INSUBCONTINENT EXCLUSIVE:
Roelof Botha, Mike Vernal, Alfred Lin and James Buckhouse
The following is a partial transcript of the session, which was moderated by Buckhouse.James Buckhouse: We partner from idea to IPO and
YouTube incubated in our office
Dropbox was an unreleased demo
Apple was just two dudes named Steve
company building ought to go
been in the trenches building companies themselves.CustomersJames Buckhouse: Great companies like Apple, Amazon and Zoom all have this one
thing in common: customer obsession
any customers? How do you even begin?Jess Lee: I think at the very earliest of stages, all that really matters is product market fit
Erika Hall where she discusses how to ask the right questions to customers in order to really understand their pain points, their
motivations and their needs
They spend a lot of time talking to customers and understanding what they want
Something we at Sequoia like to recommend when we work with seed and pre-seed-stage companies is to actually take the time to write down a
personas exercise a little bit too late
Once we had three very clear personas, I started to notice everything ran more smoothly
I found, whether it was the sales team or the engineering team, people started to clearly communicate the idea of what our customer really
People made better decisions at all levels
The problem is people think about product as art
But I actually think of product as being equal parts art and science
And I think the science part of it, which is really important, especially at an early stage, is being clear about what your hypotheses are,
Build a sign-up button for it
Run a bunch of ads for it
Test a bunch of different marketing copy and see if people actually want the product
artistic and not scientific enough about things
Usually, finding product market fit in a category is a function of two or three important things
Identifying those important things and testing them to get clarity around that first, then designing the full product, is way better than
just starting with a masterpiece, and then slowly painting over and over the masterpiece until you get to something that is great.James
Buckhouse: For enterprise companies, Roelof, can you talk a little bit about the Sales Ready Product and Templeton compression
But the product solved such an important need for the customer that they came back to Cisco and asked if they could fix it since they needed
the product to work so badly because there was a fundamental problem in trying two networks at the time
And that to me was a Sales Ready Product
this: Spend a little bit more time, probably another three months, maybe another four, five months, from when you would otherwise ship an
The reason it matters for an enterprise company is that your sales organization will be so much more effective
Could you talk a little bit about what it was like at Airbnb, where they started with culture very early on?Alfred Lin: Brian, Joe and Nate
came and visited Zappos, where we offered tours, to see what the culture was all about (Alfred was COO of Zappos)
At Zappos, we started writing down our core values a little late, when we were at about 300 people
And I told Brian, Joe and Nate that that was too late.After that trip, they went back and wrote down their core values, before hiring their
They knew that they had to create a new category
Home-sharing was not something that people really thought about
And so they needed people who were willing to champion the mission
And that was one of the first core values that they wrote down.James Buckhouse: Oftentimes, people think that culture is the thing you do
later on, once your business has grown large and suddenly you have a lot of people
Culture matters a lot more than people think
And it matters earlier than people think
Jess, can you talk about your framework on core values?Jess Lee: This is something we spend a lot of time on with seed and pre-seed
And most importantly, you need a story
You need some legendary anecdote or example from inside the company that really brings the core value to life.To use Airbnb as an example,
one of its core values is to be a cereal entrepreneur
down to the wire in terms of money
example of rolling up your sleeves and doing whatever it takes to get your business launched
Somehow, they actually managed to generate revenue that they put back into the business
The really memorable part of that is the cereal anecdote
Whatever it might be at your company, make sure that the lore lives on
Botha: There are a couple of elements in that
One is this idea of intercept versus slope
For those of you that are fans of math or science, it comes naturally, but sometimes you get to hire people who have a high intercept
They have a lot of experience
You hire people with intercept, but then you want people with slope
People who are going to learn very quickly
And at the end of the day, part of what made PayPal successful was that we had a good slope and we learned very, very quickly.Our culture
We faced a bit of a crunch in June of 2000
Culture was really important to the success of the company
We had a strong bond between us as team members because we were in the trenches
We had to figure out how to make this business work when the odds were against us and the press had given up on us.Most people on the
you discern a strong founding team?Roelof Botha: My favorite, especially with companies at the seed stage, is to have no slides and to have
a conversation with you about your business
trying to solve, shows itself
There are a lot of people who start companies for the wrong reasons, and they have very superficial knowledge
That inspired you to start this company
As I ask you questions, you just have this depth of knowledge
We see this in our industry
about you? What do you look for to discern a strong founding team?Jess Lee: I do agree, and I think different investors look for very
There is probably a notion of founder/investor fit to some extent
For me, I especially appreciate a unique insight and depth of understanding of that customer and that market
But on top of that, the other thing I think about is grit
I think that being a founder is so hard
Your job changes underneath you every six months
Sometimes it shows up in the form being really mission-driven, and you have some burning desire to solve the problem
Being able to tell a good story, both taking something complicated and making it sound simple, as well as being able to influence and talk
about why your approach is interesting and different, not just better than the competitors
I think it showcases your storytelling ability
I look at a lot of consumer companies and your attention to design and detail is also an interesting thing that you can suss out with
Some bad meetings end up as the following: Someone will come in with 40 slides and want to convey all of the knowledge in the 40 slides in
excruciating detail.I think a couple of things
One is, many investors look at a lot of companies all day long so they might actually know more about your space than you might think
Then two, if you need 40 minutes to explain the business, marketing and all of these other things, then for an investor meeting that might
work because you have that time scheduled, but for the random engineer you meet at a party who you want to get excited about joining your
This is super interesting
Buckhouse: Different types of companies need different types of capital strategies
become a public company, when you do M-A, is actually a function of your free cash flow, or a multiple of your revenue, so just being able
your company is acquired for hundreds of millions of dollars, or billions of dollars, or you IPO, what is your ownership at that moment? We
have founders like Dropbox, that when they went public, Drew and Arash owned nearly 40% of the company
ownership at the end of the day is really important
So you have to think about those three things, which is a pretty complicated equation.It really hit home for me when my company, Polyvore,
went through the M-A process and it suddenly hit me that all the acquirers were not using funny VC math
They were looking at our cash flow and the multiple of revenue
I was optimizing for ownership for the team
We were a pure software-based, capital-efficient kind of company, but I think not enough founders think about that from first principles,
starting from the early days
You could potentially be selling it to people that are not going to be there six months or six years from now, helping you close a
candidate, helping you wrestle with an important strategic decision or helping you refine your business model
Your investor is going to do references on you
