Sequoia’s steward recommends going on the offensive for opportunities that ‘don’t announce themselves’



Leadership Next ROELOF BOTHA Sequoia

On this episode of Fortune’s Leadership Next podcast, co-hosts Alan Murray and Michal Lev-Ram sit down with Roelof Botha, managing partner and senior steward at Sequoia Capital. During the wide-ranging conversation, they discuss Botha’s excitement for AI and the industries he believes could use an AI boost; how he and his partners at Sequoia approach decision making; and why he says venture capital is overfunded and “not an asset class.”

Listen to the episode or read the transcript below.


Transcript

[Note: The transcript has been edited for clarity.]

Alan Murray: Leadership Next is powered by the folks at Deloitte who, like me, are exploring the changing rules of business leadership and how CEOs are navigating this change.

Welcome to Leadership Next, the podcast about the changing roles of business leadership. I’m Alan Murray.

Michal Lev-Ram: And I’m Michal Lev-Ram.

Alan, today’s guest is Roelof Botha. He is the steward, not the CEO of Sequoia, which as we all know, is a storied venture capital firm on Sand Hill Road. But Roelof has done a lot in his career. Last couple of decades have been at Sequoia, but before that, he was at PayPal. He worked with Peter Thiel, with Elon Musk. Really found a lot of success both back then and as an investor.

Murray: Here’s the most amazing thing I learned in this interview—that 20% of the value in the Nasdaq these days is in companies that were funded early on by Sequoia Capital. That’s an amazing statistic.

Lev-Ram: It was actually 27%, he corrected us. So…

Murray: What did I say?

Lev-Ram: You said 20.

Murray: Twenty-seven.

Lev-Ram: Twenty-seven. It’s even more impressive now. It is astounding. And they invested in Apple, you know, for crying out loud. Like this is a firm that has hit some pretty insane home runs. And they’ve also come across some more challenging times in the last couple of years, which we get to in the interview.

Murray: Yeah, he was very interesting on that point. He was saying that the decline in the overall market, he was suggesting that that may be a good thing and is more of a return to normality and that the go-go period of the last decade when free money was available and unicorns were being minted on an hourly basis may have been the aberration. So I thought that was one of the best parts of the conversation.

I’ll tell you that, Michal, though after my experience in Davos, which we did on our last podcast and after this conversation, I think we should rename Leadership Next to AI Next because that is all anybody wants to talk about.

Lev-Ram: Yeah, absolutely. And that’s a big reason that that Roelof is, you know, very bullish. And I mean, VCs have to be always of course, but very excited about sort of this next wave. He talked about sort of why this is so transformational and some ways that this is actually different from previous transformations.

Murray: By the way, before we dive into this interview, I want to give a shout out to Fortune‘s editor-in-chief, Alyson Shontell, and to our head designer, Peter Herbert. There was a famous Fortune cover in 2015 that had a picture of a unicorn in a hoodie that sort of signaled the beginning of the crazy era of unicorns. In the most recent edition of the magazine, the cover was a uni-corpse, a unicorn that had turned into a corpse, still wearing, of course, the hoodie. [Herbert’s full title is executive creative director.]

Lev-Ram: Very creepy, but I think totally on point for what we’re seeing now. And by the way, life back in the day was part of the PayPal Mafia. You know, we alluded to Peter Thiel and Elon Musk, and that was a term that Fortune coined. So we had a lot to talk about with Roelof Botha, you know, past, present and future. And without further ado, here is the interview.

[Music marks start of interview segment.]

Roelof, thank you for joining us today. I want to dive into present and future because there is a lot to talk about there. But before we do that, let’s quickly touch on the past. There’s been a lot of tumult both internally and across the industry over the last year or two in venture capital. And I’m curious to hear, in your words, is Sequoia a different place today because of some of the shifts over the last couple of years? And if so, in what way?

Roelof Botha: Thank you very much for having me. It’s a pleasure to spend time with both of you today. So the industry has changed. One of the things I’ve been trying to explain to people is that venture capital is not an asset class. If you look at the amount of money going into venture capital globally last year, it was $248 billion, which is down from the peak, which was north of $600 billion. So venture funding is obviously come down pretty significantly along with all the other asset classes.

