partners, "If they're French or German, you add 1 or 2 points. If they're Americans, usually you want to subtract 1 or 2 points on the other end." That's also the beauty of investing here: you just have to take the local nuances into account.

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

Now you're a ripped adult.

Yeah.

Yeah.

But do you have any preferences?

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

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 what trajectory they're on, so going back to their past. If you stop just at their professional history, in some of these cases, they've been working 2 years.

But you have so much richness if you go back to the first 15 or 20 years of their life, and I'll give you an example. I met 2 French founders. Both went to Polytechnique, the most competitive technical program in France, and I could have said, "Oh, these 2 guys are equally good."

What was interesting is, when I started digging into their childhood stories, one of them was the son of a 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 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.

It doesn't mean that they'll continue on that path, but at least it tells you a lot about their existing trajectory. 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 the shit they had to go through to get to where they are today is materially just more.

Yeah.

I totally agree with you.

Mm-hmm.

I always love it when you check the name of the library and you're like, "Ah, it's also your father's name on the library." That helps, usually.

I did think, Jean-Charles, that you were—whatever. Okay. There's Doug Leone, Pat Grady, Alfred Lin, and Shaun Maguire. I'm going to choose 1 lesson from each. Start with Doug. What's the 1 lesson you learned from Doug?

The 1 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 that founders usually tend to say, "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. As they finish, you ask the counter-question, which is, "Who would be your worst reference, and why?" And you see their color change. People answer that honestly. 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?

Oh, I have so many.

That sounded so like the GFC: "Ah, aha." I think mine would be Nick Laster at Omico.

Oh, really?

I think he'd say I was useless.

Uh-huh.

And I was, by the way, when I was at Atomico—

You were also 17 years old.

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

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

Which is why references are really hard for me. Okay, I love that. I'm going to steal that.

Just on the reference point—

Mm.

You asked me about Sean. He has this ELO methodology framework where, if you've played chess, Elo is the score you get attributed depending on how good you are. It's exponentially harder to get to a higher score because you have to beat better and better people to get there.

His point is that if you're a 2,400-rated player, which is extremely good—outlier territory—you're much more likely to be able to judge who another outlier is. I think in the case of chess, in 10 moves, a 2,400-rated player can tell another one. But if you ask someone who's a 2,000-rated player, they 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. When I speak to Torsten at Helsing or Alan at Fuse, they're obviously 2 exceptional entrepreneurs.

Yeah.

I've never met anyone they like. There's 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. Do you not find that the best people 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 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?

The magnitude is how ambitious that person is. Are they going to go through the pain to keep doing what they're doing? I find that framework just so simple, as always with Pat.

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.

The 1 thing I always remember Pat telling me is, "People think that we're so great. Every single company that goes public, we have seen at some point in their journey."

Mm-hmm.

"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. This is fucking Pat Grady.

Harry Stebbings: Yeah.

Harry Stebbings: Like, he leads Sequoia now. To have that humility, I just thought it was awesome.

Julien Bek: Again, my first day at Sequoia, we were all asked to write this one sentence: “We are only as good as our next investment.” We have that printed on the wall now. It was very intimidating to write that on my first day at Sequoia. Very humbling. That’s the focus, and I think you can just see it in the way people behave.

Harry Stebbings: God, you’d be pissed if you’re Sean Maguire and you’re just like, “I just did SpaceX. Come on. Give me a break. Come on.”

Julien Bek: He’s definitely not on the break.

Harry Stebbings: Yeah.

Julien Bek: Yeah.

Harry Stebbings: Alfred Lin.

Julien Bek: 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.

Harry Stebbings: 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. Final one: is Sean the ELO one, or is there another one?

Julien Bek: Oh, the Elo one. Yeah, 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 2 other dimensions. One is judgment; the other is political quotient. Basically, if you think of judgment as how you’re able to find solutions in complex systems, it’s the same with PQ. It’s the ability to navigate politically complex systems. His argument is that judgment is actually more important than IQ, and PQ is more important than EQ.

Harry Stebbings: He’s got amazing PQ. I go back. The balance sheet of Shaun is relatively undeniable. Very funny. Which of those 4 is the best reader of founders?

Julien Bek: Well, it depends on the founder. If it’s a young technical founder, I would ask Alfred or Shaun. If it’s a more commercial founder, I would actually ask Doug or Pat. Again, you mentioned those 4 names, but we have 11 people. I actually think, for instance, that Bogomil is amazing at reading people. So, for some founders, I would definitely bring Bogomil. If it’s a company in fintech, I would bring George because he just knows all of them. He’s very calibrated.

