Live on Bloomberg TV

00:00So walk us through the vision for ARC and how you think this sets apart what Sequoia is trying to do here. Thanks for having me. Emily Arc is the new seed stage catalyst for outlier founders. We offer three things a million dollar investment from Sequoia as well as seven weeks of programming on foundational company building topics. And you're working alongside a cohort a community of really exceptional people around or at the same stage as you. The reason we're doing this is we know it takes a lot more than just money to create a category defining company. And we know founders want company building help and Sequoia has had the privilege of working for over 50 years with some of the best founders we've tried to do is take all those lessons all those mistakes the journey of all the other founders that we work with and boil them down into a foundational company building concepts everything from product to customer obsession to culture to how to hire. And so that's the seven weeks of of jampacked programming for when an outlier founder is right. Applications are open now until July 22nd. That's right. All right. So you've got a few more days. So when you say outlier founders what exactly do you mean. Sequoia has done a lot of really innovative things in the past. For example your scout program to try to find you know unearth new entrepreneurs and new ideas. You know why do you think you need to do this as well to find those outliers. You know the venture market has been continuously evolving over the years. And I think there are a lot more founders coming into this space as investors and a lot more product thinking and innovation. What can a firm offer beyond money which is actually a commodity and a board member. And so we often think about what do founders need. There are customers. How do you work backwards from that and figure out what they need help with. And the number one request we get and the number one thing I think Sequoia delivers is help with actual company building. And so we really tried to boil down everything that we've learned over the years through working with some of the best into the core things that you kind of. For example when I was a founder there are things I wish I could have gone back in time and told my younger self about how to run a company that is a lot of what ARC teaches. Now every company gets a million dollars. What is the Kois stake and what is the chance for follow on funding. So the. It varies from company to company where work some are precede to people with an idea and then some are actually a little bit further along. And we put one million dollars into their existing seed round that maybe they've already reached a race. So it's a little bit of a range. But the focus is really on the how to build an enduring company a company that lasts for decades not just you know how to get to the next quarter or the next fundraising milestone. So there's a little bit of a range. So given this very tumultuous macro environment that we now find ourselves in. How is that changing what you are looking for what you're looking to fund at this stage stage or the early stage or the growth stage. I mean Sequoia really runs the gamut. Yeah I would say that we've seen multiple compression and valuations come down. I don't think we've seen earnings compression yet. And really I think consumers are feeling poorer and that's going to trickle down into the way people spend and the behavior of buyers both on the consumer side and the enterprise side. That said Sequoia has been designed to outlast the cycles in the tech industry. The purposes of our firm is to look beyond those short term fluctuations. And so we're looking for the same thing we were looking for before which is founders that have unique insight who have a lot of grit to endure these ups and downs as well as just the difficult journey of starting a company. And we're looking for large markets where you think you can build almost like define a category from scratch create a new one. What Sequoia is read on the macro environment right now and how bad this will be for tech. I don't have a crystal ball that said I do think that. Like I said we just started to see multiple compression and not yet earnings compression. I really think people are. What do you mean by that. You know we basically the public market has returned to historical valuations the revenue multiples but earnings have not. I don't think we've seen the full impact of consumers feeling while gas is really expensive. My company had layoffs. I can't buy as much enterprise software so I think that may still be coming. That's what we've been forecasting for our founders. We called an all hands recently where we gathered all of our founders and we walk them through what we were seeing in the market as well as how to think about forecasting financial planning and how to lead in uncertain times. So that's that's what we expect. As for how founders should react that really depends. It's on a case by case basis. Some founders aren't a great cash position and should be leaning in very aggressively. What we see in these down cycles tends to be that hiring freezes. Everyone sort of pauses and reflects and it actually becomes easier to get a higher concentration of talent versus before you were competing with the fang companies with every single startup seed stage everyone was hiring. And now I think for the mission driven for the people who are venturing out of jobs now it's actually possible to get a greater concentration of talent. And then some folks are in a not so