But here’s a little simple exercise just to think about the logic of this. Let’s just run the $248 billion to $250 billion. Let’s say that investors conservatively have to make a 3x on that gross before fees and carries, that’s about $750 billion per year. And let’s say that investors own three quarters of the companies that they invest in, which is, I think, too high. But just to make the math easy, that’s a trillion dollars a year that has to come out. If the venture industry as a whole invests $250 billion-ish per annum. That’s 100 decacorns a year. And I just don’t think we generate that much in aggregate outcomes because these are outlier events. There are 20-30 companies a year that really matter that drive venture returns.

And so I still think the industry is overfunded and that there’s too much money in the venture capital industry. It is not an asset class. So it’s clearly affected us because there was a period in 2021 where it was go-go days and tourists arrived, late stage investors, corporate investor, sovereign wealth funds. Everybody thought it was easy to make money in venture capital, and it’s not. And so from a Sequoia point of view, it’s actually been fantastic to go back to our roots, which is working with founders who are daring and helping them build legendary companies. And that partnership that we have with them, that ability to roll up our sleeves, early on…when we first invested in YouTube, the three founders were in Chad’s garage. I’d worked with them at PayPal. They moved into Sequoia offices, and we worked together for the first couple of months. That’s the kind of company building that we love.

Murray: It’s fascinating you say that. The current cover of Fortune magazine, that’s a uni-corpse. It’s a take off a cover we did in 2015 of a unicorn in a hoodie. This time, the unicorn is a skeleton, but still with the hoodie.

Botha: So macabre of you.

Lev-Ram: Yeah, it really is. It’s quite disturbing. Take a look at it.

Murray: It was really fun. Listening to you, you’re almost saying that what we have now is closer to normal than what we had four years ago when we were breeding these unicorns and decacorns at an alarming rate, fed by free money to a certain extent from the Fed.

Botha: I think that’s right. When interest rates were so low, many companies got funded and achieved valuations that maybe weren’t realistic. One of my partners, Ravi Gupta, has a fabulous expression, which is just because you haven’t gotten on a scale recently doesn’t mean that your weight hasn’t changed. And there are very large number of companies that were able to raise money at very, very high prices in 2021 that don’t reflect the reality of where the businesses are. Many of them are still good businesses. I think about some of the public companies that we’re involved with that today, trade at 50% or 40% or 60% of their all-time highs back in 2021. They’re still good businesses. There’s just that when interest rates are higher, future cash flows are worth less. It’s just the mathematics of finance. It’s that simple.

Lev-Ram: Are you thinking like we’re in for more? You know what, I think a lot of people would consider pain. I mean, we can call it a correction in a lot of things. What’s the state of the state as you see it right now?

Botha: Well, I think there’s a natural pace at which companies start and fail and flourish in the venture industry. And one of the economists I love is Joseph Schumpeter, who talked about creative destruction. And there’s so many cases throughout history where some companies fail, and those people and those assets could redeploy to doing other very interesting things. And so there will be a natural progression where there are companies that were funded five years ago, three years ago, two years ago, that just don’t survive. They don’t find great product market fit, they don’t have great unit economics, or maybe they just don’t achieve enough scale to be independent businesses. And that’s natural, that’s healthy for the ecosystem.

And at the same time, there are just fabulous businesses being built right under our noses. I mean, the companies that are not yet public that we’ve been investors in for a long time, companies like Stripe, that we first made a seed investment in in 2010 that are continuing to do incredibly well. SpaceX, that we talked about earlier, continuing to do incredibly well. So these businesses will eventually flourish. You have an AI wave that is propelling an incredible wave of innovation right now, which is super exciting that will lead to future successes. And along the way there’ll be some casualties. And I just think that’s healthy for the ecosystem.

Murray: I want us to talk about the AI wave, but before we do that, I mean, the difference between three four years ago was more than just the number of companies; it was what was expected of those companies. I mean, there was kind of a sense in the valley that you pursued growth at any cost and spent whatever you had to on growth, and nobody was looking at free cash flow or looking at profits. That’s clearly changed. Was that blitz scaling ethic, was that a mistake?

