NewsFlash Articles Data Fundraising BlockBeats Pro

The Man behind sequoia: The Investing life of Roelof Botha

老雅痞

Read this article in 25 Minutes

"Cash will dry up, but advice is evergreen."

Redwood's Invisible Hand: How Roelof Botha Became the Most Powerful Man in venture Capital

This article is from the official account:Old yuppie

As the hidden master of the investment industry's leading firms, few people know much about Roelof Botha, the man who is transforming one of Silicon Valley's top venture capital firms. Today's post by Yuppie is about what founders and other insiders think of him and his plans to upend VC tradition.

When he started working at Sequoia 19 years ago, Roelof Botha wrote "109" in the corner of his notebook every week. It's a shorthand that allows him to focus on picking good start-ups to achieve his personal goal of $1 billion in total revenues. It is also a milestone that he believes means he will have a measurable impact on venture firms.

Thanks to investments in companies like YouTube, Instagram and Square, he has 109 targets. In 2020, he even hit 1010, or $10 billion in total returns, putting him in the top tier of tech investors.

One thing was bothering him. How much more could Sequoia have realized if he had made those bets work? Square (now Block) has grown tenfold in value since going public, even allowing for the market's recent pullback.

"It helps that I have never sold a stake in Square since we invested more than a decade ago," Botha said of his personal holdings. "So why don't we offer the same thing for our LP?"

Today, Botha's influence exceeds the dollars he returns. An IPO or acquisition used to be the natural end of a VC's relationship with a company. Botha wants to disrupt that -- for Sequoia, not the industry.

Sequoia's move grew out of Botha's idea to create a Sequoia Capital fund, an evergreen venture capital model that would allow it to hold shares of its winners after the traditional 10-year vc clock. Removing artificial restrictions suited Botha, whose favorite part of the job was working with the founders of the early corporate era to get into public markets. He still serves on the boards of public companies such as 23andMe, Unity, and Natera. Indeed, he questions what it means to be a "VC" these days.

"I see myself as part of the Sequoia team, where I can work with founders and help them build extraordinary businesses. And I don't really want to call myself a VC. It's because we're not replaced that way.

Botha's own personal story, from a Tupperware salesman to a 28-year-old chief financial officer of a public company to one of Sequoia's youngest partners, is certainly unique. The founders praised him for his integrity and wisdom. The 48-year-old has become sequoia's head of INVESTMENTS in the U.S. and Europe, and one of the company's three butlers. His job is not just to provide financial returns. It needs to grapple with how to maintain Sequoia's status as a top company in a risky industry facing more competition from private markets.

He may be irreplaceable. But he and the venture capital industry still face a broader existential question: Is a dollar just a dollar? The rise of companies such as Tiger Global in the industry suggests that founders are interested in finding hands-off investors. Less coaching, more cash.

"The biggest threat I see right now is having money but no advice, and I'm really worried about what that does to the company," Botha said.

Sequoia is a company at the top of its game, thanks in part to Botha's leadership, but it is now his responsibility to keep it that way. Not every company can handle the generational shift or go on to pick the top companies.

"He didn't want Sequoia to be the 10th best company, or even the third best," said Jess Lee, a sequoia partner. "Our goal is to have industry-leading returns every year for decades, which is hard to do, but possible."

Botha may not be the kind of head of a venture capital firm who posts memes on Twitter or spouts podcasts, but those who know him well caution others not to misinterpret his raw, composed exterior. There's a lot of 109 files at stake, and he wants to win them all.

"He's very competitive and loves to win," says Eventbrite CEO Julia Hartz, "and most importantly, he has the ability to channel his energy and not let his ego become a distraction or, more frankly, get into that destructive zone."

In the face of the test

Part of that drive came from growing up in South Africa and then moving to the United States in his 20s. "There's a loneliness about being an immigrant that leaves you no choice but to work hard to get something," he says.

He could have stayed in South Africa, where he was one of several prominent Roelof Bothas working in government and the economy. His first job as a door-to-door salesman for Golden Products, selling local Tupperware in the summer before college, took him out of his comfort zone. "It's bad," he admits. What suits him better are the numbers. At university he studied actuarial science, economics and statistics, and at the age of 22 became the youngest licensed actuary in South African history. But instead of continuing in the job, Botha decided to join McKinsey for half her salary, hoping it would be a springboard to living and working abroad.

It was the first "crunch time" of his career, a phrase Botha and his Sequoia partners like to use to describe serious experiments with big results.

Botha's next trial came when he met Elon Musk.

By 1998, Botha had enrolled at Stanford Business School. That's where Musk tried to recruit him to PayPal's finance team. Botha did not have the required work authorization. Few people turn musk down these days, but Botha twice turned down PayPal before the fall in the South African rand drained his savings. With rent to pay for the month of April, he changed his schedule and joined PayPal in March 2000.

"He was super young, like in his 20s, but somehow he came across as a serious guy that the other GSB students didn't have," said PayPal co-founder Max Levchin.

