Читать книгу The Business of Venture Capital - Mahendra Ramsinghani - Страница 47
Оглавление7 Generational Transfer and Succession
“Succession in venture funds is like a Shakespearean tragedy — it involves money, ego, fame, and emotion,” says Paul Holland of Foundation Capital. Some describe the adrenaline-laden world of venture investments as in the song “Hotel California” — where you can check out any time you like, but you can never leave.
Hanging out with cool kids, doling out large sums of money, playing rich Daddy power trips, and feeling mighty invincible can be heady. Yet how best should you plan to get out? And where do you go from the world of venture — where you get to see a thousand great startups each year? Most career paths sound mildly interesting after venture, and worse, you might be ill-qualified to do any meaningful operational role.
MANAGING SUCCESSION - NOW MY WORK IS DONE
Succession and generational transfers in venture firms is hard — nearly impossible. When firms are successful in generating returns, ego and greed take over. Rainmakers and top performers get the “God” syndrome, and they are the ones carrying the weight of this world, while others are socialists. Even the legendary investor Warren Buffett has not been able to find a suitable replacement to run Berkshire Hathaway and continues to run the firm at the age of 89. But Sequoia Capital has mastered the art of passing the baton to the next generation without missing a beat — over the past nearly 50 years, Sequoia has done it not once, but twice.
When Don Valentine decided to start a venture firm in 1972, he did not call it “Valentine Capital” — partly because he wanted the firm to last well beyond his years. The California coast is abundant with Sequoia trees, an evergreen variety, typically living 1,200–1,800 years, among the oldest living things and also one of the tallest trees on Earth. That sounded like an apt name for the firm he had in mind. For five years, he ran the firm largely by himself, making investments in early-stage technology companies.
Pat Grady, who co-leads Sequoia's Growth business, a role he assumed as part of the firm's most recent generational transfer, describes the firm's first succession — the transition of Sequoia Capital from Don Valentine to Sir Michael Moritz and Doug Leone. Pat says that Don walked in one morning and sat down with Sir Michael and Doug. “He pulls out this sheet of paper. He had made notes in two separate columns — duties he could do and duties he no longer wanted to do. He asked them to make a checkmark next to those duties they would still like Don to do. Then he said, all of this is now yours.” Pat chokes up as he recalls Don's words, “But make sure when you leave the firm, it is in a better place than when you took over Sequoia.”
Within months, the worst public market debacle occurred when the internet dotcom bubble burst of the year 2000, leaving behind some deep losses. Both Moritz and Leone were proven investors, having returned investor capital multiple times over. “It would have been an easy decision for Sequoia to hide behind the fact that everyone in the market lost their shirt. But that's not the spirit — Doug and Sir Michael fought for every inch and made our investors whole.” Sequoia has never lost money for its investors. They did not let the Don down — on performance or generational transfer. They built a team, and when the time came, Moritz and Leone would go on to pass on the baton to Jim Goetz, who would remind other Sequoia partners to rise up to the challenge. “I'm not going to be here forever,” he would often say. Emotion wells up, yet again, as Pat talks about the second generational transfer. “Jim Goetz was at the height of his game, when he decided to step down … saying, my work here is done.” Today, Roelof Botha leads the US business.
Generational Transfer at Sequoia: Letter to LPs
Subject: Time to pay it forward
Disruption is at the heart of our business. It's what creates opportunities for Sequoia entrepreneurs, and it's what helps them produce extraordinary returns for our LPs. Ironically, it's also the force that many venture capital firms resist, often contributing to their own decline.
Sequoia is the exception.
Over the past 45 years, starting with Don Valentine, Sequoia has embraced change as much within our partnership as outside it. That willingness to renew and reinvent — often by empowering the less experienced among us — has been the foundation of our success. I am deeply indebted to Doug and Sir Michael for the trust they placed in me, first as a Sequoia-backed entrepreneur, later as co-lead of the venture business, and more recently as a Sequoia Steward. Implicit in that arc is an obligation to pay it forward to the next generation. That time has come.
During the coming week, I plan to step aside from my leadership responsibilities. I do so with great confidence in this next generation of leaders. They represent a gifted cohort who bleed Sequoia, and their fresh ideas will spur the next wave of reinvention. More to come on these well-deserved changes from Doug.
To ensure a smooth transition and encourage change, I am going to decamp from the Menlo office for a few months. I will remain a GP in existing funds and continue to represent Sequoia on boards. When I return, I intend to sponsor new investments, but I plan to reduce my workload, so that I can start saying “yes” to some of the other aspects of my life that have been on hold over the past twenty years.
Forever grateful.
