Every company has a story. Learn the playbooks that built the world’s greatest companies — and how you can apply them as a founder, operator, or investor.
Thu, 26 Sep 2019 14:58
Acquired dives into the history behind storied venture firm Sequoia Capital and its legendary founder, Don Valentine. Part 1 tells Don’s story, starting from humble beginnings born to uneducated parents in Yonkers, NY, through shaping the fabric of Silicon Valley first as head of Sales & Marketing at both Fairchild and National Semiconductor, and then for generations to come via his pioneering concept of “company building” at Sequoia Capital. No matter where you sit in the ecosystem today, Don and the companies he helped build laid the foundation for nearly everything technology has become over the past 60 years.
I love it. You know what they, I had been intending to upgrade than when I was in New York, I was like, I'm gonna go to the flagship Nike store and get the latest, latest model. They don't make them anymore. They don't make the flynets anymore? Well, they make flynets, but they don't make the free flynets. Oh, crap. The Nike free flynets. So I think this might be the last model. Well, to stock up. Yeah, I know what I'm doing this weekend. Welcome to season five, episode four of Acquired, the podcast about great technology companies and the stories behind them. I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and early stage venture fund in Seattle. And I'm David Rosenthal, and I am a general partner at Wave Capital, an early stage venture fund focused on marketplaces based in San Francisco. And we, as you know, are your hosts. Today, we are talking about the absolutely legendary Sequoia capital, and because it would be inappropriate to try to cover Sequoia's immaculate history in just one episode, this is only part one. And typically, I try and throw out some stats in this section about why the company that we're covering on this episode is important. Well, today I'm only gonna throw out one. Since it's founding in 1972, the firm has helped to catalyze companies that now represent $3.3 trillion of public market value. And for context, the entire NASDAQ is $10 trillion. It is frankly, absolutely unbelievable that a single firm can be responsible for helping to create so much of our modern economy. David, this is bananas. Yeah, for comparison sake, what did we say next? Which is one of our A-pluses, we said generated a trillion dollars in market cap value, the next acquisition. So here we are talking about $3.3 trillion. Obviously, it's a venture firm not a company, but this is one of the reasons I've been so excited to dive into this new category here on acquired and can't wait to tell this history of Sequoia Capital. Absolutely. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders Podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and Founders, so we knew there's a natural fit. We know the host of Founders. Well, David Senra, hi David. Hey, Ben. Hey David. Thank you for joining us. Thank you for having me. I like how they group us together, and then they say it's like the best curriculum for Founders and Executives. And really, as we use your show for research a lot, I listened to your episode of the story of Akiyama Rita before we did our Sony episode and it's this incredible primer. You know, he's actually a good example of why people listen to Founders until acquired because all of his great-sendishmenters and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and they're such good compliments as unacquired, we focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of Founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest such punerate ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's my hero. So the reason I did that is because I want to find out like I have my heroes, who were their heroes? And the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use those ideas. And so I think what acquired is doing what founder is trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. So lastly, our limited partner bonus show this week was kind of a fun flip for me. David interviewed me on what is a startup studio and how does it work? And I dove into our process here at Pioneer Square Labs. If you want to listen and become a limited partner, you can get started with a seven day free trial and listen right here in the podcast player of your choice by clicking the link in the show notes or going to glow.fm slash acquired. I promise it's very easy. I like that. I like that. Yep. All right, David. It's time. It's time. Let's do it. So one thing that is often forgotten these days because it's just a name and it reminds me of the quote about fishism water where you ask a fish like how's the water and fish says what's water. And that is that silicon valley is called silicon valley because of silicon, even though it is mostly software these days and the internet. So to set the stage for this episode, we need to rewind back to the origin of silicon valley and indeed silicon. So we go back to 1957 when, and this is really the moment I think you could argue when silicon valley, as we know it both in terms of silicon and in terms of the concept was born. And that was when a group of eight employees leave a company called Shockley Semiconductor, Shockley Semiconductor Laboratory and started a new company that ends up being called Fairchild Semiconductor. And this group of eight employees goes on to be known as the Traderus Eit. And we'll link to, in the show notes, to this amazing photo, we'll link to the Wikipedia page of these eight individuals. It's just so great. So 1957 and all the best ways. Why did these eight folks leave Shockley and start their own company? And this was a radical thing to do at the time. Well, Shockley Semiconductor was started by Bill Shockley and Bill was a genius. He was the co-inventor of the transistor that he helped him when he was at Bell Labs. And for that, he won the 1956 Nobel Prize. I mean, he literally helped him in computing. But he did have a dark side. And that dark side was that he was a terrible manager and people hated working for him. And to help you kind of get the picture at this point in time and then for kind of the rest of his life, he became a white supremacist and was a proponent of eugenics. So this is the sort of person we're talking about that would prompt people as brilliant as he was and as amazing as the innovation that was happening at Shockley would be prompted to maybe leave and do something rash. So who would the traitor say? Well, among them, there are some names you might recognize starting with Gordon Moore of Moore's Law and Bob Nois, who, of course, the two of them would go on to found Intel, although that's a story for another day. And Eugene Kleiner, who would go on to help found Kleiner Perkins, which is another venture firm story for another day. But what was interesting is when they left and they started Fairchild, it wasn't actually a startup in the way that we think about it today. It wasn't an independent company. It ended up a data really tough time getting it financed. And so how it ended up being organized was as the West Coast semiconductor division of an East Coast company called Fairchild, Camera, and Instrument Corporation. So Fairchild was located back on Long Island in New York and they owned the company. So funny, I always assumed that Fairchild was like one of the traders ate. No, not at all. Yeah, they didn't actually own the company. I believe they had equity in it, but no. So how did this happen? A man named Sherman Fairchild at this point in time who lived in Long Island was the largest shareholder in IBM because his father had helped finance Tom Watson in forming IBM many years earlier. So when the traders ate, we're trying to get their new company off the ground. They intersected with a man named Arthur Rock, who's going to come up again in a minute here, who was one of the early proto venture capitalists in California. And he was a former investment banker and he was trying to get financing. It was really hard. And so he ended up going to Sherman Fairchild because he knew Sherman was the largest shareholder in IBM. He was interested in technology. And Sherman agreed to set this up as a division of his camera and instrument corporation. Wow. Creative. Yeah, which is crazy. So the way it happened, they loaned $1.5 million to the company in return for which they got an option to buy all of the stock of the company for $3 million. Imagine if VCs structured deals that way today with founders. It wouldn't quite set up the right set of themselves. But you got to crawl before you can walk. Yeah. Fairchild would lead to many, many things, including, of course, Intel. And we'll get into that a little bit later. I mentioned Arthur Rock. So what was the financing environment for quote-unquote startups in California at this point in time? Knowing how markets work, I think we can assume that there wasn't much of it given the terms of that other investment that you just mentioned. Indeed. So as you might guess from how Fairchild was financed, the quote-unquote venture capital industry, or the proto-venture capital industry that existed in California at this time, was pretty much nothing like we know it today. For one, it was so small that the individuals who were doing it, all of them, in California, they would meet for lunch once a month at the Marcopkins Hotel in San Francisco, at a table, a regular table, and they would sit around and talk about the various companies that they were working on. That was it. That was the entire industry. And for two, none of them actually came from a technology or a startup or company background. So Arthur Rock, who we mentioned, he was an investment banker, and a few other folks that were kind of instrumental at this point in time, Pitch Johnson, and Bill Draper, that a driver might ring a few bells for folks, they had worked in the steel industry and come out to California and started financing companies. There was another gentleman named Tommy Davis. He was a real estate developer who developed and interested in this sort of thing. So that was really the state of things. And as evidenced by Fairchild, here you have eight of the most talented scientists and engineers working in the highest growth industry in the world. And it's literally impossible to finance them. They have to get essentially bought by an East Coast company to even get their company to file. It's so interesting. Venture Capital falls under the broad asset class today of alternative investments, which always seems a little funny. He given how much, especially today with all the late-stage money coming into startups, how much money is really invested there and it's silly to call it alternative. Now, when you look at it in these days, it's very much. You had to be a very alternative counter-culture person to believe that this was the best way to go and invest your money. So it's right at this moment in time that a quite a maverick, what might say, individual comes on the scene. And basically, single-handedly writes the playbook of what modern venture capital and alongside it, what a modern startup would look like. And that man's name is Don Valentine. So Don, of course, goes on and starts a quiet capital. And we're going to tell this story here. Cannot recommend highly enough. Anyone, whether certainly if you work in our interested and venture, but even if not, if you're just interested in technology and startups, go do two things. One, watch the YouTube video of a talk that Don gave at the GSB at Stanford in 2010. And two, read this wonderful, wonderful oral history that Berkeley did as part of the history department there with Don. And you will get a sense for what an amazing character this guy is. And a lot of this show is a lot of the history of this show is taken from those two documents. Yeah. And listeners, the way to think about part one and part two of the Sequoia story, part one that we're going to focus on here, this is really Don's story. Yeah. And it's really cool, actually, the talk that he gives at Stanford. He holds up towards the beginning of it, the resume of an individual who had just joined Sequoia Capital that week. That individual is Alfred Lin, of course, friend of the show and former guest. And this is kind of amazing, he printed out Alfred's resume and brought into this talk. I also loved that Alfred had a resume at that point. He was CMO and Chairman of his appos that had just been acquired for over $1 billion, but always hustling. OK, so who is Don? So he was born in 1933 in Yonkers, New York, back on the East Coast. His father was a teamster, so a delivery truck driver, and a union member, if you can imagine it, which Don took a very, very different path in life. His parents were completely uneducated, both of them. Neither of them had finished grade school. Wow, so not like heading to college, like heading to finish grade school. No, literally, like, had