Sequoia's founder taught that the best investments are in individuals who are both exceptional and "not so easy to get along with." These founders challenge convention and refuse to accept the world as it is, a trait that makes them unconventional but also uniquely capable of building category-defining companies.
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Limited Partners, much like VCs searching for outlier founders, are often looking for fund managers who are "a little off." They value investors who think differently and don't follow the consensus, as this non-traditional approach is seen as the path to generating outsized returns.
Sequoia quantifies its search for 'outlier founders' in statistical terms. An exceptional founder is three standard deviations above the mean in a key trait, but a true outlier is four. This statistical lens explains their high bar, reviewing around 1,000 companies for every single investment.
Instead of coaching unconventional founders to be more palatable for mainstream Series A investors, early backers should encourage them to lean into their unique traits. The investor's role is to help them find the right future partners who appreciate their peculiar worldview, not to change it.
VCs at the highest level don't just write checks; they fundamentally reset a founder's aspirations. By placing a startup in the lineage of giants like Google and Oracle, they shift the goal from building a big business to creating a generational company.
While domain experts are great at creating incremental improvements, true exponential disruption often comes from founders outside an industry. Their fresh perspective allows them to challenge core assumptions and apply learnings from other fields.
The firm distinguishes between speed (magnitude) and velocity (magnitude plus direction). Founders are encouraged to focus on velocity, ensuring the entire team is moving quickly *in the right direction*. This prevents wasted effort where mere motion is mistaken for progress, a common trap in turbulent markets.
A truly exceptional founder is a talent magnet who will relentlessly iterate until they find a winning model. Rejecting a partnership based on a weak initial idea is a mistake; the founder's talent is the real asset. They will likely pivot to a much bigger opportunity.
Unlike operating companies that seek consistency, VC firms hunt for outliers. This requires a 'stewardship' model that empowers outlier talent with autonomy. A traditional, top-down CEO model that enforces uniformity would stifle the very contrarian thinking necessary for venture success. The job is to enable, not manage.
Lonsdale recounts passing on brilliant founders with seemingly terrible ideas, only to watch them pivot and build billion-dollar companies like Cursor. The lesson for early-stage investors is to prioritize backing exceptional, world-class talent, even if their initial concept seems flawed, as they possess the ability to find a winning strategy.
Venture capital should focus on what a founder does exceptionally well, rather than penalizing them for past failures or weaknesses. Ben Horowitz uses the Adam Neumann example to illustrate their principle: judge people by their spectacular talents (like building the WeWork brand) and help them manage their flaws, which is a more effective strategy than seeking perfectly flawless individuals.
