A Block Step Forward

New liquid token fund complements ongoing crypto investing

By Michelle Bailhe, Shaun Maguire and Alfred Lin on behalf of Team Sequoia

We have partnered with an ever-growing group of some of the best founders in crypto. From Sam Bankman-Fried at FTX, Jack Dorsey at Block, Uri Kolodny and Eli Ben-Sasson at StarkWare, and Michael Shaulov at Fireblocks, to Elena Nadolinski at Iron Fish, Yubo Ruan at Parallel, Ming Wu at Strips and more in stealth, these founders have expanded both our thinking and how we support their unique needs. While we’ve invested in both equity and tokens over the last five years, many have asked that we take a more active role in managing our tokens, including staking them, providing liquidity, participating in governance and trading through their platforms. Our network of builders at Ethereum, Solana, major DeFi protocols and beyond have urged us to do the same.

Today, we are doing just that with a new $500–600M sub fund focused primarily on liquid tokens and digital assets. Sequoia Crypto Fund complements our broader commitment to crypto. Our goal with this fund is to participate more actively in protocols, better support token-only projects, and learn by doing ourselves. We remain committed to working collaboratively with the crypto community, including providing ongoing support for open-source research. We will also continue to partner with crypto teams across every stage of their journey out of our seed, venture, growth and expansion funds. Sequoia Crypto Fund is one of the first sub funds to invest out of our new capital structure, the Sequoia Capital Fund.

We gathered feedback from many of our founders to design this effort, and we welcome yours. If you have advice for us, or want to share something you are building, please reach out.

More to come.

Disclaimers

In early 2021 the value of the combined cryptocurrency market crossed $1 trillion for the first time, a figure that caught the attention of even the staunchest skeptics. In November, that figure crossed $3 trillion — more than the value of any company on earth. Thousands of developers are now building crypto projects, with much of that activity inflecting in the last three years. There are over 7,000 tokens today, a nearly 12X increase from early 2017.

There is a Cambrian explosion underway in crypto. While we’ve invested in crypto for years, the recent acceleration in the space has been astounding. Over a quarter of all new Sequoia partnerships in our U.S./Europe business in the last year have been in crypto-related companies, and as part of our new structure, we’ll be participating more directly in governance and staking tokens. The question is no longer if cryptocurrencies will win mainstream adoption but the full scope of how, over the next generation, blockchain technology will transform economies and our digital lives.

We’ve learned through experience how easy it is to underpredict these transformations. For example, when we first met Chad Hurley, Steve Chen and Jawed Karim as they were just starting YouTube, we imagined what future scaling scenarios might look like at widespread adoption. The best case scenario in our investment memo entertained the possibility of serving 30 million videos per day. That represented 300X growth, which seemed ambitious at the time. But this was two years before the first iPhone and the rise of mobile, which brought a force multiplier in global video consumption. Today, YouTube serves 5 billion videos per day.

At this transitional moment in crypto, we’ve been reflecting on that 2005 YouTube investment memo. We realize how pivotal YouTube was not only in defining the previous generation of the internet’s evolution, but in setting the stage for the creator economy and what comes next. To honor YouTube’s place in that story, and to celebrate the unpredictable upside of foundational technologies like crypto, we’re minting an NFT of the original YouTube investment memo and auctioning it on OpenSea.

The rise of blockchains echoes the rise of the internet itself: the direct, free flow of information between people laid the foundation for the direct, free flow of value on blockchains. This is as much a shift in culture and psychology as it is in technology, and it will enable new economic realities across the world. In the world of NFTs, anyone can create a digital asset — and anyone can invest in one — bringing unprecedented diversity to asset valuation and exchange.

We now see YouTube as a tipping point that paved the way for how we think about the creator economy today. YouTube made the notion of digital asset ownership personal and brought wide distribution of those assets to the mainstream. The YouTube investment memo is a time capsule from the precipice of web2. It seems only right that it be tokenized for posterity. What better time to auction it than at the precipice of web3?

In the next phase of digital evolution, the role of distribution gatekeepers will diminish. Creators will gain the upper hand as control over assets tips toward network participants and away from aggregators. But blockchains will impact far more than currencies and how digital goods are valued and traded. Decentralized protocols and new entities like DAOs may reshape everything from how products are built to how people communicate and create community.

We can’t predict the scope of change or how it will reshape culture. At these early stages, we don’t know what factors will catalyze crypto or in which direction. Those catalysts could be technological, regulatory or cultural. It’s unclear whether transformation will come from a new diversity of currencies in the world, or from the decentralized applications enabled by blockchains — or both.