Part of the reason is Botha's size and demeanor: he's very tall, very serious and very intelligent, and he's also a stickler for punctuality. The combination can be frightening and mask a more stupid side. "He always acted like a 40-something old man with a white beard, ready to take the company public," says Levchin, who describes Botha as more like a super-competitive 13-year-old at heart.

It was a battlefield promotion in a management mutiny, and he was thrust into the role without any C-Suite experience. When PayPal decided to go public, questions were raised about his credibility. Over and over again, he was yelled at by reporters and analysts, along the lines of, "What's this kid doing on Wall Street when he's barely grown?" Levchin recalled. "It was controversial."

But internally, no one questions Botha. He took the company public at 28 and, shortly after, helped negotiate its sale to eBay in 2002. CEO Meg Whitman wanted him to stay with the company and offered him a big title and a sizable option package, which is notable given how competitive eBay and PayPal are.

Sequoia Capital's Michael Michael Moritz, who had endorsed PayPal and served on its board, offered a different proposition: join the company as a partner. It's not the richest deal: he won't initially get the spread, the fat profit sharing that makes venture capitalists rich, but Sequoia will at least match eBay's salary.

It was his third clutch, and Botha chose Sequoia.

Nuggets, and out

After working nonstop at PayPal, the transition to venture capital wasn't easy. Botha recalls that in 2003, which was still a weak year, many venture capital firms were underwater in their dot-com investments.

His big break came with YouTube, one of the first deals he led. He met the founders through contacts at PayPal when it was a three-person team.

YouTube was one of the first unicorns before anyone used the term, says Gideon Yu, its former chief financial officer.

When Google comes knocking, you'd expect a young venture capital firm to be eager to strike a deal, as it did with YouTube. But Botha wasn't interested in a quick sale of YouTube at a high price to win at the board meeting, Yu recalls. Instead, he insisted on a deal that would set the company up for long-term success.

"For some people, in situations like this, emotions and bright, shiny objects tend to distract you. With Rolov, there is always a very strong base and a very real north," Yu said. After working with other investors, Mr Yu realised that Botha's approach put him in the "top echelon" of venture capitalists.

YouTube was eventually sold to Google in October 2006 for $1.65 billion. "But then I looked at the rest of my portfolio and it wasn't that good," he recalls.

Xoom, the money transfer startup he helped lead, was the first investment that was struggling. He missed out on Twitter and turned down the CFO job at Facebook, thinking he could get Sequoia to invest. (The job went to Yu; Sequoia didn't get the deal.) Then came the financial crisis of 2008, and 2009 looked pretty bleak.

Sequoia founder Don Valentine warned Botha during the interview that he hadn't failed enough in his career. Successful people join venture capital only to face the fact that good investing means taking risks in start-ups that are more likely to fail. "Facing mistakes, not 5 percent of the time, but 30 percent of the time, 40 percent of the time, really eats into your confidence, to be honest," Botha says. "There were a lot of regrets at this point," he recalls. "I almost got out of the business."

Out of the valley of Despair

Maybe the pesto saved him.

Looking back ten years later, Botha smiled. Sequoia partner Doug Leone grew basil in his garden and brought him a box of homemade sauce one weekend. "It's a small thing in a big way, but it makes a difference," he said. "Of course, it's not just pesto." It was the personal gesture and Lionel's consultation that made Botha feel he had a team behind him.

He's on the other side now; He saw many investors go through a similar 'valley of despair' a few years later. Part of his job now running the firm is to recognize when a new generation of Sequoia partners might be in the same situation, though from Botha's point of view, he makes homemade jerky broth, a South African snack similar to beef jerky that uses salt, pepper, vinegar and cilantro.

As Botha entered that dark valley, partners like Moritz, Leon and Jim Goetz rallied around him, "giving me enough rope that I had to solve on my own, but also providing enough guardrails that I wouldn't go off track." It was the advice he needed from his partners to get him back on track.

Botha discovered Unity and Eventbrite in 2009. The following year, he invested in MongoDB, and then finally got the chance to invest in Square in 2011. They will all become public companies, part of nine ipos during his career.

Botha also had some high-profile failures. Whisper never became the next Instagram. TokBox, a video API, sold for less than it raised. Jawbone became one of the most expensive venture capital failures of all time.

"That's part of the beauty of this business. Even though you can make big mistakes, tomorrow there's another blow because people are starting interesting new companies," Botha said. "So if you're willing to swallow your disappointment, buckle up, get back on your bike, get back on your horse, get back on your skis, whatever it is you can identify with, you try again."

For now, funny things change for Botha. Unlike many venture capitalists, who end up focusing on one sub-industry, Botha is a true generalist, with investments across consumer, enterprise and healthcare, sequoia's Lee said.

It's not just about being smart and doing research. Botha has "the dream gene" of being able to sit down with the founders and imagine a potentially bigger market, Lee says. She said: When Unity started it was a small game, no one knew mobile gaming and AR, VR and 3D would be so huge, but he was able to dream with the founders and take off around that, and now it's a huge public company.

