📶 Lessons from Don Valentine

“The two things in business that matter: high gross margins and cash flow.”

“Finally, and perhaps most importantly, if you ever wonder why large companies fail you have to look no further than Fairchild Semiconductor. The East Coast management of Fairchild Camera and Instruments, instead of feeding the business needs of the thriving semiconductor division and rewarding its employees with stock options, used the cash generated by its west coast semiconductor division to invest in sleepier and more traditional areas such as graphic arts, office equipment, home movie cameras, and printing presses. When business at Fairchild Semiconductor started to slow in the late 1960s, competitors picked off its key employees with option packages and an exodus began.”

“As he gravitated towards marketing he figured out the destiny of a company fell between a marketing department that could figure out what customers needed and an engineering department capable of designing them.”

“It was not until 1978 that the government relaxed the rule prohibiting U.S. pension funds from investing in venture capital pools, meaning that Don spent almost two years cobbling together the first pool. It took a lot of work on the part of both Don and Capital to raise $5 million for what later became known as Sequoia Capital I.”

“He would say to newcomers, 'You can attend partners meeting, but we don't want to hear you unless we ask you a question.”

“Don was a nonconformist with a rebellious streak. He detested regimentation and disliked being organized by others, telling an assistant on one occasion, 'I do not want to be mothered.' He was not a man who courted popularity or much cared about what others thought of him. Beyond a golf club, artistic organization, or Stanford, he took satisfaction in not being considered part of a group, hence his refusal to ever countenance the idea that Sequoia should join the National Venture Capital Association, which struck him as dangerously close to a trade union. He was no fan of policies or procedures since he was convinced that they stifled creativity and were promulgated by mediocrities. He didn't wear a watch because there was always someone else who knew the time. Since he disliked raising the blinds in his office and the cleaners always lowered them in the evening, he just severed the cords. At functions he wore his nametag on his right breast because the convention was to wear it over the left. 'It's disobedience that gets you innovation,' he would say.”

“By nature, Don was a pessimist and I never quite understood why, particularly since he was such a gifted and resilient salesman.”

“For some reason he considered semi-colons and parentheses pretentious, broke out in hives when a management ever contemplated the construction of a ‘campus,' saved paper-clips, was wary about subscribing for a second copy of The Wall Street Journal, and banned filing cabinets because he thought the amount of energy spent storing and retrieving documents was a colossal waste of time.”

“Don took refuge in the idea that if a document was important, someone else would have a copy.”

“Don kept his emotions under lock and key. His encouragement was indirect. He was not a back-slapper.”

“He was certain that the conventional view was wrong – how else could he account for the success of characters as diverse as: Arthur Rock, the former investment banker without a technical background who had defied the crippling handicap of a Harvard Business School degree, and had arranged the financing for Fairchild Semiconductor and subsequently Teledyne, Intel and Apple; Tommy Davis, a former vice president of the Kern County Land Company, who had helped form The Mayfield Fund; Pitch Johnson, who had worked in a Midwest steel mill before starting Asset Management; or Reid Dennis who had worked within the Fireman's Fund pension department before forming IVP. ”

“For Don, the most important attributes of a venture investor were the power of observation, a lively imagination and “a good dose of creativity.”

“The road to success at Sequoia would be determined by two things: 'chemistry' and 'when we trust you.”

“Among the many things I did not know in 1985 was that Don was not seeking what the leaders of other firms sought. He had seen plenty of people deeply versed in the intricacies of an arcane technology, who were incapable of expressing themselves clearly, let alone tell a story. He knew these types would not flourish at Sequoia. He did not like pontificators or poseurs, people who were full of themselves or thought they had many of the answers, particularly those who made the cardinal error of pretending to know something about which they didn't have a clue. 'There is nothing wrong,' he would remark, 'in saying "I don't know."' In his mind, this ruled out consultants, business school graduates, lawyers, investment bankers, anyone with an HR background, people with hyphenated names or roman numerals after their last name, direct descendants of immigrants who arrived on The Mayflower, people who had enjoyed living on the East Coast, and those who wore Hermès ties, suspenders, cuff-links, signet rings, and monogrammed shirts. Unknown to me at the time was Don's habit of counting the number of times a candidate used 'I' as opposed to 'we.' Candidates who favored the first person were dead on departure.”

