Sequoia partner Roelof Botha announces a radical change: replacing the traditional 10-year fund with a permanent fund, because great companies create most of their value after going public. Example: Square returned 9x before IPO but 90x when Sequoia held on longer. Botha is bullish on long-term holding. Key picks: Square (IPO at $9, exited at $80-90), YouTube (invested when only 9,000 users, later sold to Google), MongoDB (cloud database now 50% of revenue, bets on developer tools).
At a Glance Sequoia Capital partner Roelof Botha announced the firm's boldest innovation since its founding in the 1970s: abandoning the traditional venture capital fund cycle model and restructuring into a single, open-ended, perpetual "The Sequoia Fund." The core argument is that this structural c
Roelof Botha (Sequoia Capital partner) announced on the program the boldest innovation since Sequoia's founding in the 1970s: abandoning the traditional venture capital fund cycle model and restructuring into a single, open-ended, perpetual "The Sequoia Fund." The core thesis is that the traditional 10-year closed-end fund is fundamentally at odds with the long-term goal of "building legendary companies," and that an IPO should not be the endpoint for venture capital—in the Square case, continuing to hold post-IPO boosted returns from 9x to 90x.
Roelof Botha argues that the traditional VC model (invented in the 1970s) has a fundamental mismatch with investment reality: the 10-year lock-up period forces venture capitalists to exit shortly after an IPO, yet value creation for "legendary companies" accelerates precisely after going public.
New fund mechanism:
Readers should note: Botha uses Square's extreme success case to justify the new structure, which reflects a holder's perspective — not all portfolio companies will achieve similar post-IPO growth.
Roelof Botha points out that traditional VC exemption rules restrict funds from allocating more than 20% of assets to non-primary issuances (secondary transactions, crypto assets, public securities, fund-of-fund investments). The new structure will break this constraint.
Fee Structure:
Comparison with Other Models: Botha believes that true "crossover investors" should be able to "see the company from inception through its full lifecycle," rather than entering from public markets back into private markets. Competition drives Sequoia to innovate, and the ultimate beneficiaries are founders.
Roelof Botha emphasizes that in early-stage investing, "value creation is far more important than value capture" — "It is rare for a company to create enormous value and still fail to build a good business."
The common DNA of great investors: Curiosity — "If you lose curiosity and become cynical, you should stop being an investor." Other essential qualities include analytical ability, judgment of people, intuition about market direction, and imagination (YouTube had only 9,000 registered users at the time of investment).
Standards for investment memos: Clarity and conviction — "Being able to explain a complex business or technology so that anyone can understand it shows you have truly mastered it." At the same time, one must "make a judgment amid uncertainty — whether it is a 60-40 or 55-45 decision."
Roelof Botha distills core insights from cases including Square, Unity, YouTube, and MongoDB:
"Crucible Moment": A company faces one or two decisive moments each year; the challenge lies in identifying them and making the right decisions. When MongoDB pivoted to cloud services, Sequoia brought in a former AWS executive to join the board, helping the company "retrain its muscles"—shifting from selling on-premise products to cloud services, including adjusting sales compensation, product features, and resource allocation.
Roelof Botha argues that as the role shifts from investor to leader, the core challenge becomes "people problems rather than product problems" — ensuring team composition, collaboration, and organizational capability building.
The Preplay and Premortem Framework (attributed to Larry Summers): Imagine the company achieving tremendous success in 3-5 years — what conditions led to that success? Then write a "premortem" — everything that could go wrong. Sequoia uses this framework internally: "Imagine Sequoia disappears in 10 years — what did we do wrong? What did we fail to do?" This drives continuous innovation, including the creation of the Sequoia Fund.
| Position | Guest Stance | Key Data |
|---|---|---|
| Square | Bullish (long-term holding case) | Investment price ~$0.95/share, IPO price $9, exit price $80-90; IPO market cap $2.95B → $86B after 5 years → ~$115-120B today |
| YouTube | Bullish (early participation, later credited to Google) | Only 9,000 registered users at time of investment; founder was a former PayPal colleague |
| Unity | Bullish (open ecosystem stance) | 70% of the top 1,000 App Store games built on Unity |
| MongoDB | Bullish (developer rise theme) | Atlas cloud product accounts for ~50% of revenue |
| Natera | Bullish (holding) | Global leader in non-invasive prenatal testing technology |
| PayPal | Reflective (sold too early) | eBay acquisition price $1.5B, today's market cap over $300B |
| Filecoin | Bullish (crypto investment) | Smart contracts automatically pay for storage fees |
| DoorDash | Not explicitly stated (citing Alfred Lin's memo) | - |
| ServiceNow | Not explicitly stated (citing Pat Grady's memo) | - |
| Zoom | Not explicitly stated (citing Pat Grady's memo) | - |
| Not explicitly stated (citing Jim Getz's memo) | - |
1. Botha: The traditional VC 10-year fund cycle fundamentally conflicts with building legendary companies — IPO should not be the endpoint for venture capital, because "most value creation happens after going public." In the Square case, holding the position post-IPO boosted returns from 9x to 90x.
2. Botha: The new fund fee structure "only rewards us when we exceed the benchmark" — It adopts a three-year rolling perspective to avoid short-term incentive distortions. Partners commit at least 5% of the total fund, and Botha himself has pledged over one-third of his net worth.
3. Botha: In early-stage investing, "value creation is far more important than value capture" — "Rarely does a company create enormous value without building a good business." First understand why a founder is deeply troubled by a particular problem (the Eureka moment), then assess the uniqueness and persuasiveness of the solution.
4. Botha: The core DNA of a great investor is curiosity — "If you lose your curiosity and become cynical, you should stop being an investor." Other essential qualities include analytical ability, judgment of people, and imagination (YouTube had only 9,000 registered users at the time of investment).
5. Botha: Open ecosystems are superior to closed ones — Unity believes in an open metaverse, whereas "in the late 1990s, we nearly compressed the open internet into Microsoft's internet." Monopolists don't need to innovate; openness unleashes everyone's creativity.
6. Botha: Only 25 million people worldwide make a living writing software — "Any technology that boosts the productivity of these developers has a massive multiplier effect." This drove Sequoia's investments in Unity, MongoDB, GitHub, and Confluent.
7. Botha: Actuarial thinking (looking 20 years out) is better than accounting thinking (looking 1 year out) — "Most of my bad decisions came from having too short a horizon and failing to imagine the power of compounding." 1.1 raised to the Nth power becomes enormous as N grows — this is the core philosophy of the Sequoia Fund.
8. Botha: Use the "preplay and premortem" framework for strategic decisions — Imagine the conditions for success or failure 3-5 years out, then reverse-engineer what to do today. Sequoia uses it internally to ask: "10 years from now, Sequoia has disappeared — what did we do wrong?" This drives continuous innovation.