But what does seem clear is that blockchain technology is beginning to constitute a new protocol for digital interaction at a foundational level. Innovation is accelerating at the application level above layer 1 blockchains, as well as below: one of the most exciting developments we’ve seen is the pursuit of a protocol to make different blockchains fluidly interoperable. This effort has been compared to a TCP/IP for crypto. What this could unlock, we can only imagine. Early web enthusiasts knew it would change everything without being able to foresee trading stocks on an iPhone. The same is true of crypto today.

Whatever the future of web3 holds, visionary founders will be the ones to mold it, just like Chad, Steve and Jawed did before them. Our mission is seeking out the exceptional founders behind the next era-defining innovations.

The best way to prepare your mind for the possibilities of emerging technologies is through insatiable curiosity to learn and understand. So starting next week, we’ll begin hosting a series of live conversations about crypto on Twitter Spaces. We’ll get a global perspective on its potential and challenges — from technology and scaling to regulation and business infrastructure — from the founders and innovators pushing crypto forward. We’ll speak with some of the brightest people in crypto, and we’re happy to learn in public. If you’re a crypto founder — or just curious — we hope you’ll tune in and talk to us.

Until then, happy bidding on the 2005 YouTube memo. Proceeds from the auction will go to 0xPARC’s public goods ecosystem development pool, which will distribute them to maximally benefit the crypto community. We minted the NFT as an ERC-721 token. The auction is taking place on OpenSea and will close on Tuesday, December 7. We’re not retaining a royalty stake — the winner will assume 100% ownership. We’re remaking history, and you can own a piece of it.

Disclaimer
The information contained herein is being provided to you for informational purposes only and should not be relied upon as legal, business, investment or tax advice. Please consult your own advisors as to these matters.
This is not an offer to invest in any fund (“Fund”) managed by Sequoia Capital Operations, LLC (together with any affiliates, “Sequoia”). Any offers will be made only by means of a confidential private placement memorandum (“PPM”) which will include important risk factors and considerations that should be carefully evaluated before making an investment in the applicable Fund. Any decision to invest in a Fund must be based solely upon the information set forth in the applicable PPM and the exhibits thereto, each of which should be read carefully by prospective investors prior to investment.
The information herein is given in summary form and does not purport to be complete. Please note that any investments referenced herein are illustrative and do not reflect the performance of any Fund as a whole. Past performance is not indicative of future results and there can be no assurance that any Fund will achieve comparable results. All forward-looking statements are based upon assumptions that may not prove to be correct. There is no obligation for Sequoia to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise.

Why We’re Auctioning an NFT of Our 2005 YouTube Memo was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

This month marks my ten-year anniversary in venture capital, and rare and exciting have been the occasions when I met founders who are shaping a new category. I had this feeling when I met Will at Deliveroo in 2014, Daniel at UiPath in 2016, Andrey at Miro in 2018 and Johnny at Hopin in 2019. Meeting Toussaint and Stéphane at Upway was deja vu, to use a term close to home for them.

At Sequoia we love partnering with founders from idea to IPO and beyond. We met Toussaint and Stéphane at the idea stage, and what an idea! Reducing greenhouse gas emissions to protect our climate is perhaps the most urgent mission of our generation, and shifting to electric mobility is a must. Unfortunately, production of electric vehicles — especially those on two wheels — hasn’t scaled with demand, prices have remained high, and there is no platform for preloved vehicles to be resold. Upway’s mission is to address these challenges and make electric mobility accessible to all, by building a worldwide marketplace for reconditioned small electric vehicles. They’ll source from both consumers and businesses, then sell via their platform, allowing customers to buy e-bikes at the click of a button, without long wait times, and at a better price.

While Upway launched in the Paris region (set to become one of the most bike-friendly cities in the world over the next five years), their ambitions are global — a tall order, but if anyone can do it, it’s them. Having cut their teeth at Uber in some of the most operationally demanding roles, Toussaint and Stéphane are now moving their team forward at lightning speed. (If you would like to join them, please reach out!) We at Sequoia are proud to lead their seed round and thrilled to be part of their electric journey.

Upway: Electric Mobility For All was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

From decentralized finance and NFTs to DuckDuckGo and Signal Messenger, the last 18 months have exposed exploding consumer demand for greater autonomy and privacy in the way they search, collaborate, and conduct business.