“Unlike Sequoia, Kleiner Perkins operated with a different approach, but in a spectacularly successful fashion, from behind smoked glass windows in an expensive, designer office high up in San Francisco's Embarcadero Center. There Tom Perkins, usually dressed in a tailored suit and smoking Cuban cigars, received visitors in an office decorated with models of the super-charged Bugattis that he collected (and maintained in a large garage staffed with mechanics in Corte Madera) and of the classic sailing yachts he had begun to restore. When Tom wanted to impress local CEOs and people within the firm's orbit, he stumped up large speaking fees for people like Henry Kissinger, while we staged our own versions at a local bar watching Monday Night football.”

“Don was leery about hiring industry executives with name recognition and large reputations who by the time they gravitated to the venture industry had been too successful, had lost some spring in their step, were not hungry enough, had too many outside commitments and, most of all, were not prepared to become rookies again.”

“Don, knew, even if he didn't express the sentiment very often, that consistency, stability, longevity and mutual trust are a partnership's greatest allies, whereas personal vanity, greed, a quest for individual supremacy, the need to traffic around A-Listers and the sense that a partnership should revolve around the whims and needs of an individual, are not the fodder of which enduring partnerships are made.”

“Don took pains never to speak first and almost always spoke last. He was very aware of what would happen if he voiced his opinion before others and went to great lengths not to influence the jury.”

“He liked to keep things simple and didn't believe people were capable of remembering more than two or three goals.”

“Don's favorite response to any limited partner who began badgering for lower fees, preferential returns or some other concession was to say with a stony glare, 'I read in the history books that slavery had been abolished.”

“Though he understood the personal benefits, he thought any goon with a spreadsheet could double a large amount of money but believed it took real talent to consistently deliver high multiples of money. The shenanigans of the leveraged buyout business with all its financial hokey-pokey left him cold.”

“Like Larry Ellison, he believed that anything not closely associated with either directly making, building, marketing or selling a product was a waste of money.”

“He would latch onto any function or person in a company whom he felt impeded the rapid advance of the business or devised rules and processes he found irksome. He reserved special scorn for HR, saying, 'The last person you want to hire in a startup is an HR person. They are the destroyers of companies. They're the ones that write the binders and tell you what the rules are and how much everybody gets in grade seven.' He reserved a special place for lawyers, 'I'd have them nailed up in the lobby.”

“Don jealously guarded the way he spent his time and the effort involved with portfolio companies saying, 'time is only invested where the return prospects do not require candles and prayers.”

“He took a dim view of people who confused travel with work.”

“Justifiably, much has been made of the fact that Don chose the world's largest and longest living redwood as the name for our business rather than stamping his own name on the front door. It conveyed the longevity and strength with the realism of someone who had seen what happens when people want vanity billing. We were thus able to avoid a plague that has beset other firms – the inevitable second-class citizen status attached to anyone whose name is not on the door.”

“He had scant regard for the heads of hedge funds who hog all the economics or the titans of the private equity industry who believe that the sun only rises when they get out of bed.”

“Don liked the way Terry said he would take stock in lieu of commissions, admired his missile-force directness, his impatience with formal reports and organization structures and the way that he carried everything around in his head rather than on paper.”

“Unlike some of his generation, he never tried to put a value on the management company and sell his stake to the rest of us.”

“Any idiot can overpay and buy a company.”

“Kings in this business don't die. They stay around. There's nothing worse than having a King who refuses to die. Former Kings are a pain in the ass. They're all like the Duke of Windsor.' But unlike the former King of England, Don did not set up a separate court, or engage in subversive politics and neither did he feel a need for the trappings of a former leader.”

Chief capitalist to out-of-distribution individuals.