📶 Sequoia splits

This Week in Venture

Sequoia splits 🖖

Fortune broke the news last week that Sequoia was splitting up its iconic brand into three different sub-branches. Sequoia will stay in the US, Sequoia India and China will break off and become their own separate entities.

It’s an end of an era, but the more you read, the more it seems like the split was a long time in the making.

Why it matters: Sequoia has been the most-respected fund in the world for the past several decades. The news of their split last week has led to a bunch of surprised reactions from all over startup world.

If you read through the lines, here are some of the main takeaways:

1. Increased conflicts within portfolio: Conflicts tend to happen as a portfolio scales, but the risk of conflict grows even more when you start investing across borders. Sequoia has already had issues with this in the past, so this could be a way to reduce future risks.

2. Brand confusion: Sequoia manages billions and runs different strategies. More complexity makes it harder for founders and co-investors to know who they should be talking to within the fund.

3. Regulatory complexity: Operating in one jurisdiction is hard enough (ask anybody that has gone through an SEC registration process); operating in various jurisdictions sounds like a nightmare.

The last point might hint at the biggest reason for the split, and that is the rising geopolitical tensions in the US and China (some of the main countries Sequoia operates). Their team has denied this, but it’s the elephant in the room.

What happens next: We’re not geopolitical experts, so we have no idea. Sequoia isn’t going anywhere, and this split allows new independent funds to go deeper in the regions they invest in.

If you invest globally, this can act as a sign of some of the risks that come with that increased exposure.

Power of platform 🌐

VC Platform released their report on the power of platform. Most investors have seen firsthand the value that fund platforms provide, but this is the first report )of our knowledge) that quantifies that value.

Check out the full report, and let us know what you think.

Why it matters: According to the report, more platform roles equals better return numbers. Maybe that’s why the number of platform roles is increasing faster than industry growth as a whole.

Here are two major things investors can take away from the research:

1. The platform function has professionalized with over half of venture firms today having some type of platform team. VC firms have started hiring more pre- and post-investment professionals to support founders. Firms of all sizes invest in platform, with large funds making an outsized investment; of firms over $1Bn in AUM, 92.7% currently have a Moderate or Significant Platform team. In 2022, one in eight core employees at a venture firm (13.1% of core team members) are focused on Platform, compared to one in sixteen (or 6.4%) in 2000.

2. Firms with significant platform produce 1,100 basis point improvements in net IRR and 0.5x TVPI compared to firms with no platform in the last decade. More platform = more returns. Platform-focused funds have outperformed over the past two decades, and we think the results will continue to compound on themselves. As the platform function has come to maturity over the last 10 years, the difference in fund performance across these categorical cohorts is far more pronounced than in the early years of the century.

What happens next: As platform becomes more important, here’s where we think venture firms change.

1. More non-investment roles will emerge. If you want to break into VC, your best bet is to work in a platform-focused role.

2. Platform roles will become more specialized. Eventually, platform leads will run into bandwidth issues. More specialized roles will emerge as funds scale.

3. Smaller funds will outsource portions of their platform strategy to automation or third-parties. Lean teams will have to be more resourceful. ChatGPT, Zapier, and no-code tools help these teams apply leverage. So do micro-consulting services.

Links We Like

💀 VC Contagion: Is VC killing itself?

🌎 Why AI Will Save the World: Marc Andreessen gives hope for the future

🤷‍♂️ 99 Brutally Honest Takeaways About Venture Capital: Our observations from working every role in VC

🍽 Eat What You Kill: Great breakdown on VC and how we got to where we are

🔦 How to Find LPs: How to use tech to build your LP list

✅ Free Markets Provide the Best Feedback: Naval gives his two cents

💰 We Study Billionaires: Good podcast to learn from the ultra wealthy

⚠️ Pre-Seed Investing and Risk: How Notation Capital thinks about the world

📝 How to Structure Scout Funds: Our friends at Sydecar are putting together a crash course of how to do exactly that

Have an article you like that we should include in this section? Let us know by responding to this email or sharing it in Slack.

What We’re Learning

Working with sponsors

If anybody has worked in media or advertising, you know that finding and working with the right sponsors or advertisers is a brutal process.

We found a new tool (Passionfroot) to host our newsletter sponsorship packages. Check it out here if you’re interested in seeing what it looks like.

This is our offer page, and we’re creating systems to put this in front of the right people at the right time on a recurring basis.

We’re doing that by using LinkedIn Sales Navigator to find people based on on their company, title, and location, and we’re using Snov to build marketing campaigns tailored to those people. We’ll do a write up of this process later since it has saved us hours of manual work already.

If you have tips for us, let us know.

Tools: Passionfroot, LinkedIn Sales Navigator, Snov

Tweet of the Week

Nobody knows nothing

Together with Brex

Wait … you guys manage your spend?

Obvious statement alert: managing invoices and team spend is a nightmare.

Chasing down receipts, uploading to a spreadsheet, sending to another team to approve, and reimbursing your employees sounds … super fun.

Brex takes this archaic process from the Stone Ages to the modern era by giving finance teams the tools they need to operate. Dashboards, automations, integrations, and financial modeling instead of manual work that makes you want to reconsider jobs.

Give your finance team the tools they need to operate in today’s world.

Member of the Week

Paulina Szegda (IR Manager @ Forum Ventures)

Say what’s up in Slack.

Thanks for reading this far and giving us a little bit of your attention this week.

Feel free to unsubscribe whenever this stops becoming valuable to you.

- Clay and Tyler