Doug Leone on Sequoia, Fear, Great Founders & Starting Over at 69

26:02That's what founders are. In some cases, that's the only thing they know. The only thing, they're getting younger and younger. They're 23 years old or 22. They're engineers, and they know that domain. If they have to rely on me to help shape the product 10%, 20%, we're in big trouble. But then you have the business. You have the selling of shares, not the selling of product. And in the selling of shares, you have to wrap everything into it, which is the analysis of market, the product marketing of the final 10 % of the product so it's saleable. I can help with that. The product marketing and messaging.

26:39The demand gen. The lead gen. And the revenues. And then you've got support and counting and so on. Oftentimes, companies break, oh, they suboptimize that. That's what they get involved in. And in order to do that, I don't have to be an expert in the technology. In fact, I'm only partially interested in technology. I'm much more interested in helping founders build a business. Say more about that. So how do you take a 22-year-old that when he comes to us is an outlier in something in life, probably IQ 150 or above. All the adjectives that venture guys use in a negative sense, I use in a positive sense.

27:23Irreverent. Shithead. They don't listen. Love it. Give me those founders all day long. You got to say more about that. Why are you like? Oh, because who wants a founder that changes his or her mind depending on who they last spoke to? I want a founder who for the last five months has gone to sleep and has woken up three hours into his sleep, just thinking about the problem, thinking about the solution, crystal clear on what they want to build. No one can detract them, driven like crazy, and so on. That's what I want. But now we've got to build a business. And so who do you recruit as the first 10 engineers?

28:00What does your first salesperson look like? Do you want people that are up-and-comers? No one that's establishing great is going to join you as a startup. That means you have to have an eye for these up-and-comer people in sales and marketing because the made people are going to play it a little safer. And so to help navigate all those sets of issues, that is what we at Sequoia, I think, are the very best in the world at. Can you give me some examples of the founders that you partnered with that you feel you had the best partnership with that responded to this, that you helped mold and shape and build their business with them?

28:36with David Velez of New Bank. And the reason I choose him for this example is that he was an associate at Sequoia. So I knew him well. I hired him out of Stanford Business School. And I had to give him the bad news that we were not going to open a Brazil office. After he moved to Brazil, he committed to Sequoia, he moved to Brazil, we made two investments, and we finally figured out there are no engineers. A few engineers come out of Brazil. And everything coming out of Brazil was, We are the Uber of Brazil. We are the DoorDash of Brazil. No real novelty. And one, we had to make the call, hey, David, we're not going to open the Brazil office.

29:17We offered him a job in California. And he had a notion of a financial services business, a credit card business in Brazil. Minor problem. He wasn't from Brazil. He knew nothing about financial services. But he had a heart of gold and a heart of a lion. So he was a good man with driven like crazy and no one could stop him. And so we seated him. And I remember the call one night. I was at the Crowsthouse. I still remember. I get a call at dinner. It's him. We committed to a million dollars. He says to me, what do I do next? And I was in the men's room. I took the call from the men's room. And, you know, we talked it through.

30:04He knew what to do next. He was just all alone. What do I do now? It was more a, I viewed it more as a psychological assistance call than a call on what to do next. He wanted some support, and we made a plan of the first two or three things, and he didn't miss a beat. He didn't miss a single beat for the first two or three or four years. And we built a company now worth, I mean, it was big numbers a few years ago. It's$60 billion now. Like I said, I just saw a startup that wants to raise money at$10 billion pre with no code rate. So I don't know what things are worth anymore. Well, Davey has a fantastic reputation.

30:47There's a ton of people that have come on the show or people that want to come on the show. And I always ask them, like, what other founders should I talk to? It's like, this guy is incredible. This is surprising. So an associate at a venture firm then becomes a world-class founder. Yes. Is there other examples that you can think of that follow his pattern? I've seen it the other way. I haven't seen too many associates becoming founders. You're actually one of the few. I think most VCs are full of shit when they say, oh, the founder is the star and the founder is the most important. You use this thing where like zero to one is the black magic.

31:16And like that's the founder's job. I can't help with that. If you need me to help with that, then we're all fucked. We're all fucked. And he's like, if the VC could do that, they'd be founders then. Yes. And I'm like, you know, Devesh from Iconic. Yes. So I just, I just, he's a killer. I just had a fucking crazy lunch with him. He is a freaking. Dude, we should sit in our conversations. He is a killer. I wish we would just recorded that. But I literally just came here from there. Yeah, yeah, yeah. And I was talking to him about you. And because I'm like, I actually think Doug believes this. I think when other VCs say this shit, like they're full of shit, they actually want to be the guy.

31:45And they're very uncomfortable, you know, not saying, no, I'm actually assisting them. I'm in the service business. We are in the service business. I think you actually fucking believe it. No, we are. And what the trick is, is to retain that founder in a company forever if you can and for as long as possible. Because once you lose that founder, you do lose the soul of the company. A company has many refounding type moments. And we saw with Meta. Think of what Meta would be without Instagram. That company might be gone. And who pulled that off? Who bought that company on the weekend? We closed the investment in Instagram on a Thursday.

32:23And he sold it on a Sunday. Great IR, but we didn't make any money, really. And so you want the founder in the building for as long as possible. Think of the refounding of Apple. Your partner, I quote this on my other podcast all the time, Morris has that great, so he wrote, obviously, The Little Kingdom in whatever, the 80s or 70s, whatever it was. And then he updated it in, I think, 2009 to The Return of the Little Kingdom. And that updated forward. Again, Morris is a crazy writer. His writing is phenomenal. You should have seen his memos internally, his reports too. The limited partners were funny as heck.

