David Rosenthal: belief

Transcript context

…David, before diving into the entrepreneur side of things, the thing that struck me on these ground rules and as we've danced around a couple times here, Don plays by his own rules and he sort of has this ethos of this early stage investment business is a subjective business. It's not a highly analytical data-driven business. It's a feeling business and yet in these ground rules, it's interesting to see what hard and fast financial things jump out. Even in this high area of subjectivity and gut feel, must have high gross margin ability is in there. It’s one of these precious few rules. As an early stage investor, that's really ringing home to me and thinking about how important that is in the ability to scale a company, but generate outsize returns. The only number that you see in here is that that $100 million and then the only other thing that’s close to resembles a number is high gross margin ability. It's interesting to think about what makes the cut. Yeah. This also leads into his methodology for assessing entrepreneurs. Don, as so many other things in pioneering the venture capital industry, I don't think he would put it in these words, but he recognized that this is a business that is both art and science. That is what is so incredibly awesome, fun, and rewarding about working in this industry in an early stage venture capital, but again, if you think back to the folks that we're doing this before, it was all art. If you think a lot of the entrepreneurs who are starting companies like the traitorous eight, it was all science. They weren't thinking about the art of, “How do we make this into a huge wealth-generating vehicle for ourselves and for the ecosystem?” It was, “I just want to go do science and let's find some way to do science. ” Don is really the first person, I think, to bridge this gap, the methodology for assessing companies and entrepreneurs. I assume he was doing this while he was working with companies, too. Remember, he has this Jesuit education and Catholic school upbringing background, and he goes to the Socratic Method. Still to this day, I think this is a lot of how Sequoia runs their interactions with entrepreneurs. They ask questions and then they just listen to the answers. This is such a key to being a great VC. One thing that I struggle with a ton is, the temptation is always to insert yourself into what's going on. Don recognizes that what you need to do is listen to what the entrepreneurs are saying. You may agree or disagree, or understand or not understand, but you need to understand how they think about things, not how you think about things. Yeah, and it's not about their answers, but why they're thinking that answer is the right answer, how they arrived there, and what the thought process is.…

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