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While many venture firms have dialed back their investments amid a punishing economy, Sequoia Capital has made about 20 seed or Series A investments in the past 12 months, more than in the prior two years.
- Reuters
That's according to Greg McAdoo, partner at Sequoia capital, who spoke Saturday at Startup School, an event for entrepreneurs organized by Y Combinator at University of California, Berkeley. In front of a standing-room-only crowd, he repeated a common refrain among venture capitalists that recessions are great times to start companies and to invest in them.
Sequoia, considered one of the highest-caliber venture firms, is putting its money where its mouth is, unlike some firms, who meet with entrepreneurs and go through due diligence without telling them that they don't plan to invest. Entrepreneurs should research which firms didn't invest during the last dot-com downturn and be wary, McAdoo said.
McAdoo pointed out prior periods of bad economic news, such as the 1970s, early '80s and early 2000s, when Sequoia invested in prominent companies, such as Atari, Apple, Oracle, and Zappos.
"Recessions reward much more discipline," he said. "Companies tend to be more focused. They tend not to bite off more than they can chew. Start up businesses start small and build incrementally. In a recession you have no choice."
McAdoo also said that many people misinterpreted the firm's "R.I.P. Good Times" presentation to portfolio companies a year ago, mistakenly thinking that Sequoia demanded its companies shut down or pull back their businesses drastically.
"The point there was you need to run your business cognizant of the times we're in… It was a tricky time last year," McAdoo said. "A lot of start-ups got going in good times and frankly fell in to bad habits you would not get into in a bad economy but can kill you now. The message was not to fold up your tents but to reevaluate…and re-engineer your business."
Earlier this year, Sequoia backed a $2 million seed fund started by Y Combinator. Recent investments made by Sequoia include AirBnB.com, which lets private residents and commercial properties rent out their extra space; Justdial, an Indian search engine; and VisualTao, which sells software that lets engineering and utility companies mark up and edit visualizations from their Web browser.
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