David Rosenthal: preference

Transcript context

…The early stage team is about 15 people. It’s not a big team. The way we think about it is while there’s a lot of opportunity, each one of us is only going to make one or two seed investments or one or two venture events a year. The reason we keep it small is because what we enjoy is to partner with the founders as early as possible and help them and their companies reach their full potential. That is an enormous amount of work and we enjoy that part just as much as meeting new founders and thinking about the future. But once we make an investment, we want to bring the future to fruition. It’s not just about making the investment. We don’t really think about buying low and selling high. We think about helping founders reach their full potential. Bring the future that they envision to reality. The next thing I wanted to ask, in many ways, Sequoia’s history that has sparked me thinking a lot about this over the past year and the Apple investment that we covered so many times. That was an early example of buying low and selling high that, in the long run, probably served Sequoia. Not nearly as well as it could’ve. I think you guys made $6 million in net profit on the early pre-IPO Apple investment. How do you guys think about time horizon? Obviously, you need a long time horizon as we’re talking about that’s the way to compound capital. At the same time, you are a fund structure, a series of funds. You have limited partners, they want distributions at some point. When do you guys think about the right time to start to distribute out your investments? We think about whether the company has brighter prospects in the future than they do today. If that’s the case, then we continue to hold. We don’t actively think about distributions from an IRR money-on-money perspective. Yes, obviously, we are a fund and we get measured that way. But we’re very proud of the fact that our as held multiples are higher than our net multiples of the stock we distributed. It’s a deliberate strategy that that’s the case. The reason that that is is because we both pick the right founders who want to build long-lasting companies and we help them focus on what’s enduring about their business. You’re just a lot better off focusing on the long run than any short run swings up or down in the market. When we distribute, yes, it’s because it’s maybe the end of the life of the fund, but it’s more about even when we distribute we hope that the company has much longer prospects than the day we send the shares to our LPs. We distribute shares and let our LPs decide whether they want to sell or not. We generally don’t sell the stock.…

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