Sequoia Capital’s Mighty Struggle
Year one of Roelof Botha’s tenure as ‘senior steward’ has been remarkably stormy, marked by billions in devalued investments, a Twitter bet gone haywire and a rising cold war over its stake in ByteDance.
One day in March, Sequoia Capital assembled a show of force: a private summit on artificial intelligence hosted at the firm’s airy offices in San Francisco’s Mission District. Around 100 people gathered—a who’s who of tech’s hottest sector, including OpenAI CEO Sam Altman; Kevin Scott, Microsoft’s chief technology officer; and Dario Amodei, co-founder and CEO of Anthropic, a two-year-old generative AI startup recently valued at $4.1 billion.
Roelof Botha, who took over running Sequoia as its “senior steward” (Sequoia-speak for CEO) nearly a year ago, played the role of grinning host, mingling freely in the crowd as partners Sonya Huang, Konstantine Buhler and Pat Grady acted as onstage emcees. With a sweet smell drifting up from the Dandelion Chocolate factory below, a Q&A between Altman and Sequoia partner Alfred Lin anchored the morning’s schedule, followed later that afternoon by a conversation between Lin and Nvidia’s decabillionaire CEO Jensen Huang, clad in his trademark leather jacket. Several startups, including Scenario, a generative AI company offering technology for game developers, gave short demos between the longer sessions, hoping to impress the moguls in attendance. “The energy, the optimism—you could feel it,” said Scenario co-founder and CEO Emmanuel de Maistre.
Those are exactly the vibes Botha and his fellow Sequoia partners want to emanate right now: energy and optimism—business as usual for a firm that has become legendary in Silicon Valley for its unflappable culture and its early investments in Atari, Apple, Electronic Arts and Google. Aiming to prolong the firm’s 51-year run atop venture capital, Botha has set dealmakers Lin, Huang, Grady, Buhler, Stephanie Zhan and others at Sequoia on an aggressive hunt for AI startups. Already the firm has completed roughly 10 AI deals in 2023, a haul that has not been previously reported. These deals include buzzy names like Harvey (AI for lawyers) and LangChain (AI for developers).
Publicly, Botha, 49, is working hard to make it seem like little has changed during the past year. Shortly after the summit, Unity Technologies CEO John Riccitiello met with the Sequoia chief on a sunny Saturday afternoon at Botha’s Los Altos Hills, Calif., estate to discuss AI plans for the videogame software company. (Sequoia initially invested in Unity back in 2009 and still owns shares in the now-public company.) “In the world of AI, you can say you’ve got a plan, but if you’re not paying attention, the world turns itself over every 48 hours,” said Riccitiello. He was pleased to get 90 minutes with Botha, who has “less time than he used to” since taking command at Sequoia.
Despite his efforts to keep up appearances for the company, Botha can’t escape the reality of the situation. As conversations with three dozen people closely connected to him or Sequoia reveal, the past year has exposed the storied firm and its new leader to unprecedented levels of tumult. Falling equity markets have wiped away billions in value from Sequoia’s public portfolio, a decline that comes after a poorly timed, Botha-led change to Sequoia’s fund structure allowing it to hold public stocks longer.
Private markets, meanwhile, have forced even Sequoia’s bluest-chip portfolio companies to accept drastically lower valuations; Stripe’s price tag, for instance, was recently almost halved to $50 billion. Then there’s the $200 million or so gone from the FTX implosion; the $800 million the firm stunningly gambled on Elon Musk’s Twitter, now worth less than half that amount; and the $20 billion-plus stake in ByteDance held by Sequoia Capital China—a paper fortune endangered by a threatened U.S. ban on ByteDance’s highest-profile property, TikTok.
Those who can catch the spotlight-shy Botha in a private setting concede that circumstances are weighing on him. Phil Libin, who has led two companies that have received Sequoia dollars—Evernote and Mmhmm—has watched his longtime friend grow “more serious” over the past year. “He’s got a difficult job,” said the CEO. “He took over right at a time when everything’s not great.”