32:59It kills me because I read biographies for a living. And that 60-page, you know, all these obscure ones that people are not supposed to have, they all come to me anyways because I do this for a living. And I sat down and read the Don Valentine one that he wrote in one sitting. And then somebody that's mentored by Moritz that I'm friends with, I back channeled, like, dude, I got to fucking do a Founders episode on this. And it came back, absolutely not. I'm like, God damn it. I remember that when I was, there's Mike and I, you know, we both ran Sequoia, a cold-blooded strategic Brit and a tactical Italian, gregarious Italian.

33:34We had no business being partners, but we made it work for 25 years. But I remember I had a dictionary in my desk, a little black dictionary, because Mike in a partners meeting, he would use a word that you had to know the meaning of because it was the key to the sentence. I remember faking like I'm going to the bathroom, going and look it up. Like, what does that mean? Well, the writing that he put in there, I think he said, you know, turnarounds are difficult no matter what. In technology business, they're doubly difficult. They're almost unheard of. He's like, when has there ever been essentially a refounding of a technology company in the middle of a turnaround?

34:11And then he has a great line. And the first time, you know, he had a partner, he had a co-founder, the second re-founding was by himself. By himself, yes. That even if people don't read the entire book, which I'd highly recommend reading, just buy The Return of the Liberal Kingdom and read the foreword that Michael Moritz wrote. Yeah, yeah. It gives you an insight into the psychology and just how rare, fatality, that Steve Jobs was. One could argue that NVIDIA had a re-founding moment. That was a graphics chip company. and no company up to then had made it through two cycles in graphics chip. And already it achieved the two cycle thing, which shocked all of us.

34:49And then we all fell asleep. They come up with a GPU for many years. Okay, it's a faster CPU. And one day we all woke up and NVIDIA was an AI company. That was a complete refounding by the same founder. I found one of my all-time favorite quotes when I was reading the book Zero to One. The quote says, the single most powerful pattern I have noticed is that successful people find value in unexpected places. And they do this by thinking about business from first principles instead of formulas. That is exactly what Applovin has done with their advertising platform. Applovin connects you with over a billion potential new customers inside mobile games.

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36:06And you can do that by going to AppLovin.com. That's AppLovin.com. When I asked you if you induce any misery into your life, like you were saying you should induce it to your kids, I was thinking about Jensen because there's this book by Tay Kim called NVIDIA Way, which is kind of a company history of NVIDIA, but it gives you enough biographical background. You can function as a biography of Jensen. and he says something in there where he's like, you know, I don't like giving up on people. I'd rather torture them into greatness. You get to the end of the book, it's like, oh, he does that to himself.

36:37Of course he does. He tortures himself into greatness. He wakes up in the morning, looks in the mirror and asks why he sucks so much. And if you're willing to do that to yourself, people will follow you. And people will torture themselves all the way until the goal's back. But you have to be able to do, you have to be willing to do that to yourself and people see that. Did you torture yourself? Absolutely. my whole life that's all i know so your inner monologue's negative i'm kind of a miserable soul on the inside say more about this i'm always a little unhappy my instincts are to be unhappy and i carry a positive vibe and people see me as fun to be around it's not an act but when in my private moments i'm i'm pretty unhappy always i'm pretty miserable and nothing changes is that?

37:31My kids. I have reprieved when I'm with my kids and my grandkids and some good friends on a golf course. I play golf. I suck at golf. It's the same three guys so we can laugh for four hours. I'm going to interrupt you real quick. Does this start when you come to this country? You go from, you tell the story of being like this precious, like positive boy. A positive boy at 10. A sweet little boy. And then at 15, so that divine, Dave Ogilvie has this great way to put this. He says all great people do great stuff, are divinely discontent. Yes. It's like just never satisfied. A word I've always hated that I've learned to like is content.

38:14I hated that word until about two or three years ago. I hated the word content. It felt like settling for something. I hated it. Now, as I get older, it's okay to be content at this point. Maybe I'm over the hill because I've accepted that word. Stop talking about yourself that way. You're not over the hill. No, I'm serious. And you're not quitting either. I don't like this defeated attitude I'm getting from you. No, I haven't. You're 91 days in. You're not giving up nine months from now. I'm not giving up, but maybe it came through that I'm scared shitless. Good. Yeah. That means you're fucking doing something.

38:47I haven't done anything yet. I want to see if I can do it. Okay. You're not ready to be out of the game. So I was never out of the game. Exactly. It's my point. I was never out of the game. Well, one of them, I don't think of it as a game. I think it was a business where people are employed. 70 % of our capital comes from nonprofits, charities. So I never thought of it as a game. In fact, when I ran Sequoia, I made sure we used all the right words. It's not a game. It's not money in the ground, none of that bullshit. It's a business where we're trying to help founders build great companies so we can have great returns for our limited partners.

39:17That's a business we're in. But if I take myself out, it won't be down out of fear. be out of good taste and kindness for my partners. It's not out of fear. I'll never give up out of fear. But if after a year I'm not good for anything, I'm going to be the one that's going to have a look in the mirror and say, you're done, that you couldn't do it this last time. Now, I've done a whole bunch of good things in the last couple of years that I want to get into, including starting a company and so on. I'm happy to think I'm a tip top of my game. But in this one, I have to show it. I haven't shown it yet.