not finished elementary school. But in good Catholic fashion, they do value education, and especially Catholic and religious education. And so Don grows up in New York going to Catholic schools. And then he ends up going to Fordham University. He, Jesuit University, graduates in the early 1950s and promptly, as most folks did back then, at least most men, gets drafted into the army. This is, I believe, right, either during or right before when the Korean War is going on. According to Don, he quote, had a terrible attitude about the military. He didn't like and doesn't like regimentation. And this is going to become very clear, Don does things his own way. But one thing that he loves is electronics and technology. And he ends up getting put in charge in the army of, in his words, trying to teach senior officers to use modern technology instead of the way that they were inclined to fight wars, which was with like horses and cavalry. All that said, the army and Don still don't really mix. So he transfers to the Navy. And this is a major, major moment for him because he gets stationed in California. He comes out to California, and he steps off the boat, and he's like, I have reached the promised land. It doesn't snow here in the winter. I'm never going back to the East Coast. I love this place. His goal is he wants to find employment at a West Coast electronics company. So he gets out of the Navy. It ends up taking a little while. He first gets a job at Sylvania Electric, which was actually based in Pennsylvania. I believe he was working for them in New York. Is that the vacuum cleaner company? What's the vacuum tube company? So this is how he gets into technology because this was still, you know, the semiconductor I believe had been invented by Shockley and others at this point. Most computing such as it was was being done with vacuum tubes, you know, remember the Anyac? And like, this is what we're talking about back in these days. Yeah. I guess I know Sylvania is a lighting company. I think do they make light bulbs? I've seen the logo around like home deep ones. Yeah, they make light bulbs now. Okay. Who knows what the corporate structure of the company is these days. At the time they were making vacuum tubes and selling them as computing components mostly to the defense department. And of course, Don had come from the military. So Don ends up jumping ship to Raytheon and moving to Los Angeles. So here he is. He's finally, he's achieved his goal. He's living in LA, out in California, loving life, surfing. He was a big water polo player. And he's working in what at the time was the high technology industry selling computing solutions to the defense department in the military. He starts taking part time courses at the business school at UCLA focused on sales and marketing because he was really interested in, of course, sales, which is his job, but also the marketing component. Like, who are we selling to and why? And he has a great quote. He says, you know, where is the decision-making process in a great company? The answer is it's in marketing. In a well-run company, the marketing department in conjunction with the science department, science being engineering at the time, decides based on what their capabilities are, what the problems they can solve, what sequence they should solve them in, and how much money they can suspend, they can spend on building that product and how big is the market? Who's going to buy this stuff? And all that happens within marketing in a primary position. This really becomes Don's life-passion. And that ethos ends up informing everything he does and everything it's quite a capitalist, we'll see. So after a short-standing at Raytheon, he ends up getting recruited to move up to Northern California and join a fresh startup in a really hot semiconductor company up there, Fairchild, semiconductor. Was Fairchild independent at this point where they're still a part of the bigger umbrella? No, this was still very early. They were part of Cameron instrument, as we'll see. So Don joins, he's not part of the trade-versate, but he joins, he's like employee number 40 or 50. They're doing a couple million dollars in sales, but still really small. And at first, they put him in charge of selling Fairchild Semiconductors to defense firms back in Southern California, so they sent it back down to Southern California. I mean, she's kind of funny. It's exactly what is doing in the army, right? It's educating about modern technology, to people who had been doing things in older way and trying to basically do a very complex sale. Yeah, I mean, it's kind of amazing that Don's history from Yonkers, New York, everything basically sets him on. It's like the Steve Jobs quote of, you can't connect the dots looking forward, but looking back, everything you've done prepares you for what you're doing now. Don basically knocks it out of the park selling to defense contractors down in LA. He takes the company from this couple million dollars in sales when he joins to over $150 million in annual sales in just a couple years. And over that time, he gets promoted, ends up running all of sales and marketing for Fairchild, and he starts using everything that he's learned in his passion for marketing to tap into like, hey, maybe we should be selling to other markets too, and which other markets should we be selling to? And are there things that we can do to customize the chips that we're making to make them more applicable to these other applications and other markets? The quote he has here is, business was so good. I mean, this was like, God, to be at this moment in time, it was like, it was like to be there in the mid 90s when the internet was taking off or the mid 2000s when Web2.0 was taking off. And it was literally just like, you could see the roadmap of what all the applications were going to be, and it was just like, go build them first and best. Yeah, not only did the semiconductor have perfect product market fit, but it scaled horizontally across tons of industries. I mean, everybody was going to need equipment that required semiconductors. And I think now we take it for granted, actually we're in this phase where we're sort of moving forward from IT departments into companies that don't have IT departments, but this was the development of IT. This was every company that was starting to embrace technology would use something with semiconductor products in it. Yeah, I mean, we're going to see this here in a minute with the personal computer and Apple, but then with the internet, then with Web2.0, then with mobile, like you have this tectonic shift, and then it's like, okay, we know what the applications are. Let's go build the applications. And Donna's really the first person in technology to recognize that these are, this is the dynamic of how the broader technology ecosystem works. So he says, business was so good that we had more opportunities than we had engineers, and we devised a bit of an ad hoc technique for evaluating different companies, companies that Fairchild could potentially work with and sell to you before we would commit our engineering resources to work on them on a specific project. We had to understand the nature of the application and understand the size of the market. There are a number of kind of highlight things that we did before we committed engineering. And you could think about that and think about like, gosh, man, that sounds a lot like writing an investment memo for a venture capital firm. It's also what an incredible privilege to be in a position where you get to pick your customers based on who you think is going to be the most successful with your product. Yeah, yeah, totally. So remember though, Don's working at Fairchild. He's taken them from a couple million in revenue to over 150 million in revenue. And this is like the early late 50s, early 1960s. So 150 million wasn't just 150 million back then. Remember though, Fairchild, it is an independent company. It's a subsidiary of this long island-based East Coast conservative camera and instrument corporation. So every time that Don is working on building a new customization and application new market that Fairchild wants to enter, he has to go to the board of the company and get their approval for what they're doing. And Don starts, you know, that goes well enough. Like incentives are aligned, of course, Fairchild wants the company to grow and do well. But Don gets this idea. He's like, you know, we could really accelerate our market and our partners that we're working with. A lot of these applications companies are new entities that are integrating our technology into a full solution for a given industry. They're getting off the ground. We could really accelerate things if we invested in these companies and helped them build themselves because the bigger that they get and the faster that they get bigger, the more sales they're going to have, the more sales we're going to have. Right. It's this ecosystem mindset. You know, we need to help invest to build the ecosystem around our products. And totally. So he thinks this is brilliant. He takes this idea to the board. And the board is like, absolutely not. That's a crazy idea. Whoever would want to do that. So, you know, Don in typical Don fashion, he says, well, screw it. Like if the board's not going to do this, I'm just going to start doing this on my own with my own money. When he would be working on the technology and marketing roadmaps for Fairchild and working with startups to help build applications, he would just start investing small amounts of money personally in these startups that he knew that he was going to make them into big companies. The only problem though is he's doing this personally. He doesn't have enough capital to really get these companies all the way to working. You know, it's so funny how like we do care a wave that you know, you're raising money for a new startup. And even today in 2019, like the answer for how much capital you need always comes back to like, you know, somewhere between one to three million to get off the ground. And that was the case even back then. This is totally amazing. This is like one of my biggest tech themes, but it is crazy looking at their first five investments. Two of them were at two million and one of them was at two and a half million. And it is today's seed round. And yet what they're doing is they're building freaking, you know, semiconductor physical applications. Like they're using semiconductors to make another product, physically, manufacturer. Like it is nuts to me. Manufacturing, like totally. Yeah, so even back in the 60s, you know, a couple million back then was a lot more in today's dollars, but you had to do all this really hard stuff. Don's to starts doing this fast forward to 1967. And there was another company in the valley that had been around for a long time. It was kind of foundering called National Semiconductor. And National makes a big play. They're already a public company, I believe. They poach a number of people from Fairchild, including Charles Sprock, who becomes the CEO of National and Pierre Le Monde from a name that's going to come up again very soon. Pierre Le Monde from Fairchild, who becomes the chief chip designer and head of engineering there. So Charlie Sprock is CEO. He does a couple really interesting things. First is so everybody in Silicon Valley, at this point, remember, it's called Silicon Valley because they're making Silicon chips. They're making the chips there in Northern California. Fairchild's producing them there. All these companies that don's investing and they're doing manufacturing right there. Charlie and National, he offshores chip production to Asia. And he reasons that like, hey, the intellectual property that we're building here, we can just do all the design and building here and we'll just outsource the actual production of these chips of the Silicon as a commodity. So that creates a huge price war in the industry and massively lowers the cost of Silicon, which then ends up enabling all the things that come shortly thereafter, including the PC. We should also say that the incredible growth and demand for Silicon is Fairchild's fault because Fairchild was the one who pioneered the idea that Silicon was actually the most effective material to use for semiconductors. That wasn't the case before. I believe before Fairchild, people were using germanium to make semiconductors, which is a rare precious metal. Yep. National would actually go on later to acquire Fairchild. And Ben, do you know who would ultimately become the CEO of National Semiconductor? This is like the beginning out of Alley being a small place and all of these dynamics enabling the personal computer. Gil Amelio. Oh, what? Yes. Of Apple fame. Yes. Future CEO of Apple. Future. This first, I've wondering. I've foundering CEO of Apple. Yeah. I believe his first CEO, Gig, was taking over for Charlie as CEO of National. Yeah. So