Until the last 12 months or so, Botha had experienced a remarkably smooth climb to Sequoia’s summit. He joined the firm in 2003—departing from his post as PayPal’s chief financial officer—and had his first major win when he led an investment in YouTube in 2005, shortly after its founding. From 2009 to 2012, he followed up that score with investments in future unicorns Unity, EventBrite, Block (then called Square), Instagram and MongoDB, a database provider. Botha steadily moved up Sequoia’s ranks: He was co-leading the firm’s U.S. venture team by 2009, then named steward of Sequoia’s U.S. and European businesses in 2017, a designation Sequoia reserves for its highest-ranking executives.
Throughout his ascent, Botha cultivated a low profile. “He just wants to keep his head down—do his work, deal with his investments. He doesn’t want any notoriety,” said David Viniar, a former Goldman Sachs CFO who served with Botha on Block’s board of directors. (True to character, Botha declined multiple requests to comment for this story.)
In track record if not in temperament, Botha bore a clear resemblance to his former bosses at Sequoia, billionaires Mike Moritz and Doug Leone. Having succeeded Sequoia founder Don Valentine in the mid-’90s, the duo invested in many of the firms that defined technology over the last two decades: LinkedIn, Stripe, Yahoo and Zappos, among others. They also made an early foray into China ahead of most in Silicon Valley, tapping Neil Shen—co-founder and chief financial officer of Chinese travel site Ctrip, who was then little known outside the country—to set up Sequoia Capital China in 2005. Shen smartly steered Sequoia into more blockbuster investments, including Meituan Dianping, an on-demand services app; Pinduoduo, an e-commerce outfit; and, most pivotally, ByteDance.
Last year, with Sequoia’s U.S. assets valued at $85 billion, Leone, backed by the Sequoia partnership, said he would pass the top job on to Botha. For a brief moment, all seemed rosy. Leone had completed an undramatic handoff to the long-tenured, long-groomed Botha, a rare act of successful third-generation succession planning. Several Sequoia portfolio companies (DoorDash, Unity and Brazilian fintech company Nubank, among others) had just completed initial public offerings; more portfolio standouts, including Stripe, Reddit and Instacart, looked primed for an exit. And U.S. lawmakers had seemingly moved on from President Donald Trump’s attempt to ban ByteDance’s TikTok in 2020, an effort that threatened to strangle Sequoia’s golden goose.
But things have gone south ever since. With inflation high and interest rates soaring, the tech-heavy Nasdaq dropped more than 30% in 2022, bringing startup valuations crashing down and blocking the path toward public offerings for Stripe and the others—the worst macroeconomic environment for VC since the Great Recession. The downturn on top of the cash distributed to its limited partners has sunk the value of Sequoia’s assets over the nine months ended in March by 38% to $53.2 billion, according to the firm’s financial filings. This means the value of the firm’s assets are now roughly the same size as those of its younger rival, Andreessen Horowitz. Sequoia returned more than $15 billion to its LPs over the last three years, the firm’s spokesperson said.
Sequoia now faces multiple problems of its own making—some directly tied to Botha’s leadership, some not. The firm’s highest-profile crypto bet, Sam Bankman-Fried’s FTX, evaporated overnight last November amid fraud allegations against Bankman-Fried—“a toe-curling embarrassment” for Sequoia, according to Sebastian Mallaby, a fellow at the Council on Foreign Relations and author of “The Power Law: Venture Capital and the Making of the New Future.” The nine-digit wager on Elon Musk’s Twitter acquisition has fared poorly, too, with Musk’s own estimate of the company’s value spiraling down more than 50% in the past six months.
A greater detonation could soon emanate from Washington, where lawmakers appear to be set on a collision course with ByteDance over its ownership of TikTok, perceived by members of both parties as a national security threat. Thick storm clouds of doubt now hover over Sequoia China’s more than 10% holding in ByteDance (the stake’s current value: over $22 billion), with LPs increasingly anxious about how much the firm can expect to finally wring from its investment.