Botha: That’s a good question. I think blitz scaling is about how you make sure that a company gets out of the gates efficiently. If you know where the 100-meter race in the Olympics, one of the keys is being out of the blocks quickly. For me, blitz scaling is a very good analogy for in the early days of a company, how do you very quickly assemble the right people to make sure you make the most opportunity? Because these companies end up facing stiff competition, either because they’re incumbents that have massive advantages or there are lots of startups that compete with them. That’s distinct for the amount of capital, I’d say in the mid-stage of growth that we saw during 2020 and 2021. But it was a function of the environment. And as I’ve reflected on many of those decisions, I actually think they were quite rational on their own. I was involved with some of these companies. I’m still on the board of companies like Block, MongoDB, Unity, you know, these big public companies. And we’d have the situation where money was kind of free because people don’t discount the future. So you could invest in R&D projects that, candidly, it didn’t matter if the payback period was in five years or in 12 months because there was no penalty associated with a longer duration. And for investments in sales and marketing, similarly, didn’t matter if the payback period was nine months or 19 months and what you were spending. The rational thing was to invest because the money was available and inexpensive. And by the way, if you weren’t doing it, your competitors were doing it. So it was quite rational in a sense that people were behaving that way. And obviously, you know, the environment is different now and people have to make different tradeoff decisions.

Lev-Ram: We’re going to dive into the AI wave. You have been around in this industry long enough to see some previous hype cycles and sort of how things shook out there. What’s different about this current wave and what’s similar?

Botha: I think in its scale, the AI wave rivals the internet and it rivals cloud computing and it rivals mobile, and it really benefits from all of those and I don’t think it’s hype. And I promise you it will exceed our expectations in years to come. It is transformative. Every day I’m listening to a company in a category that I didn’t think of. And once you listen to the founder explain that they’re addressing an opportunity in education, in health care, in cybersecurity, your eyes just open up and you realize, “Wow, I hadn’t thought about that,” but yet another application space for this incredible technology.

Murray: So tell us then, and obviously you guys have a great track record. I saw somewhere, is this correct that like a quarter of the value of the Nasdaq comes from companies that you invested in at one point early and…

Botha: It’s approximately 27%, yes.

Murray: That’s amazing. So so you have a great track record with.

Lev-Ram: It’s not just a quarter, Alan.

[Cross-talk.]

Murray: Twenty-seven. Sorry to sell you short. What percentage of the pitches and the companies that you’re funding these days are air based?

Botha: We were investing in and around this category for a very long time. We were the original seed investor in NVIDIA in 1993. We were one of the early investors in OpenAI. We were early investors in a whole range of interesting machine learning technology companies. So it represented about 20 to 25% of our investments if I look at the last five years, and it has accelerated over the last 12 months, and it’s definitely the majority of the mission presentations we look at.

Lev-Ram: Is a bubble inevitable? Like if there is a technology like what we’re seeing with AI and gen AI, more specifically, that’s truly transformational, does it necessarily have to lead to a bubble?

Botha: Not necessarily, but I think often, and I’ve reflected on when you go back in history, if you think about what happened in the railroads, a little bit more recent memory, you think about what happened with networking in the late 1990s. People always talk about what happened with dot com consumer companies, but the truth is most of the capital actually went into hardware, it went into fiber and network connections because the internet was about to arrive and then it took another decade. But it did arrive obviously.

And in a sense, because you have that, as you call it, a bubble, because you have so much enthusiasm about the potential of a new category, lots of money floods in. And it actually creates the infrastructure for that to then become a reality, as happened with railroads, as happened with the internet. The question is which of those infrastructure providers end up being durable businesses? It’s not always that all of them do, but what definitely happens is, is that there’s an application layer on top of that foundation that ends up being incredibly rich. And I think about this, the so-called Web 2.0 investments we made 20 years ago when we invested in companies like YouTube and then later in companies like Instagram, Airbnb, a bunch of these sort of companies that really benefited from the internet capability that a foundation that had been laid.

Murray: Clearly machine learning and AI have been around for a long time. The thing that has captured everyone’s imagination over the course of the last 14 months is generative AI, the ability of these large language models to deal in both in natural language, do amazing things with coding. How big is generative AI? How important are these new large language models that we’re dealing with?

