TWiST, Roelof Botha of Sequoia Capital

Roelof is a venture capitalist at Sequoia Capital focusing on services and software investments. Prior to joining Sequoia Capital in 2003, Roelof served as the Chief Financial Officer of PayPal (EBAY). Earlier, he worked as a management consultant for McKinsey & Company. Roelof is a certified actuary (Fellow of the Faculty of Actuaries), and has a BS in Actuarial Science, Economics, and Statistics from the University of Cape Town and an MBA from the Stanford Graduate School of Business.

Interview: (02 min.)

• Is innovation dead? No I think a lot is happening, look at Twitter for instance.
• Jason comments that the expensive chocolate bars have disappeared and Roelof explains that Sequoia is no different than any other company and has cut expenses during the recession.
• They discuss that a year ago many of the Sequoia companies cut expenses before any hardship and are happy they were preemptive.
• Roelof comments that there is still a lot of uncertainty in the economy.
• Silicon Valley innovation isn’t driven by consumer credit so Roelof thinks the tech industry is in good shape.
• Many companies may have cut a little deeper than necessary and you are starting to see some hiring.
• What is the proper amount in your estimation for a startup to have in the bank how many months of cash? 3 or more years is better, but if you need to spend to meet key milestones and shrink your runway to 18 to 24 months it may make more capital easier to obtain at better terms and the founders are left with more ownership of the company.  Sequoia’s goal is to target 50% ownership for “the people in the building” upon exit any less is not great.
• Roelof gets approx. 200 request a week to speak to him.
• Jason asks what is the best and worst part of working with him?  Effervescent, tireless enthusiasm, he like working with someone he needs to reign in and not have to push, he worries about focus, Roelof comments that he struggles doing many things well and to focus on the main idea.
• Sequoia has been very active this year; a lot of the best investments have been in the dark days.  If you can carve out a niche in the tough times it will be easier to succeed when times improve.

Ask Jason: (12 min)

• They have a status changing app. for Facebook and the terms of service just changed now their app. is handcuffed and have seen a dramatic drop in users, they just reached an agreement with Facebook and things are great again. What is your opinion about basing a business around someone else’s platform? What are good strategies? Jason prefers not to build on someone else’s platform due to this downside.  What he would do is use their distribution to build a brand that transcends their platform. ie. try up sell consumers to use a toolbar something outside of FB to build a relationship. If you are going to build off their platform create a relationship with the platform owner in case problems come down the road.  Create a portfolio of applications so you aren’t reliant on one single app. for success.

• Lee – Online charity where people donate their services (type idea, very tough to hear), How can I get people on board to make money but not rip anyone off? Be very transparent and open about what you provide and the service charges, full disclosure is key. Charities have expenses; your service would be no different. Lee, is a developer but wants people to believe it’s a real company, what is the best way to achieve that? Go to 10 non-profits and ask them to be default partners and ask them if you can use their logos or say you are partners. Try getting the charities to help you with distribution and that you are a service that is an option.  Enable people to broadcast their causes through Facebook or Twitter, this will help with distribution.

Jason’s Shark Tank: (35 min.)

• Steve Hamilton, Biglocal.ca, (I hate to say this but this is an example on how not to pitch an idea, I felt like he was reading from a sheet of paper) Jason asks, in plain English to explain what your service does? Steve is still a bit wordy, better, but wordy. Jason and Roelof refine what he does as dynamic ads and landing pages.  The idea isn’t very scalable it is easy to start one client and you are profitable but you don’t need venture capital, the question is: how does this business scale? Either the technology has to scale or distribution which is difficult in the local market.

• From Michigan, idea: desktop box appliance that is powered by the cloud. Several companies have pitched this idea, VDI (virtual desktop infrastructure), problem is in licensing a lot of people need to get paid, very low margin, market dynamics make it tough. Jason’s idea try this in a vertical (such as law firms), be careful jumping in front of the Google and Microsoft train.

Notable Quotes:

• (05 min) Roelof, In some cases some people may have been over aggressive in expense cutting but it’s one of those, you know, which of the two alternatives would you rather have just cut a little more and make sure the company survives or don’t trim too fast and you don’t get to survive. Of the two, I think I would be a little bit more conservative. You want to accelerate out of the corner (break into and accelerate out)

• (28 min.) Jason, Nothing in life that is valuable, is easy.

• (42 min) Roelof, states a simple method to pitch your idea: give one declarative sentence what the company is, state the problem (who is your customer and what their problem is), give the solution.

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