all of this is going on. Fairchild is on the ropes. In 1968, Gordon Moore and Bob Nois leave Fairchild. So Don Valentine's still there at Fairchild. And they start intel. And Don sees the writing on the wall. And he's like, oh man, Fairchild is cooked. Brain drain. Yeah, brain drain. I mean, it's just like Silicon Valley today. These things start happening like the key leaders and really smart people start leaving. You know the writing's on the wall. He leaves, he moves over to National as head of sales and marketing at National. Now, this is where serendipity completely strikes. If Don hadn't made this move, I'd seriously doubt that there would be a Sequoia capital. And there may not be a modern venture capital industry as we know it today. So Charlie is obviously brilliant. And this move of outsourcing production of chips is revolutionary to the industry. But quite prescient. And quite prescient. But there's one thing that he's absolutely terrible at. And that is public speaking. And that's one thing that Don is not afraid of. So remember, National's a public company. And they have to do earnings calls with Wall Street, even back in 1968. Charlie's terrified of this. He doesn't want to do them. And so as soon as Don shows up, he says, great, Don, your head of sales and marketing, you lead the earnings calls. Whoa. Which would be unheard of today for, I mean, it's your CEO and your CFO. And your CEO. You know, without exception. Yep. And you have other executives on there from time to time. But not leading it. Don starts leading the earnings calls. Through that, he gets to know a lot of the shareholders of National. And it turns out that one of their largest investors is an enormous public investment fund based in Los Angeles back in Don's old stopping grounds at the time called the American Funds. And that was part of this institution called Capital Group, which I think a lot of people don't know about. But Capital Group still today is one of the largest mutual funds and pools and mutual funds of money managers in the world. I might believe they have well over $1 trillion in capital under management across many, many funds. Capital Group, they had been seeing what was starting to happen up in the new proto-silicon valley. They'd seen the Intel IPO that had happened, which had was the first and Intel was the first true venture backed company that had gone public and all the wealth that had created. And who originally backed Intel? I believe it was Arthur Rock. Arthur Rock organized us into get backed Intel with equity. Well, it was a convertible instrument. It was a convertible data. A story for another day. So Capital Group, they'd seen this. And they actually funded AMD. And AMD also came out of Fairchild, which I didn't know until doing research for this story. So yeah, both Intel and AMD both were Fairchild alumni. I mean, the really all goes back to the traitorous aid in this legacy of like, hey, leaving dying companies and starting new ones out of them that propels Silicon Valley to its day to this day. That is so much like all these other industries we've talked about. And Verizon and AT&T basically both coming out of the original massive AT&T company. It feels like chip companies are not unique in this characteristic of both modern giants coming from the same source. Yeah. Yeah. So Capital Group, they've invested, they've privately funded AMD. They're a big investor in national. So they're like, especially as a public investment vehicle, they're at the forefront of being investing in Silicon Valley in its growth. They get to know Don. And they learn from Don about all this private investing he's doing. And so they approach him with an offer. How about he do this full time, leave national, and come and start working with them. At Capital Group, they'll give him certainly capital. And they have more capital than probably just about anybody in the world at this point in time or access to capital. And take him from the couple thousand dollar personal checks that he's able to write to finance these companies up to enough that he can actually support them to get to a public offering where they need to get to. So Don jumps at this chance. This is his true passion. He loves this. And this is a chance to take all of these road maps and marketing and market analysis, this skills that he's developed and just have this be his full time job. This is, of course, the birth of the illustrious and name we all know today, capital management services ink. Yes. Well, it was part of Capital Group. So we'll get into the structure in a second. I want to throw in a few great quotes from Don here. He talks about why he had the courage to think that he could do this full time. I mean, this is crazy. Like nobody is investing full time in private technology companies at this point in time. It's a bunch of folks who made money in other industries having lunch at the Markovkin's hotel. Remember? And Don is going to make this his full time job. So he said, I had a sense that my system of selection would work far more than it wouldn't. But I didn't have the resources personally to play Texas Holdham and put up more chips. The opportunity to have a large discretionary pool of money to continue to support the investment ideas was the difference in the environment I was in and the environment I was interested in going to. And after 12 or 13 years in the semiconductor business, I had a very high profile reputation in this community. And again, he was already doing the investing privately. So he says, so people who are interested in starting companies often gravitated to me to help them start their companies. From their point of view, I had some money. I knew how markets worked and how to help them position their company in the market. So I had a bit of an unfair advantage in those two respects. But the most unfair advantage I had was I knew what the future was and very few people knew what the future was. Nobody else, nobody else in the venture capital industry at this point was from the semiconductor business. Nobody else knew marketing and nobody else knew the microprocessor. So it's kind of amazing. Don has this, as we've talked about. It's three pretty valuable things to be good at at this point in time. Exactly, exactly. So if you think about what he's saying, so it maps pretty exactly to the core functions of a venture capital firm. So on sourcing, he has a network of super talented technical people and scientists with the right experience to start technology companies. His name is Don. It's perfect. He's like the original Silicon Valley Mafia Don. That's one. That's top of the funnel that sourcing. But then too, he has this unique experience that he knows all the roadmaps of Fairchild and National and the whole semiconductor industry. He knows what markets to attack. So he has the selection judgment of which founders and ideas to invest in. And then he has the ability to actually help them unlike anybody else in the industry at the time, actually help them build their companies through certainly recruiting management teams, but also strategy and decisions in the early days because he's lived through it so he can help them build their companies. And now finally through Capital Group, he has access to essentially an unlimited pool of capital, which again, nobody else in the industry had. People were having to go back to the East Coast at Fairchild to finance their companies. So David, you're saying an unlimited pool of capital. How does that really break down and how much money from the Capital Group could Don really invest in startups? Exactly, so this is 1972. Don leaves, he starts working with Capital Group and Capital Group sets up a new $5 million fund for their clients who want to invest in this high risk, high return startup in the semiconductor industry in Northern California. And Capital Group calls it the quote unquote Sequoia fund. And this is the beginning to do. Oh, Capital Group came up with the Sequoia fund. Well, I don't know, I don't know if Capital Group or Don did, but it is within Capital Group this 1972, $5 million fund is called the Sequoia fund. And so Don starts working on this on behalf of Capital Group and Capital Group's clients. But again, Don's kind of like a Maverick and he does things his own way. He's not super interested in just working for Capital Group forever. He really wants to do this himself. And Capital Group totally supports him in that. So he starts making investments on behalf of them, but he also starts working in parallel on creating his own fund and own firm that he's gonna call Sequoia Capital and raising an outside fund. And you would think this would be easy, right? I mean, Don has this amazing track record. He has a brilliant strategy that nobody else can replicate. He knows what's gonna work. He has the, he has the, he has the, there are no LPs. Well, he has the stamp and impromptu of Capital Group, you know, one of the most storied money managers, you know, in the world at that point in time. And Don, he learns a lesson that, you know, generations of people who start new firms have learned again and again. We learned it wave, which was that even with all that, starting raising a first time fund is really freaking hard. Like really freaking hard. Yeah, and what Don was doing was raising a first time fund for an asset class that didn't yet exist. So for Don, there weren't a group of investors who were used to putting money in this risk return profile. It was going and convincing them, hey, like there's not really historical data on this, but you should take a fly or not only on me, but on this entire concept. Yeah, totally. I mean, you gotta remember, this is pre, you know, for listeners who know about David Swanson, at Yale, the Chief Investment Officer at Yale, he really pioneered this, this approach that large pools of capital, especially tax exempt nonprofits, so pools of capital should put a lot of their assets in alternative investments, where they can get extremely high returns over a long time horizon, and because they're tax exempt, they can compound those returns at a much higher rate than ordinary folks. This concept didn't exist. So most pools of capital, you know, university endowments, foundations, family offices, and the like, you know, all of capital-based clients. It's bonds, it's treasury bills. Yeah, it's fixed in a little bit of stock. Yeah, they're investing in, you know, and these folks, they're targeting across their investments, a 10% IRR, which, you know, it is great, and better than like the, you know, average market returns, but it's nothing like what Don thinks he can generate and what the venture capital industry promises. So he goes out and he makes this pitch about like, hey, I think I can at least double 10% IRR, and if you look at my personal track record, like it's much more than that, and indeed Sequoia's first few funds would be well, well above 10% IRR, many multiples above that. The reception he gets is like, well, this doesn't sound like the investing business, you know, this isn't fixed income, this isn't, you know, and Don's like, yeah, you're exactly right. This isn't the investment business, this is the company building business. I'm in the business of starting and helping build great companies. And he's so right. I mean, that is what true early stage venture is. It's not, you know, investing, allocating money and seeing what happens, it's really digging in and helping start something from scratch. And that's where to this day, you know, the deep, the true outlier returns are. But the LP community is just like, they don't get it. So Don tells us great story. He goes to see Solomon Brothers in New York, the old story of investment big, which I believe it was Solomon Brothers that was the subject of Liars Poker, Michael Lewis's first book. And he sits down with the folks there. He gives them the pitch and they say, I see that you didn't go to Harvard Business School. And he says, right, I didn't go to Harvard Business School. I went to Fairchild Semiconductor Business School. And they didn't like laugh at all. And they're like, we're not going to invest with anybody who didn't go to Harvard Business School. So it ends up taking him almost three years while working with Capital Group to raise the first independent Sequoia fund. But finally in 1970. And even that was like single digit. Like how big was that fund? I couldn't get the exact data. Well, I saw a couple of conflicting sources, but I believe it was somewhere between three to five million. So quite, quite small. And that's with three years of work on it. Just think about the tenacity. I mean, most people would give up. Yeah, totally. Think of Sequoia Capital today. And then think back to the early 70s and one man, Don Valentine scraping together for three years because he believes so deeply in this vision of the future to put three to five million together and start investing. Like it really just like tells you a