Botha: I call them foundational models, not just language models, because very quickly, these are going to become multimodal models, by the way. And we’ve seen applications now where in the health care space, for example, people are using the images of the scan that you got along with a medical health record that you have and all the notes associated to end up making clinical recommendations and decisions. So it’s multimodal in that sense. It’s not just language, it’s not just images. It’s really the combination of these things. But we’ve got to remember that these systems are prediction systems, they’re memory prediction systems. They’re modeled after the way that the neocortex works in mammalian brains and leverages the accumulated memory you have stored with an ability to make forecasts. But they’re probabilistic in nature and that’s part of why you get this phenomenon of hallucinations, because it’s not certain, because it’s making predictions. And that’s why I love the term augmented intelligence rather than artificial intelligence, because I think these capabilities are going to push us forward rather than push us out. It’s really going to make humans radically more productive and lead to fabulous economic growth.

Murray: As an investor, are you looking at investing in foundation models, investing in applications, or is it just a small piece of a broader investment thesis around AI?

Botha: So we have made investments in some of the foundation companies. We’re an investor in OpenAI. Most of the investments we made last year were in the application space, and I think that’s where there’s tremendous opportunity. As I mentioned, you know, the categories we’re looking at: health care, education, cybersecurity, developer productivity. I mean, we’re seeing productivity gains of 20 to 40% already for software developers who use these sort of capabilities. So think about it magnifying that capability across many other categories. Why can’t graphic designers or interior decorators or architects also benefit from this kind of productivity boost?

Murray: I want to take a turn and talk a little bit about China. Obviously, big players in the AI space. There’s a sense that China and the U.S. may be the two superpowers. But at Sequoia, you made the decision a few years ago, you had a very productive Chinese business run by Neil Shen. You made the decision to separate the two. Was that for geopolitical reasons? Was that because you thought tension between the two countries could become a problem for your business?

Botha: So we actually had five different business units at Sequoia: India, Southeast Asia, China, Sequoia Capital Heritage, and Sequoia Capital Global Equities, along with the traditional U.S. and Europe venture growth business. And for a variety of reasons, those five business units made a decision last year, almost 12 months ago, that it would be better for us to separate and be independent. We got to a point where we felt that the cost of running this global business wasn’t worth the tradeoff when we could just focus each on our respective categories. So there were a whole host of reasons that fit into that particular decision. But it was a joint decision.

Murray: Was geopolitics a substantial one or not a substantial one?

Botha: I mean, it was clearly a consideration. I mean, one would seem asleep at the switch if you didn’t realize that there is a world of increased polarization and geopolitical tensions. It was one of the variables, but it wasn’t the sole variable. And that also explains why, you know, it was all five different businesses that went in separate ways that now have separate brands.

Lev-Ram: This was just one of the shifts over the last, you know, again, year or two. Another relatively recent shift is just in leadership. And this is something that we’ve seen across some other top firms on Sand Hill Road and venture capital as well. Can you talk a little bit about the generational leadership shift? What is this era to you? How do you want Sequoia to be sort of, you know, thought of in this era?

Botha: Don Valentine made a very important decision when he started Sequoia and he didn’t call it Valentine Ventures. He called it Sequoia Capital. The Sequoia tree is the longest-lived tree in California. They grow upwards of 2,000 years old. And Don did that because he wanted to build a partnership that would outlive him. And that led to a whole series of seemingly small decisions that accumulated in a very important advantage for Sequoia to be able to manage generational transitions. Because Don recruited people like Mike Moritz and Doug Leone not to work for him, but to work with him. And in turn, that’s now led to a series of successions.

And my title is steward, not CEO, steward. I’m here to serve. And so whenever we recruit young people at Sequoia, we think about whether they have the potential in years to come to lead the partnership and that we each have a responsibility to leave Sequoia in a better position than we found it.

So there are some very important seed conditions that Don provided for us that enabled us to be this durable as an organization. And so we have these deep cultural traits around individualism and teamwork. You know, we really treasure our culture, and that’s part of why we’ve been able to navigate these generational transitions so well. There’s always room for improvement, obviously. We sort of think of leadership as, you know, how do we deal with the day-to-day execution? There are a lot of interesting challenges we have to deal with. A global separation last year was obviously a critical moment for Sequoia Capital. And, you know, we had to navigate through that decision winning particular investment. How do we manage our team day to day? And then I think about stewardship is sort of slightly longer range. How do we put in place the right strategic decisions to help us become a much better business five, ten years down the road?

