Post-mortems of bad investments reveal the cause is never a calculation error but always a psychological bias or emotional trap. Sequoia catalogs ~40 of these, including failing to separate the emotional 'thrill of the chase' from the clinical, objective assessment required for sound decision-making.
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.
Sequoia's internal data shows consensus is irrelevant to investment success. A deal with strong advocates (voting '9') and strong detractors (voting '1') is preferable to one where everyone is mildly positive (a '6'). The presence of passionate conviction, even amid dissent, is the critical signal for pursuing outlier returns.
To avoid stifling talent, Sequoia uses 'freedom within frameworks.' It provides guiding principles—shared values and a common value chain (sourcing, picking, winning)—but allows partners total autonomy in their methods. This enables diverse, authentic styles, from deep thematic work to high-volume networking, to coexist effectively.
When a talented partner is too risk-averse, advice alone fails. The solution is to actively co-pilot their initial risky decisions, saying, 'We're going to invest in that company.' This 'teach by showing' approach gradually builds the courage and comfort level necessary to pursue asymmetric upside independently in the future.
For over a decade, Sequoia has systematically asked top operators, 'Who are your five smartest peers?' By tracking responses in a proprietary CRM, they've built a talent map that functions like a 'PageRank for people.' This system allows them to assess engineering team quality deep within organizations, providing a unique diligence advantage.
The most critical decision in venture isn't the final investment vote but the mid-funnel choice of which companies get a deep look. The costliest errors are false negatives—great companies dismissed prematurely. Firms should therefore optimize process hygiene at this stage, implementing mandatory post-meeting debriefs to avoid these misses.
Venture capital returns materialize over a decade, making short-term outputs like markups unreliable 'mirages.' Sequoia instead measures partners on tangible inputs. They are reviewed semi-annually on the quality of their decision-making process (e.g., investment memos) and their adherence to core team values, not on premature financial metrics.