Sequoia Capital’s 56 Slide Presentation Of Doom

http://www.techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/

by jasonlbaptiste • 18 years ago

79 36 18 years ago

techcrunch.com

alaskamiller• 18 years ago

How many souls of Sequoia interns went into this?!?!?

Sam_Odio• 18 years ago

I'm pretty sure sequoia doesn't have internships. Or, at least, they're not easy to get.

fallentimes4• 18 years ago

Agreed. But they have lots of secretaries. Lots of hot, smiling secretaries. I need to schedule another appointment soon.

jedc• 18 years ago

That's a great summary of the macroeconomics that led to the current situation. I'm a bit surprised Sequoia went into that much detail, but they've got some great advice for their CEO's at the end. (Get cash-flow positive!!)

JoelSutherland• 18 years ago

I find it fascinating that just a couple of slides have data for this year. Should this financial mess be a "surprise" at all? Just the chart of home values should have been a clue:

http://www.1stmillionat33.com/posts/06-09-12/house_his.gif

SwellJoe• 18 years ago

While that graph is interesting (and I've seen it referenced a number of times in a number of places), I've always found the scale misleading. Almost the whole bottom of it (0-50) is chopped off...so what looks like a logarithmic leap, is really merely doubling. While doubling is dramatic, and certainly a sign of something amiss (either tremendous inflation, or something else that is distorting value), it's not the astronomical rise the chart feels like when you first see it.

apstuff• 18 years ago

Doom? Looks more like a countdown to something. While most major corrections since 1929 have occurred on 4/1, 7/1 or 10/1, this one dropped out on 10/09/08. Hmmm, let me guess, the Dow's bottom is at 7,654.

We are currently at T minus 8 and holding . . . our breath.

rgrieselhuber• 18 years ago

I find it difficult to believe that these guys didn't see this coming at least a year ago; their own data from a year ago certainly points in that direction. So, why are they presenting the doom deck now?

The VCs I have met were talking about a serious downturn over 16 months ago and I've known for at least 4 years that the real estate bubble was going to cause a lot of problems. I think lots of people saw this coming. So, why did we have to get to this point before getting such sober advice? Seems odd to me.

alexandros• 18 years ago

have you read the black swan? graphs can be made to explain everything. after the fact.

alecco• 18 years ago

You don't need to read Taleb to know that. "Lies, damn lies, and statistics" :)

About Taleb, "when all you know is the hammer..." He is no renowned economist. MBA and Phd. in management. Oh, and he teaches risk. Try Roubini, it's even more dramatic.

Retric• 18 years ago

There is an old quote that the market can stay irrational far longer than you can stay solvent. I keep hearing "Doom" but for the most part the stock market seems to be at a fairly rational level right now. Most stable companies P/E is back around 10, and companies in unstable market's or those that lack real profits are taking a beating.

As an example the P/E on DryShip's is has a P/E of 1 right now but it's a risky market and it's unlikely they will be anywhere near as profitable this year as last year. It's still I reasonable long term buy but who knows. On the other hand Pepsi and IBM are both extremely stable both on the business side and in their stock price.

josefresco2• 18 years ago

Monday morning quarterback always knows what's best.

They simply did not know (no matter what they say now) and were too busy cashing out at the height of the boom.

Now, they want to buy up assets and it benefits them to push valuations lower.

sethg• 18 years ago

The VC fundraising cycle has something to do with this, right? I mean, if I understand correctly, if you dropped a few million bucks into a VC fund back in 2005 to become a limited partner, that money is locked up until 2010 or so; if you notice storm clouds on the horizon in 2006, you can't just cash out. At that point the VCs just have to do the best that they can with the portfolio they have, and you have to trust that the VCs will do their job competently.

kingkongrevenge• 18 years ago

> why did we have to get to this point before getting such sober advice?

My guess is they feel it necessary to smack some sense into relentless optimists they've funded.

Remember, If you made similar points two years ago you were ridiculed to hell or laughed at ... by the relentless optimists. I remember posting some good analysis of the housing market a couple years ago and seeing it down-modded to oblivion. It was only after the bubble burst that the very same links were front page all over the place.

fallentimes4• 18 years ago

I wish ycsearch.com still worked so I could look them up. It's hilarious reading old dot com bust stock recommendations.

Pretty much all the people I knew in finance saw this coming. Our first hint was when people making less than 50k per year were buying 400k houses with no money down.

"It's different this time"

Tulip Bulbs take 10.

biohacker42• 18 years ago

Anyone here lived through the Japan depression care to share their experiences with us?

hugh• 18 years ago

It was terrible. People were forced to eat raw fish for sustenance. They couldn't get full-sized electronics, so they were forced to make tiny ones. Unable to afford proper entertainment, folks would make do by taking turns to get up and sing songs.

ojbyrne• 17 years ago

And they couldn't find beer or proper mix for their drinks. So they drank scotch.

anamax5• 18 years ago

Supposedly one of (Sequoia partner) Doug Lenone's slides was "If the product is ready, cut the number of engineers."

That’s going to make it tough for to get and keep engineers. When hiring, there will be increased resistance to four year vesting and one year cliffs, especially when a product is close to "ready". The engineers that they have will be more likely to leave a 3/4 to "ready"product for another company/product that is only 1/4 to "ready".

“Cut engineers when ready" makes sense only for companies only have one product and it’s "done" at some point. Companies that work that way shouldn’t employ engineers - they should contract out.

liuliu• 18 years ago

I think that is necessary to cut down engineers. Let's face the truth, not all engineers you hire is so talent that you can never find another one on the market. Cut down the salaries you pay to the not-so-talented engineers or let them go.

anamax5• 18 years ago

I'm not saying that they won't be able to hire engineers. I'm saying that it's going to be more expensive to do so.

Sequoia has increased the perceived risk of being an engineer for at their companies and arguably most tech startups. When the risk of an activity increases, either the reward goes up and/or the activity goes down.

skmurphy4• 18 years ago

Slide 47 from http://www.slideshare.net/eldon/sequoia-capital-on-startups-... shows that they are encouraging cuts in every department. The line for engineering is "Decrease headcount for next version?" which is in line with their other questions

   Product: What Features Are Absolutely Essential? 
   Marketing: Measuring & Cutting What's Not Working? 
   Sales & Bus Dev: Getting Return On Expense Increase? 
   Pipeline: Real Probabilities Of Closing Deals? 
   Finance Cashburn: Where Can Payments Be Deferred?
   Finance G&A: What Departments Are Essential?

anamax5• 18 years ago

Yup, and those folks should react the same way.

sunilbhargava• 18 years ago

These slides seem to suggest that the exits will be smaller for while. They are missing one critical slide - one that tells entrepreneurs to look at their cap table and terms and if they don't make sense at a small exit, get recapitalized or go home (take off the suit, put on some jeans and apply for the next YC session)

prakash• 18 years ago

good point :-)

josefresco2• 18 years ago

This is one of those threads that just never dies.

Sequoia Capital’s 56 Slide Presentation Of Doom

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