All Things VC

A few weeks ago, we looked into why Sequoia invested in Apple, Yahoo, LinkedIn, Airbnb, and Whatsapp, how they won the deals, what Sequoia’s general investment thesis is, how you as a founder can position yourself to get funding from Sequoia, and discuss some regrettable passes they have in their anti-portfolio.

After studying my notes on Sequoia Capital, I realized I had more information to share beyond just why they invested in the companies they did. I realized I could recycle some of my notes to produce a new type of episode I intend to start releasing weekly, which will be five questions I’d ask founders if I were a partner at the VC firm of focus for this week.

While I don’t know whether they ask these questions, I have many direct quotes from current and former partners about what they look for in founders and questions they ask founders when determining whether to invest in a company. 

I think this will be a helpful thought exercise for founders who intend to raise to think about your answers to some of these questions as I believe they are questions an investor would ask whether Sequoia or not, so It’d be good to think about.

For investors, it’s good to think about the questions you like to ask founders and why and read some of these quotes from Sequoia partners, who are certainly some of the best investors in the world, so it’s worth reading this information and maybe adding some of these questions to your list if you think they’re effective.

More All Things VC:

To read this podcast in an abbreviated format, check out the substack: All Things VC. It has the same content as the podcast, just a little more direct with less improv.

To read more about Benchmark and 15 other companies they invested in that we didn’t discuss, more on their general investment theses, what makes a good VC, what they look for in founders, and general advice for founders, head to allthingsvc.blog to read more.

You can also follow me on X at Justin_Pryor for more information I post throughout the week based on what I discussed in this episode. Likewise, you can find All Things VC on YouTube to see clips of these episodes separated by each major topic I discuss.

The idea of investors who were former entrepreneurs and engineers backing entrepreneurs and engineers is mainstream in venture capital today. Back in 1972, however, at the founding of the venture capital firm Kleiner Perkins, startups were presented with different types of institutional partners. Partners that were typically from a finance or sales background and used banking tactics to invest in risky startups.

We know now that this mindset of investing is clearly flawed, and the best venture capitalists are the ones who understand the entrepreneur’s mentality, product, market, and business plan, having been in the shoes of the entrepreneurs before and knowing what it means to build a product. Tom Perkins, the founder of a startup pursuing a new laser technology, and Eugene Kleiner, a member of the “Traitorous Eight” who formed Fairchild Semiconductor, were the firm's founding partners with the uninspired name of Kleiner Perkins. 

As we’ve mentioned in past essays, VC firms have to sell their services, so every new firm needs to stand out. Kleiner Perkins, being a firm of entrepreneurial engineers for entrepreneurial engineers, was certainly a way to stick out in a field that had yet to find this notion as mainstream. 

As a result, Kleiner Perkins cemented itself as one of the top VC firms throughout the 70s, 80s, 90s, and early 2000s. Much of their early success is attributed to this counter-positioning, allowing them to partner with exceptional entrepreneurs pursuing a difficult technical challenge that the Kleiner team could analyze better than many investors. In the 80s and '90s, the firm reached pinnacle status as one of its partners, John Doerr, became unquestionably known as the top VC in the valley, and many young entrepreneurs sought his counsel. 

However, this run did not last, as the firm has seen less-than-exceptional results since pursuing a green-tech wave in the mid-2000s, from which it is now recovering. The firm currently has a group of twelve partners, all having joined the firm no earlier than 2017, seeking to bring Kleiner Perkins back to its heyday by investing in breakthrough internet technologies, much of what made the Kleiner Perkins of old so spectacular. 

Today, we will investigate why Kleiner Perkins invested in Genentech, Amazon, and Google, their general investment theses, what they look for in founders, what traits they feel make the best VCs, and general advice they have for founders. At the end, we’ll look at some huge misses they had in the past in companies like Tesla, VMware, and Robinhood.

More All Things VC:

To read this podcast in an abbreviated format, check out the substack: All Things VC. It has the same content as the podcast, just a little more direct with less improv.

To read more about Benchmark along with 15 other companies they invested in that we didn't discuss, more on their general investment theses, what makes a good VC, what they look for in founders, and general advice for founders, head to allthingsvc.blog to read more.