Big tech platforms and unproven challengers have pivoted to incorporate privacy-respecting features or build more decentralized web3 products. In the April 2021 iOS 14.5 update, iPhone users were given the option whether or not to be tracked across apps. A staggering 96% chose not to be tracked, indicating that when given the choice, users choose privacy.

In January 2021, tens of millions of users flocked to encrypted messaging platforms Signal and Telegram. The migration was driven at least in part by anxiety about WhatsApp’s privacy policy: a notification reminding users that it shares data with its parent company, Facebook, drove more than 25 million users to Telegram in just three days. Simultaneously, DuckDuckGo — which began with a post on Hacker News — has continued to grow, now exceeding over 100 million queries daily on average, while its advertising business and mobile offerings expand dramatically.

These impressive statistics point to a sea change in consumer demand for increasing privacy and ownership over their own data. Yet, this craving for privacy isn’t new. Early in the internet revolution, consumers took free products at face value, not yet realizing that “if you’re not paying for the product, you are the product.” Private applications appealed to fringe users, while non-private, ad-supported internet applications proliferated, becoming cash machines for their makers. Monetizing personal data became the default business model. The default effect is powerful. So much so that the majority of Americans have resigned to the default and believe that the tracking and collection of their data is inevitable.

Good news though: The times are changing.

Why now?

The movement of all communications — including private communication — online during the COVID-19 pandemic helped open the public’s eyes to digital privacy. Consumers started to demand more out of the companies they would share their data with.

Increasing consumer interest in cryptocurrencies, DeFi, and NFTs is also driving wider consumer adoption of cryptography and education about private practices (a crypto wallet functions like other end-to-end encrypted products). The word crypto itself comes from the Greek kryptós, which means “secret.”

Simultaneously, innovative newcomers have entered the scene and made privacy-first apps more attractive, leveraging existing UX patterns to create familiar experiences. We’ve partnered with a couple of them recently: private search engine Neeva and web3 collaboration platform Skiff. As the newcomers gain traction with part of the population, they exert market pressure on the incumbents to start at least gesturing towards privacy.

Increased supply of user-friendly private tech and increased demand for privacy have converged, creating a moment of unprecedented opportunity for founders with a vision for privacy-first online experiences.

Who’s poised to win?

While incumbents will try to fast-follow to meet the demand, they’re at a disadvantage compared to new startups. Here’s why:

1. Business model: Many incumbents are dependent on privacy-exploitive, ad-dependent business models. New technologies enable companies to place greater control of data in the hands of users while delivering great user experiences. With subscriptions, rather than ad sales, these new companies align incentives with the user.
2. Distrust: Big tech companies have lost consumer trust on privacy: The majority of Americans, in every demographic group, believe that their data is less secure today than it was five years ago. In January 2021, Facebook’s breach of over half a billion users’ personal data (which then landed on a cybercrime forum) was treated as commonplace. That means there’s room for new companies to earn the trust that incumbents have lost.
3. Inertia: Just as it’s hard to get consumers to shift their behavior, it’s perhaps even harder for incumbents to migrate to privacy-first technology. Case in point: Facebook has said that adding end-to-end encryption to Messenger would require rebuilding the product from the ground up, which will take years.

Visualizing privacy-first products and the levels of consumer privacy they enable in the chart below, it’s easy to see that new entrants are pushing the boundaries more than incumbents.

Building a private internet

In the physical world, privacy products might mean one-way glass, taller hedges, and thicker curtains. Online, the definitions are less clear. “Privacy-first” engineering, design, policy, and marketing reflect different commitments, priorities, and constraints:

• Engineering: Privacy-first products may be end-to-end encrypted (meaning the service provider is unable, in any circumstance, to access certain customer data), decentralized (where data, trust, or identity may be split across people or users around the world), and are generally built with greater transparency (open-sourcing) or community involvement.
• Design: Products may choose different design patterns when focusing on privacy, reinforcing transparency, agency, and platform security. Other platforms (such as Signal) have incorporated privacy more discreetly into the design, leveraging familiarity to ease adoption.
• Policymaking: Privacy-first products have slimmer privacy policies with significantly fewer avenues for providers to collect, share, and monetize user data. For example, compare Signal’s privacy policy with Facebook’s, which includes sections such as “device information” on personal data used for advertising.
• Brand marketing: Privacy-first companies can capture consumer interest by playing to existing dissatisfaction and mistrust (see Signal’s subversive take on Instagram ads) or by highlighting how expectations online differ from those offline (such as Apple’s satirical campaigns around app-tracking and transparency).

