📶 15 Lessons from Doug Leone (Managing Partner @ Sequoia)

Winning through simplicity, finding a person's drive, investing in outliers, and how to earn trust

Author

Clay Norris
January 05, 2024 • Estimated Reading Time: 8 minutes

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Good morning 👋

This week’s deep dive is on Doug Leone (@dougleone), managing partner at Sequoia and one of the legendary venture investors of Silicon Valley.

He mentored under Don Valentine, has helped take multiple companies public, and he is partially responsible for making Sequoia into the firm it is today.

Here are 15 takeaways from studying Doug, his career, and his investment philosophy.

Explore all investor deep dives here.

TL;DR:

LESSONS

  • Simplicity wins: If you want to move faster, simple is your friend. When Doug looks for great businesses, he looks for simple operations.

  • Leaders evolve: Leone began as a competitive investor when he was young and evolved into somebody who values insight and maturity above anything else. This reminds me of basketball coaches (Coach K, Roy Williams, Bob Huggins) who became more mellow as they got older.

  • Understand intrinsic motivations: Leone was famous for trying to identify what drives a person as early as possible. His go-to line of questioning was figuring out what type of trauma a person had to endure since he believed that that experience shaped their current worldview and motivation. Leone and Sequoia look for humble backgrounds and a need to win.

  • Culture eats strategy for breakfast. Nothing builds a great culture like winning.

  • Trust is earned through short-term sacrifice: In the early 2000s, Sequoia was underperforming. The fund was valued at 0.3x, so the Sequoia team did what no other fund would; they cut their carry, fees, and wrote personal checks to LPs. They reinvested all fees and turned a 0.3x fund into a 1.9x fund. It hurt the GPs’ wallets in the short term, but paid back massively in the long run, deepening the trust with their LP base.

  • Investing firms are becoming technology firms: Sequoia has built itself into a tech-enabled investing firm, realizing they can’t continue to run like a law-firm model. Expect that trend to continue. Seven Seven Six is an example of one of the funds leading that charge.

  • Invest in outliers: VC investing is all about finding outlier businesses, but what are you doing to find outlier people? How do you spot them? Are you in the right rooms to spot them? Doug believed if a founder is described as “insufferable, maniacal, doesn’t listen,” you should always dive deeper to understand the context.

  • Capital is not as commoditized as you think: Not every investor dollar you take is worth the same. The right investors can open doors and see around corners; the wrong investors can blow up your company. If you’re a founder, you should date around before committing to any investors (it is a decade-long partnership after all).

QUOTES

❝

"You have to be willing to risk things; otherwise, somebody else will put you out of business."

"In a downturn, aggressive PR and communications strategy is key."

"Be incredibly, ruthlessly selfish with your equity."

"The trick is, a market has to be nonexistent when you start. If the market is large early on, you will have too many competitors. You have to make it large."

"We work as a team. I think having the individual being shown as a star actually creates problems internally. We encourage all our investors to work as a team for the benefit of the founders."

"Crystal-clear thinking is one of the things we look for - not a fancy slide pitch, but crystal-clear thinking."

"I love spending time with people who are different from me, just listening to what they come up with. It helps make me more open-minded."

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READING

15 Lessons From Doug Leone (Managing Partner @ Sequoia)

confluence.vc/doug-leone-managing-partner-sequoia

Doug Leone - Lessons from a Titan

open.spotify.com/episode/1drc5vABbnRAEaLSjgowkd?si=jiCtkMd_SqCHNhcaJ-Yanw

Sequoia Capital Part II (with Doug Leone)

www.acquired.fm/episodes/sequoia-capital-part-ii-with-doug-leone

Sequoia's Doug Leone on What Has Been Instrumental To Scaling Sequoia Over Generations

www.thetwentyminutevc.com/doug-leone

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