great cash position and may need to take more drastic action. But it's really case by case. And Sam Walker our founders do all of that. Sequoia is famous for its our IP Good Times message which you gave to entrepreneurs in 2008 the height of the financial crisis. What's the headline of the presentation today or what would it be today. It was called Adapting to Endure. It was about how to build those long term enduring companies how to outlive the cycle. The founder of Sequoia Don Valentine. He had a license plate that said brooked on it which is the German word for crazy or insane. And he you know some of the wisdom that gets passed down from him is as well as to every general throughout that the partnership has been that tech moves in these cycles on the four phases. The first. Well the one we were just in was called verdict. It is the hype the excess the the the high multiples like parties you know when Lambeau and then there is a correction quite sharp correction where people tend to tend to freeze and then of course correction and then it slowly comes back. And then it happens all over again. That's sort of what we've been seeing play out over over decades. It is compressed in certain industries like crypto. I would say the twelve year bull market becomes a four year bull market. But the best companies are often formed in that correction phase. It's the founders who really are mission driven. They want to start their company no matter what. They're courageous. They're brave. They have the grit to allies that they can get that concentration of great talent and they have fewer competitors. So we believe at Sequoia that now is a great time to start a company and that's why we're launching now. Last year Sequoia made a big break with tradition to do away with traditional venture capital timelines and in some cases keep money invested longer in companies. Your portfolio companies going public. Some of these companies have had a tough time in the public markets air B and B. Door Dash Robinhood. Is that strategy evolving at all given these tumultuous times and our LP is reacting at all are asking for their money back or out sooner. So the purpose of the Sequoia Capital Fund was actually to look beyond those short term fluctuations. It allows us to be the long term partner the shareholder the long term partner. You know we don't have to immediately distribute after the IPO to lock in some return for our LP. It also actually lets us generate superior returns for our LP. We get to capture the compounding value. Some of the best companies Google Cisco Urban be the companies who had the privilege of working with for for a long time. We have a lot of information about how well they're doing. And the real like what those founders are truly like. And so we think we're in a better position to manage some of the distributions for all peace. And the founders really love that that we are that long term partner. So the strategy has not changed. OK. Now I have to ask you you're on the board of all raise. You mentioned you're a founder yourself. There's been a lot of concern about women backsliding in the pandemic. And I wonder if those concerns continue if there's concern about women backsliding in a downturn. What are you seeing out there. Are you concerned or do you see a bright future. Yeah this is a deeply personal issue for me. I was a female founder. I was working on a product targeted at women and it was very hard to fundraise. I never pitched a single woman investor and I made the connection. I realized that the complexion of who makes funding decisions affects what problems and what customers get served in the world by the tech industry. That's part of what motivated me to move to venture and to co-found all raise alongside 30 other amazing women in venture and female founders. I think in some ways we've moved forward. Certainly the percentage of women check writers at DC firms has gone up. I think it's moved from 9 percent to 14 percent in the last four years. I'm very proud that at Sequoia over twenty five percent of our investing team is women which is high for our industry. There are some steps forward however there are also some steps back. Overall for women in this country I think you know the overturning of Roe v. Wade is a tragic step backwards. I think a lot is going to fall on private on the tech industry on innovative founders on employers to help move the ball forward for women. I'm very proud that Sequoia is a backer of Maven clinic. Maven is the leading women's only health telemedicine platform. It does everything from pregnancy counselling to IVF and egg freezing on the fertility side to maternity and BOVESPA. I've used it through pediatrics. I ask a lot of new baby questions. I just text them to a pediatrician. It's a wonderful service and it does offer a a wallet option that allows employers to pay for it for travel out-of-state as well as to cover things like fertility benefit. So I think a lot is going to fall on. The hopefully some of the tech issues some of the female founders and so we just need to keep moving. Overall I'm optimistic in the long term but it's always a multiple step forward a few back and then we continue to make progress.

No schedule data available.

Sequoia Capital's Plan to Back 'Outlier' Founders

Sequoia Capital Partner Jess Lee speaks exclusively with Emily Chang about Arc, a seed-stage catalyst for founders. They also discuss the macroeconomic environment, future valuations, and backing women-led startups. (Source: Bloomberg)

More From Bloomberg Technology
All episodes and clips