Successful products will blend all four of these elements together to meet the new tide of demand for secure, private online experiences.

As more of our work and lives shift online, digital privacy will be increasingly vital. Privacy isn’t a fad. This is an important cultural shift that will drive innovation — and we’ve only scratched the surface.

Where do you see the biggest opportunities on the privacy spectrum? What kinds of privacy-first products do you want to see in the world that don’t exist yet? Let Konstantine Buhler know at web3@sequoiacap.com.

Methodology for segmenting the privacy landscape

Private Applications

On the supply side, we’ve identified five levels of secure and private applications, segmented by their sophistication and practices. A0 are the most vulnerable applications, A4 the most secure.

• A0: Provider-centric products. These products give the provider a high degree of access to user data. User data is stored in plaintext with no encryption (as in the Equifax hack) making the risk of data breaches and government accessibility high. These products share user data, content, and metadata with third-parties and governments or use for targeted advertising.
• A1: Enhanced privacy. Better practices are followed for encrypting data in transit and at rest, but the provider has the keys to decrypt and provide to third parties or use for targeted advertising.
• A2: Protecting sensitive content. These platforms limit the sharing and collection of certain sensitive customer data. For example, while messages in WhatsApp are end-to-end encrypted — and accessible only by senders and intended recipients — other account data (such as who a user interacts with) may be used for marketing purposes. In A2, the provider maintains access to some user data, but much of it is end-to-end encrypted.
• A3: Fully private. At this level, the unit economics of products change. As users’ data is no longer collected by the provider, or shared or sold to third parties, users may be asked to pay for products. For example, Neeva’s ad-free, private search engine requires a monthly subscription. In A3 the provider maintains no access to user data.
• A4: Future Applications. Here centralized providers cease to exist. There are several decentralized projects that are aiming to decouple user data from the application entirely. In such scenarios, you would store all of your data locally and only interchange data when an application needs it and has your explicit permission. In these cases providers collect no user data so there’s no risk of breach or unwanted use of data. For example, Skiff’s web3 collaboration platform just announced with Protocol Labs an option to store end-to-end encrypted files on the decentralized (InterPlanetary File System).

Private consumers

A similar segmentation can be made for the demand side. In this analysis, we include some security practices, as user security is the lowest hanging fruit for consumer privacy. (Using an end-to-end-encrypted application isn’t helpful if the password is easily guessed, like “1234.”)

The security and privacy practices of internet users can be broadly plotted on a scale from C0 to C3, according to their level of vigilance. C0 are the most vulnerable consumers, C3 the most secure.

• C0: Vulnerable. These consumers use any application they find on the web, reuse weak passwords and lack awareness of privacy threats. These are the consumers most vulnerable to being taken advantage of by websites and hackers. But at least their ads are well targeted.
• C1: Informed. These consumers are aware of privacy threats and protect their accounts with hard passwords and/or a password manager (like Dashlane), but they still liberally share personal data by using A0 or A1 applications.
• C2: Secured. These consumers protect themselves from several cyber attacks by using multifactor authentication and in some cases hardware tokens. They take control of their privacy rights and know how to navigate the privacy and security settings on mainstream applications. They are aware of their privacy rights (GDPR, CCPA, etc) and may even submit data subject requests and data deletion requests to large providers.
• C3: Advanced. In addition to hard passwords and multi-factor authentication, these users protect their data from cross-site ad tracking by using A2 and A3 privacy-oriented applications across the web, from browser to social media. They opt into end-to-end encryption whenever it is available, use high-privacy products like Neeva, Signal, and Skiff, and avoid applications that violate their trust.

The Rising Consumer Demand for Data Privacy and Autonomy was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

When we partnered with Aurora in early 2019, co-founder and CEO Chris Urmson had been on Sequoia’s radar for several years. As we noted at the time, he even helped shape our early thoughts on the autonomous vehicle landscape itself, with a memorable 2016 presentation he shared after leaving his role leading Google’s self-driving unit.

With deep expertise in a space that we consider one of mankind’s largest and most exciting “science projects,” Chris was already widely respected for both his technical and leadership abilities. But in the years that followed, we got a closer look at what makes him so exceptional — not only as a technologist and as a leader, but as a person.