ton about, you know, you look at their ethos today and this is where it comes from. Once he gets started, he sets what he calls a few ground rules for investing. So these are, this is the original Sequoia Capital investing checklist. One, must be in a very big market, the potential investment. Two, must be in Northern California. That's changed. Three, must be in advanced technology. Four, must have high gross margin ability. That is also changed. And five, must have the potential for Sequoia to make $100 million on the investment. I mean, that's incredible. Like a three to five million dollar fund. And he's still like, he's only aiming for shooting for the moon. Sequoia alone could make $100 million on these investments. Which is basically by today's standard, saying it has to be a unicorn. Because in general, an early stage, call it a series A investor is going to get diluted to around 10% ownership by the time there's an exit. It's sort of the finger in the air way you would think about this stuff. Sequoia's had some examples where they've bought up more, think Dropbox. And there's also examples that we're about to go into where the terms were much different and you didn't just buy 15 to 20% of a company, you bought much more in these early days. And that company is most of them weren't raising multiple rounds. So Sequoia was financing. That was the only private capital that they were raising. And then they were going, achieving profitability and going public. But still, you think about today, people talk about VC investing. You got to underrate to 10X returns. Even from day one, Don's underwriting to 20X plus returns. And if he doesn't see that, and still to this day, I mean, I think one of the things Sequoia is really known for is they will only attack markets that truly have the potential to be large. A billion dollar market is not enough for them. You need a multi-billion dollar, ideally 10 plus billion dollar market. Because again, they're aiming for each of their investments to make 20X plus. And then the final, I love this. The final item on the checklist for Don's criteria for investing is must be positively responsive to our active participation, which is great though. Ed, Ed, Mom, obviously Don develops quite a reputation as we talked about with Trip on the EA episode. Being very active and being very active. Not only governance, but influencing management of the companies. This is really critical. Don, he has the credibility to be very active in these companies because he has helped build the previous generation of defining companies that are setting the roadmap for everything that's going forward. The other thing that he develops is a methodology for assessing entrepreneurs. David, but before diving into the entrepreneur side of things, the thing that struck me on these ground rules, and as we've danced around a couple times here, Don plays by his own rules. And he sort of has this ethos of this early stage investment business as a subjective business. It's not a highly analytical data-driven business. It's a feeling business. And yet, in these ground rules, it's interesting to see what hard and fast financial things jump out. So even in this high area of subjectivity and gut feel, must have high gross marginability is in there as one of these precious few rules. As an early stage investor, that's really ringing home to me and thinking about how important that is in the ability to sort of, of course, scale a company, but generate outsize returns. The only number that you see in here is that 100 million. Then the only other thing that's close to resembles a number is high gross marginability. It's interesting to think about what makes the cut. Yeah. Well, this also leads into his methodology for assessing entrepreneurs. But Don, as so many other things in pioneering the venture capital industry, I don't think he would put it in these words, but he recognized that this is a business that is both art and science. And that is what is so incredibly awesome and fun and rewarding about working in this industry and in early stage venture capital. But again, if you think back to the folks that were doing this before, it was all art. And if you think to a lot of the entrepreneurs who were starting companies like the trader estate, it was all science. They weren't thinking about the art of like, how do we make this into a huge wealth generating vehicle for ourselves and for the ecosystem? It was like, we just want to go do science. And let's find some way to do science. And Don is really the first person, I think, to bridge this gap. The methodology for assessing companies and entrepreneurs, he kind of goes back to, and I assume he was doing this while he was working in companies too. Remember, he has this Jesuit education and Catholic school upbringing background. And he goes to the Socratic method. Still to this day, I think this is a lot of how Sequoia runs their interactions with entrepreneurs. They ask questions, and then they just listen to the answers. This is such a key to being a great VC. One thing that I struggle with a ton is like, you can, the temptation is always to insert yourself into what's going on. Don recognizes that what you need to do is listen to what the entrepreneurs are saying. You may agree or disagree or understand or not understand, but you need to understand how they think about things, not how you think about things. And it's not about their answers, but why they're thinking that answer is the right answer and how they arrive there and what the thought process is. Yeah. And so Don talks a lot about, and if you watch the YouTube video of him at Stanford, how formulating a question, he believes is the most important thing in his business. And so he has a rule that questions can only be 20 words or less. And yeah, when he solicits questions from the audience at Stanford, he says, 20 words or less, or I'll kill you. It's great. But that's how he approaches things, because he's really interested in the storytelling technique of the entrepreneurs, because he says it's about the building of the idea, the size of the market, the degree of technical risk to get this product finished, who's going to care, and explaining that in a very simple way. We can tell that that person who can do that, explain it in a very simple way, is somebody we want to be in business with. People who are instead complex rambling all over the place, they're not, you know, Don has realized that the value, the only competitive advantage that startups have is focus and speed and stealth. And so if you're all over the place, you're not going to be able to execute on those things. And that's still true today. So David, how do you square all of this with Don's sort of off-stated principle that he invests in markets, not founders? And how does this assessment of founders fit into that notion? Well, you know, I think he is as technology historian, not, obviously you're not in Don's head. Yeah, exactly. Well, I think of course they're interrelated. And like all investing, it is, it is early stage investing. It is about both the market and the team. But I think that's, this is the key. Like the market is the important thing. But you need a team that gets back to Don's last point on his checklist of must be receptive to our active participation. You need a team that's going to be focused and able to quickly get the right solution into the market. And so he has this really great quote that I think encapsulates this. He says, so our view has always been preferably, give us a big technical problem, give us a big market when that technical problem is solved. So we can sell lots and lots and lots of stuff. Do I like to do that with terrific people? Sure. Are we willing to invest in companies that don't have them? Sure. You can augment management. You can help them with more people that are highly qualified. We invest in the size and the dynamics of the market. I don't care if Ginghis Khan is running the company. We'll give Ginghis Khan some help. Give me a giant market always. But I think Steve Jobs is going to come up in a mini here. But I think his point about Ginghis Khan is that Ginghis Khan may be Ginghis Khan, but he was focused on winning and speed and conquering. And that's what they're looking for. And to just beat this metaphor to death and that Ginghis Khan also has weaknesses. And therefore, must have a team that surrounds and complements. And I think Don has some quote, I don't have it exactly, but about how the most critical thing for an entrepreneur when listening to these questions, what are you listening for, is really this self-awareness of what they're good at and what they're not. And exactly point number six, how receptive they're going to be to being helped with those weaknesses. Yeah. I mean, again, think back to this moment in time. The people that were starting these companies, they were engineers. They were scientists by and large. And Don's superpower was he was able to augment these companies and these teams with folks like himself who were able to do sales and marketing and go to market. And then Sequoia could help argument with finance and accounting and everything around that and the outsourcing of all that. What he couldn't have was folks who thought they knew everything. So what actually do they end up investing in once they closed the first Sequoia capital fund in 1975? So it turns out Don makes his first investment in indeed a quite giant market enabled by semiconductors. But one, a little off the beaten path and certainly different than the defense contractors that he started his career selling to. And that was Atari. And we're going to talk much more about Atari later in the season here on Acquired. But it was the very first independent Sequoia capital investment down in best $600,000 in the company in 1975. And the very next year, the company ends up getting acquired by one of communications for $28 million at Sequoia makes a quick forex return, which is great, great IRR. But does fall short of the 20X that Don is hoping down to right too. Did I find a different source on that? I thought it was a $2 million initial investment. Or did he do a follow on for $2 million? I believe the initial investment was $600. Now Atari had also already been around for quite a while when I think... And three years they had gone without before raising. Yep. And Don had known Nolan Bush and all the CEO for many years. So I have to assume this was one that he had kind of waiting in the wings until he closed the fund. Which every good venture capitalist should have went out raising their first fund is who's going to be your first investment. Oh, we did that too. We have, it's amazing. It's amazing how much the industry is still the same. So then in 1977, Sequoia makes what could have been perhaps their biggest and most important investment ever. And unfortunately becomes perhaps their biggest and most important lesson. Just to pile one more thing on before the big reveal, which everyone probably already knows, is responsible for about a trillion of that 3.3 trillion number that I quoted of public market value today. Yeah, yeah. Well, it's a good thing they still have another 2.3 trillion that they're part of. So in 1977, as triple-leuded to on our year episode, Sequoia invests in another little company that was founded by an early former Atari employee and that was Apple computer. So Steve Jobs had worked for Nolan Bushnell at Atari and Don had gotten to know him a little bit then. And they'd, so Jobs and Waz had started the company and they brought on Mike Scott as the first president of the company. Yeah, we should say Doug got to know Jobs a little bit at that company but did not have the impression that this was a venture backable guy at this point in time. I believe his quote on Steve Jobs was that he looked like Ho Chi Minh. Yes. And so Mike, the two steves had brought on as the first president and it turns out Mike used to work for Don back in Fairchild and National. And so Don gets wind of the company, he meets with them and Don also knew a very important guy in Apple's history. Mike Marcola also used to work for Don back in the summer I conducted days and Don quote, quote, sends him to the company with the intention that Marcola is going to replace Mike Scott as the president and run the company. Ultimately though, as Trip talked about, Marcola makes a brilliant decision. Says, you know, I don't actually want to run this thing day to day, I'm going to be the chairman and really help these guys. But regardless, this is a kind of perfect example of Don's company building at work and management team recruiting. On the back of this, Apple raises their first venture capital around of just over half a million dollars. Interestingly, the lion's share of the capital comes not from Sequoia but from Venrock, which does a little over $250,000. Don and Sequoia do $150,000 and Arthur Rock does the balance. So Apple is off to the races and they