

Ideas - ct
http://www.sequoiacap.com/ideas

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chubot
Playing devil's advocate:

"Pick the one thing that is of burning importance to the customer then delight
them with a compelling solution."

"Customers will only buy a simple product with a singular value proposition."

What about iPhone, probably the most profitable product of the last 5 years?
Is it really that focused?

I don't think that many people in 2006 would have said: my phone is not enough
like a computer. I would have said that cell phone call quality and battery
life sucks, so give me something that will hold charge for a week, has the
quality of a land line, is ultra light, small, can be dropped, etc. That would
have been focused.

Steve Jobs said it was 3 products I think... it's a phone, an ipod, and a
computer in your pocket. It's this thing where you can play music, surf the
web, call your friends, text them, take notes, download apps, and the
interface is better than predecessors because you can use your finger.

Not to say their advice is wrong... it's just that thing kind of advice is
applicable in limited ways. It sounds like conventional wisdom, and isn't one
of their points to challenge conventional wisdom? :)

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oconnor0
Some of us would still like that kind of phone. :-)

~~~
bambax
Yes!!!

> _give me something that will hold charge for a week, has the quality of a
> land line, is ultra light, small, can be dropped_

I would pay dearly for such a phone. I don't need "apps" when I'm on the road;
I need something small and durable that can survive anything (including being
put in water).

I don't carry a purse and find it hard to make room for a smart phone, esp.
newer ones which are only getting bigger and bigger.

I had hoped Nokia would make that phone, but they too seem to be only
interested in the smart phone business. Too bad.

~~~
Julianhearn
You can get a waterproof phone. My friend has the one below and he lost it at
the beach, we called the phone a few hours later after he realised that it was
missing and the person who answered said he found it in the sea and couldn't
believe it was still working.

[http://www.pixmania.co.uk/uk/uk/3169336/art/samsung/solid-b2...](http://www.pixmania.co.uk/uk/uk/3169336/art/samsung/solid-b2100-black-
red.html)

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jpk
The left-hand side: Pretty good, and most would do well to follow this advice.
Remember, however, this was written by a VC firm. This isn't a list of things
good companies do, it's a list of things that Sequoia portfolio companies do
when they make Sequoia money. To be fair, the overlap is notable. Just
remember where the incentives are for a piece like this.

The right-hand side: Steve Blank aptly defines a startup as "an organization
formed to search for a repeatable and scalable business model." So a business
plan written by a startup is, by definition, all lies. They're a fine exercise
as long as you're grounded by the fact that you'll end up with 20 slides of
pure bullshit. (Read: Don't put real effort into writing business plans, build
a company instead.)

~~~
wheels
You can't validate a business idea on paper, but you can _invalidate_ one. If
you can't make the numbers add up in your _best case_ , then you can save
yourself a lot of time building a product that's destined to flop. What a
business plan shows is that you know how to invalidate structurally flawed
ideas and that you've found a starting point that appears to at least be
numerically plausible.

For example, if you work out that your best theory for acquiring customers
costs you $20, but their best-case total lifetime value is $15, you have a
business model that you can throw out.

~~~
johnrob
The only way to invalidate an idea is to prove that people don't want the
product. While I wouldn't always bet on a business that has a proven demand, I
definitely would not bet against one.

A great example is Instagram: I wouldn't have bet on that product because it
seemed destined to make no money, but since so many people liked it they
somehow found an exit.

~~~
wheels
That's nonsense. So long as we're talking about the _mechanics_ of the idea,
which is implicit when talking about a _business plan_ , then yes, you most
certainly _can_ invalidate an idea. Just because people would like to have
something doesn't mean you can either produce that or make money selling it at
the price point they'd like to buy it at.

I'd like a hand-cranked machine that takes my daily garbage and spits out
Ferraris in under 10 minutes and I'd like to pay $5 for this machine. I'm sure
I can demonstrate demand quite easily. Will you fund it?

~~~
johnrob
I was operating under the assumption of reasonable execution risk. If you
can't even get the product out the door then you'll definitely fail. My main
point was that it's hard to disprove ideas that are feasible and are something
people want. To pursue such an idea is a gamble; to not pursue is also a
gamble. I've unfortunately been wrong in both ways ;)

~~~
lucisferre
And how would you arrive at that assumption? Generally speaking a simple
business plan is what states those risks and explains these essentials of your
execution plan.

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bcantrill
Nice list and all, but I find myself wondering just how many of these elements
of sustainable companies were exhibited by (Sequoia-funded) Color Labs...

