David Rosenthal: evaluation

Transcript context

…David’s sigh there comes heavily. I know, this is so painful, so painful, and clearly has left its mark on Sequoia. Two years later, I couldn't find all of the circumstances around this but to the best of my understanding, the first Sequoia fund did not have only tax-exempt nonprofit LP's in it, it also had I believe individuals, big corporations, not Salomon brothers, but other folks in a certain capital group, as a result of that, those folks needed to pay taxes. Apparently, some of these LP's were encouraging Don to make a distribution of some of the games in the fund so that they could pay their taxes on the gains. Apple had grown quite a lot. It's now 1979 and Don, before the IPO, sells Sequoia’s stake which they had invested $150,000 for $6 million to make this tax distribution to LP's. Now, that's an enormous return, a phenomenal return, but oh my goodness, $6 million compared to what Apple would shortly become and then ultimately in the long term of course become, and it's this lesson that drives Sequoia in subsequent funds to take their capital only from nonprofit tax exempt sources, which becomes really not certainly the norm across the industry, but a goal, and the lion’s share of money that moves into venture capital ends up being university endowments foundations, folks that are super long-term impatient and aren't going to force VCs to make this terrible decisions like this. Yeah. You can check me on this David, but my understanding is, Sequoia more so than your average venture firm, holds the stock in companies longer after they go public, and often sticks with the companies for a very long time. I think probably also inspired by this lesson.…

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