really, you know, as we've chronicled many times and will continue to chronicle in the future, really invent the personal computer and usher that wave of technology in two years later though. And this is the David Sye there comes. I know, oh, this is just so painful, so painful and clearly has left its mark on Sequoia. Two years later, I couldn't find all of the circumstances around this, but to the best of my understanding. So the first Sequoia fund did not have only tax exempt nonprofit LPs in it. It also had, I believe, individuals and maybe corporations and not Solomon brothers, but other folks like in certainly capital group. As a result of that, those folks needed to pay taxes. And apparently some of these LPs were encouraging Don to make a distribution of some of the gains in the fund so that they could pay their taxes on the gains. And so Apple had grown quite a lot. It's now 1979. And Don, before the IPO sells Sequoia's stake, which they had invested $150,000 for $6 million to make this tax distribution to LPs. Now, that's a enormous return. Phenomenal return, yeah. Phenomenal return, but oh my goodness, $6 million. Compared to what Apple would shortly become. And then ultimately in the long term, of course, become. And it's this lesson that drives Sequoia in subsequent funds to take their capital only from nonprofit tax exempt sources, which becomes really not certainly the norm across the industry, but a goal and a lion's share of money that moves into venture capital is ends up being University Endowment's foundations, folks that are super long-term inpatient and aren't going to force VCs to make these terrible decisions like this. Yeah, and another, you can sort of check me on this, David, but my understanding is Sequoia, more so than your average venture firm holds the stock in companies longer after they go public. And often sticks with the companies for a very long time, I think probably also inspired by this lesson. This and others that we're going to talk about here in short order, we're going to talk about Sequoia's playbook in a little bit. But one of the key lessons that they learn is when things are going well, go long. Value creation in these companies that are building and creating enormous markets takes a long, long, long time. I mean, just look at Airbnb. Look at Google. Look at Apple. You can still be getting enormous, enormous value creation a decade plus after these companies are founded. Regardless of whether they're private or public. Yep. So it's fascinating to think about the first couple of investments or first two out of a handful of investments being Apple and Atari. In total, you returned a profit of about $10 million or a max of $10 million. It is wild to think that that is the sum total of Sequoia's return on those two companies. I know, I know. But at the time, I mean, even pulling it into context today, if we within two to three years of starting wave, if we could be sitting on 2X cash distributed, I would feel great about that. But the lesson here is that's not the business we're in or the game we're playing. The game we're playing is 10X plus cash distributed. And to do that, you really need to be in it for the long haul, especially when you're investing early. Yeah. The other thing to know here, and David, as you foreshad on you, be smiling a little bit, we'll get into this much more later this season. But with Atari, the Atari boom that we all sort of know of in the 80s was after it had sold to Warner. And so Sequoia didn't even have an option in participating in that upside, unless they were going to block the sale. Yeah, yeah, totally. And that also leads to another part of the Sequoia Playbook, which is like when things are going well, really try and convince these companies to stay independent and not sell. I mean, to look at Instagram, right? Selling Instagram to Facebook was a terrible, terrible mistake by the founders and the investors, even though it netted them great returns at the moment. And it was interesting. Sequoia ended up investing right before that deal happened. That is a debatable topic, but we can. You think that's debatable, though? I think if it had gone a lot longer than Facebook would have had to pay a lot more, like in the dozens of billions of dollars to acquire, purely because there is a very, very high user count social network that is a threat to them. However, do I think that Instagram would develop the business that they have today that is billions of dollars of revenue flowing through them by advertisers? Maybe, but that's not a sure thing. I mean, that's all a lot of that's because of what Facebook had done funneling all their existing advertisers there. I think that's true. And certainly they helped accelerate it, grow it more quickly. But at a minimum, Instagram should have waited longer and then had a WhatsApp acquisition. At a bare minimum. Yes. I get it so hard to, it's easy to arm check quarterback this now and hard to be sitting in the seat of Kevin and Mike when they have a billion dollar offer in front of them. But this is the value. Sequoia has learned these lessons over so many decades and seeing it time and time again. So the other lesson that they take from Apple is what Donetskoia call an aircraft carrier approach that they start taking to these big markets. They realize, Don realizes that Apple has created this PC market. And it's not just going to be Apple that's going to succeed in the PC market. They're going to usher in all of these other enabling companies that you need around the PC. So like Apple is the aircraft carrier, but you need all the destroyers and the ships around it and like all the planes on the ships and all that stuff. So they start financing component companies around the PC industry. Apple and Don help start a company called Tandon Corporation that makes disk drives. They are first investors in Tandon. Tandon goes public after a couple of years, reaches a market cap of over $1.5 billion. This is in the early 80s company called Printronics that makes printers a company called Priyam that makes disk drives, a company called Dyson that makes magnetic disks for the disk drives. I'll told, I believe Sequoia ends up making about 15 investments kind of in this aircraft carrier strategy around Apple. And it drives much of their returns in these early funds. Some other notable investments that they make during the 70s and 80s. In 1981, they invest in a company called LSI Logic, which makes again around PC and computing that makes storage and networking products. In 1983, so just two years later, LSI goes public in the largest IPO on the NASDAQ in history at that point, raising $153 million in the IPO, which is, I mean, $153 million, that's like a solid soft bank size round today. This is two years after Sequoia invested in the company. And yeah, inflation adjusted. I mean, that's in the sort of 500 to a billion range. Totally. And the way to think about how much they raised. Totally. 1982, as we chronicled, they invested in Trip and Electronic Arts or Amazon software in the beginning. They also invested in 3com in 1982. Folks might remember 3com, which was a networking gear and eventually bought POM and the POM pilot. 3com, I didn't realize, came directly out of Xerox Park. So that's the other thing that Sequoia, kind of on the back of Apple starts doing is, they started raiding Xerox Park and IBM's West Coast Division and all of these old school East Coast companies that had been training these technologists and developing advanced technology. And they just started commercializing them left, right in center. 1983, they invested in Oracle and also Cypress semiconductor, both of which become massive successes. And then in 1980s. One point I want to make on Oracle before breezing, because we of course, we need to do an episode on Oracle and Larry at some point. But there's a crazy thing here that Oracle went six years before raising money from Sequoia. And I think they had bootstrap off of $2,000. And if you think about it, like Oracle was really one of the first true software companies. They were wildly capital efficient and Larry was very outspoken against, you know, pushing back against this rising venture capital industry and speaking all kinds of ill tongues of the venture capitalists and what they do in common and trying control companies and raid them, all these things. And of course, ends up partnering with Sequoia six years in. But a very different start than a lot of these other companies which required much more capital to get going. Yeah, and the reason I didn't want to dive too deep into it is that I might be speaking a bit out of school not having done the deep dive on Oracle in their history yet. But to jump in and speculate a little bit, I think part of the reason why Larry, that said, I'm going to speculate wildly. I think part of the reason why Larry was so anti-VC was VC was anti-software and anti-layer. Like this was like, they didn't understand, Don didn't understand software. He was a semiconductor guy. All of these companies we're talking about with the exception of EA are hardware applications companies. And so I don't think Oracle could raise venture capital when they got started. They were the first real software company. It's the highest gross margin of them all. I know, I know. It fits that thesis so well. But it wasn't the venture world had woken up to that just yet. They would. And Sequoia would too, of course. But so much of the DNA comes from this hardware world. The last kind of great and for Sequoia, certainly the greatest hardware investment that they make is in 1987, Don invests $2.5 million in a little company called Cisco for 30% of the company. Started on the campus, actually at the GSB, had Stanford started on the campus of Stanford. Sandy and Landware, I can't remember which was which. One of them was the IT administrator for GSB. And one I think was elsewhere on the campus. And networking was just becoming a thing. And they were married. They were sending messages to one another. And this is this amazing romantic story that they had Jerry Rig the network to be able to send messages to each other at work. I know. And that turns into Cisco. And that turns into Cisco. I mean, it just goes to show you how these companies start. And Don, having learned the lesson from Apple of like, hey, we'll finance Ginkgo's con. He doesn't care. Most VCs would look at this team and be like, we're not going to finance this team. But he cares about the market and the application. At the time, there were no routers. So networks, like local networking was just becoming a thing. But networking networks was impossible. And so Sandy and Land developed the first router. And just, you know, such a brilliant quiz still uses this example today of like the very, very best most elegant expression, simple expression of what a company does. It's three words for Cisco. We network networks. That turns out to be not just an enormous, enormous market, but really the enabling technology for the internet. Cisco stock was the tracker for the internet hype in the.com era. I mean, it was like, if you wanted something that was emblematic of people's excitement about this new technology, it was Cisco. And so now we're in 1987. We're 12 years after the kind of independent constitution of Sequoia Capital. Don has learned all these lessons. He's not letting this one go. So not only does he fully finance the company upfront with $2.5 million, gets 30% of the company. The company then goes public shortly thereafter. I believe there is 160 some odd million in the IPO. Don stays on the board. Don doesn't distribute the shares. He remains chairman of the board, I think, until the mid 90s. And they ride Cisco up and make enormous, enormous returns on this company. And that is, that really becomes the playbook for Sequoia Capital going forward. Amazing run. Also just such a great example of like Sandy and Len weren't thinking about the internet. Nobody was thinking about the internet when they started Cisco. But things just kept, the market kept evolving and kept getting bigger and expanding. And Don again, you know, it's a quite being so focused on the market. They knew that like, even though this company was public, there were still enormous returns to be had because the market was nowhere near penetrated. So alongside all these investments that they're making, the funds kind of steadily grow in size from that first fund of three to five million, it stabilizes at around 150 million per fund in the 1990s that Sequoia is raising every three years or so and having that be their investment period. Along the way, though, of course to do that, you have to not only build these companies, but you have to build Sequoia, you have to build the firm. You can't invest in all these companies and give them the time and attention that you need to do true or at least age company building alone. So Don starts adding partners to Sequoia and he talks about the process