Harry Stebbings: Listen, we’ve covered a lot about Sequoia and what makes Sequoia what it is. In terms of 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?

Julien Bek: Yeah. We’re 3 years into AI, and we’re already at parity in terms of agent traffic to human traffic. I think Cloudflare said this morning that in 5 years from now, we’ll have 1,000 times the amount of agent traffic to human traffic. Again, we’re not good at thinking in exponentials, but if we’re on the foothill of the exponential, we better act as if it will be.

Julien Bek: My thesis is that, on the demand side, you have a new customer that we’re not treating as well as human customers: the agent. 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 it’s going to make the decision on your behalf because that’s just the rational thing to do.

Julien Bek: Today, we’ve basically built these interfaces, whether it’s on desktop or mobile, that are a layer sitting between your business and the customer intent, and you’re trying to translate that customer intent into dollars 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.

Julien Bek: Better UI—

Harry Stebbings: Exactly.

Harry Stebbings: Better onboarding, better sign-up, better payments workflows, 100%.

Julien Bek: And so you end up with a pixel-perfect website that’s amazing at converting humans, but now we need to think of a bits-perfect platform that’s good at converting agents.

Harry Stebbings: What changes then in that world? What should founders take from that? What do we look for that changes? Does UI become completely irrelevant then? How do we think about that?

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

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

Julien Bek: In fact, you have hedge funds buying data to understand how agents are making decisions because that may influence the stock price of these companies. We need to understand, just as we did for customers, what those biases are, how 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. We’re just at the very beginning of that transition.

Julien Bek: In the portfolio, we have a company called Profound. It’s the answer to SEO for the modern marketer. They help you make your business visible to people who are using chat interfaces.

Harry Stebbings: It’s AEO—answer engine optimization, right?

Julien Bek: Yeah.

Harry Stebbings: 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? Will AEO be a significantly larger market than the SEO market?

Julien Bek: What I would say is that we have to consider that it’s not just a new category; it’s a new economy. You’re going to have a parallel economy for agents, just like you have a parallel economy for humans. In that new economy, you will have new categories created. AEO is one of them.

Harry Stebbings: How do you determine what is in that new economy versus what is not? Because I would’ve traditionally said, “Well, a honeymoon for my wife would be in the old economy.”

Julien Bek: Mm-hmm.

Harry Stebbings: I don’t know, dude. I invested in Audacia with you guys, with Konstantin and Francis from Sonder.

Julien Bek: Mm-hmm.

Harry Stebbings: 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.

Julien Bek: Yeah.

Harry Stebbings: So how do you determine which is in which?

Julien Bek: 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’re the one who’s going on that holiday, you want to have a say.

Julien Bek: The difference is, right now, 80% of the databases are written by agents, so why would humans have a say as the AIs become so good that they can pick better than humans? That’s the distinction I would make.

Harry Stebbings: So does that destroy software margins, then? If everyone’s able to switch super quickly, and it could be a race to the bottom on price, with agents optimizing for a load of different preferences, do we just lose margin as providers? What happens there?

Julien Bek: I don’t think that’s true, because that’s assuming that you have no switching costs. The reality is, you may have no switching costs for very menial things. You might want to book different plane tickets—that’s easy, to swap providers. But if you’ve picked a database and you’ve been building in that database, there’s data gravity, enterprise controls, and all the things that enterprises care about.

Julien Bek: That will remain something you build with trust, and trust you build over time. That will remain true no matter what.

Harry Stebbings: When you look at 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? Is it going to fundamentally change as quickly as we think? I’m always conscious of being—I’m not that young anymore, and neither are you—but I’m always conscious of being exuberant. Then I’m always reminded: you always overestimate what happens in a year and underestimate what happens in 10.

Julien Bek: Right.

Harry Stebbings: Enterprises won’t move that fast. They don’t buy as quickly as we think they do. Agents buying in a—

Harry Stebbings: No, no, no. Just like they don’t have Slack, mostly.

Julien Bek: Yeah.

Harry Stebbings: How do you think about agent willingness to engage in that new buying behavior?

Julien Bek: Yeah, I mean, like everything in the adoption curve, this will sit somewhere else on that one. Right now, what you’re seeing is that 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. Today, I think that will probably be further out on the spectrum.