JJG
(Jim Goetz)
The first wave of establishing its brand and superior performance, and the second of successfully expanding globally, now enters the third inning for Sequoia. And for Sequoia to stay ahead in the game, it has to constantly innovate and reinvent itself. “Our partnership will be a reflection of the future that we all want to live in. If we lose our edge, it's over — we are dead. But we are working to make Sequoia a firm that is beloved,” says Pat, as he mulls about the future. “We reflect on how we can democratize access to capital, so that any founder can win, not just someone with a Stanford degree and a warm intro. We look around the table and wonder how we can build a partnership that is representative of all groups of founders — our customers — not just diversity of thought and experience.
Christy Richardson, director of Private Investments, Hewlett Foundation, has been a Sequoia LP for over two decades. “The best indicator of a well-executed succession plan is when the senior partner wants to leave, but the younger partners ask them to stay and continue to share their knowledge and experience. We have often watched for how the leaders are building the next-generation team, and stepping away at the right time. Sequoia works hard to help their next-gen and newest partners succeed,” she says.
We'll Turn the Lights Off When We Leave
“At Foundry Group, we have no succession plan. We will turn the lights off when we are done, and leave.”
—Brad Feld, Foundry Group
THE ART OF LETTING GO
While the transition for teams at Sequoia was a planned move, for Jerry Colonna, author of Reboot and a CEO coach, the exit from the world of VC investments was abrupt. He was co-leading investments for a fund with $23 billion under management. His prior partnerships include stellar names like Fred Wilson, of Union Square Ventures, and JP Morgan. He volunteered to help the New York City Olympic bid in 2012. Indeed, Jerry was at his peak. And then the Twin Tower attacks occurred. “My home had been attacked,” Jerry said. “I came out of an Olympic bid committee meeting and I stood across the street from the pile, as they referred to it — Ground Zero, which was still smoldering. It all felt like it was falling apart. It felt like there was a complete charade.” At that moment, Jerry contemplated suicide. He called his therapist, who urged him to “get in a cab and come see me,” and that was a pivotal point, which led him to spend years in reflection. He emerged from all the hurt and ashes as a mensch and a mentor to startup founders.
“Doing yet another deal will not help me grow. VC business is always there — it's not going away, and I can always come back to it,” says one investor, who walked away from an investment role after nine years to try something different, something new. Author and angel investor Tim Ferris stepped away, taking a hiatus investing, because the noise simply wasn't worth it. The cortisol-fueled, unnecessary hurrying associated with that culture was causing more harm than good.1
Igor Taber left Intel Capital after a decade of making investments in Silicon Valley startups. “I loved to see multiple flowers bloom,” he said. Growing up in Ukraine, he was the first in his family to go to college and get a formal education in the United States. “I spent 10 years in Intel in a business development role and another 10 as investor in the VC arm — no one should stay in one company for 20 years — it feels like a lifetime,” he quips. “My transition out of venture was driven by a great CEO and a phenomenal opportunity — it was just too good to pass.” Igor had invested in a machine learning platform and served on the board for four years. “The CEO's determination, work ethic, vision, and importantly a team builder of giants got me excited,” and he joined Datarobot, heading up corporate strategy and acquisitions. At Intel Capital, Taber had funded and served on boards for more than 20 companies, but one caught his eye.
For Paul Holland, the role was reversed. He started his career in an operating role after a chance meeting with Reed Hastings, founder of Netflix. “It was at a hot tub party 30 years ago,” recalls Paul, and he ended up working with Reed, shaping the trajectory at Netflix. After eight years of investing at Foundation Capital, and as a GP for six funds, Paul plans to transition out of the fund. “The third generation of management is coming in at Foundation. We need to make it easy for them. Transitions need to be structured and respectful for both sides. At 35, you don't know what it is like to be 58,” he says. And on his way out, he did a parting favor to a junior partner. He helped shepherd a particularly risky seed investment that the junior partner would work on. As he heads off to his next phase in life, Paul has made some lasting contributions, not just to his LPs but to the industry as whole. He produced a documentary — Something Ventured — which memorialized the views of some of the legends of the first generation — these include Arthur Rock, Don Valentine, and even the late Tom Perkins, founder of Kleiner Perkins.
For some that got out, it was triggered by a life-event, for others, boredom. And we should ask of ourselves, as Don Valentine did, can we leave behind a better firm — a better society or a better tomorrow? Or did we try to enrich ourselves one last time as we head out that door? In one of the Silicon Valley firms, a retiring GP presented an elaborate NPV calculation and a payment stream that the junior partners had to commit to pay to the retiring GP. The departing partner planned to collect a “royalty for using his name” for several years, and after all that, he even retained a percentage of the GP. The new members of the firm were bonded labor, albeit Tesla-driving Stanford-graduates.
Paul Holland, who has designed his own transition at Foundation Capital, says, “As an industry, we can certainly do better — for the most part, it has not been done right.” To which we say, true, and read aloud, one more time Shakespeare's Sonnet 60:
“Like as the waves make towards the pebbl’d shore,
So do our minutes hasten to their end;
Each changing place with that which goes before,
In sequent toil all forwards do contend.”