Chris and I happen to live only a few miles from each other, and as he began to build Aurora and Sequoia continued to explore self-driving technology, we started meeting for coffee every couple of months. His IQ was immediately clear — but so was his EQ. He is open, authentic and down-to-earth, a truly good human. He also has a clear sense of purpose. Each decision he makes is with Aurora’s mission in mind: to accelerate the adoption of self-driving technology, and to do it safely.

As we got to know his co-founders, Sterling Anderson and Drew Bagnell, we realized that while Chris may have set the stage, Aurora is led by a dream team, all of whom are all-in on its impressive company culture. Their leadership is contagious — in the Bay Area and Pittsburgh offices alike, we found the same commitment to making our roads safer and our supply chains more efficient, and the same understanding of what it takes to deploy self-driving technology at scale. And at their new trucking center in Texas, which opened last summer, that mindset again quickly took hold.

In the years since Chris, Sterling and Drew gave us the opportunity to support their mission and lead the Series B, we’ve seen Aurora grow rapidly. But through it all, their culture has remained intact. From a small lidar company in Bozeman, Montana, to the entire ATG unit of Uber — several-hundred-engineers strong — Aurora has successfully added new team members and new ideas while retaining its values. Merging two organizations is difficult even under normal circumstances, much less in the middle of a global pandemic. It wasn’t always seamless. But because Aurora was so intentionally built to scale, they were able to figure it out, and those two teams are now one.

As Aurora has grown, so have its ambitions — with Chris and the team wisely recognizing that the Aurora Driver platform is a true crossover technology, applicable to autonomous trucking as well as passenger mobility. By starting with trucking, they are helping meet the moment of a supply-chain crisis fueled in part by a shortage of 60,000 truck drivers — which is expected to grow to 160,000 in less than 10 years. In the process, they are also expanding Aurora’s already world-class partnership ecosystem, with an industry-first pilot program with Paccar and FedEx that is already on the roads in Texas (with a safety driver for now).

Five years after Chris, Sterling and Drew launched their dream of revolutionizing transportation, today’s IPO is an exciting validation of the hard work they and their team have put in, and we are proud to celebrate alongside them. But we also know there is much more hard work to come; this is merely a milestone on the path to commercial deployment of the Aurora Driver. So on behalf of everyone at Sequoia, congratulations to the Aurora team on this accomplishment, and thank you for trusting us to be by your side. We’re confident that you will continue to drive down the road toward safe and autonomous vehicles — even and especially when no one’s at the wheel.

Aurora IPO: The Road Ahead was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

The democratization of investing is one of the most important consumer trends of our lifetime.

Today, more than 50% of U.S. households are investors in the stock market. This is the result of decades of progress: from 1975 when fixed retail commission rates were deregulated, to the rise of discount brokers like Charles Schwab, followed by the rise of online brokerages and today’s mobile-first, fee-free trading platforms. A lot has changed to make investing accessible.

However, this financial revolution has not been evenly distributed around the world.

In Latin America, things are different. Banks limit investing access to their wealthiest clients. Even if you do manage to find a bank that will give you a brokerage account (which is no small feat), the fees, investment minimums and withdrawal penalties all remain prohibitively high. This makes the logistics of investing far too challenging — and thus few do it.

But as the global middle class emerges, so will their assets. Today, these assets don’t have a great home. Tomorrow, we suspect they will.

Enter Fintual: a simple, digital-first way for consumers to invest. What Charles Schwab did nearly a half-century ago in the U.S., we believe Fintual is doing today in Chile and Mexico.

Half of Fintual’s users have never had experience investing, and an additional 25% have only ever had a savings account — yet the average client invests thousands of dollars on the platform. What’s more, they are virally referring their friends and family: 90% of Fintual’s user base comes from organic acquisition and customer referrals. This is not something we see every day.

Most unique, however, is the team’s flair. The first time we met CEO and co-founder Pedro Pineda, he described the company as a “kind jungle.” We were instantly charmed by Fintual’s hungry culture and distinctive Chilean sense of humor. See their mutual fund products: Conservative Clooney, Moderate Pitt and Risky Norris. And note their fund reviewing and rebalancing process, “Woodstonk.” It was thus no surprise to learn that Fintual was named the best place to work in Chile for employees under age 35.

For all our enthusiasm about the opportunity in Latin America, we at Sequoia have been selective in our investments. We’ve only partnered with a handful of companies in the region over the last decade, including Despegar, Nubank and Rappi. We are delighted to add Fintual to that list, and to welcome Pedro, Omar, Agustin, Andrés and their team to the Sequoia portfolio.