Harry Stebbings: Can I be humble again?

Julien Bek: Again.

Harry Stebbings: This is becoming a bad habit.

Julien Bek: Bad habit.

Harry Stebbings: I don't know, in a lot of cases, which is durable and which application provider will survive. It feels so transient.

Julien Bek: Mm-hmm.

Harry Stebbings: I feel a lot more certainty when I invest in Fireworks, when I invest in Macaw, when I invest in ClickHouse—the infrastructure that I know whoever wins at the top layer, in the application layer, wins, but they're going to use Fireworks, they're going to use ClickHouse, they're going to use Macaw to get there. Do you not just sit around the table as a partnership and go, “God, the infrastructure layer is much easier and better. We want to be there”?

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

Julien Bek: 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 mentioned Relate 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. In a couple of years from now, this will compound into a very large and sticky business.

Julien Bek: 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.

Harry Stebbings: It's funny, one of the things that I love to see when I'm investing is the percentage of the customer base that is non-startup or nontraditional, tech-oriented.

Harry Stebbings: Because when you have Ford Motors in Idaho using it, 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.

Julien Bek: It's funny you say that because, in the case of Rillet, we had the board meeting recently, and they have this thing they call Project Iowa. It's basically appealing to companies outside of tech. This is the fastest-growing segment in the business, and we have car washes and regular auction companies signing up.

Julien Bek: That was a very interesting turning point in the company: that they're able to appeal both to the tastemakers in AI and to the company that your uncle's running with his wife. That's really important because you want to participate in the real economy, not just in the AI economy.

Harry Stebbings: Do margins matter less today, given the expansion of outcome sizes? Whether we look at Fireworks or Lagora, Harvey, Lovable, Wrapit—all the margins are lower right now than they were traditionally in more mature software markets. Do we just not mind because markets are bigger?

Julien Bek: On that point, it's very important: we're in a transient 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 tickets to Hawaii, right?

Julien Bek: What will remain true is that machine-to-machine interactions still benefit from 500-IQ AIs. 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.

Julien Bek: Right 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, 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 investing at even negative gross margins to earn the customer's trust and build a superior product to your competitor.

Harry Stebbings: Speaking about margins and building superior products to competitors, you went viral, which is very exciting to you. You went viral for your post on the services economy being the next trillion-dollar economy, and you're 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, “Oh, empower accountants with ChatGPT to make them more efficient.” I'm like, “Well done.”

What am I missing? I have it written down in much more articulate ways. What am I missing when it's like, “Services is the next trillion-dollar economy that we should pay attention to”?

Sure. The prediction was that the next trillion-dollar company will be a software company that masquerades as a service business. The masquerading is very important, because they cannot be a service company. Does that make sense?

It does. So what would that look like?

We're in the third year of AI. The first wave was about copilots, so it's companies that are helping human workers be better at their jobs. The reason we started there is that 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. The agents are able to complete tasks end to end.

Instead of selling a tool that can help you achieve an outcome, you can sell the outcome directly, and I think that's very interesting. To go back to the accounting example, today you might buy QuickBooks for 2K, but you spend 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?

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

The conclusion is that there are some categories that are already getting there. People may not realize it, but customer support is already in this phase. You already have $1 billion in ARR in this category where outcomes are sold.

The way it works is that we have a company called Sierra. They're an AI company for customer support and customer experience. A typical way is that they go see a customer who has X number of tickets to resolve at an airline, and they know that today they have human agents answering these tickets. For every ticket resolved, they might spend, let's say, $50.

Sierra comes in and says, “We will resolve those tickets for, let's say, a fifth of the price.” At the beginning, customers may want to see how it's working, so it starts as a copilot, but very quickly it moves to an autopilot. The beauty of that is that, 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 a very clear resolution, no resolution, or TBD. What do you do when there's ambiguity? Sales tools? Or marketing tools? No, it 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 do that yet. The combination 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.

My framework is that you have intelligence, which is what the models are really good at: things that are verifiable. How much do we spend for this in that month? Then you have human judgment. People call it taste; people call it the sum of the small experiences you have interviewing someone.

Their body language—are they leaning back or into the chair? That may lead you to ask a different question than 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 its training data.

But today, what's interesting is that those tools that start as copilots are basically in the judgment loop. If they're building the right product, they will be able to harness that judgment so that the judgment of today is the intelligence of tomorrow.