of doing this. And again, remember, back when they started, like the number one requirement for being an investor, quote unquote, was going to Harvard Business School, not fair child semiconductor business school. To be clear, investor in this sense was generally a public market investor or perhaps some other alternative investment, but not investing in startups. I mean, the Solomon Brothers folks probably looked at this more like gambling. Like what you're doing is an investing and you're not a person that looks like an investor. So what are we even talking about here? I think that- And the irony of it all is it's the exact opposite of gambling it's building. But yeah, so, okay, so Don has this great quote. He says, adding new talent was and remains a continuous process. Conventional education was never a high priority. Plenty of folks have gone to Harvard and say for business school, worked at and worked at Sequoia, but that's not what they look for. We look for people with functional experience in a startup. I.e. design and application engineering, product marketing, sales, aspects of outsourcing manufacturing, our investment decision making process requires very self-confident people able to be challenged publicly. I look for people that are as far different as possible than I am because we do things here on the basis of consent among the partners. And I don't like having a marginalized set of opinions. Don wants people to be faces I want as much confrontation and different thinking as possible. And he wants people that are gonna be confident and comfortable enough to put their thoughts out there and debate as part of the group. One of these lessons that Don's learned is that sometimes the most amazing companies like Apple, like Cisco, they look crazy. And so you need somebody that's willing to see the potential behind the craziness and stand up for them. And oftentimes that's not folks who are coming from Harvard Business School. I believe the first partner, ironically, that joins Don at Sequoia does come from the investing world. In 1979, Gordon Russell joins Don. He had worked with Don at Capital Group. So he comes from Capital Group, comes in and joins Sequoia. And he builds Sequoia's healthcare and biotech investing practice. So kind of in parallel, even from the 70s back in Sequoia, they're not only investing in technology and hardware and semiconductors, they're also investing in healthcare and biotech. But of course it's technology that the firm finds. It's true success in. And in 1981, we mentioned Pierre Le Mans earlier. Don convinces Pierre already had an amazing storied career as a chip designer and architect at Fairchild and at National to come in and join him at Sequoia as a partner. And Pierre has an amazing run. He stays as an active investing partner at Sequoia for almost 30 years. And then this is incredible. He moves to Coastal Adventures in joins with Node over at Coastal in the mid-2000s. And then he goes and he joins Formation 8. And he's now after Formation 8 at Eclipse. He is still an active general partner, making and leading investments today. He just turned 89 years old. This is incredible. He was born, I believe, in 1930 in France. He is a true legend in the industry. But that's the kind of folks that Don is looking for as people who are literally going to die in the seat because their lifeblood is building technology companies. And Pierre absolutely fits that to a tee. So then in the late 80s, two very, very important people joined Sequoia from interesting backgrounds. So in 1986, a gentleman, a true gentleman, by the name of Michael Moritz. Now Sir Michael Moritz, who was from the UK and had come over to America and had become quite a famous journalist for Time Magazine. I believe he wrote a book on Apple while he was still at time, right? The little kingdom, I think it was called. Sounds right. And that's how he gets really interested in Silicon Valley and technology and sort of the people behind Apple and venture capital. He leaves time and he starts a VC newsletter with the goal of he wants to break into the venture capital industry. I remember, what's old is new again, Davey. Michael never, you know, other than this VC newsletter company, he's never built a company or worked in technology at his life. But remember Don's looking for these Mavericks and he has a soft spot for people that kind of do things their own way. Don decides to take a chance on Mike and invite him into Sequoia and to join the partnership. And that ends up being just an incredibly, incredibly prescient decision that leads to Yahoo and Google and so many other companies. Does this count as how to hack your way into VC and the first example of start of VC newsletter? Yeah. That actually probably still worked today. Yeah, I think there's a quote about Moritz, which is he had the journalist instinct to go for the jugular and not hold back. And a friend said that about him. David, we've started a podcast and have a love for media, but I have this sort of reverence for really good journalists who not only are able to really tell a great story, but sort of get the truth out there. You know, it's a special talent for someone to be able to cover an industry and yet have their respect in this way. You know, we talked about the secratic method of questioning that Don holds so dear. And I think this is what he saw in Mike. I won't say a lot of this for part two of our Sequoia journey here too, but that's what Mike was so great at as a journalist. And Don actually says, you know, he says the two people that he's met in his life who are the best questioners are Mike and Steve Jobs, high company. The other very important person who joined Sequoia Capital in the late 80s is a relatively young, brash sales guy who comes from Pulet Packard and Sun that also is an Italian immigrant decides that he wants to work in venture capital. He just calls Don up one day, cold calls him and says, hey, I want to join Sequoia. And if you know anything about the person that we're talking about, this is exactly in character. And this gentleman is Doug Leoni, who today, of course, is runs all of Sequoia and all of their operations globally. And I believe it would be the person that ultimately advocated for and took Sequoia into becoming a global firm. We're going to talk much more about both Mike and Doug next time on part two, but just to wrap up part one, which again is really, you know, the story of Don. And I mean, you can't extricate Don not only from Sequoia, but from venture capital and the whole industry and total in 1996 after it had become clear that Mike and Doug were amazing investors and not only amazing investors, but had internalized all of these things that it meant to be Sequoia and then built on them themselves. Don does something pretty amazing. He literally hands the keys of Sequoia over to Mike and Doug. Doug talks about this in an interview with Dan Primack and Axios that I don't have the exact quote here, but he says Don, one day in 1996, invited Mike and Doug into a conference room and he sat them down and he said, I'm giving this firm to you. And there are three things. One, you're going to run the firm. I'm not going to run the firm anymore. Two, you get to decide what I do. You can keep me around. I can continue making investments or I can not. It's completely up to you. And then three, if you do want me around, here's the things I'm willing to do and not willing to do. But one of the things I'm not willing to do is run the firm. So you guys make all the decisions about what's going to happen from now on. And that's just like even today that's so rare. I mean, this is the first, very successful, well, not the first in the industry, but the first successful generational transfer at Sequoia. Most venture firms and most founders at venture firms don't have the ability to do this. And it's so hard. I mean, Don created all of this. And he's willing to say, you guys of the future change is part of not only what we invest in, but part of the venture industry too. And you guys are the people that are going to leave the change. It takes a lot to do something like that. It reminds me a lot of another great venture firm that we may also cover benchmark. It was a very different way of doing this. Very different, yes. But equal partnership, there's a great interview with Andy Rackliff and Patrick Oshanasey on Invest like the best where Andy talks about how at the peak of their power, the original partners handed us the keys. And I think it's well done very differently. There's definitely common elements between both of these great firms. Yeah. And if you look at the firms that have managed to survive generation after generation and wave after wave of the technology industry and venture capital is evolution all excited, it's the firms that do this well. The firms that don't make the transition. And Don has a great quote about this. He's, you know, when Sequoia was started, the positioning was to LPs was we're going to deliver vastly superior returns to anything else you can get out there. And that proved, well, we'll talk about it in grading, but I think that proved true. But the positioning of Sequoia is now two things. And he says, it's this stability that comes with generational transfer. He says, the stability is part of why we have had the same limited partners for almost 40 years. When Don was saying this now almost 50 years, stability and returns is how Sequoia is positioned. For the type of LPs that they're trying to attract, which are patient, very, very long-term capital, you actually need both of those things. Returns isn't enough. You need the stability that accompanies those returns so that people will have confidence that like, hey, you can get your returns, but if the firm blows up then you're useless to me. Do we want to go into what would have happened otherwise? Yeah, let's do it. All right, so listeners, the way that we want to do this section on this unique episode is, what would the world be without Sequoia? And there is a very Sequoia-centric view of the world, which is all of the technology industry looks very different. And without building this sort of aircraft carrier strategy around Apple and financing all of that in a very scarce capital environment like there was then, we may not have the Apple that we have today. We may not have some of the other tech giants that we have today. There is a alternative view that you could take to that that says, look, capital is capital. And the 99% of the value, or maybe 110% of the value that comes from receiving investment from a venture capital firm is the capital itself. And everything else is either hololulu or value detraction. And capital will always expand to fill all attractive opportunities. Exactly, exactly. That we, despite some friction points, we live in an efficient market. And if it's truly a great opportunity, then capital will flow to go and fund that thing. And so the world would look no different today if there was no Sequoia. I think I fall slightly toward the former part of that scale. And I'm not willing to say that we wouldn't have some of these amazing technology innovations without Sequoia, but I do think in just pouring over the hours and hours of reading that we found about Don and really learning about the history of this firm, it's on plate of very active role in building a lot of the companies that they invested in and deserves a lot of credit for that. Well, listeners, let us know how you like this type of episode focusing on venture firms. We of course love it as venture investors ourselves. But we've been talking all about Sequoia on this episode. There is really along the exact same timeline. There is a perfect example of what would have happened otherwise. And that is Client of Perkins, which over this time frame that we're talking about was equally, if not arguably, more successful than Sequoia. But what's really interesting and we'll dive into when we ultimately do an episode on Clienter, their philosophy was quite different and was a lot more interested in the entrepreneurs and the backgrounds of the entrepreneurs than necessarily Down in Sequoia were. So I think to my mind, what would have happened otherwise, of course Silicon Valley would have happened. Of course, the modern venture capital industry and startup industry would have happened, even though Don helped catalyze all of it, somebody would have, and certainly Clienter would have and did, Clienter Perkins would have and did. But I don't think there would have been as many chances taken and opportunities given to the quote-unquote Ho Chi Minh's out there that Sequoia was willing to fund. And it wasn't just in those days. I mean, look at Airbnb in the early days and Sequoia's extremely precious early investment in the three Airbnb founders. They didn't look like what a prototypical founder looked like at the time, far, far from it. I think it's Sequoia and Don's DNA coming from a true incredible