Mike Moritz of Sequoia Capital spoke at Stanford's Thought Leader's seminar this past Wednesday. These are some of the notes I took during the lecture which you can see here. He even brought Crispy Cream's for everyone in the auditorium. I think he called his talk "parking tickets and lunch". Something about, they always wind up getting a parking ticket at Stanford when visiting to see a new company presentation because the meeting always goes longer than expected, and something about Google's fancy lunch that rewards their team's effort.
He talked about the lessons that he and investors have learned from folks who start successful companies. He also covered the various reasons people start companies, like to prove to themselves they can do it, to erase a dark era in their life, to prove they're smarter than somebody else, to get rich, to recover from a setback in life, and on and on. The lessons learned are not new lessons, but valuable to see again and again.
Sequoia's list of investments is incredible. But they've had some blunders as well.
Apple
Founders Jobs and Wozniac started Apple to build a single board computer they wanted themselves and to sell it to their friends in the room. Wozniac was frustrated with work at HP.
Lesson taught: a manic devotion and care for product sensibilities and asthetics from day 1 is important
Moritz said Steve Jobs is one of the handful of people that deserver the "visionary" title.. He says that visionary is an overused word in the Silicon Valley.
Cypress Semiconductor
TJ Rogers, 1984
started from TJs frustration at AMD, and large company culture.. felt he could do a lot better
Lesson taught: Everything inside a company, everything, can be measured
LSI Logic
Wilf Corrigan Was approaching 50 when he founded LSI. Had 20 yrs of experience in semiconducter business. Had been at Fairchild semiconductor. Need to prove his detractors wrong.. to prove the nasayers wrong. He was at the point in his life where he only had 1 shot.
Electonic Arts
Trip Hawkins. Started the company to prove that he was smarter than Steve Jobs.
Lesson taught: The power of agility to move from one avenue to another if the first seems like a dead end. Founders were rigorous with themselves and realized their company was adrift and need to make a change. The original concept to design entertaiment sw for PC wasn't happening. No sales. But lots of people were buing lots of software for early games, Nintendo, etc, and they jumped on it.
Flextronics
Michael Marks
Lesson taught: Build a fantastic team of managers. Duh.. perhaps.. but there's a wrinkle. These managers didn't come up from his own company. They are result of a lot of M&A activity.. CEOs of companies, now working together as exec staff at Flextronics. Only 2 people from orig Flextronics team there now.. rest are from the companies they acquired.
Failing Asian circuit board printing company that was making $17mil per quarter.. this quarter they'll make 3.2 bil. Mike was VP of operations at Electronic Arts before joining Flextronics. He had operated a flower stand in St.Louis, then started a small computer terminal company. Then he brought and operated a company that made soldering irons.
Nvidia
Jen Hsung Wong
Lesson taught: Never give up. They were a few steps from the grave in 1995. Rearchitected and turned it around.
worked at LSI Logic
now they're a 2 bil company in a business that doesn't yield a billion dollar company very easily
Yahoo
Lesson taught: The incredible power of word of mouth.
PayPal and X.com
Lesson: Focus focus focus
Elan Musk, Max Levchin, Peter Theil. 3 very different founders. X.com's CEO built it to prove to himself that he could do it again. Peter Theil wanted to get rich (ex wall street guy). Paypal company almost died. August of 2000, in 4 weeks, they saw $11 million go out the door. Peter got the company to focus.. focus only on EBay sales. Stopped all other business activity. Sold to eBay this year.
Google
Lesson learned: Reward your employees. Example is the fancy food truck and other perks. It's thanks for working on weekends, thanks for working till 3am. Nobody at Google thinks of free lunch as an entitlement. They see it as a reward for the hard work. As soon as you see the google employees see free lunch as an entitlement. Sell your investment in Google.
Larry and Sergei are commmitted and devoted to the purity of the product and the challenge of search.
Lesson learned: The importance of doing something extremely useful for your users and paying customers. Total marketing budget was probably the salary of the people in marketing relations. No TV, no ads. The power of the product, and the power of the internet where you don't have to ship physical goods.
Cisco founders, also built the router product for themselves. Needed something to help with the Stanford network.
failures First CEO of Cisco was recovering from setback of running Grid computing for 3 years
Moritz also talked about one of their failures:
WebVan
quoted from Roger McNamee "Webvan respresents the single largest transfer of investor's pockets to customers in history"
It was massively capital intensive. They raised 850 million for webvan .. going too fast in market that was tumultous.. They were worried that Amazon would destroy them, before Safeway did it. Traditional retail like Walmart, Gap.. roll out one store, test and test and tweek and tweek to get the recipe right, before they open the 2nd store or 2nd facility. Webvan, unproven system they took national before proving it out. 37% gross margin and demand was there.. they should have focused on CA market where there was a strong demand.
Tip for successful founding group of a company:
Need a mariage of sensibilities amoungst the founders, early managers, vc.. if all 3 agree you're off to a good start.
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