To give you a quick example: before the pandemic hit, we held an offsite where we applied something to ourselves that we encourage our portfolio companies to use, which is this idea of a pre-parade and a pre-mortem. And a pre-parade is imagine five, 10 years into the future, you’ve achieved everything that you could hope for. Write the narrative to explain what that entails. And then write the pre-mortem, things not going quite as well and what went wrong. And what we did is we had the entire investing team write several pages of pre-mortem and pre-parade and then we anonymize them. So one of the things we treasure at Sequoia is the triumph of ideas, not the triumph of seniority. And so then we circulated those and we read them and we made some very important decisions for the partnership to set us up to be one of the best firms in 2030.

We doubled down on our seed investment business, making sure that we partner with founders as early as possible. We launched the program called Arc, where we do company building in a batch fashion for these early-stage seed and pre-seed stage companies. And then we also developed the Sequoia Capital Fund, the vehicle that gives us a capital advantage structure and enables us to hold on to the public positions of some of our legendary companies many years after they go public. You know, the venture capital fund model was invented 50 years ago and it had a 10-year duration. So you have this expiration on your relationship with legendary companies. It made no sense. And so we undid that. We really tried to bookend our business both from the early stage and our ability to hold on to winners much longer. And those are some of the key changes we made at Sequoia.

[Music begins.]

Murray: Jason Girzadas, the CEO of Deloitte U.S., is the sponsor of this podcast and joins me today. Welcome, Jason.

Jason Girzadas: Thank you, Alan. It’s great to be here.

Murray: Jason, public trust in institutions has taken a hit in recent years, but trust in business remains relatively strong. Why do you think that is and why does it matter?

Girzadas: Trust is a function of businesses meeting their stakeholders’ expectations and creating value, and that’s true for customers. That’s true for the workforce. It’s true for society at large. And I think given the challenges that other key pillars of the economy and society have faced in terms of trust, businesses have an opportunity to actually rise above that set of concerns and forge new levels of trust with all their stakeholders. This is an opportunity for businesses to really lead around trust, creating experiences that are reliable, resilient, as well as fulfilling their expectations to those stakeholders. And over time, I think trust will be a function of our businesses actually meeting the human needs that are resident, whether it’s around health and wellbeing or contributing to the environment or to worker satisfaction and engagement.

Murray: Jason, thanks for your perspective and thanks for sponsoring Leadership Next.

Girzadas: Thank you.

[Music ends.]

Murray: Roelof, can you give us a little bit of your backstory? I think everybody, you know, you’re running this hugely successful business. Everybody would like to know, geez, how do I get there? You have an unusual path. Born in South Africa, studied actuarial science. How did you end up as head of Sequoia?

Lev-Ram: Steward. Steward of.

[Laughter.]

Murray: Steward. So how did you end up as a steward of Sequoia?

Botha: So I was fortunate enough to come to Stanford Business School in 1998, which is the first time I set foot in America, which is amazing. This was 1998, when long-term capital management blew up and there was an emerging markets currency crisis, and all the rand I’d saved to come to Stanford lost 40% of its value on the eve of my departure. So that was, it was a brutal wake-up call.

So I had to work in my second year in business school to make ends meet, and I’d been introduced to Elon by a classmate of mine, a mutual friend. And I love the idea of the intersection of financial services and technology, and so I ended up joining PayPal before graduation, partly out of necessity, and then I became the CFO of the company. So I took the company public when I was 28 years old in 2002, and I think I was the youngest CFO in the Nasdaq. And maybe I just knew so little that I didn’t know how daunting a task that actually was. And my board had backed me. And Peter, who was my manager of PayPal, was an amazing supporter of me, which I really appreciated.

And after eBay acquired us, Sequoia was looking for somebody who majored in computer science, who worked in product management at an enterprise software company. And I was an actuary who was CFO of a financial services company. But Mike Moritz was impressed and recommended that the rest of the partnership interview me. And so despite my not meeting any of the specs in, I ended up at the job. I must confess that for the first year or two, I wondered when they were going to realize what a mistake they’d made. And that’s how I ended up at Sequoia.

Murray: I guess that means anybody can be a venture capitalist.

Lev-Ram: You just have had to take a company public as CFO at the age of 28. That’s all. And so, otherwise anyone.