When we say the $1-to-$6 spend, Microsoft, OpenAI, Anthropic—every freaking provider is putting a huge amount of money into the services and implementation side of that business. Are we not actually just seeing traditional enterprises, more than ever, cry out for help to implement AI?

It's interesting you say that because the stat is that 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: you still need human judgment and hands to do a lot of that work.

In the case of ServiceNow, I think they've never hired so many system integrators. You and I are investors in a company called Octor that's an AI for software implementation. 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.

I think what people didn't understand from the article is that it's not because you go from copilot to autopilot that you remove the human completely. What I'm proposing is that we can build companies that will have software-like margins even though there are still humans making the judgment calls. The difference is that you start with lots of humans and little AI, and you end up with lots of AI and few humans. Simple frameworks.

Incredibly reassuring for humanity. Do you buy the “we’ll have smaller teams” argument?

Oh, absolutely.

Yeah?

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. When you see the agrarian revolution or the Industrial Revolution, it took 10, 20, 30 years to buy and train—

Yeah.

—and then deploy machinery on farms in the middle of France. When an update to Gemini can remove a whole generation of designers in terms of movie posters—

Yeah.

—that's worrying. In 6 months, raw code went from 20% of Andrej Karpathy's workload to 80%.

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. We can't underestimate human creativity. In this case, people are just building more. I find that exciting for you and me, 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 where it's like, “Hey, we're collecting the data. We're understanding workflows.”

Yeah.

“We're clearly getting as close to our customer as possible to build the software product.” No?

I'll always tell you when I have low, medium, and high conviction in 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, in my career, I've only seen the best companies 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 transitioned into an AI company. They might have data, but not necessarily the data, because it's just really hard to harness the right 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 a US partnership in a lot of ways. Do you see the promiscuity of US employees in terms of their willingness to move? You mentioned people wanting to work at X or Y. I find US employees incredibly promiscuous in terms of jumping from hot company to hot company to hot company. In Europe, I think we're much more loyal.

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

It must be so confusing for your email.

Yeah.

Do you update your network every time? Like, what?

I think—

It's exhausting.

—they probably keep the emails just in case, because some of them come back.

Might come back.

You see—

“Can you keep Karen at OpenAI just in case?” Like, what the fuck?

Exactly.

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 also just aren't 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 whether they have the ability to do more deals, because so many of them are underwater with shit deals.

Yeah, yeah.

Like—

Yeah, that's true.

—when you're dealing with 5 Titanics, are you really willing to let another flower blossom?

Yeah.

Tough.

Yeah.

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

Sure.

What's the most overfunded category?

Probably legal. I think there are 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. I just don't understand investors' willingness to invest in the Nth competitor.

I will naturally say I think Lagora is obviously going to win. But going back to your point, I think scope is what's important. I do agree with you on the overfundedness, but I kind of don't in a way, 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.

Yeah.

That is so different from a lot of what Harvey and Lagora 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 you'll see the unbundling of law. Now, will Solve be as big as Harvey or Legora? No.

Mm-hmm.

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. I'm a big believer that you should just follow where the smartest people are going. 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 Sierra.

The best agent company outside Sierra 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”?

Well, they joined the portfolio company, so—

Ah, yeah.

—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. We're in business with Trade Republic, but I looked at the seed before I joined Sequoia. 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, it turns out that they barely compete, and they're both building amazing businesses. I failed to understand that it was not a winner-takes-all market. I underestimated the size of the category.

You know, one of the most BS reasons to miss a great company is, “People will use you at the start, but then when they become bigger, they'll just build their own.”

Yeah.

The classic—

Exactly.

—Stripe—

Yeah.

—or search APIs or whatever. It's like they—

It just never happens.

—they don't.

Yeah, for infrastructure in particular.

Yeah.

It's just painful.

It is.

Yeah.

I'm like, “Why would I do that?”

Exactly.

What founder trait do you refuse to compromise on?

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

Which fund, when you hear they're competing, do you go, “Oh, shit, we need to bring our A game”?

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

Yeah.

I've never lost an investment in my time at Sequoia, but I've lost investments before. I lost my first investment 2 weeks into the job when I started in venture a long time ago, and that company was Revolut. Incredibly painful. I think Index and Balderton did that round, if I remember correctly.

Basically, the story is that I'm 2 weeks into venture. I'm 20 years old. I don't know anyone, and I call up the one person I know in venture capital, Sia from Seedcamp. He tells me, “You should come to that pitch. We have 10 companies.”