39:52And it's all in performance. It doesn't matter what you do. It's the results at the end. Have you seen anybody in your business stay too long? Stay too long? A million people. Did Don? No. Don stepped down in 1993. I believe, I'm going to guess, he was probably 58 to 60 years of age. He didn't stick around for too long. Why did he stop? I think he had enough. I think he had enough. He had two guys in Mike Moritz and me that he thought could take over. He had older people that wanted to take over. And it's interesting how Don told us we were the guys. There wasn't a big conversation. It was a yellow sheet of paper.

40:42Don always wrote in green pen and a yellow sheet of paper. One day, we get a little note that said, Mike, 1.1. Doug, 1.1. The other name, another young man. I don't want to embarrass anybody. 1.0. The older guys, 0.7, 0.6. That was the vision of the carry for the next fund. DTV, Don, question mark. You figure out what you want to give me. and that's how Mike and I knew we were the two guys that were chose there's not even a conversation? no conversation so I'm a big fan of the way he thinks he gave a few talks maybe he talked to Mike Moritz he didn't talk with me I just saw the sheet of paper to me when I think about him he's like a simple genius to the way he thought and operated would that be an accurate way to describe him?

41:37I think part of it was accidental you know look I love Don Valentine and there's not bad things I can say about Don Valentine, but Don also made a ton of mistakes, as we all did. We sold our Cisco shares for cash for the total gain of 90 million. We owned a quarter of Cisco systems. How big is that mistake in dollar terms? What's Cisco's market cap at its height might have been half a billion. So like what's a quarter of half a billion? A lot more. No, no, sorry. Half a trillion. Half a trillion. Yeah, I understand. Half a trillion. A lot of money. A lot more than 90. But look, we all make mistakes.

42:14How many of distributions I push for at ServiceNow, I left a 10Xer on a table. 10X, you know, is crazy. We left billions upon billions of dollars, as we all did in the venture industry. But you know the story. I'm sure that you've heard a story of my review from Don Valentine. I don't know. So I came out of a presentation with a, it was Don, me and two other guys and a founder. And I guess I asked some questions maybe too aggressively. There was a note on the table when I got up. Doug, dash, not fit to listen to founders. He left that on the table for me to see. I love whenever I hear young guys, I like some feedback and I get a three month review.

43:00That was my review right then and there. And so, you know, it was a school of hard knocks. It was the semiconductor days. Of course, we evolved through time. Founders are the most important person in our business. Founder first, our client second, and us third. It's not that we're Boy Scouts. It's not that we're third, but we know if we do right by founders, we'll have great returns of which we'll share. So Don was wonderful. Don was the one when everybody wanted me out at Sequoia because I was insufferable. Don was the one that said, give the young guy a little more time. So he saved my ass. Back to this mistake of selling early.

43:41I just finished reading this book. It's essentially a biography published in 1966 on all the merchant bank families. It's called the Merchant Bankers. And at that time, they're all family businesses. And there's one of my favorite quotes in the book is this guy bitching because they own like, whatever, 20 % of some company like DuPont or something back in the day. And they're like, do you understand if we didn't sell this? And he's saying this is like 1915. He's like, we'd be billionaires. in 1915. Yes, yes, yes. So that's a very common mistake. Yeah, but most companies, if you hold them too long, go away because technology changes.

44:13But if you have a sniffer for one of these that happens maybe five or 10 a cycle, maybe there'll be a lot more in this cycle. If you can sniff one of those and hold on to it for 20, 25 years, there's really nothing else you have to do in life. Are most of your friends investors or entrepreneurs? Most of my friends are neither. Most of my friends are people that I've met in my early days of life who have blue collar jobs,

44:44who are nowhere near the techno world. I have maybe two friends in this world. Most of my friends are from high school and maybe college, completely, or maybe from Italy. Even further back? Yeah, even further back. You know, I just came from Italy a couple of days ago. I spent a couple of days with a friend of mine who's a cop at the airport in Genoa, Italy. You know, he's one of my closest friends. So you're still able to relate to people even though? Still, just the notion, relate to people, I find that kind of weird. Okay, so why? Well, when you relate to people, it's almost as if, ah, you're there, I can relate to you.

45:28No, but you got it. ago it's like yeah people start out with nothing they're really successful it's like they kind of isolate themselves no I have thankfully and that's maybe one of my few good traits I'm still normal I make sure that I'd lead my life with no handlers look I have everything in life that somebody needs but I have no handlers I haven't I have no personal assistant I don't have anybody who you who cleans up after me. I still take my water glass down in the morning, put it in a dishwasher. I cooked yesterday afternoon. I wash all the pans and everything on my own. Those are the things that keep me grounded in this crazy world of ours in which we live here in Silicon Valley.

46:11In the way I think of myself, a fairly simple man who found himself in the right place at the right time, didn't screw it up, whose only true skill is a sniffer. You can say sniffer. What is a sniffer? Sniffer. I'm people sniffer. I have an ability to walk in a room in a business meeting and kind of know what everybody's thinking, kind of know what everybody wants to hear. You know, I really haven't lost an investment in 30 years in Silicon Valley. People have beaten me because of price, but I haven't lost otherwise. But relate not losing an investment. Because I can see I have a sniffer of what people want.