Fintual: The Future of Consumer Investing in Spanish Latin America was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

The creative spirits. The underdogs. The resolute. The independent thinkers. The fighters and the true believers. This ethos describes the founders we partner with, as well as Sequoia’s relentless drive to help them succeed.

Since 1972 we’ve had a front row seat as visionary business and technology leaders pushed the bounds of the possible. And it’s just the beginning.

Ironically, innovations in venture capital haven’t kept pace with the companies we serve. Our industry is still beholden to a rigid 10-year fund cycle pioneered in the 1970s. As chips shrank and software flew to the cloud, venture capital kept operating on the business equivalent of floppy disks. Once upon a time the 10-year fund cycle made sense. But the assumptions it’s based on no longer hold true, curtailing meaningful relationships prematurely and misaligning companies and their investment partners.

The best founders want to make a lasting impact in the world. Their ambition isn’t confined to a 10-year period. Neither is ours.

Our experience with category-defining companies — Apple, Google, Cisco, Unity, Snowflake, Zoom — has taught us that they take more than a few years to build. In recent years, many of our most promising companies have chosen to stay private longer, building scale and expanding their strategic footprint before debuting as public market leaders. They then compound their advantage for decades, with much of their value accruing long after an IPO. Square, for instance, which we partnered with early in 2011 and where I remain on the board of directors, had a market capitalization of $2.9B at the IPO in 2015. Five years later Square grew to $86B, and today is worth over $117B. “As a founder, the understanding and trust we’ve built with Sequoia and Roelof over many years are irreplaceable,” says Jack Dorsey of Square. “That history and relationship has been crucial to me at defining moments.”

Patience and long-term partnerships generate exceptional results. For Sequoia, the 10-year fund cycle has become obsolete.

Over the years, we’ve reinvented ourselves in our quest to discover outlier founders. We followed technology innovation around the world as we expanded from Silicon Valley into China, India, South-East Asia and Europe. We developed the industry’s first Scouts program over a decade ago. And we’ve launched initiatives to help founders succeed, from recruiting and customer roundtables to company design and community programs.

We can do more. Today, we are excited to announce our boldest innovation yet to help founders build enduring companies for the 21st century.

In our U.S./Europe business, we are breaking with the traditional organization based on fund cycles and restructuring Sequoia Capital around a singular, permanent structure: The Sequoia Capital Fund.

Moving forward, our LPs will invest into The Sequoia Capital Fund, an open-ended liquid portfolio made up of public positions in a selection of our enduring companies. The Sequoia Capital Fund will in turn allocate capital to a series of closed-end sub funds for venture investments at every stage from inception to IPO. Proceeds from these venture investments will flow back into The Sequoia Capital Fund in a continuous feedback loop. Investments will no longer have “expiration dates.” Our sole focus will be to grow value for our companies and limited partners over the long run.

This new structure removes all artificial time horizons on how long we can partner with companies. It enables us to participate on their boards and help them realize their potential over the course of decades. Enduring engagement with our legendary companies will be Sequoia’s hallmark.

It also lets us hold public shares long after the IPO and seek the best long-term returns for our limited partners, the majority of which go to nonprofits and endowments. For nearly five decades, we have delivered unparalleled performance to our limited partners, with capital distributions meaningfully outpacing capital calls. That foundation and our track record of finding and helping build category winners has earned us their confidence to take this bold step.

As part of this change, we are also becoming a registered investment adviser. This expands our flexibility to support our portfolio companies through various financing events, such as secondaries or IPOs. It also enables us to further increase our investments in emerging asset classes such as cryptocurrencies and seed investing programs.

This is a fundamental disruption to the venture capital model. We often talk with our founders about crucible moments — the rare, bold decisions that shape their future. This is a crucible moment for Sequoia. For the first time, this structure means Sequoia’s partnerships can be every bit as enduring as the companies we work with. This move lets us foster deeper relationships with the principal drivers of innovation and value creation — our founders and their companies. We look forward to building lasting value with them as they realize the full scale of their ambition.

__________

Disclaimer:

The information contained herein has been prepared by Sequoia Capital Operations, LLC (together with any affiliates, “Sequoia”) and is being provided to you for informational purposes as background on Sequoia’s recent investment activities. This is not an offer to invest in any fund (“Fund”) managed by Sequoia. Any offers will be made only by means of a confidential private placement memorandum which will include important risk factors and considerations that should be carefully evaluated before making an investment in the applicable Fund. Any decision to invest in any Fund must be based solely upon the information set forth in the applicable confidential private placement memorandum.