Botha’s response to this annus horribilis has been in keeping with his decades of soaking in the Sequoia Way: Stay calm and project strength. He has continued to voice support for his longtime friend Musk and the firm told LPs in a letter that the growth fund backing FTX had actually seen roughly $7.5 billion in “realized and unrealized profits” despite the doomed crypto investment. On the whole, he has maintained a familiar talking point, insisting that Sequoia must hold firm to its long-term investing horizon. “There’s a temptation when you become a leader to change for the sake of change,” he said in October at a Wall Street Journal conference. “I don’t think there’s much we need to change.”
But while Botha publicly projects an air of calm, behind the scenes change may indeed be afoot—especially as it pertains to the firm’s investments in China. In an active acknowledgment of the geopolitical tightrope it is walking, Sequoia last year decided to hire Beacon Global Strategies, a well-connected Washington consultancy, to advise it on China-related issues, The Information first reported last week.
Whether Botha will admit it or not, the firm has encountered what Sequoia executives like to refer to as a “crucible moment.” In a 52-slide presentation first reported by The Information last May, Botha and other firm leaders warned portfolio founders about the headwinds they would likely soon be facing. “This is not a time to panic,” they intoned. “It is a time to pause and reassess.” But soon the situation would only darken further.
The great expectations for running Sequoia must feel like a familiar type of inheritance to Botha. He was born into a prominent South African family, the grandson of Roelof “Pik” Botha, a high-ranking minister in the country’s government for almost 20 years, from apartheid into Nelson Mandela’s presidency. His mother was a teenager when he was born, and his grandparents helped raise him in Pretoria, South Africa’s administrative capital.
Botha had his grandfather’s name but longed to move away from his shadow. Looking for a degree in a field that might have “portability” (his phrase) overseas, Botha studied actuarial science at the University of Cape Town, which also gave him a chance to hone his English after growing up speaking Afrikaans.
Later, Botha started a master’s degree in options pricing—“I thought I’d end up on Wall Street,” he told podcaster Tim Ferriss—but didn’t complete it, instead taking a job as a McKinsey consultant for a couple years before heading to America for a Stanford University MBA. He liked America’s distance from South Africa. “Part of why I came here was to not be someone’s grandson but to just be me,” he said in 2007.
At Stanford, he impressed Garth Saloner, an economics professor and fellow South African. “Even in a class of smart people he stands out,” said Saloner, who today holds a Stanford professorship named after Botha and his wife. “Roelof would just sit back and listen, and when things were very confused, he would finally put up his hand and just nail it.”
In 1999, while Botha was still an MBA student, a friend introduced him to Elon Musk, a fellow South African. The two hit it off, and Musk offered him a job at the company Musk was trying to get off the ground: PayPal. Botha ended up joining part-time just before finishing his degree.
While most PayPal employees wore T-shirts and flip-flops, Botha, then as now, was more buttoned-up, opting for a polo shirt and jeans, a former PayPal colleague recalled. He appeared reserved in other instances, too: When the company developed a boisterous social scene centered around Musk and his first wife, Justine, Botha never seemed interested in joining it, that colleague said.
A year after PayPal’s IPO in 2002, Botha departed for Sequoia, where he promptly plied his connections. A trio of ex-PayPal staff had a hot startup—YouTube—and Botha guided the firm into a seed investment, a year before Google bought the video service for $1.65 billion, an enormous sum for an internet company after the dot-com bubble. A thin stretch of years followed without any comparable wins for Botha—his lowest moment perhaps being his botched chance to invest in Twitter. The period left him struggling to “come to grips” with VC’s low hit rate, a factor “that really eats at your self-confidence,” he recalled in an interview with Protocol last year. “I nearly quit the business.”