46:57And that same sniffer takes me through what businesses, like what's a real business and what's a dream and what's a pipe dream. Even though I do not know much about that technology. Maybe a way to say it's EQ. That is really my main skill. And the other thing that I pride myself is I'm a very good soul. In fact, the Sequoia speck of people we want to hire has changed. We had this complicated speck. It's now down to a hyper-competitive person with a heart of gold. That has become our speck and the people we hire. We want people, not like me, but that are willing to do the right thing when it's highly inconvenient for the person doing it.

47:42And it's willing to walk through walls in order to win in an ethical kind of way. How does the people you want to hire differ from the founders you want to back? Same thing. Same. They need to be outliers. The founders who want it back have to be extreme outliers in something. IQ, drive. It's kind of the same thing in the people. We have all these adjectives when you walk into Sequoia office, the reverends, the outliers. And I look at that, and to me, they're the same adjectives in people that we want to back and people we want to hire. I think we look a lot like our founders. We don't give up.

48:22So when we go back to this idea that you said earlier where it's like, hey, you know, some of these other traits that other venture people, you know, don't like in founders, I love, I'm very attracted to them. Going back to the founder of NewBank, did he have those founder traits? He had a combination of smarts, drive, clarity of thought, toughness, goodness, judgment, mature way behind his years. Look, here's what I have to tell you. We interview people, and Mike Moritz had a great line, called them half-pagers or full-pagers. You interview someone, you write a half page, there's nothing else to write.

49:09You're there, 30 minutes, you look at it, you watch. God, I can't believe it. You know, I'm done. And then you have people that you look at, you watch, and it's an hour has gone by, and you can't believe it. And David was one of them. And I remember talking to him. The hour flew by, and it was clear to me that we love this person. And he tells the story to show you how Sequoia works. I said, yeah, there's somebody else I want you to meet. He makes it to his car, and his phone rang, and it was Mike Moritz. He didn't make it out of the parking lot. That's how fast we moved. We pulled him right back in, and Mike met him.

49:43And within two minutes, Mike and I knew that we were going to hire this kid. And I had interviewed 10, 15 people from Brazil. They all looked the same. There were all these super smart, fine, wonderful guys and girls. They all went in consulting because that's how you self-select in these new markets. I saw it in India and so on, but they all looked the same. I couldn't tell them apart. And then I met David Velez, and within one hour, I knew for sure that he was going to be the person we were going to hire. Who were some other of the great founders besides him that you partnered with? Fred Luddy of ServiceNow.

50:18He was older, but he made everything simple. He came to Sequoia to present, and he told us everything that was fucked up with his company. It was the wildest pitch. Yeah, everything that he screwed up. I mean, if you didn't want to sell shares, of course, you knew what he was doing. But if you didn't want to sell shares, that would have been the type of pitch. Now, we all still saw through that and so on, but he was terrific. Complete clarity of product. He simplified this thing called workflow where I ask for something and you respond and you answer back and you ask me something. He simplified workflow to the most basic of ways that people can communicate.

51:00And that was the foundation to service now. That was incredible. Incredible. And then you get into the Israeli founders, which I adore. They are tough. You know, keep in mind, they think incoming missiles are kind of everyday type of occurrences. And so they're naturally tough. They don't take any shit. They're smart as hell. Somehow they know what America needs way over there when they work at 8200, which is one of the units in a government, you know, in Israel. They're very trustworthy. They're terrific. I love. And they're tough as hell. And the conversation with one of these usually men. No, actually, there's a woman that she used to be a spy in Iran.

51:49She's tough as hell. Now she's a founder? Yeah, she's a founder. What's her company do? It's a cybersecurity company. But not with her, although a little with her. It's almost when you talk to these founders, have you seen those, I don't know what that sport is where you smack the shit out of one other guy's smack. We had the founder on the show, Dana White's company. And you take it and then the guy, no, it's not quite that bad when it is we found it. But there are no holds barred. They will tell it to you straight. You'll give it to them straight. It's productive. It's not personal. It leads to an outcome.

52:22It leads to an agreement. And it takes 15 minutes. It's just terrific. How do you build trust with the people that you want to invest in? It doesn't start with trust. It always starts with fear. We had the big, bad venture guys who, in their minds, want to own their whole company. In fact, I love to tease founder. When they asked me, how much do you want to own? I said, we usually start being happy at about 100%. But we can go out from there. And I do that on purpose to almost take the nervousness out of the room. The way you build trust is first to go in and explain to them, we don't want to screw it up.

52:58It all starts with that. And then having the look or the conversation with them that begins to show them you might know something about their business. And then paving the way for them to ask you the first question, which may come in an email. The first little bind they find themselves in. And if you rush in and you help them and you take no prisoners and you don't make it painful, and when they're down, you help them. Don't turn the screws when they're down. If you're going to turn the screws, do it when their ego's up here because they beat the quarter by 30 % or something. When you help them out when they're in a jam, slowly by slowly you build trust, which usually takes about a year.

53:40It's not done immediately. There's usually lots of fear at the very start. Oh, no, I got Doug Leone on my board. It's almost they want Doug Leone, but they're scared of shit to have Doug Leone. The reason I ask, because you have one of the greatest quotes I've heard, where you said, trust is the grease that makes all business run. It's accelerant. I created the tenets of Sequoia. One was performance, two was teamwork. And the other eight, I said, if you don't have the first two, the other eight don't matter. And after I wrote those and I published them, I said, shit, I forgot the zeroth one, which is trust.