marketing background and market's focus that maybe wouldn't have developed in the same way without Sequoia. Yeah, and one way to look at this is like, if the Clienter Perkins in 1978, you are backing founders and outsourcing a lot of your judgment to them and you're just saying, you run, obviously they weren't hands off, but you run the company and the reason I'm investing in you is because I trust you to figure out how to run this company and what Don was looking at is you're really onto something in this killer market. We're gonna go build this thing together and I'm gonna help you do that. And the downside to that that we haven't painted yet is if you're a founder that believes that you need to be the CEO of that thing forever and you're in a market that deserves a team to really go and value maximize the way to tackle that opportunity. Like the terms of these investments, especially at this time where that often firms would own 33 to 51% of the company, they would have the right to buy the rest from you, they would have the right to replace you, they would have, I mean, all these rights. Of course, much of this still exists today. The job of a board is to hire and fire the CEO, but it was much more prevalent back then, especially within Don's view of the world is that I'm building this company with you right now and like this company may outlast your leadership. Well, the unspoken words in Don's quote we said earlier about management can be augmented is management of course can also be replaced. Now, there's upsides and downsides there, right? Like if you're focused on, if your focus is building a great company, sometimes that's the right thing to do. And sometimes of course Don and it's going, we'll get that wrong, but sometimes it is the right thing to do. Thinking back to our conversation with Trip and what attracted Trip and EA to Don was this knowledge, you were getting what you saw with Don and he was going to force you to build a big company. One way or the other, you know, with you or without you. All right, we are in tech themes now, but to officially call it that and move through it here. The thing that really jumped out at me, and of course, you know, being in this industry, knowing folks funded by Sequoia, knowing folks at Sequoia, you know some of this tangentially but it's worth taking a fresh look when preparing for these episodes to really ground yourself in what assumptions am I making. The thing that jumped out at me was Sequoia and all of their copywriting never says investment, but rather partnership. It's not we let an investment, you know, it's not it. It's we decided to partner with that company. And they have a statement on their website called their ethos which says we're serious about our work and carefully choose the words to describe it. Terms like deal or exit are forbidden. And while we're sometimes called investors, that is not our frame of mind. We consider ourselves partners for the long term. It immediately jumps out at me as David used so often say company builders. You know, we are partners and the way that we do that is we've got this, you know, huge fund that we manage that of course we have a fiduciary responsibility to our LPs to maximize the value. The way that we decide to partner is through investing in you but you know, we are your partners in this business. Five, six, seven years ago, I always thought that was, when I heard we were so excited to partner with this venture firm on this thing. I was like, oh God, here it comes. You see, it's the invested money and you just say it. I finally am sort of like seeing, I think what firms like Sequoia, and you can't really say firms like Sequoia because there's no firms like Sequoia. But what Sequoia means when they say partnership rather than investment, it is a very different frame of mind. It's not, I'm looking for opportunities to get a multiple in my cash. This looks pretty good. So I'm gonna throw it in and hope that I get a multiple out of it. It's for some reason I believe that this is going to be a society defining company in the next coming decades and I'd like to be a part of that with you. Well, it gets back to, I think I've talked about on the show before, but when we were starting, if one of the first people we talked to was Greg McAdoo who was a long time partner at Sequoia and led their investment and initial investment in Airbnb and was on the board for many years and was a big part of the reason why my partner Riley joined Airbnb. And he said to us, something that always stick with me. He said that doing venture extremely well and at the highest levels, early stage venture, it's all about alignment. And I think this is what, you know, through this history, we've told how Don and Sequoia came to understand what this alignment meant. The alignment is around building long term, big, great companies. And so if your focus is that, you need LPs unlike the original set of LPs who wanted a tax distribution and forced them to sell their stake in Apple, you need LPs who are willing to sign up for an essentially infinite, not infinite, but decades to multiple decades long time horizon because when there's true opportunity, the lion's share of the value gets built at the end, you know? Think about the run that Amazon's had or even Apple's had in the last 10 years in their market cap relative to the first 10 to 20 years of the company. So that's the LPs aspect. But then to this company building aspect, like if you're truly aligned around that, you're optimizing for those outcomes, which means you aren't just like sitting on the side and letting things like play out, you are helping make the decisions and build the company and build the culture that is going to enable a super long term, great company to be built like that. And I think that really is there ethos. Now that's not the only way to do investing. And well, we've talked about it, and we'll talk about many more on this show. But it's a really, really unique one that I think has been cool doing this episode to see exactly how this was developed. All right, my second tech theme is that it's called Sequoia, not Valentine Capital or Valentine and Co and Valentine and Perkins. Exactly. The way that Sequoia thinks about themselves is that Sequoia exists behind the founders. It's not about Sequoia, it's about the founders. No, it's more importantly about the companies. And not the founders. Right, right. And even more so, it's not about the person, but it's about Sequoia. So even when you pop up that one level, it's not high I'm Don and I'm extremely public and loud and writing op-eds all the time and doing all this. If you want to talk about the investment company, let's talk about the investment company and that's Sequoia and I happen to be a part of that. But it's not all about me all the time. And it's interesting, you talk to people and you say, do you think Sequoia's low ego and people would say, no, absolutely not. Like that is not the way that I would use to describe them. But I think you talk to folks at Sequoia, you talk about companies that have been funded by Sequoia and they do take that very, very seriously where we're one of the best firms in the world. But at this level, it's about the firm, not the partners. Well, I think it all comes back to this super long term orientation. Like, you know, does Sequoia have ego around that? Of course they do. Go look at their website. But it's all about long term. It's not about like, look at this deal we just did. It's about like, look at this company that was built over decades that we were part of and look at all of these companies and look at Sequoia itself, which we're going to get into much more in our next part of this series here. So I tried to, for this section, kind of catalog and crystallize like, what are the elements of, if you had to distill the Sequoia playbook from this history and from Don's experience? I think these are the points that I would put in it. You know, one, first and foremost, of course, is focus on the market, both the size of the market and whether the dynamics of the market will lead to rapid adoption by a new entrant. The second is that change equals opportunity. This also didn't make it as much into the history in fact, but Don has this great, great quote about this. So he says one of our theories is to seek out opportunities where there's major change going on, a major dislocation and the way things are done. Wherever there's turmoil, there's indecision, and wherever there's indecision, there's opportunity. When it becomes obvious to anyone who reads Time magazine that it's useful to have a disk drive on a computer, then it's already too late in the cycle to invest in disk drives. So we look for the confusion phase when the big companies are confused, when the other venture groups are confused. That's the time to start companies. The opportunities are there if you're early and you have good ideas, which I think that is just like such a perfect way to frame it. So hard to do in practice, but a really perfect way to frame it. Next, I think is when you find one of those opportunities, don't get caught up in overly focusing on the team. Like, of course, you want the team to be great, but like if the team doesn't look like a traditional team that you would pick from central casting to do this, like don't worry about it. You better to pursue the opportunity and you can augment the team if they're receptive to working with you on it. That gets to the next piece, which is be a company builder, not an investor. To really do this at the early stages, you've got to dedicate the time and effort. You have to have a partnership with people, made up of people who have actually built these companies, whether that's in their career as investors or their career as operators, but people who really know what they're doing and can help the companies make good decisions and recruit great management teams around them. Related to that, you can only do that at the early stages. Like, Sequoia now, of course, and we'll talk about this much more, invests at all stages of a company's lifecycle, but this type of company building investing that we're talking about, you can really only do it at the outset. Once the DNA is set, and it's interesting, I think Sequoia used to have one of these quotes on their website and their ethos section. I don't think it's on there anymore. They believe that the DNA of a company is set within the first 90 days of operation. And after that, it's really, really hard to change it. And having lived through that and now, making the whole focus of my investing at that stage of the market and YouTube end, like I completely agree with that. Just reflecting on how crazy it is that this asset class exists, we all take for granted that there's early stage fundraising, that like in mass, a couple million dollars are gonna get deployed into ideas, hundreds of thousands of times per year, and that there's a whole asset class of investors that are willing to do that. And now it makes sense because we've seen the handful of those become so, so valuable that, you index the whole asset class and sometimes it overperforms, sometimes it underperforms, but it sort of tracks other asset classes in terms of risk adjusted return. It's a pretty special thing that it exists, and this is probably an ethnocentric statement, but that it exists in our country. Like if you think about the impact that it has had on GDP, the access to early stage capital from a large group of people who, it's their business to take a flyer and their business to underwrite a tremendous amount of risk by having a 20 plus company portfolio, I think it's a really good thing that this system got created and that this type of capital is available today. And surely it is not deployed in the best way that it could, or certainly the most fair way that it could, but the fact that it exists at all is intensely value creative. And we take it for granted that it exists today, and it's kind of mind-boggling how difficult it would have been to convince people at this point in history that they should plow money into it. I mean, Gaster, remember the Solomon Brothers meeting that we talked about the time had? One of the other reasons I was so excited to do this episode is we deeply believe it wave something that I think Sequoia also believes in this history shows, which is, you mentioned this asset class exists now, and you can have an index on it, and it works because like a few companies out of these many, many seeds of small companies will get built into giants Sequoia like trees. That's true, but I think there's a faulty logic conclusion you can draw from that, which is that we should have an index fund on this, because what this history illustrates is that that defeats the whole cycle. Like the reason that Sequoia's size trees get grown from seeds is because of careful watering and feeding of them from people who are experienced gardeners who really know what they're