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Sequoia wants to invest $1 million in your idea, then teach you how to actually sell it – TechCrunch


Investment firm Sequoia Capital has no shortage internal program to its founders back. The idea is to help our startups not simply by having them affiliated with Sequoia, but by helping them from the start with everything from storytelling to recruiting strategies to benefit them. position compared to competitors.

Now, Sequoia is using some of that know-how for a longer, seven-week program called Arc that it’s using to get more promising founders on the first list. Roughly speaking, the idea was to invest $1 million in each company that matched the company’s criteria, then Sequoia gathered the startups together both directly and virtually before consolidating. Bring them together to present what they’ve learned about the partnership – along with potential customers.

Currently, 17 startups are completing the program in Europe, and the same number will be welcomed into the program in the US and Latin America this September. (Start-ups can apply here through July 22.) To learn more, today we spoke with Sequoia partner Jess Lee, who is leading the initiative this fall. We also spoke with Lee about whether Y Combinator could consider Arc a competitor, terms of agreement startups should never accept, and more. Our conversation has been slightly edited for length.

TC: Arc is an outgrowth of Sequoia’s internal programs?

JL: That’s right. There’s a lot involved in building a great company, and what we’ve been trying to do over the years, across multiple programs, is to boil it all down to company building concepts. background on topics such as culture, recruitment, products, customer obsessions, and business models, and [we’re] pack it into Arc.

You have received thousands of applications for the Europe program. Who reads all those apps?

All the investors at Sequoia on the first team are reading them. We talked to a lot of founders who signed up and finally ended up with this amazing class.

Each of these teams received $1 million. How much shares does Sequoia receive in exchange for its capital? Is it 10%? Than?

We have flexibility on terms. What you say will be quite typical for some people for whom this is the first test. Then there were some people who were in the process of raising their seed round, and so we put $1 million in that round; [others] even opened their last round to join the show. So there’s definitely a bit of scope. However, most companies are either pre-seed or seed.

The program uses the word “exceptional” to describe what it is looking to fund, but it appears that Sequoia doesn’t mean “exceptional” which means it is looking for founders from African backgrounds. traditional.

We are truly looking for founders who want to build long-lasting, transformative and portfolio-defining companies. . . create a new market. There’s no one we would rule out, but it’s about the scale of the ambition.

What is an example of a European team in Arc creating a new category?

One thing I find really fascinating is Option Option. The founder is Martin Gould, who runs the I think a product org of 100 people at Spotify. He is quite experienced. And he finds that what Spotify has done so well is narrowing down — through understanding your preferences — to what you might like, overcoming the paradox of choice. Now he’s trying to do that for various categories across books, food destinations, and travel.

For Arc participants, what kind of time commitment is on both sides?

The first week is live, and the last week is live in the Bay Area. And then in the fourth week, we’re going on a group field trip together. In Europe we have come [Sequoia portfolio company] Klarna in Stockholm; The location for the Americas program is TBD. In between, that’s about an hour and a half, three days a week, often with one of Sequoia’s partners teaching the concept and framework, or a founder or an exec from the field sharing examples reality of how they built the Company. On Fridays, there’s usually a time for founders to get together for what we call a ‘peer board’ where they simply join their team and share a little about what’s going on. what they do.

This is the seventh week for this European cohort, which means they’re almost done. Does Sequoia provide additional funding for any of these startups?

It’s not a fundraiser, so no one should expect a check at the end. This is not a Fundraising Demo Day.

Speaking of Demo Day, I was recently reminded that Sequoia was an investor in Y Combinator many years ago and owns a direct stake in the business. Is that still the case?

We are no longer LPs but I think we were many years ago; that is certainly true.

Looks like Arc is competing with YC. Do you think it could strain that relationship?

I actually think it can be quite complementary. YC is great at giving you speed as well as helping you with fundraising. I think our program is more about building a long-term, foundational company, and I can totally imagine someone going through both.

Take a step back, the market has moved. A lot of “structure” is being put into transactions that it didn’t have before. What are some terms with which Sequoia is most comfortable? What are some terms that you would advise your startups to never accept?

Wearing my old founder’s hat – as well as my Sequoia hat – I would say it’s better to avoid the structure. Even a shortened round with clear terms is probably better, because you can get caught up in the structure and get your hands tied.

Another way to look at all of this is that 2021 is just an anomaly. The multiples, the mass stock market, the stimulus – it’s just an anomaly. If you look at companies and remove the 2021 valuation from the map and look at your trajectory from 2019 or 2018, that’s probably a better way to look at it. . . I think our returns are actually somewhat correlated with that based on the analysis I’ve seen.

In the meantime, some founders may wonder why they have to cut spending while they see Sequoia and many other companies continue to grow. billions of dollars in capital investment.

Joint ventures operate on the order of decades. Traditionally, each fund has a 10-year lifecycle, and the idea is to outlast these market cycles – highs and lows.

We are [closing] our VCs and growth funds today, and they do so at the right time. We raise them every two to two and a half to three years. So there is no real acceleration.

What we did was change our structure a bit. We added the Sequoia Capital Fund, so the venture and growth funds are now sub-funds in addition to the Sequoia Capital Fund and the Sequoia Capital Fund can hold public companies and is designed to allow us to disrupt break that 10-year cycle [where] you must give yours [investors their] distribution and instead let us manage our LP money over time in real time combined companies and really generation. We did some math looking back and found that if we really managed our LP’ [shares] and [they hadn’t cashed out these shares upon receiving them]We will be back for more.



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