

Sequoia Capital: Armchair quarterbacks - qhoxie
http://www.37signals.com/svn/posts/1304-sequoia-capital-armchair-quarterbacks

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pg
This is an attack on a strawman.

What the Sequoia presentation says is: Economic conditions vary. In bad times
you can't take as much risk. Bad times are here. Stop taking risks.

Though I don't endorse Sequoia's conclusions (I don't know how bad the economy
will get, or how long it will stay that way), the chain of reasoning is just
common sense. It doesn't make them hypocrites, or imply that what they had
been telling startups before was wrong.

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sabat
It's not an attack on a straw man. It's an attack on Sequoia's logic and its
presumptions -- a valid attack, if you ask me. Except for Sequoia's
recommendation for stasis (bad advice in any conditions), all of its
suggestions are _how you run a startup_. If you aren't doing everything that
the deck suggests, your startup probably isn't going to do well. As a startup,
you should not be taking stupid risks. Smart risks: you need those, even in
"bad" times.

If a startup can only survive in "good times" (still trying to figure out what
that means, given the past eight years), then it probably shouldn't have
existed to begin with.

Google, while a startup, added value to the universe and soon enough figured
out how to take monetary advantage of that value. Google busted out of the
dotbomb era like a bat out of hell.

Pets.com did not. Turns out the world needed a better way to find
information/ideas/people, but not a "better" way to order dog food.

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cstejerean
"If you aren't doing everything that the deck suggests, your startup probably
isn't going to do well."

It depends on the business models. Some companies can be built cheap and they
can reach profitability quickly. Not all companies can follow this model.
Sequoia doesn't just invest in YC style companies that can be built by 2
people over 3 months. I highly recommend you take a look at
<http://www.sequoiacap.com/company/all-stages>

"Google, while a startup, added value to the universe and soon enough figured
out how to take monetary advantage of that value."

How do you define "soon enough"? IMHO soon enough at a time where there's
plenty of venture capital to go around might be very different from soon
enough at a time when capital is scarce. Take a look for example at the story
of how Amazon reached profitability.
<http://seattlepi.nwsource.com/business/158315_amazon28.html> Amazon also
figured out how to become profitable, but it took them 6 years to do so. That
was soon enough back then, it might not be soon enough today.

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hello_moto
A quote from the seattlepi.newsource:

"What few people understood was that the reason that they didn't make money
was that for the previous five years every time there was a trade-off between
making more money or growing faster, we grew faster,"

They were making money.

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cstejerean
I'm sorry, I don't understand what you mean.

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mixmax
This seems like blatant linkbaiting from 37signals, and frankly I think it's
childish.

They know quite well (or at least they should) that the reason some companies
get a huge cash injection from investors is to grow fast and grab marketshare.
This costs a lot of money. It's a risky strategy but if it works it pays off
bigtime. The get fast big strategy is obviously not for 37signals, but I'm
sure they are aware that there are people in the world that have had success
with it. Amazon comes to mind as a classic example.

What Sequoia is saying now is that the get big fast strategy will have to be
postponed if you want to survive. And they're right.

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smakz
Just curious, can you think of another company besides Amazon where 'get big
fast' actually worked?

"Get big fast" was actually a rather symbolic phrase for the excesses of
bubble spending. It worked for amazon and few others.

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mixmax
I'm not on firm ground here, but I would think that ebay, Cisco and paypal are
all in that category.

~~~
nostrademons
EBay got big slowly...they went almost 2 years between initial launch and VC
funding. Also, they're one of the few companies that was profitable before the
founder quit his day job.

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namcos
37signals have been extremely successful in their niche and I think they have
a wonderful product. However I think their biggest mistake is to try and
extrapolate their experience to what seems like all tech businesses and start-
ups, with the diversity we see in funding requirements, growth strategies and
segments start-ups appeal to chances are slim that the 37signals model is for
everyone. Furthermore considering Sequoia Capitals track record this post is
unimaginably arrogant, you need to come up with a better argument than that to
take them on in a business model ideology war.

~~~
pxlpshr
I agree... that blog post came off a bit arrogant and naive TBH. It doesn't
sound like Jason has an ounce of experience outside of 37signal's success.

On the flipside, I've seen wayyy to many inexperienced but well-funded
companies burn through cash like it's never ending and with little purpose or
direction. So in that regard, I do agree with the general point of his post.

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axod
This was a pretty predictable and lazy post... "We were right all along. We
are the best in the world, 37s kicks ass!!! We're _awesome_... we're wildly
successful etc etc"

Reading the embedded slideshow was more interesting than the 37s ego post, so
thanks for posting that anyway.

The point for me was that before, you could wait maybe 2 years or something
building something awesome, building up traction before making profit. Now,
you should try to achieve that a lot faster, as investment will be harder to
come by. I think that's pretty sound advice.

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callmeed
Personally, I like what 37s has to say. It's the same thing people here
(myself included) have said to all these "How to survive in hard times"
articles (and that is "why do sound business principles only count in hard
times?").

I'm glad someone with a bigger voice is saying this.

Yes, I understand "get big fast, grab market share" MO–but I guarantee they
have portfolio companies that have burned a lot of money with nothing to show
for it (revenue or market share).

Yes, Sequoia had to say this given their current situation. But, what's wrong
with having an opposing voice to "raise vc/ramp up fast/ignore revenue for
now" mentality? It's good to give entrepreneurs both sides of the coin.

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smoody
Let's say it's boom times and money is cheap and plentiful and there are a
stable of eager acquirers looks for companies to buy. Why not grow fast in
that case? It didn't seem like it hurt the guys who started YouTube. And there
are more examples where that came from. Then, when the economy slows, cut
back. Seems like a good approach to me.

A lot of the innovations we take for granted today are the result of people
with big dreams and no clear path to profitability. If we didn't have big
dreamers and investors to fund them based on... gasp... a leap of faith, then
the web would probably consist of nothing more than simple project management
services, enterprise chat services, and single page editors.

"If you had to keep borrowing to stay afloat, were those good times?"

I know the good people at 37s understand what venture investment is, but they
keep trying to prove that they don't. If you're taking money from Sequoia,
you're not borrowing money, you're exchanging money for ownership.

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bad_user
Yeah, but Youtube got acquired, and it really hasn't had a business model.

I think this getting big fast is really useful when you want to get bought.

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mjnaus
Amazing... the sheer volume of news.YC folks jumping on the defense wagon
here. If I wouldn't know any better, I would say that 37Signals personally
offended some you.

To do some reflection... I can't help but wonder how many adjustments a
company such as 37Signals is going to have to make to their operations
compared to the average overfunded "innovator" from Silicon Valley...

I know for damn sure who to put my money on.

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josefresco
The sub heading of the article more accurately describes their point about
Sequoia as "Monday morning quaterbacks.

Armchair quarterbacks would mean that Sequoia is not directly involved in the
industry and is chiming in on something they know nothing about (not speaking
of something with the benefit of hindsight like the term "monday morning"
confers).

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hooande
Personally I think Sequoia's goal with these slides was to calm people down
and provide reassurance during tough economic times. I don't think they were
trying to really get people to change their spending or strategies. The people
at Sequoia are definitely smart enough to not recommend major business changes
based on the events of a few weeks.

Kind of saying "Just stick to the basics and everything will be fine people".
As a vc, I would imagine there is some incentive to keep the confidence of
your portfolio companies up in tough times.

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tlrobinson
We get it: 37signals hates VCs.

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nickjames
Sequoia Capital are a bunch of idiots.

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timtrueman
That could be true, but they're a bunch of successful idiots at the very
least.