Still, he had already impressed his Sequoia higher-ups. When Doug Leone sensed Botha’s confidence had slipped, he showed up at Botha’s home with a jar of homemade pesto sauce, a gesture Leone hoped would show his faith in the young investor. “That’s part of the beauty of this business,” Botha told Protocol. “Even though you could make big mistakes, there’s another at-bat tomorrow.”
Botha soon rebounded, leading Sequoia’s investments in Instagram, Block and MongoDB and established the firm’s much-coveted scouting program, in which Sequoia provides capital to a network of portfolio founders and other people connected to the firm who identify potential investments. This was how Sequoia invested in Uber around 2010—about a year after the ride-hailing app’s start.
While Botha maintained a close relationship with the avuncular Leone, his management style tended to more closely resemble that of the soft-spoken Mike Moritz. “Everyone waited for the thing [Moritz] was going to say in the board meeting. Roelof is the same,” said Ian Small, former CEO of Evernote, which Botha backed in 2010. “He doesn’t say a lot, and when he says something he’s not saying it when it first comes into his head.”
Botha’s tight-lipped nature could be read in other ways, though, and a half-dozen people all separately used the same word to describe him: intimidating. “I’ve observed people who were totally easy to talk to—super eloquent—get in front of Roelof and all of a sudden they’re bumbling and stumbling over their words,” said Colleen Cutcliffe, CEO and co-founder of Pendulum Therapeutics. (Botha led Sequoia’s investment in Pendulum in 2017 and remains a board director.) On several occasions, he has criticized potential Pendulum hires for violating his pet peeve: “Too talkative,” Cutcliffe said.
In the past, Botha has struggled to present himself well in public-speaking engagements, like TechCrunch’s Crunchies Awards around a decade ago. “I remember him being pretty nervous ahead of time,” recalled Libin, who wrote some jokes for Botha to tell onstage at the event. They fell flat. “It was just crickets, like maybe people didn’t realize that there was a joke in there or something.”
Internally, Sequoia sought to bolster its rising star’s profile with “pages and pages” of notes to improve his performance in TV interviews, according to one person who saw the firm’s media-training plan for Botha. Overall, the notes advised him to “pretend to be interested in the other person—try to appear as a human being,” the person said. They then clarified that Botha’s “not a bad guy,” just not someone “you’re dying to go have a beer with.”
While he didn’t sparkle with the same charisma as his bosses, Botha had little trouble connecting with Silicon Valley’s wonkish founders. He established a fluency in the industry’s “dolphin talk,” the person said, “where they squeak at each other in a language that they all understand.”
As Botha worked his connections for deals and rose up Sequoia’s ranks, he had a formidable rival seated at Leone’s other elbow: Shen, head of Sequoia China. Throughout the 2010s, Shen had amassed a stellar run, culminating in 2018, when Sequoia China saw 17 portfolio companies go public, including Meituan and Pinduoduo. Although Sequoia has maintained a profit-sharing arrangement with its China arm, Shen ran his shop with almost total autonomy from the U.S., according to a former high-ranking Sequoia executive. U.S.-based partners like Botha didn’t “have a desire to delve deeply into Neil’s ecosystem,” the person said.
Given Shen’s performance, outside observers thought he might pull ahead of Botha in the race to succeed Leone, The Information reported in 2018. However, internally the contest’s outcome had already been made clear when partner Jim Goetz turned management duties of Sequoia’s U.S. and European business over to Botha in 2017, several ex-Sequoia partners and staffers said. And even if Shen once had a chance, it likely dwindled as the U.S. relationship with China chilled during the Trump administration. The two countries have grown even more adversarial in the following years, their tensions epitomized by the increasingly bipartisan criticism alleging that one of Shen’s top investments—ByteDance—peddles little more than Chinese government spyware. Lawmakers’ suspicions had only deepened after Beijing took a board seat and stock in a key ByteDance entity in 2020, The Information previously reported.