~~~
jpk
Every investor picks duds. What's your point?

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bcantrill
My point is that Color Labs was obviously a dud when it was funded by
Sequoia[1] -- and that it almost certainly satisfied none or nearly none of
Sequoia's own putative criteria. They are certainly entitled to their duds --
but when they are of Color's magnitude, it makes it a little hard to endure
their sanctimoniousness around building sustainable businesses.

[1] <http://news.ycombinator.com/item?id=2364463>

~~~
jpk
Color was pictures plus location, that's true. Instagram is also just pictures
and filters, which is equally dumb but turned out pretty well from an
investor's point of view.

However, you make a good point. Neither Color nor Instagram were/are
"sustainable businesses". Sequoia just wants a return. Google is a sustainable
business, and if you build one, Sequoia will get their return. You can also
just get a bunch of users and flip it to Facebook. They'll get their return
then too. And I'd bet Sequoia doesn't really give a crap which way you do it.

~~~
daemon13
>> And I'd bet Sequoia doesn't really give a crap which way you do it.

Very succint and clear explanation of the venture industry. All start-up teams
shall print this in big letters and read daily.

~~~
ahuibers
This is pretty cynical and not my experience.

~~~
daemon13
It may be and your might have encountered an exception(s), but as whole the
venture industry has clear economic drivers and generally people's behavior
matches the underlying incentives.

Of course, my point excludes the examples of non-ethical behavior.

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dm8
This one page succinctly conveys what any entrepreneur should think when
building a startup be at starting phase or fundraising phase.

Btw, Sequoia has one of the best "about us" page
(<http://www.sequoiacap.com/about>). It's focused on their customers (showing
entrepreneur's pictures in early days and how they serve entrepreneurs) rather
than glorifying their ninja investing skills.

~~~
6ren

      We could not find the page you requested.
    

That's what I'm getting from clicking that link. (They have "China" left of
the search bar at the top - maybe because I'm in Australia, they think I'm in
China, and so don't show the /about.) Also, their "Meebo Bar" almost
completely obscures their links at the bottom of the page.

Most of the ideas advice is obvious-but-good-to-be-reminded-of, apart from
"Rich Customers". That is one legitimate approach (and fair enough if that's
what Sequoia wants) - but it's not appropriate for _all_ startups.

Another approach is to target (1) a niche market (2) with no money (3) to do
something that doesn't matter. pg argues that's how Facebook, Microsoft and
Apple began <http://paulgraham.com/swan.html>

It seems likely that most _revolutionary_ startups began this way (especially
when the customer doesn't feel pain); whereas incremental startups address
rich people's problems.

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hcarvalhoalves
_LARGE MARKETS Address existing markets poised for rapid growth or change. A
market on the path to a $1B potential allows for error and time for real
margins to develop.

RICH CUSTOMERS Target customers who will move fast and pay a premium for a
unique offering._

Sure, I too would love to invest only on huge markets composed only by the
world's 1%.

~~~
waterlesscloud
INFERNO Start with only a little money. It forces discipline and focus. A huge
market with customers yearning for a product developed by great engineers
requires very little firepower.

So why does it require large vc firms?

~~~
dm8
Majority of Sequoia companies become billion dollar businesses and sequoia
invests few million in them. In fact for companies like Yahoo it started with
few hundred thousands. So what they are saying is not wrong.

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wtvanhest
"Your browser appears to be out of date. We highly recommend you upgrade to
avoid problems while you use our site."

Then it won't go to the page. I know I'm one of the few stuck with a browser
version at work I have no control over, but come on.

~~~
bronson
IE8 support will probably arrive, it's just a matter of developer hours and
setting up ugly VMs. If you're on IE7 or below, won't happen ever. :)

~~~
wtvanhest
IE8. Sounds good. The funny thing is that we just upgraded to Windows 7 about
5 months ago.

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adrianwaj
Here's an idea: avoid funding 1 company per year and blanket fund with minimal
due diligence a whole batch for <$30,000 each so long as they have a business
plan (as seen in article) meeting those objectives (as seen in article.)

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brandoncapecci
Sequoia should take out or redesign the leaf in their mark. It looks like
cannabis and conflicts with their image.

~~~
melvinmt
Uhm, they're named after a tree.