The information herein is given in summary form and does not purport to be complete. Investors should understand that the post-IPO performance of the portfolio companies discussed herein is not indicative of the results that have been achieved by other Sequoia portfolio companies. Please also note that the examples herein are illustrative and do not reflect performance of the Funds as a whole.

The Sequoia Capital Fund: Patient Capital for Building Enduring Companies was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

“Don’t lower the bar on us,” Spenser growled, with a friendly smile on his face that did just enough to blunt the intensity in his voice.

We already loved Amplitude’s co-founder and CEO, but this was the moment we knew we wanted to be in business with him for as long as he’d have us.

We’d recently partnered with Amplitude, and the first couple quarters out of the gate had been rough. The company was young, the team was still coming together, and there were some growing pains — no different than any other startup. There were plenty of valid reasons for the bumpy performance, and most CEOs would have happily trotted them out and then moved right along.

But not Spenser Skates. He expected more of himself. He demanded more of himself.

And thus, we found ourselves midway through a board meeting in which Spenser had meticulously dissected the company’s recent performance, taking personal responsibility for shortcomings and systematically ascribing wins — and there were plenty — to anyone but himself. Spenser was far more interested in solving problems than he was in celebrating successes, and thus the tone had been decidedly negative. Eventually, a well-meaning participant had offered a few words of comfort, reassuring Spenser that Amplitude’s performance was still excellent by any external standard. It was this reassurance that elicited Spenser’s rebuke.

That moment taught us a lot about Spenser. People are motivated by different things. Some seek external validation in the form of status, money or power. The work they do is a means to those ends. But not Spenser. He seeks excellence, plain and simple. The work is an end in and of itself. He takes joy in it — because it matters, and because he appreciates the exceptional focus and grit required to deliver exceptional results.

What we saw in Spenser that day mirrored what we’ve seen in many of our most legendary founders over the years: a burning desire to win, to get better and to build something special — not by anyone else’s standards, but by their own. In our experience, those are the founders whose potential has no limits, and whose companies surprise everyone over time. Spenser’s co-founders, Curtis Liu and Jeffrey Wang, are cut from a similar cloth, and all three are living examples of Amplitude’s core values: humility, ownership and growth mindset.

Just as Spenser, Curtis and Jeffrey keep raising the bar on themselves and on Amplitude, so too does the company keep raising the bar on the quality of the products we use in our daily lives. Amplitude is driving the second wave of digital transformation, called “digital optimization,” which is focused on using product data to drive business outcomes. The company is important to its customers, including household names like Anheuser Busch InBev, Burger King, Ford, Walmart, Instacart, Square and many more, because it takes product development from being a largely intuitive process to being more data-driven — or as Spenser likes to say, “from Mad Men to Moneyball.” It’s part of a new world of product-led growth, where mediocre products that persist on strong sales and marketing have nowhere to hide. For consumers, these better products create better experiences. For companies they create better businesses. And when only great products will survive, anyone who embraces Amplitude has an unfair advantage.

Eric Vishria, Amplitude’s first investor and business partner, identified Spenser as special many years ago, when Amplitude was more of an idea than a company. He once described Spenser as a learning machine, and we have come to see that Eric was right — and that because he is a learning machine, Spenser is always getting better. Over the years, he and his co-founders have built a world-class team around themselves, have grown from founders into executives, and have pushed the boundaries of what it means to help companies build better products. Thus as Amplitude begins its life as a public company, we have great hope that this is not the end of our journey together, but the beginning. We know that Spenser will keep raising the bar for himself, for Amplitude and its customers, and for the products we all know and love, and we look forward to seeing just how high those bars can go.

Amplitude: Raising the Bar was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

In early 2010, while I was serving as SVP of Engineering for Google, the company took the unusual step of publicly sharing information about a recent hacking attempt. Earlier we had discovered the attack known today as “Operation Aurora,” which targeted several U.S. companies. It appeared to have originated in China, and was apparently aimed at accessing the Gmail accounts of Chinese human rights activists.

In the days that followed, an information security engineer named Mike Wiacek stepped up with a lot of creative ideas about what to do next. Before Google, Mike had worked for the Department of Defense analyzing network exploitation and vulnerability. He understood well the playbook of not just hackers, but sophisticated and patient state actors.

Within days, Mike was asked to form Google’s Threat Analysis Group (TAG). Back then, such organizations mostly existed in government, but Mike’s vision would prove prescient; more than a decade later, commercial threat intelligence teams are now commonplace, and advanced hacking toolkits are more available.