Sure enough, Leone officially handed the top job to Botha last July. Further down Sand Hill Road, Barry Schuler, the former AOL CEO turned investor who met Botha while serving on Unity’s board, found himself nodding in approval at Sequoia’s choice. Botha “has a strong stomach and a good temperament,” said Schuler, who’s now a DFJ Growth managing director. These are all good qualities to have when you undertake a “very important job,” he said, “at a tumultuous time.”
As the tumult has unfolded around Botha since last summer, he has tried to maintain his studied air of steadfastness. In some instances, though, the extraordinary times have pushed him to make small concessions and changes—mostly in private—to Sequoia’s business.
The tempest arrived first in the form of a former colleague, Musk, who needed help funding his $44 billion takeover of Twitter last fall. Sequoia gamely handed Musk $800 million across several of its funds—one of the firm’s largest investments to date. But the deal has quickly proven nightmarish, as advertising revenues plummeted and the company halved its internal valuation.
Sequoia’s LPs were concerned not only by the sheer size of the firm’s investment, but also by its choice not to insist on a director’s seat, according to one LP. In fact, despite writing Musk a massive check, Sequoia hasn’t been actively involved in Twitter’s chaotic reorganization process in the months since, according to a fellow Twitter investor.
While Botha has carefully maintained his distance from the Twitter mess, he couldn’t do the same with FTX. When the crypto exchange failed last fall, prompting Sequoia to write down its stake to zero, Botha knew LPs would want more from him than the usual talking points for crisis communications. So in his fourth month at the helm, he gathered LPs for a conference call and issued a rare apology about the situation Sequoia found itself in. Some LPs remained unsettled about what other shoes might drop in crypto, but Sequoia further assuaged their fears by lowering management fees for its $600 million crypto fund. A Sequoia spokesperson said the firm “voluntarily changed fees” for its crypto fund “in light of the pace of investing following the market correction.”
Over the past year, some LPs have been privately grumbling about the new flagship Sequoia Capital Fund’s strategy to hold public equities for longer, which had sounded more appealing when the fund debuted in October 2021 near the apex of a seemingly invincible bull market, according to one LP. Sequoia in March also allowed investors in the fund to break its two-year lockup rule and withdraw some capital early, according to a Sequoia spokesperson. The firm was cognizant that the broad equities downturn had led to a liquidity crunch among LPs, the person said. The move got LPs some money when they needed it and bought Botha some breathing room with his investors.
With China, Botha faces another high-wire act. Sequoia has made at least one quiet shift to its China strategy by hiring Beacon, the deeply connected Washington consultancy, to advise it on geopolitical issues. Sequoia’s core concerns include the U.S. government’s rapidly shifting views on tech investment in China, as the Biden administration reportedly readies an executive order to limit U.S. investments in the country.
Neil Shen, managing partner of Sequoia Capital China, pictured last November. Photo Bryan van der Beek/Bloomberg
Still, Botha doesn’t seem poised to hasten a retreat out of China. Partly that’s because Shen still calls many of the shots there. “I don’t think Roelof can pick up the phone and tell Neil to do anything,” said a former Sequoia executive. Sequoia Capital China, that person added, “might as well be called Neil Shen Capital.” But a hasty withdrawal from China would also be entirely out of character for Botha, who is the living embodiment of Sequoia’s evergreen philosophy.
Tellingly, even in the face of Twitter’s stumbles, FTX’s failure, public equities in freefall and looming doubts regarding ByteDance, Sequoia isn’t facing an exodus of LPs or anything resembling an internal revolt. This, perhaps, is why Sequoia tapped a partner like Botha to lead the firm in the first place. The institution has built a reputation over the last half-century for being both far-looking and indefatigable; its leader must be made of the same stuff.
“He’s the right steward for the moment,” said Antonio Gracias, founder of Valor Equity Partners and a fellow investor in Musk’s Twitter. “This is the time when you want someone who can separate emotion from logic and fact.”