54:15Yeah. with trust. Trust, if you have trust in an organization, you can fly. You can make decisions extremely quickly. Trust is interesting, though, because it has both knowledge and intention. In other words, I can trust your intention, but I think you're a putz, in which case I'm not going to trust you. Or I can trust your skill, but I don't trust your intentions, in which case I run the other way. And so I've taught my partners early on to make sure they understood trust as having those two components. That's interesting. I've never heard it broken down like that. What came to mind when I heard that quote from you is like a quote from Charlie Munger, who said something very similar, where he said that trust is one of the greatest economic forces on earth.

54:57Yeah. It's necessary in order to have a business. And you see these companies with broken culture where no one trusts one another. And you can't get shit done. And by the time someone here that knows something makes a decision, which is the right decision, to the time it gets to the VP or the CEO, forget it. It's a whole different thing. I'm glad you just said that because I had dinner at his house right before he died. And he told this story where he's like, Munger. Charlie. The right page of 99 years of age. I know. And then I had another dinner scheduled after his 100th birthday. And obviously he passed away that previous November, unfortunately.

55:32He told us a story where it was during the Enron blowup. Yes. And him and Buffett, they knew all the assets they actually wanted. And they had a decade-long relationship with a lot of people. Yes. And they wanted to, they, they saw this, I think it was like a pipeline business that Enron owned. Guy Buffett trusted, called on Friday and said, Hey, this is happening, but you have to wire the money like now. Like, and it was like a couple hundred million dollars. I think I forgot what it was. Let's call it 400 million. And, uh, the Bursar's lawyer is like, you can't do this. Like, we have to check it.

56:01You're going to be liable if this thing blows up or whatever. And, um, Munger goes, we wired the money without even an email. And then I think food was dripping down his mouth. if I remember correctly, he's like, we made a couple billion on that risk-free. Yeah. Because he's like, why? Because Buffett trusted the guy that was on the NFL. It's quite interesting because I'm a trusting soul by nature, and I've never been screwed in business. I've never pre-wired money, if you will, as a metaphor, and paid the price. This is why I wanted to read about the merchant bankers, because there's just something very appealing to me.

56:33Like, they have an old-school, like, gentlemanly way of doing business, where in many cases there's no paper at all. It's just you said you're going to do this. I said I'm going to do this. We don't even write anything down. We just do it. Well, it's the value of a term sheet. A term sheet is not worth the paper it's written on. But once you sign it, both sides, I think you have to honor it. You know how many times where I'm on the board of a company and we signed a term sheet with an investor, and then three days later someone's interested in a much higher price? There's no way. There's no way.

57:08No, no. We shook somebody's hand. And people said, well, you have a fiduciary duty to take the higher price. No, I have a fiduciary duty to make sure the culture of the company is a clean culture, and we do business the correct way. Yeah, at the end of the day, you have to be comfortable with like your own self. Yeah, absolutely. Yeah, 100%. Absolutely. I'm actually surprised that you're trusting, like default trusting. Yes, I have a round head, a deep voice, and people are scared shitless of me, and, you know, and no, I'm serious. and then people find just the opposite. I will bust my ass to help you probably more than anybody else you've ever met.

57:46It makes me feel good. It's a very selfish thing on my part. I don't do it for you. I kind of do it for myself. What do you mean? I really like helping others. It makes me really, really happy. Yeah, one of my closest friends, he's kind of like an advisor, an older brother. He says he finds it intoxicating to be dependable for his tribe. Yeah. Is the way he puts it? Yeah. Yeah. Look, I ran Sequoia for 26 years. I never viewed it as running Sequoia. I viewed it as working for all the other people. I used to tell them, you all have it backwards. I work for you guys or gals. Like, you don't work for me.

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59:36Deal is trusted by over 40 ,000 businesses. Learn how they can help your business today by going to deal.com forward slash Senra. That is deal.com forward slash Senra. So looking forward, you're on day 91. like what do you what's gonna you think occupy most of your time in the next 30 60 90 days like what is on your mind right now if you're not looking backwards looking for investments because at the end of the day it doesn't matter if it helps the choir during a crucible type moment and so on as i said it's gonna matter what's on that sheet of paper what i've done in the first year so we have a little thing we do on mondays call my team the most important thing for the week and everybody talks about I've got to do this, and I have nothing going on.

1:00:22I just came back from vacation. I don't think anybody ever said they have nothing going on. I mean, it takes guts to say in front of nine people. I have zero going on. My MIT is to go scrounge, I use that word, for deals. And that means getting on the phone, calling people I know, networking like crazy, and try to intercept some kind of very nice investments. It's one of the 20 or one of the 30 that I want to make in my lifetime. But is that process today different for you than it was when you were at Sequoia previously? It was because I was more in the deal flow of my generation. In fact, it's very different because the founders of the super interesting companies are 23 years of age.

1:01:11I don't have a network of 23-year-old age friends. This is very interesting to me. I want to hit on that. Before I forget, though, I remember setting a friend of mine up with one of the smartest people I know. He had two businesses running trying to figure out which business he should give his attention to. Then, like, 15 minutes, my smart friend just identified the core of the issue. And so the guy that I hooked him up with texted me, he's like, man, this guy was just fucking nailed it. He understood it. And I sent him a text back. I go, he's my favorite type of person. Very hard to get to, hard outer shell, but once you break through, he'll do anything for you.

