Apple, Google, Oracle. Cisco, Yahoo, LinkedIn. WhatsApp, Airbnb, Dropbox. Sequoia Capital is Silicon Valley's search engine for disruption—and billionaires. That's why the firm dominates Forbes's 2014 Midas List—and has made its principals as wealthy as the entrepreneurs they nurture
When Doug Leone arrived in Mount Vernon, New York in 1968, the 11-year-old Italian immigrant didn’t have a clue. He flunked a math quiz in school because the terms ‘true’ and ‘false’ bewildered him. He wore unsightly slacks from Sears that invited classmates’ teasing. After school he watched McHale’s Navy alone on a black-and-white television, hoping to learn colloquial phrases that would help him fit in.
A few years later Leone began to get his bearings. “I was working on boats as a teenager, sweating like a pig during a summer job,” Leone recalls. “I could look across and see all the kids at the country club’s swimming pool. The young guys were talking to the girls. And I was saying to myself: ‘I can’t wait until I meet you in the business world. You just made your big mistake, letting me in.’”
Ambition. Vulnerability. Vindication. Lots of successful immigrants bottle up those feelings as they rise to prominence. They hide old slights and do their best to blend into America’s aristocracy. Not Leone. Even in his perch as a managing partner at venture firm Sequoia Capital, Leone still carries himself like a hard-luck striver, scrambling for his first decent break. “A lot of what keeps me going is fear,” he confides.
Step inside Sequoia’s spartan offices at Silicon Valley’s capital of capital, Sand Hill Road, and see what happens when a handful of hungry perfectionists like Leone band together. Start at the entryway, packed with framed copies of financing documents for 98 companies. The hit parade begins with Apple’s initial public offering in 1980; it includes the likes of Oracle, Cisco, Yahoo, Google and LinkedIn. These are Sequoia’s children. Since its founding in 1972 Sequoia has backed startups that now command a staggering $1.4 trillion of combined stock market value, equivalent to 22 percent of Nasdaq.
Yet Sequoia doesn’t display its heritage with the well-heeled pride you might find at other top-tier venture firms, let alone the likes of JPMorgan or KKR. At Sequoia the historic IPO filings are crammed into drab, drugstore-quality frames. Sequoia partners don’t enjoy luxurious private offices; instead they toil at stand-up desks in a big open hall. Conference rooms are adorned with cheap plastic wastebaskets. It’s as if Sequoia’s partners haven’t fully realised that they might be rich.
The past year Sequoia’s scrappy methods have produced the firm’s biggest gains ever. A record nine Sequoia partners appear on the Forbes Midas List of the most successful venture capitalists, thanks to the firm’s lucrative investment in companies such as Airbnb, Dropbox, FireEye, Palo Alto Networks, Stripe, Square and WhatsApp. At the No 1 spot is Sequoia partner Jim Goetz, who backed WhatsApp in 2011, well before Facebook agreed to buy the mobile-messaging company for $19 billion. Leone ranks No 6, followed by colleagues Michael Moritz, Alfred Lin, Roelof Botha, Neil Shen, Michael Goguen, Bryan Schreier and Kui Zhou.
Base pay at Sequoia isn’t meant to be dazzling. While the salaries of the firm’s nine general partners can top $1 million, Sequoia doesn’t bother with Wall Street-style guaranteed bonuses, and some of Sequoia’s more junior partners have taken pay cuts to join. That’s an easy sacrifice to make. The capital gains vastly exceed base pay.
These days Leone serves as senior partner. Moritz remains an active investing partner but shed his administrative duties in 2012 after being diagnosed with an unspecified illness that, he said, could dim his quality of life in the next five to 10 years. In a recent interview with Forbes Moritz said that “staying as fit as possible is the key to everything,” adding that he had been swimming for 90 minutes early that morning. Asked if there was any change in his health outlook, Moritz added: “Who knows what fate will deliver?”
“We want people who come from humble backgrounds and have a need to win,” Leone says. “And we want a culture where people continuously share credit.” Sequoia does hire some recent business school graduates to serve as nonvoting junior partners. But the firm’s bigger partnership slots go to seasoned tech executives like Alfred Lin (Zappos), Bryan Schreier (Google) or Omar Hamoui (AdMob). These men are known quantities; they have worked for years at one of Sequoia’s portfolio companies.
Other venture capitalists salute Sequoia’s results, though they can’t resist the temptation to quibble a bit with its style. “There’s a ton of respect,” says David Sze of Greylock Partners. “We are both completely dedicated to creating huge successful outcomes to change the world. They are a little more acerbic; we are a little more collaborative.”
(This story appears in the 02 May, 2014 issue of Forbes India. To visit our Archives, click here.)