After 23andMe CEO Anne Wojcicki met with Botha, he sent her a sweet message. Sequoia led a $250 million growth round for the DNA testing company. "He's really helpful, he's really constructive, which I think goes against the reputation of some venture capital firms," she says.

Former Evernote CEO Phil Libin relied heavily on this side of Botha when he built his video conferencing app, MMHMM. As unexpected as it may seem, Botha was Libin's first phone call when he started MMHMM. Botha invested early and joined Evernote's board when Libin offered to step down as CEO, a process he initiated but that "spun out of control."

"He always did what was right for the company. He acted in good faith and went to great lengths to ensure I was treated fairly and with respect." Libin said.

Because of this, the two now hold weekly standing meetings to discuss MMHMM's products and strategies. Libin believes Botha was actually a co-founder, though Botha never wanted to take credit. "Phil mentioned to me that he felt that way about me. I really appreciate it. I would never repeat myself." Botha said.

The role of the butler

While many venture capitalists will go out of their way to talk modestly about their role in the company's early days, Botha's style remains low-key. 23andMe's Wojcicki calls his intelligence and integrity "Obama-esque."

"The few people I've known in my life are like that, up there." Vojic says Botha is one of them.

His natural leadership within the company was evident early on. "Walking into that partner meeting, it was clear that he was actually a leader. It wasn't surprising to see him finally formally end his leadership role at the firm." Yu, the former YouTube chief financial officer, said.

In 2009, Botha launched a scouting program as a way for the company to expand its network of startups it heard from, and competitors quickly copied the initiative and began co-leading the company's U.S. investment business with Goetz. Goetz took over the mantle of "steward" of the company after Moritz stepped down in 2012, but handed it over to Botha when he stepped down in 2017.

This is a complex power dynamic within a classic team-driven company. Botha was not the one in charge at the trade meeting, nor was he the one who ultimately gave the green light to the deal. But when it comes to managing the company's operations, Botha is one of three butlers, along with Leone and Sequoia China's Neil Shen. (Botha, who loves literature and often tells stories, cites George Orwell's Animal Farm series as an explanation: "All animals are equal, but some animals are more equal than others." )

Botha's name on the Sequoia Capital announcement is a very visible sign to the outside world of his rise within the company, but he only grudgingly acknowledges that he is the agent of change. "Internally, it would be very dangerous for us to attribute any activity we do to one person," he said.

Even so, the idea for Sequoia Capital came from crunching numbers. For years, Botha kept a close eye on the "holding value," or the actual value sequoia assigned to LP versus the circumstances under which sequoia held it. 'It's a good metric, in part because you don't want to assign LP companies that are about to fall off a cliff,' Mr. Botha said. But he was disappointed that the fund had to distribute shares to LP so early, when they could have seen higher returns if they had had the chance to hold them.

The new fund pools LP money into a larger portfolio of publicly traded companies. Sequoia Capital funds then provide funding to a group of more traditional venture capital sub-funds, which return their earnings, including shares in public companies acquired through ipos, acquisitions or other transactions, to the main fund. Sequoia LP has signed off on the idea, opting to roll 95% of eligible balances into the new fund. After a two-year lock-up period, LPS will be able to ask to redeem some of their holdings twice a year.

The Sequoia Capital fund means that Sequoia will give up some of its advantages as a venture capital firm (mainly light regulation) and become a registered investment adviser, allowing it to invest more of its cash in secondary offerings, cryptocurrencies and perhaps other venture funds. Another reason for creating Evergreen funds is that venture capital firms are expected to step down from the board when a company goes public. Botha was troubled by this notion.

"A lot of people underestimate how much company building is still going on at every stage," he says. "Even if a company goes public, you think it's mature and there's a lot of innovation that can happen."

Botha's challenge is to do the same for Sequoia, who turns 50 this year. Few companies have made it this far, let alone delivered consistently high returns at the same time. LP may be loyal to Sequoia, but the new generation of founders is harder to deal with. Many entrepreneurs, including some backed by Sequoia early on, chose investors who brought in money but didn't need a board seat.

There has also been a slow deflation in tech stocks, and there are already fears that valuations could fall later as well. This could be bad in the short term for companies looking to exit, but it could also prove some of Botha's arguments that companies need support. It could also indicate that the timing of evergreen's move, which could more easily wait for the cycle to end, was prescient.

In the past two years, fundraising records have been set and startup valuations have soared, but Botha likens it to an open-book exam. Founders had it easy in development, but when the final exam suddenly closed, did they learn enough to survive? The same is true for new investors, whose companies are simply flagged in round after round of exams.

"It's easy when things are going well. Personally, I haven't seen a story that's been completely right. So what happens when things go wrong?

His own story is proof of that. A rugby salesman from South Africa is now the head of a top venture capital firm, but he needs some help (and some pesto) to get there. In the process, he learned a crucial lesson: cash dries up, but advice is evergreen.