Botha: But I do think there’s something that, as you said earlier, which is, you know, there isn’t a clear set of prerequisites for what makes a good investor. And honestly, when I think about the team that we have at Sequoia, one of the things I love is that we have a very eclectic team. You know, we have one person who’s a high school dropout, somebody else who’s got a Ph.D. We have a finance person, we have a marketing person, we have a product person, we have a designer. We have these people who have very, very different backgrounds. And the beauty of that is when you make an investment decision, you get very different perspectives. It’d be terrible if we were all the same, if we were all product managers with computer science backgrounds, or we were all actuaries who were finance people. I mean, it’s actually the beauty of that combination that makes for very good decision making, which is one of the most important things we do obviously.

Lev-Ram: You have a unique approach to decision making and would love for you to tell us what it is and how you would how you came to it also.

Botha: One of my partners, Jim Goetz, actually coined the phrase “crucible moments.” And, you know, it’s one of the things we’ve reflected on at Sequoia as board members and as company builders with our founders. How do we help them navigate these one or two very important decisions that they face every year that have a very meaningful bearing on the ultimate outcome of a company that isn’t always obvious? So one of the issues with crucible moments is they don’t knock on your door and announce themselves. Sometimes they do so at Airbnb and Eventbrite, you know, when COVID hit and they lost 80% of their revenue in two weeks, that was kind of a crucible moment unambiguously.

But there are other situations in which crucible moments are much more offensive. It’s you realizing there’s an opportunity to go do something. So NVIDIA’s decision to invest heavily in AI in 2012. That was a crucible decision. It wasn’t obvious. No one, there was no crisis, there was no emergency. And yet they were on the offensive looking for an opportunity. Similarly at Block, where they made the decision to launch Cash App many years into the company’s founding. And today Cash App is half the company’s revenue. So to be an SMB business and then add consumer was a non-obvious decision. That was a crucible decision.

So these crucible decisions have a huge bearing to happen infrequently. You need to identify them, because they don’t announce themselves, and you need to get the decision right. And so do you surround yourselves with the right mentors, advisors? Are there precedents you can look at to help you make a really good decision? And then the third one, which I think is probably the most difficult, which is all the organizational changes you need to make that a success. And I saw this firsthand at MongoDB, where we made a decision to go from being a downloadable database software business to being a cloud database-as-a-service business, where we operate the database on behalf of our customers. And that required a completely different set of skills from those that were in the building at the time. Because now you actually have to spin up these instances on your customers behalf. You have to take care of the scaling requirements they have. You have to build a completely different marketing and sales team because you have a different business now. So it is very difficult for companies to actually understand all the organizational changes that emanate from a crucible decision.

Lev-Ram: As you look back over your career, is there a moment where you turned something down or you, you know, quote unquote made a mistake or what seemed like a mistake at the time, but in hindsight was a really good thing?

Botha: I think there were three of those, and in essence, they were all marshmallow tests. And if you’ve heard about the marshmallow experiments that ran at Stanford University at the big nursery school. If you delayed gratification, you’ll get a second marshmallow. And I think most people struggle with these marshmallow decisions. When I finished studying actuarial science in South Africa and I was the youngest qualified actuary in the country’s history, I had an option to go work as an actuary, and instead I took a 50% pay cut to go work at McKinsey & Company, which had just opened an office in South Africa after sanctions were lifted. In the short run, that was a poor decision, but it opened up the door for me to be able to work and to study abroad. And so that was an important decision and that enabled me ultimately to come to Stanford.

Then the second one was when I finished business school at Stanford, I had an opportunity to go back to McKinsey and instead again, I took a meaningful pay cut to go work for this little financial services company called PayPal, where I had upside. And that was a good decision in the long run though it didn’t always seem that way. And I think there were moments where I regretted my decision. The burn rate of the company exploded, and fraudsters were trying to kill us, and it wasn’t obvious we built an independent business.

And then the third one was when I joined Sequoia. Meg Whitman had offered me a package to stay as the CFO of PayPal as a subsidiary of eBay, with maybe the opportunity to become the CEO of that business unit down the road. And instead, Sequoia matched my salary and gave me no shares, no equity, no carry, nothing. And I had to take a chance on myself in this brand new career. And I took that chance and I’ve never looked back.

