Finding the Next Silicon Valley with Doug Leone (Sequoia Capital) | Disrupt SF

Transcript

everyone knows Sequoia Capital is a is a excuse me a giant in the United States but fewer of you may know that more than 50% of every dollar that Sequoia now returned to those investors comes from an overseas strategy and from China primarily and today we have the sort of one of the masterminds of that global strategy with us Doug Leone thank you s... Read More

Summary

In this video, Doug Leone, one of the masterminds behind Sequoia Capital's global strategy, discusses the success of their overseas investments, particularly in China. He shares insights on their decision to focus on China early on, the differences between Silicon Valley and China in terms of recruiting and work ethic, the impact of the trade war on their business, and the challenges of doing business in China. He also talks about Sequoia's recent fundraising efforts and their approach to investing in companies.

Questions & Answers

Q: How did Sequoia Capital's overseas strategy contribute to their success?

Sequoia Capital has seen significant success in their overseas strategy, with more than 50% of their returns coming from overseas investments, primarily in China. They made the decision to focus on China early on, recognizing that it would become a globalized world by 2025. They found local teams in China and gave them the decision-making power, which allowed them to navigate the Chinese market successfully.

Q: What is the difference between recruiting in Silicon Valley and China?

Recruiting in Silicon Valley has become expensive, with competition from companies like Google. Doug Leone shares that while Google offers great perks, working at a smaller company can provide engineers with the opportunity to make a real impact. However, the volatility of startups makes engineers vulnerable to market changes. As a result, Sequoia advises companies to recruit their core engineering team in Silicon Valley but move the balance of engineering elsewhere in the world.

Q: What are some of the differences between founders in Silicon Valley and China?

While founders in both markets share the dream of changing the world, Chinese founders have a greater sense of desperation and drive. Leone explains that being a first-generation with an opportunity creates a sharper edge, which tends to dilute through the generations. Chinese founders exhibit a crazy work ethic, working late into the night, which is not as common in the US. The Chinese founders have a little more desperation to succeed and make their mark.

Q: What is Sequoia's role in helping American companies enter the Chinese market?

Sequoia Capital has a cross-border fund that helps American companies navigate the challenging Chinese market, which has opaque laws and is not fully open. This fund assists companies like LinkedIn, Evernote, and Airbnb in entering the Chinese market successfully. When companies reach a certain size, Sequoia also has a global growth fund to support their global aspirations.

Q: Is it still viable for American companies to try to enter the Chinese market?

While there are challenges and concessions to be made, Leone believes that China will become more open over time. Despite the current trade war and tensions, there is pressure in China to open up its markets to be part of the global community. Sequoia believes that going where the puck is going to be is crucial, and they continue to invest in China with a long-term perspective.

Q: How has the trade war between the US and China affected Sequoia's business?

While the trade war has not had a significant impact on Sequoia's business in the US, it has affected China. Leone mentions that there has been a notable change in the mood and a prolonged market downturn in China. Founders in China are now more cautious and focused on profitability. However, he believes that the pressure to open the markets will ultimately lead to more opportunities in China.

Q: How does Sequoia navigate the different regulatory environments in the US and China?

Sequoia has local teams in both the US and China, and each team makes decisions based on the market they operate in. The Chinese market has different business models and regulations, which requires a nuanced and localized approach. The aim is to find opportunities where the market and investors are receptive to their investments.

Q: How does Sequoia approach public market offerings in the US and China?

Sequoia considers the preferences and requirements of different markets when it comes to public offerings. In the US, investors focus on growth, while in China, investors prioritize profitability. Sequoia aims to take companies public in markets where they will be well-received and find the best long-term shareholders. The IPO is just a moment in a company's life, and Sequoia also considers where the company wants to be in the future.

Q: How does Sequoia's latest fundraising effort and global growth fund help their founders?

Sequoia has raised a large global growth fund targeting companies with global aspirations, particularly those that want to stay private longer. The fund provides friendly capital to support Sequoia's founders throughout their journey, including through the IPO process. Sequoia aims to be a reliable and supportive partner to its companies and protect them from outside pressures, such as competitors offering significant investments.

Q: How does SoftBank's investments and large fund impact Sequoia Capital?

While there is competition between Sequoia Capital and SoftBank, Doug Leone emphasizes that Sequoia's relationship with SoftBank is not adversarial. They have invested together in several companies and are co-investors in some deals. Sequoia recognizes that players with significant funds like SoftBank can drive up prices, but their goal is to navigate smartly and pick the right investments.

Takeaways

Doug Leone's insights provide valuable lessons for founders and investors looking to navigate the global market. Sequoia Capital's success in China highlights the importance of customizing strategies for local markets and finding the right local partners. Furthermore, the changing recruitment landscape suggests the need for companies to find a balance between Silicon Valley and global talent. With the trade war affecting the Chinese market, understanding market conditions and government policies is crucial. Sequoia's fundraising efforts demonstrate their commitment to supporting their portfolio companies throughout their journey, and their approach to investments holds valuable lessons for founders. Overall, the global market presents both challenges and opportunities, and adaptability is key to success.