The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: The Sequoia Investment Process | Investing Lessons from Doug Leone, Roelof Botha & Alfred Lin | Sequoia's Framework for Analysing Founders | The True Benefit of Having Sequoia on a Cap Table & Sequoia's Biggest Threat with Pat Grady

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Jul 8, 2024

Pat Grady, Head of Sequoia's growth investing practice, has shaped the venture landscape with his investments in influential companies like HubSpot and Zoom. He discusses the evolution of Sequoia's investment process, emphasizing transparency in decision-making. Grady shares his framework for assessing founders, highlighting the importance of founder market fit and team dynamics. He reflects on learning from successes and failures, and the unique advantages Sequoia brings to startups, including strategic mentorship and talent acquisition.

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ADVICE

Investment Process

Crystallize your investment thesis with a clear, declarative statement like "We should invest because..."
Stress-test your thesis rigorously to ensure it's sound.

INSIGHT

Contrarian Investing

Focusing on being contrarian isn't essential for successful investing.
Prioritize identifying promising companies and generating strong returns.

ANECDOTE

HubSpot Investment

Sequoia's investment in HubSpot was initially controversial due to its product and market.
Jim Goetz's understanding of founders and market analysis led to the successful investment.

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Pat Grady is one of the most successful growth investors of the last decade. As the Head of Sequoia's growth investing practice, Pat has invested in companies with a combined market cap exceeding $250BN. Among Pat's immense portfolio is Hubspot, Snowflake, ServiceNow, Okta, Amplitude, Zoom and Qualtrics. Pat is also one of the best acquirers of talent in venture hiring Andrew Reed, Matt Huang, Julien Bek.

In Today's Episode with Pat Grady We Discuss:

1. The Sequoia Investment Process:

What is the Sequoia investment process today? How has it changed over time?
What could be improved about the process? Where is it weak?
What is the biggest strength of the process?
How do Sequoia remove politics from the investment decision-making process?
Are the best deals "contrarian"? What does Pat mean when he says you do not "get extra points for being contrarian and right"?

2. What Sequoia Look for When Investing:

What is Pat's framework for assessing founders? How does it differ when investing early vs late?
Team, traction, TAM, how does Pat rank the three when investing?
What have been Pat's biggest lessons on market sizing? Does Pat take market timing risk?
How much weight does Pat place on "traction" when investing? How sustainable is PMF?

3. The Three Core Pillars of Venture:

Sourcing: What does Pat rank Sequoia for sourcing? Who is the best at sourcing in the firm?
Selecting: How does Pat rank Sequoia at picking? How has it changed over time? What could Sequoia do to improve their picking ability?
Servicing: What does Pat give Sequoia for their "value add"? To what extent does Pat truly believe that venture investors do add value?

4. Pat Grady: AMA:

Pat has hired some of the best in the next generation of venture investors; what are his biggest lessons in what he looks for when hiring investing talent?
What is his single biggest takeaway from working with Alfred Lin, Roelof Botha and Doug Leone?
What are his biggest takeaways from working with Hubspot, Snowflake and ServiceNow?