1:01:47I think that's very similar to what you were saying. It's like, don't be confused by the round head and the booming voice and the fucking everything. Yeah, the bald round head. Yeah, the bald round head. The other thing, it's very interesting to me. I've had a couple, like I don't hang out with venture capitalists. Like I just hang out with founders. I have no friends that are not entrepreneurs. Like I work on Founders Podcasts during the day, hang out with founders at night. Well, I'm so proud that I'm a founder of a company. I actually love that. Well, no, the reason I bring that up is because it happened on a few occasions, but this happened recently, where there's another venture capital firm that's like, hey, we have an issue with like our story and everything.

1:02:23Can you just like meet with my partner and like talk to us about this? We'll have lunch. I was like, I fucking like you. We'll just have lunch. I don't even give a shit about what you really give a shit about your business, but let's talk. And then I would ask this guy who's been in venture his whole life, which was interesting to me, you know, like who he thinks, like, if you're a young founder right now, like, who's the first person you're going to call? You can pick anybody and they're going to be your first investor. And he starts naming off all these firms. So I go, how could you work in this business and not understand it?

1:02:48I go, you're hanging out with too many venture capitalists, not enough founders. It's nobody on that list. It's exactly what you're talking about. It's these young kids are identifying a vastly different group of people than they, than the previous generation has done. So that is an interesting prompt to rest. I mean, in the ideal world, a 25-year-old says, let me get some experience. Let me go call Doug Leone. It doesn't work that way. So then what's the solution to that? Yeah, what's the solution to that? I think you have to hustle just like everything else in life. It's what you're doing in your business.

1:03:18You know, like you hustle like crazy. All the books you read, all the people you meet, all that you're doing for your business. Yeah, but like here's the thing. I just talked to Devesh about this too, where it's like, I have this fucking uncontrollable obsession. Like I can't tell you why, since I was a little kid, all I want to do is fucking sit in a room and read books. That's never stopped. Right. And then once I found podcasting, I just can't stop fucking thinking about it. I get sad. This whole crew that you see here, all these fucking cameras and stuff, they didn't tell me that somebody on the team was getting married.

1:03:49They went to Italy. It took two weeks off. I was like sad as fuck. I went to Italy for like, what, three days, Rob? How long was I gone? They're like, I'm like, I'm going back. I got shit to do. Like I want to get to work. So It doesn't even feel like a hustle to me. It's just like this compulsion. I think it's the best kind. Yeah. I mean, it can feel like a hustle because then you're exhausted. Then you need, you know, Friday, Saturday, and Sunday off. No, it's your love. Yeah, but one thing that did change, you know Brad Jacobs? You've spent any time with him? I mean, it's in a beautiful way.

1:04:17Weird cat. Unique. Just read his book, How to Make a Few Billion Dollars. Half of it's on his, like, his, not hypnotism, his meditation practices. like his it's all about his mind and stuff but he's an unbelievably joyful human yeah and he's the one that changed this for me because i was just like you and like all these other founders and anybody else he's divinely disconnected people it's like my inner monologue i just wake up every day now focus on what i did just like that wasn't good enough you could have done it better like it's just super negative until he sat me down one day and he's just like this doesn't serve you anymore it's like that got you to where you started to where you are now but now your your drive is generative.

1:04:54Your drive is that you fucking love what you do, so stop being mean to yourself. And it was weird. You know, he's 68 years old when I had this conversation with him. And overnight, overnight, you changed my inner mom. No, the things I think about is not all the success I achieved, but all the opportunities I let slip. All the screw-ups I made as an investor. You know, I don't think too much about rebuilding my life or redoing my life, I should say. But all I think about, oh, my God, the community, the venture community and I have screwed up so badly. I could have done so much better. Look, I've done fairly well.

1:05:31That's an understanding. No, no, both. I'm not saying just financially, but, you know, in things I've done. But all I can think about is how much better I could have done it. As I think about my next board or two, I think about it the same way. I mean, all the other boards I've done, I've done a decent job, but I've got a lot of room to really go. I can't wait for my next one to exercise yet another time all my learnings for yet another next founder for his benefit or her benefit. We should actually talk about that because you have a ton of experience with that. So many of my founder friends just have completely fucked up their boards, don't know how to run one, don't like the one they have.

1:06:07What advice do you have on this? Choose to architect your board the same way you architect your product. You know, a lot of people choose boards like they choose, like to find a girl or a guy kind of in a bar. You know, she talked to me. Let's go out Friday night. You know, he talked to me. Let's go out. It's no more complicated than that. I'm not going to put any thought into it. You know, a board is like a mate, a lifetime mate. There you mate for the next five, seven years. I bet you most marriages last probably five, seven years these days. Be extremely careful. And it's not about the first term sheet.

1:06:47It's about who do you need, who has the skill set and the temperament you need to complement what you have. And complement means a bit of discomfort. Because if both of you have the same background, there's probably a little more comfort. And you want to find a little bit of discomfort. You want to find someone with a very different set of experiences. Which means that initially, you're going to talk like this. Initially, you're not going to understand what he or she is telling you. But that's where the learning comes. And so I find people, they don't do it at all. I got a term sheet. How many times have I heard, I got a term sheet?

1:07:20I got a lead term sheet. So what? Who cares? Of course you got a lead term sheet. Everybody gets a lead term sheet. So talk about some of the mistakes you've seen in board construction then. Is it just that? It's like this person volunteered and I took him? So there is domain skills, there's level of knowledge, and then there's personal traits. So early on when you're building a business, I don't think it helps you at all to find a board member who's an engineer. You're an engineer yourself. That's not the skill you need. That's what I mean by domain skill. An experience, you have no experience.