I thought, “Oh, great. 10 companies? That's amazing.” That was the only criterion that I was given. I show up to this rundown place in East London, in a basement, and there are 10 founders pitching.

One of them is Nikolay from Revolut. Another one of them is Daniel Dines from UiPath. Think about the concentration of EV that was in that room that day. They're both raising their seed and Series A.

I think Nikolay 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 outside his office on Canary Wharf. I 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 they would go with a competitor.

I was really crushed. I remember thinking, “This could be bigger than PayPal.” We'll see. Time will tell, but I think it's a fantastic business. At that time, I took my chances and said, “Can I invest personally in the company?” They begrudgingly pointed me to an SPV, but I was penniless at the time, and even though I had the opportunity, I didn't know how to fund the commitment.

I remember calling my mom on the way back. Like your mom, she's always been there for me with business decisions. She said, “That sounds like a pretty good idea. How about I give you the money, but we'll do 50/50?”

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. 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—

Well, it depends on the valuation, but we entered at $180 million to $200 million. I think the latest valuation is over $100 billion.

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

Yeah, exactly.

Revolut, mic drop.

Exactly. Exactly.

Well done, Mom.

Yeah.

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

Exactly. Exactly.

That's unbelievable.

Yeah. Yeah.

This is why I'll be forever unhappy. You know what I always think in those situations? If only I had put double my check size.

Exactly.

Yeah.

Yeah.

That's amazing. I love that.

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

When I joined his company, I said that I wanted more than $30K, and he refused. I was actually able to negotiate that I would be able to invest in the companies in order to make enough money to survive from the investments. Those angel checks are pretty healthy these days: Preseed Annatto, 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 about venture capital that most of the Sequoia partnership would disagree with?

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. I can post an article about services being the new software, while simultaneously you'll have David Cahn talking about “The $600B Question,” and simultaneously Pat and Sonja saying, “This is AGI.”

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

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

It's what people forget about a brand: the best brands make you feel something. The worst is meh. Whether for or against Nike or Adidas, Apple or Windows, you feel something.

Exactly.

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

Final one. What are you most excited about for the next 5 years of AI—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 maybe find cures for your mom's or my dad's disease. We'll find things that are just so transformative to humanity that it'll make all these things we worry about today sound completely insignificant.

I'm not from the world of science, but I'm very excited about companies that are helping push the frontier of life sciences and biology. The great thing is, in London, we have a lot of focus on that. We just saw Demis's post, and it's great to have these big brains focusing on these problems. So I'm 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 almost 10 years, which is terrifying and makes me feel very old, but you've been an amazing friend to me, and I really appreciate you.

You're my brother. Thank you, sir. But before we leave you today, founders face a different set of challenges at every stage of growth. For Sid Shate, co-founder and CEO of DMatrix, JP Morgan delivered the guidance and expertise to help navigate what came next. He credits JP Morgan's high-touch approach with supporting DMatrix as it grew and expanded internationally. Whether you're in the early days or expanding into new markets, JP Morgan helps startups navigate complexity with real confidence, offering personalized guidance and deep sector expertise. Find out how JP Morgan helps founders at jpmorgan.com/growwithoutlimits. JP Morgan is the bank of the innovation economy. While JP Morgan supports growth, Corgi protects it. My word, what an arresting first line. Get your ass covered with Corgi Insurance, and I'll tell you why. If you're running a business right now, you already know this pain all too well. Getting insurance, it's really slow, it's confusing, and my word, it's full of paperwork. Well, that's exactly why Corgi is here to change the game. Corgi is the first and only insurance carrier designed specifically for tech companies, allowing you to get covered in minutes instead of days. Corgi provides essential coverages for all growth stages, such as D&O, E&O liability, cyber, commercial, general liability, and more. Get your ass covered, I love the way we say ass, with Corgi Insurance, alongside thousands of other startups at corgi.com/20vc today. That's corgi.com/20vc. You won't regret it. While Corgi covers risk, Flexe gives you room to move. Business owners run their whole financial life on Flexe. One platform from business revenue to their personal spend. Float every purchase for 60 days. Tap capital that grows with your revenue. And pay vendors in 170 countries across 32 currencies. Plus, the whole back office, bills, expenses, accounting, all in one place, so you spend less time reconciling and more time growing. That's why thousands of owners use Flexe, named one of Fast Company's Most Innovative Companies of 2026. Visit flexe.one, that's F-L-E-X dot O-N-E, and use the code 20VC.