You can also follow me on X at Justin_Pryor_ for more nuggets of information that I post throughout the week based on what I talked about in this episode. Likewise, you can find All Things VC on YouTube to see clips of these episode separated by each major topic I discuss.

Chapters:

Why did Kleiner Perkins Invest in Genentech? - 3:34 mark

Why did Kleiner Perkins invest in Amazon? - 14:07 mark

Why did Kleiner Perkins invest in Google? - 26:35 mark

The Kleiner Perkins Anti-Portfolio - Why did Kleiner Perkins pass on Tesla, VMware, and Robinhood - 40:51 mark

There are a few companies that define a decade of startup investing. In the 1990s, it was eBay. In the 2010s, it was Uber. While these seem like completely different business models today, they rely on a similar theme around network effects that are at the core of the investment thesis of the VC firm we’re going to talk about today: Benchmark. 

Benchmark has solidified itself as one of the greatest and most consistent venture capital firms of the last 30 years, defined by its seventh fund, which returned somewhere around 20-25x to its LPs, and its first fund, which returned at least 50x to LPs, potentially even 92x, making it most likely the greatest returning venture multiple of its size and scale. 

Today, we’re going to talk about why Benchmark invested in decade-defining companies like eBay and Uber and another notable win that has many lessons to learn from in Riot Games. As our traditional format follows, we’re going to investigate why Benchmark invested in these companies, what their general investment theses are, what they look for in founders, how you as a founder can position yourself to raise capital from Benchmark, and lastly, we will take a look at some HUGE misses they’ve had throughout their near immaculate journey.

More All Things VC:

To read this podcast in an abbreviated format, check out the substack: All Things VC. It has the same content as the podcast, just a little more direct with less improv.

To read more about Benchmark along with 15 other companies they invested in that we didn't discuss, more on their general investment theses, what makes a good VC, what they look for in founders, and general advice for founders, head to allthingsvc.blog to read more.

You can also follow me on X at Justin_Pryor_ for more nuggets of information that I post throughout the week based on what I talked about in this episode. Likewise, you can find All Things VC on YouTube to see clips of these episode separated by each major topic I discuss.

Chapters:

Why did Benchmark invest in eBay? - 6:15 mark

Why did Benchmark invest in Uber? - 24:06 mark

Why did Benchmark invest in Riot Games? - 56:48 mark

The Anti-Portfolio - 1:11:12 mark

Sequoia Capital is one of the most notable venture capital firms in the world. How notable? Well, As of this writing, Sequoia has financed companies worth over $7 trillion, yes, with a T, including three of the top six most valuable companies in the world: Apple, Google, and Nvidia. Founded in 1972 by a former Fairchild Semiconductor sales executive named Don Valentine, Sequoia rose to prominence by being an early investor in breakout companies like Atari, their first investment, and Apple, not too long after that. The success of their first fund, which included these two companies and generated a 60% IRR, increased their credibility along with the credibility of the entire venture capital ecosystem itself. 

Today, we’re going to investigate why Sequoia invested in Apple, Yahoo, LinkedIn, Airbnb, and Whatsapp, how they won the deals, what Sequoia’s general investment thesis is, how you as a founder can position yourself to get funding from Sequoia, and discuss some regrettable passes they have in their anti-portfolio. 

MORE ALL THINGS VC:

1. Website:

I only mention a few companies, investment principles, and advice for VCs/founders, in each blog post and episode, but on my website, allthingsvc.blog, you can find dozens of companies that I provide insight into why that VC firm invested in that company and many more pieces of advice and lessons you can learn from. For example in the Sequoia blog post I talked about 5 companies Sequoia invested in, on my website I have information on about 25 companies Sequoia invested in. I encourage you to also check that out if you’re interested in learning more.

2. Substack:

If you prefer to read rather than listen, you can subscribe to my substack with the same name, All Things VC, with the same logo and everything. Every essay will be shorter and more ot the point than the podcast, but still contain all the vital information within this podcast contained in 7,500-10,000 words. I recommend subscribing to both and seeing which you prefer or, ideally, consuming both!

SOURCES:

Episode Sources

All Things VC brings you the hardest-to-find secrets about why venture capital investors invest in the companies they did, what advice they have for founders, what makes a good VC, and what are some huge mistakes they've made from companies they passed on.

You can expect an episode of All Things VC every Wednesday, so subscribe to stay up to date. I hope you learn as much as I do!