1:07:59Put a board member with no experience, I don't think it helps you at all. It doesn't mean you have to find someone who's 68 years old, but find someone who's been through the cycle. And then there's personal needs. Out of 10 venture folks, and I've said this and I've taken Shifford, maybe 30 % are incompetent. They don't know what they're doing. Another 40%, I call them no-ops, no damage, no anything. They nod. You know, they nod with a group. And maybe 30 % or fewer, maybe 20 % know what they're doing. And that's one overlay. The other overlay is managing their firms, their stature or their status in a firm.

1:08:40I need a win. I need an exit. What's my partner's going to say? So you don't really have the board member there. You have the shadow. You have the interpreter of what he thinks he or she thinks the firm wants. If you take a combination of lack of experience, duplicated type domain, covers your ass with the partnership and incompetence, that's the worst of all kind. I see that all the time. I see that all the time. Just completely, let me put it in your terms, completely fucking clueless. Completely fucking clueless. To a damage, not a no-op stage, a damaging stage. The best boards that you've been on, are the board meetings contentious?

1:09:24No, but issues are put on the table. Real conversations are put on the table. But you're willing to argue. Forcibly. You're willing to have the real conversation. The argument implies a tonality, a combative stage. I don't view it as that. I view it as supportive stage to come up with the answer the founder needs. So we're willing to get the real job done. I won't concede the word argument. Interesting. It's the same thing at partners meeting. We don't argue, but we have the real conversation. At times, at Sequoia, we have to take a five or ten-minute break. Five or ten-minute break. We walk around.

1:10:07We go back in a room. The temperature has cooled down by 10 degrees. We have the conversation. We come up to an answer. We're all in. We all agree. No more conversations when we go out. It's done. And it's the same thing about board meetings. And it's okay to disagree. It's okay to disagree. I would say that one of the most interesting things I learned this year from doing the show, So Ed Catmull was nice enough to let me come to his house and record a conversation with him. And he was like, hey, you know, a lot of people don't know that in the 10 years that Pixar was a public company, before, you know, the acquisition from Disney, that Steve Jobs fired two of our board members.

1:10:43And they might know that he fired him, but they don't know why he fired him. And so I asked him one day, like, why he fired him? He's like, because they didn't disagree with me. He was like, they always agree with me. They serve no purpose. And he was saying that, you know, a lot of people say they want to get to the truth. And I think Ed on the episode said most people that say that are actually full of shit. They're full of shit. Steve actually wanted to get you the truth. No, they're full of shit. Here in California, more than the East Coast, people don't like the direct conversation. I had to learn that first coming.

1:11:09You know, I went from Italy to New York City, which was halfway to America, and then to California, where everybody told me, yes, give me the feedback. The honest feedback. Nobody wants to hear the honest feedback. Who am I kidding? Yeah. You know, everybody's full of shit. But the best founders have to. They have to, and you have to figure out a way to do it in a fashion that it's understood, received, accepted, and acted upon. It's almost an art. It's not just giving it. It's giving it in the right way at the right time, with the right tone, with the right words, with examples, and so on. Look, it's like telling a founder your VP of sales sucks.

1:11:57You're not going anywhere. What about if you said, there's a couple of VP of sales I'd like you to meet? Just so you can gauge yourself, he'll meet or she'll meet two people that know what they're doing. Suddenly they'll say, holy shit. Okay, this is like Inception. Well, I don't know about Inception. Okay, so I'm a big fan of Christopher Nolan. I just reread his biography for the second time. And one of my favorite lines in Inception is like, what is the most resilient parasite? You know, is it, you know, bacteria? Is it warm? It's like, it's an idea. And the whole thing is like, but it can't be an idea that somebody else gave you.

1:12:31You can't say, Doug, you should believe this. You have to incept them with the idea so they believe that they came up with it. Yeah, it's like your kids. What are you going to tell your kids? All the things they shouldn't do. Good luck. Yeah. Forget it. Are you familiar with the shit sandwich? The shit sandwich. On how to get feedback. I don't know if this is the art you were talking about. But shit sandwich is like compliment, the negative feedback, and then another compliment. That's what I call it, the shit sandwich. Yeah, well, I don't know how to do that. If anything, the mistake I make is I'm too direct.

1:13:01I remember there was a venture guy, Jim Breyer. I heard him turning down an investment once. And I said, oh, my God, the founders are going to walk away from this thinking he won the freaking lottery. And I don't know how to do that. And I was always admirers of how he could do that. And I'm more direct. I hear people talking on the phone for 20 minutes, 30 minutes. My conversations are three, four minutes at most. Hi, what do you need? This and that. Done. Okay, yes, I got it. All right, I'll let you know. 30 seconds, not even three minutes. Yeah, most of my conversations are less than three minutes long.

1:13:43Yeah. Don't you think it's interesting that you don't, like, hang around with other venture capitalists? Why? I don't know. Founders hang out with other founders. I think it comes to the fact that I grew up from dirt, and the inside of me, there's still mostly dirt. I really think that's it. You know, I really think that's it. I'm not an intellectual. I don't find, to me, technology is terrific. It's interesting. It changes every day, but it's not my lifeblood. I think humanity and one-on-one relationships are probably the most interesting thing for me. Are you introverted? I'm right on the line.

