Lessons From The Greats: Doug Leone

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Virta Ventures

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Lessons From The Greats

In 1988, Don Valentine hired a brash young Italian named Doug Leone. Eight years later, Doug became a General Partner and helped lead the firm until 2022, a tenure that included investments in Google, NVIDIA, YouTube, Instagram, LinkedIn, and Zoom. Doug shepherded Sequoia from an early-stage fund managing a few hundred million dollars to a global powerhouse with over $85 billion in AUM, from early stage to public.

On the due diligence of founders - If a founder is described as “insufferable, maniacal, doesn’t listen,” you should always dive deeper to understand the context. If this person was in a large and bureaucratic company and was trying to drive bold changes, then they may be a perfect startup founder despite these seemingly negative descriptors. Leone always looked for outlier people who can do extraordinary things; founders who are extra driven, for reasons of nature or nurture; founders who have the right moral compass to channel that drive.

“Execution eats strategy for breakfast” - A different take on the old adage, “Culture eats strategy for breakfast.” Nothing builds a great culture like winning. A good culture will never last if a company is really struggling. Founders can’t ignore culture, but they should focus more on delivering results, which will breed a strong culture over time.

Show, don’t tell - If a portfolio company’s VP of Marketing is clearly terrible, don’t simply tell the founder that they suck. Instead, introduce them to the three best VPs of Marketing you know, and the founder will quickly realize the issue. This is a bit of “inception” at work here, but ultimately you help the founder come to their own conclusion rather than forcing it down their throat.

Minimize product drag on the company – If your product requires six months of onboarding and three custom features, you are creating significant drag on the company post-sale, and that implementation becomes the bottleneck. This is a problem.

This challenge is currently being tackled by a few of our portfolio companies. They are working to become more self-service versus high-touch consulting, and more configurable versus customizable. They are shortening the sales cycle and reducing the customer support burden.

Technology in every aspect of the [investing] business – Technology is used to look for, win deals, and support companies. Over recent years, Sequoia has built itself into a tech-enabled investing firm, realizing they can’t continue to run like a law-firm model. At Virta, we’ve been leveraging best-in-class technology from day one. Recently, we’ve been exploring how to further leverage APIs, automation, and LLMs to more efficiently source, diligence, and support startups.

Putting LPs’ interests ahead of GPs’ – Faced with a drastically underperforming fund in the early 2000s, Leone and the Sequoia team did what almost no other venture firms did. The fund was valued at 0.3x, and the Sequoia team cut their carry, fees, and wrote personal checks to LPs. They reinvested all fees and turned a 0.3x fund into a 1.9x fund. It hurt the GPs’ wallets in the short term, but paid back massively in the long run, deepening the trust with their LP base.

Stealth and speed - “Little companies have really two advantages: stealth and speed. The best thing for little companies to do is to stay away from the cocktail circuit.” We’ve recently been asked why we don’t attend more conferences to source companies. The answer is simple - we aren’t interested in meeting pre-seed founders who are spending their time at conferences and cocktail events. We’d rather find the founder who is quietly building in stealth, doing deep discovery with prospective customers, and building momentum before ever revealing themselves to the world.

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