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Why I don’t like Sequoia Capital’s "R.I.P Good Time" presentation

October 28th, 2008 · 1 Comment

I have been waiting for such an article — Ho Nam, a venture capitalist from Altos Ventures, had a great post about his different perspective on Sequoia’s "R.I.P Good Time" meeting/presentation.

In case you haven’t seen the "R.I.P" slides, GigaOM has a detailed post.

Since the "R.I.P Good Time" slides were leaked to the press, every single tech publication/blog has talked about the story with so much respect and admiration for Sequoia. The underlying tone is that "Sequoia is the best venture capitalist company out there. They knew what they are doing. If they told their portfolio companies how bad the economy was, it meant it’s really bad out there. They’re such a savvy investor."

I don’t want to dispute Sequoia’ track record. They’re a great venture investor. However, for some reasons, I feel that their "emergency meeting" with their portfolio company CEOs is as much a PR move as anything else.

Just look at how many of their portfolio companies had layoffs within 4 weeks of the emergency meeting. Adbrite, Jive Software, Redfin, Mahalo … The list goes on and on.

If Sequoia is really that savvy about managing its portfolio companies and understanding the macro economic environment, they should have had the "R.I.P Good Time" meeting 6 months ago, not now.

On the other hand, Sequoia is very smart in doing two things:

  • its "R.I.P" presentation provides PR for their portfolio companies to justify layoffs
  • it’s ruthless in forcing its portfolio companies to cut its staff to stay alive and achieve cash-positive

Google was the most successful company coming out last recession. Did they lay off anyone? I never heard about it. Recession is what separate a contender from a pretender.

I’d like to end this post by quoting Mr. Nam:

"Foxes are great at raising capital – they thrive in bubble markets. Hedgehogs would rather bootstrap – they do far better during the inevitable crashes."

For all you hedgehogs out there, this is your time to shine!"

Let’s build some great companies and make a difference in this world.

Tags: Beat Recession · Company Analysis

1 response so far ↓

  • 1 Ho Nam // Oct 29, 2008 at 2:39 pm

    Thanks for your post. I agree with your comment that cuts should have been made many months ago. In fact, some of our companies did make cuts earlier this year. Interestingly, since the Sequoia presentation, not one of our companies have done lay offs (we have 30 companies). Most are growing headcount and using this market environment to opportunistically add some great people, especially focused on poaching from competitors. I’m sure some of our companies will struggle in the coming years and I would not say that layoffs are out of the picture for any of our companies going forward. But let’s get real. If you are having to cut 30-40% of your workforce just because the stock market is getting hammered, there is something wrong. Such companies were being mismanaged in the first place and had burn rates that were way too high to begin with.


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