1:14:29According to Myers-Briggs, I'm right in the middle. I do not like meeting new people in general. In fact, every time I have to meet somebody new, the thought, and it's kind of nasty that goes through my mind is, shit, another asshole I got to meet. Where I remember talking, where the extroverts, I'm told, find energy. All they get energy. They love it. They love it to meet you people. Oh, my God, another person I have to meet. Yeah. And yes, I do it. I can turn the charm gene on. I can fake it. I can be a cocktail party in order to walk around and network with everybody, but I get home and I'm exhausted from that.

1:15:09Yeah, you're definitely introverted. I am too. And I think there's a very similar, like, you know, I think about the opportunity cost. Again, I always quote Munger where he's like, you know, the way intelligent people make decisions today, it's all opportunity costs. And for me, it's like I'm going to spend two hours with somebody new. That's very expensive to compare to maybe the five true friends that you have in your life, the cop in Italy or your friends back in New York or whatever. It's like I'd rather just deepen that relationship that I have and go out and meet again. But I realize, though, that putting myself out there and meeting new people makes me happier later.

1:15:39In other words, if I let my instincts of going to the same three restaurants or hanging with the same people, if I do that all the time, I'm less happy that if I put myself out there, I dare take these minor emotional risks, I find myself happier because I feel more well-rounded at the end of the day. I feel like I've done something. Could you even be in the business that you're in? But not meeting new people? No, absolutely. Although it's not a social setting, right? It's work. It's presentation, present, help, assist. I think the closest friend I have as a founder is Vales. All the other founders are pure business.

1:16:21I don't socialize with spouses or anything with any of the founders. But you do with Vales. Yes, because he was an associate. I hired him. We had kind of a paternal son relationship. Yeah. Is there any venture capitalists that just made like maybe one or five or ten investments and then that was it? Crosspoint Ventures had a hell of a run for seven years and they went away. It's a name you may not remember. Look them up. Now, they still exist, but it's all the partners left after just making a whole bunch of investments. There was a venture firm called TVI. You may not remember. Technology venture investor.

1:17:07Is that the one that bought Microsoft right before the IPO? They didn't buy Microsoft, but Dave Marquardt was on the board of Microsoft. Yeah, they got 900. It was a couple of one guy started Benchmark with two other persons from another firm. But Dave did, I think, if I remember correctly, from this book called Hard Drive. He was on a board of Microsoft. He was the only venture investor in Microsoft. The year before Microsoft went public, if I remember correctly, they were doing$140 million in revenue,$38 million in profit. And they sold 995 ,000 shares for a million dollars to him. No, I don't think, I don't know what they did.

1:17:41We're going to put this in a shout out. But that was a venture firm that had the keys to the kingdom and somehow didn't last as a venture firm. Where Crosspoint, they just called it in and they all went in every way. This is a firm that just couldn't coexist even though they had everything. Yeah, there's something interesting about that. So I can't name who, but it's one of the best entrepreneurs living. And he's like, actually, you know, they were talking about the greatest seed investors of all time. He's like, greatest seed investor is my dad. He made one investment. He made$40 billion. That's it.

1:18:12Didn't invest in anything at all. That's it. That's it. That's awesome. So I asked you if you're introverted. I want to ask you something that I think Moritz is definitely introspective. You don't strike me as introspective at all. Moritz taught me how to listen. Moritz taught me how to listen to the exact word that said, the timing of that word. you really can understand that about a human being by just listening to the adjective and so on. I took the more basic training that I got and I used it and I expanded on it. I love listening to people speak. Wait, what do you mean you can learn by listening to the adjective they use?

1:19:00Oh, what does that mean? And how they use when they describe a situation. Humans can't help but letting it out by showing themselves. And how they use the word I versus we when they describe, I can sell you this. I'm thinking to myself as this pretty, he's presenting and said, fuck that, you can't sell me shit. You know, that's what I think during the presentation, you know, as I have that stupid grin in my face. But just listen to the specific words that are said when they say it. We often choose a founder without a line of code, without anything, based on a presentation, a clarity of vision.

1:19:43But we also want to get the interpersonal traits. And you can learn a lot if you just pay super careful attention. I mean, Morris used to do it to me all the time. he used to re-quote my words back to me or the way I said them. You know, it would drive me nuts. It'd drive me nuts enough that I learned. What was happening there? Why would that drive you nuts? We used to write memos at Sequoia, and the memo were from and to. And Mike pointed out to me that the from puts myself first, and the to, the recipient second. And Moritz was the first that wrote the memos to and from to put the other person first and yourself second.

1:20:32I understood that putting the from first and the to second as being a somewhat egocentric move where it comes from you. You had to put yourself first in that memo. And that's one of the minor little things that I learned from Mike Moritz. And there were hundreds of things like that. What else did you learn from him? So Mike was brilliant. Let me tell you, he was a very painful co-head. And he knows that. I was painful for him. He was painful for me. Like I said, it's a badge of honor for me anyway that we made it work. But Mike had the ability to dream broadly in ways that I've never seen before.

1:21:14He could answer the question better than anybody I've ever known, what if everything goes right? Not, oh, we're hedges and that. No, what if everything goes right? What can this business look like? And if you look at the companies he's been investors in, it's a spectacular list. You know, look, he had his faults and we're not going to talk about all his faults here. But on that dimension, he was by far the best in the world. All right, Doug, I appreciate you doing this. We're going to run this back because a year from now, you're still going to be doing this. I have faith that you're not going to quit nine months from now.

1:21:47And if when you're still around, nine months and one day from now, let's run this back. I appreciate you taking the time. Thank you. All right. Bye-bye.