doing. I really want you to change your Twitter bio to experience gardener. I love it. I experienced forest keepers. Let's put it that way. That's a big part of a change that we, and I think you guys too, like hope to be in the early state ecosystem now, is getting away from this like watering a million seeds and into like tending a garden. Yeah. Yeah, I mean, we thought long and hard about that with PSL, when we were first getting started, and I think it should we be doing sort of more companies, should we be doing this in like an accelerator style way. And I mean, we talked about the studio model in the LP show, but it's very different, and it's much more concentrated bets. And I think Sequoia is a great example of, especially in the era that we're talking about, it have incredibly concentrated bets, and a lot of work into them after the investment. Yeah. OK, so my last two for this Sequoia playbook are one, let your win is run. Everything we've been talking about, if you've got something that's growing into a Sequoia size tree, like most of the growth is going to become, after decades plus into the company, let your investment in them run. And then the last one, which is what Don did that we ended history and fax on, which is hand over the keys before you fall asleep at the wheel, if you're running a venture firm. So much easier said than done. All right, should we move on to value creation value capture? Yeah, let's see. What's the best way to do this one? Well, one thing we talked about is, we don't have the exact data on the returns of Sequoia's early funds. We have a general sense from a few sources that we can talk about, but compare that to how the NASDAQ performed over a similar point in time, which is kind of the closest you could come to, like, approximating this type of investment as an investor at this point in time. Yeah, and I guess what we're doing here is we're sort of rolling together value creation value capture and grading to touch on what we do in the section with value creation value capture. Normally, when we're covering a company, we say, hey, Shopify enabled $250 billion of sales or something like that. I can't remember the number last year. How effective were they at actually capturing that value that they sort of created? I would say Sequoia has been surgically good at capturing the value that they created in the world with, I think, few misses. I don't think Don had any trouble capturing the value he created in the world. Well, I would say yes, yes, no, certainly no one's quiet today. No, but I think it took them many years to learn how to do that, right? Even Don coming from the background and the personal investing he did. I mean, the Apple decision was such a huge mistake. Sequoia captured $6 million of value from Apple. And lost out on dozens to hundreds of billions. So yes, I think they reminded of mistakes. A few mistakes. One very costly one. But yeah, I think that's fair. The real testament here would be to ask the entrepreneurs that Sequoia worked with. Do they feel the successful ones, the value that Sequoia and their limited partners captured from the value that was created at those companies? Do they, as entrepreneurs, feel that it was worth what they got in return? Acquired FM at gmail.com. Yeah. Fenty people on Fenty Melissa. Well, I think we didn't ask Trip that directly in the EA episode, but I think he probably would have said yes, right? Oh, yeah. Yeah. That was my, I mean, that was definitely the sentiment I got from him. Good point. We were mixing grading and value caption and value creation. So we move on the game. Yeah. So I mean, grading the way that we traditionally do it for folks that are new to the show is big company buys little company and we have history as our guide. Was that a good use of capital by big company to buy a little company? Dave and I were talking before the show on how to think about grading for this episode. And I guess the way we sort of landed on it is opportunity cost for LP capital. So what, you know, if you had just put money into the NASDAQ to try and do some technology investing, you know, from 1975 onwards, sort of how would that have looked? Just interesting to know the NASDAQ between 1975 conveniently when it was created in 1990 grew about 6.5x with a couple of pretty serious hiccups in the middle where it lost 30% of its value and then took a long time to creep back up. So a stock market like any other. And so that's sort of the basis that we decided to compare it to. David, how do you think Sequoia sort of stacks up against, you know, that public market accessibility? It's hard to compare exactly because we don't know the returns for any given fund little on all the dollars in aggregate. But I believe based on some quotes from, from Don in some of our research and other data we have that Sequoia was probably averaging a 50 to 60%. I R R on their funds during this period. So if you look, actually I haven't done the math of what that would be over 15 years, but it's well, well, well above 6.5x. And so now if you assume Sequoia is taking as carried interests, you know, probably in the early days 20, I believe now they're at 30% carried interest that they take on their funds. So taking that out of their returns, I still believe that you're performing well. I believe you're performing much, much better than that and there's a great quote. There was a Forbes profile that they did on Sequoia in 2014 and there's a great quote in there from the CIO at Notre Dame, which is a great LP. One of the most sophisticated endowments out there and they say that Sequoia is the single best performing manager that they have had in their entire portfolio for the last 30 plus years. And that is across all asset classes, which is pretty incredible. Wow. Okay. So how do we assign a letter grade to this one? Well, I mean, clearly it's an A, right? Like, I think the question is like, is this an A plus? I think it has to be an A plus, right? Like if we're looking at a whole bunch of funds bundled together is like too difficult to like assign a single letter grade to. You know, I think like were we looking at one that had, it was of significant size and had the highest IRR of all time, then we could go, oh, that's an A plus. But like it feels reasonable for me to say that like the first 15 years of Sequoia's existence were a, a relative to other venture firm. I mean, yeah. The reason I make a case for an A plus is twofold. And how much done really was a part of inventing so many things about the way the whole not-to-venture capital but startup ecosystem works today. And two is, is that quote from from Notre Dame now, you know, maybe there are other great managers that Notre Dame has not invested in. But, but man, to be the single best performing manager over 30 plus years in a marquee and the almonds portfolio, like it's hard not to, hard not to assign that an A plus. All right, I'll go with you. All right. Well, with that, this has been a blast for us. Audience, hopefully you guys have enjoyed it too. Certainly hit us up in the slack or acquired FM at gmail.com. If you have stories to share or thoughts or other areas you want to see us dig into, especially on our continuing saga of telling the story of Sequoia from Doug and Mike. Well, their generation, when they were coming up, then taking over and taking Sequoia into the now $12 billion plus global growth behemoth that it is today. Yep. We'd love your feedback. All right, Carvouts. Carvouts, let's do it. You want to go first? Yep. Mine is an episode of The Daily, the podcast by The New York Times, from a few weeks ago called What American CEOs Are Worryed About. They report on an event that happened last month where nearly 200 executives got together at something called the Business Roundtable, which I didn't know was a thing. It's not like a governing body of any sort, but it's like a 200 of the fortune, I don't know, 1000 CEOs that get together and make proclamations. And one such proclamation that they made this year was that they are going to not just think about their stakeholders, their only stakeholder as their shareholders, but also their employees, their customers, their community, a broader set of stakeholders. And in my head, the thing that first occurred to me was, well, that feels like illegal in some way. It feels like the purpose of a corporation is to maximize shareholder value. And I just have taken that at face value, committed capitalist, but like that is my understanding of... Yeah. And I didn't realize and it got me thinking, because I've always thought, well, you should do all these other things. That's bending the rules of the company to potentially sacrifice shareholder value to go and do things that you don't think long term will accrue to shareholder value. So obviously, you should be active in your community and you should take care of your employees. But I always thought with this lens of companies do that because it's going to accrue to shareholder value at some point. And it's fascinating to... Number one, listen to this proclamation. And then they dive deep into exactly David what you were talking about. The fact that it's a relatively new phenomenon, one that sort of grew up in the 70s and 80s in the sort of professionalism of Wall Street and companies changing their bylaws to basically say, we exist to be a publicly traded security. And then we are at the sort of mercy of that. It's this interesting, if we actually drift its direction that they brought up, it's much more of a return to sort of the business as a pillar of the community from the early 1900s. And I'll be very curious to see if this sort of comes of anything and if this stirs more sort of similar sentiment. Yeah. Yeah, super interesting. Well, and definitely reflective of the times we live in in terms of corporations and the world at large. So I hope things go more in that direction. It's interesting to see, we have one of our five portfolio companies is a B corporation. Do you guys have any B corporations? Awesome. Wow, we don't yet, but we're super. Yeah, super sort of that. Yeah, it's been really cool to see that emerge as a way to institutionalize some of the governance rules around this idea. We invest in B corporations as in C corporations, but no preference necessarily for one or the other, but we're in many other VC firms. So we're super open to it and support it. Okay, my carve out as listeners may know, for some reason that I even I don't understand, I use Amazon Music instead of Apple Music or Spotify. I'm actually, yeah, I'm definitely going to change that because Amazon does so many things. Great, but music is not one of them. But one thing that popped up on the homepage of Amazon Music last week, which may be as worth the whole thing is I had no idea last week was the 25 year anniversary of notorious BIG's first album, Ready to Die. So like speaking of Mafia Don's on this episode, and Viggy, it's so good. And so Amazon did this cool thing where they have a bunch of tracks from the album and then in between each track, they have like a commentary from journalists and people that were there, producers, Puffy, you know, everybody part of making making Biggie's first album. It's listening to it all again. Just man, right? Like it's so good. Like maybe some of the content and language he uses, you know, haven't aged too well, but like he was so good. Like I've never heard anybody that can rhyme like Biggie and just the music and the tracks and like what did he did producing it? Like it was really cool to rediscover and be listening to that over the past week. David, I love the incredibly eclectic collection of carve outs that you have. It's this like, you know, crazy place in France. It's this really hard to get through, you know, a thousand-page book that like I will never have a prayer of actually. And then oh yeah, well, it's this, you know, it really takes me back to when I was really into Biggie, you know? Well, the secret is I keep a little note, my Apple notes, of anytime someone strikes me, I just put it in there as a potential future carve out. So. Oh, that's awesome. It's a good idea. All right, listeners, thank you so much. Thanks to all the great sources that you can find in the show notes for helping us research and put together this episode. And if you would like to either join the Slack, you can do that at acquired.fm or become a prestigious acquired limited partner, you can do that at glow.fm slash acquired and it comes with a seven-day free trial. Yeah. One quick note on the Slack. We found a couple of questions about this recently. The Slack is awesome. You absolutely should join if you're not part of it yet. The way to do it is go to our website, acquired.fm. And then on the homepage, there's a little button on the left-hand side of the homepage right below the main image. Click that and you'll get an invitation to sign up and join the Slack. All right, listeners, we'll see you next time. See you next time. Bye.