Mike and I kept in touch after I joined Sequoia, as he moved from leading TAG to co-founding, within Alphabet, the enterprise cybersecurity startup Chronicle, and then to his current company, Stairwell. With each step in his career, he developed a deeper understanding of the patterns common in technical attacks. As he shared the ideas he was exploring, I found him extremely thoughtful about building technology that was not just difficult for bad actors to beat, but also very simple to use.

For traditional products in the security space, perhaps the biggest challenge is separating the signal from the noise. Of course the worst outcome is a false negative — failing to notice when something malicious has occurred. Often, though, security products actually do identify problems that eventually lead to breaches, but those signals get lost in a flood of other information. Recognizing them requires well-trained staff with deep knowledge of the domain, and that is difficult to find. What’s more, security teams are in a race against the clock. The program an attacker uses to access a system can disappear within hours, and the breach may not be detected for the better part of a year.

Traditional approaches also rely on a distinction between “inside” and “outside” that is increasingly outdated. Firewalls, for example, were originally conceived as moats around an organization’s resources. Today, enterprises recognize that their networks are permeable and that protecting key resources is the paramount concern.

Mike founded Stairwell with these challenges and more in mind, and in the two years since, he and his team have begun rewriting the rules for cybersecurity. Instead of a game of “retroactive whack-a-mole,” Stairwell proactively looks inward, applying the same techniques that power internet searches to scrutinize every file already in your organization, where the most concerning risks are often found. The platform’s recursive approach — analyzing those files again and again — allows it to detect novel activity more quickly, making it harder for hackers to cover their tracks. And because Stairwell creates a tailored defense that’s based in part on a customer’s own environment, attackers can’t simply reverse-engineer their way around it.

Stairwell is on a path to make it possible for every company — not just those with large, highly qualified security teams — to detect and stop attacks, and we at Sequoia are proud to have partnered with them at the seed and to now co-lead this Series A alongside Accel. With today’s launch of the new Inception platform, we are as excited as ever about being part of this team, and we encourage anyone interested in joining us to reach out. Just as Mike did years ago at Google, he and his team are poised to again reimagine the future of security.

Stairwell: Rewriting the Rules for Cybersecurity was originally published in Sequoia Capital Publication on Medium, where people are continuing the conversation by highlighting and responding to this story.

We’re delighted to announce our partnership with Ledgy after leading their $10M Series A funding round.

The European tech ecosystem has been flourishing over the past few years. Founders have access to more talent and capital than ever before to pursue their dreams, but they are still stuck in spreadsheets to manage their cap tables and employee shareholdings.

As startup activity and VC funding continue to grow on the continent, it’s past time for European companies to have a modern equity management platform at their disposal.

With multiple jurisdictions, the European market requires a product that is country-agnostic. The three co-founders of Ledgy — Yoko, Timo and Ben — knew this all too well, and designed Ledgy to be geo- and jurisdiction agnostic from the start. Having experienced firsthand the painful and error-prone process of working without an equity management platform, the trio created a product that helps leaders to manage their cap table and equity plan, and employees understand their grants and track valuations. They also created a product that delights its users with simplicity and ease of use.

Ledgy couldn’t have come at a better time. Nine months in, 2021 has already seen record VC investment in Europe. European stock option regulations, which have stagnated since the first dotcom boom, are finally beginning to see favorable reforms. Lastly, remote hiring has become the norm, and managing options in various jurisdictions is nothing short of painful. As these forces dovetail, there will be more companies raising funds and needing help with complicated stock-based compensation than ever.

At Sequoia, we believe equity ownership is not only important for aligning incentives between founders and investors, but crucially it drives alignment across the entire organization when employees are made owners. Owners drive better company outcomes. Equity grants that are easy to interpret will continue to give early stage companies an advantage in attracting and retaining the best talent in the market. Communication around stock options shouldn’t be complicated. A clear equity story can create an edge in an ultra-competitive talent market.

Ledgy is already winning customer love, and has seen adoption across industries. Companies including Trade Republic, Bitpanda, Gorillas, Kry, and Raisin are current customers. Employee shareholders love the intuitive interface, which helps them better understand their holdings. CFOs, Heads of People and lawyers love that it integrates with other HR systems and third parties involved in equity management, creating a single point of truth.

The startup opportunity is blossoming in increasingly diverse markets. Yoko, Timo and Ben are poised to make the best product for the continent and beyond.