Lev-Ram: Sequoia has such a unique positioning in the industry as a leader, as kind of this thought leadership. And you guys have been known for decades now for chiming in at appropriate times, either when things are really tough, for example, or when things are good and founders across the board look to you for that. It’s an immense responsibility. And I’m just wondering, under your stewardship, how do you make those decisions of when it is appropriate to step into the conversation in this way?

Botha: You know, in my time we’ve done it four times at Sequoia in 20 years, so it is an infrequent event and so we do take it very seriously. We did it in 2008 and the global financial crisis hit. We had it with the black swan event, when COVID hit. We had another one adapting to endure when the market crashed to make sure the founders realized that they needed refounding moments in their companies. They really needed to think very differently about the future because the fundraising environment had just indefinitely changed. And so we take it very seriously that when we intervene in this way, it carries a lot of weight. But we need to express our views when we see reality very differently. And it’s very important for us to act in those moments.

Murray: You talk about having a sense of the future. I mean, that’s critical to what you do. Give us a sense of how the world is going to be different five years down the road, 10 years down the road. What do you see as the big changes that are going to affect the way we live and work and coexist on this planet?

Botha: We’re going to be very careful of these. I think this is one of these exercises where you come back a few years later and go…

Murray: That’s the goal.

Boths: You weren’t even half right.

Murray: That’s the goal. We’re going to hold you accountable.

Botha: I’d say one that I’m very confident in is the future of genetics in medicine. And it led to us making a seed investment in 2007 in a company called Natera, now a public company that does, amongst other things, oncology testing, preimplantation genetic diagnostics for pregnancies in America. They account for about half the pregnancy tests in America, and that started as a million dollar seed in 2007. You know, I’d seen what had happened with the Human Genome Project and just had a sense that genetics was going to play a huge role in the future. And so last year we had the first genetic therapeutic approved. We can start to use CRISPR to do sort of custom design. I think there’s a future in customized cancer vaccines. I think genetic testing is going to become better and more ubiquitous. We’re going to be able to do early cancer detection and the probability of being able to prevent harm from cancer goes up dramatically if you can catch it very early. So I think that genetically-driven medicine is going to be the future both in therapeutics and diagnostics. I think it’s going to be obviously a massive boon for health care and for longevity. So that’s why one of the biggest changes I predict.

And then one that I’ve been wondering about is whether we really are at the endpoint of hardware for the future. So when I see all these pictures of people walking around streets looking down at their phones and I see how families behave, you know, out at restaurants when everybody’s on their phone, you know, being alone together, I just wonder if this is the end state. And I have a hard time believing that. And I think the the new AI capabilities that we talked about earlier are going to render new opportunities for our ability to interact with consumer hardware. I haven’t seen the end of that yet. I don’t know if the Apple Vision probe might be a window into that future. I don’t know if what Google Glass had shipped originally was a window into that. If it’s the Meta Ray-Ban glasses, which are pretty interesting, but I have a sense that there’s going to be a different way in which humans are going to interact with computers in the future. I’m very eager to see what that entails.

Lev-Ram: Well, good job framing your view of the future in the form of questions, because now we can’t go back and tell you you were wrong. You just asked a question. So…

But Roelof, thank you so much for joining us and for letting us pick your brain a bit. I’m sure there’s lots more to talk about when it comes to AI in particular, but hopefully we’ll get to have you back.

Murray: Yeah, and Roelof, I just want to point out that we talked about who can become a venture capitalist, that Michael Moore, one of your early partners, was a journalist. So, you know, if you think there’s a place for Michal and me.

Lev-Ram: So you were right. Anyone can become a venture capitalist, even a journalist.

[Laughter.]

Botha: Absolutely.

Lev-Ram: Thank you.

Murray: Thanks a lot.

Botha: Thank you very much.

[Music.]

Murray: Leadership Next is edited by Nicole Vergara.

Lev-Ram: Our executive producer is Chris Joslin.

Murray: Our theme is by Jason Snell.

Lev-Ram: Leadership Next is a production of Fortune Media.

Murray: Leadership Next episodes are produced by Fortune‘s editorial team. The views and opinions expressed by podcast speakers and guests are solely their own and do not reflect the opinions of Deloitte or its personnel. Nor does Deloitte advocate or endorse any individuals or entities featured on the episodes.



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