Neil Sequeira had a front-row view of the dot-com bust, first at at short-lived incubator CMGI and later at AOL-Time Warner. Perhaps surprisingly, those experiences didn’t scare him off of venture capital; he joined General Catalyst Partners, a respected East Coast firm, and four years ago the San Jose native came home to establish a Silicon Valley beachhead. In this week’s Elevator Pitch, we ask Sequeira for his take on the differences between that bubble and today’s frothy tech scene.
Q: HOW’D YOU GET INTO THIS RACKET?
A: I started right as the dot-com world began to tank. After graduating from business school, I joined one of the few public VC and acquisition firms at the time, CMGI. As the market dropped, we went from buying to selling. I got to work with management teams, fix problems, understand strategy and find a way through tough times.
That experience taught me a lot, but I knew I needed direct leadership experience if I wanted to provide guidance to entrepreneurs. I joined AOL during its height, followed by the painful merger with Time Warner. The skills I learned in business development, marketing and sales stay with me today. In the end, however, I wanted something more entrepreneurial.
I joined General Catalyst when it was a young firm, very hungry, with an entrepreneurial style that appealed to me. Over 10 years later, we’re now bi-coastal with $3 billion in assets, but we still have that same people-first culture. I’m having a blast helping to establish the firm here in the Bay Area.
Q: WHAT DO YOU LIKE ABOUT VC?
A: What’s not to like about helping to create thousands of jobs for the economy? Being a small piece of contributing to this region’s innovation and growth? Working with some of the most creative and hard-working entrepreneurs in the world? Delivering a financial return that allows us to build a firm for the next generation and incubate innovation in this country? Every day, I wake up excited to talk with entrepreneurs and work with our team. I’m incredibly lucky to love what I do.
Q: WHAT KINDS OF PITCHES ARE YOU LOOKING FOR NOW?
A: Over the past 10 years, I’ve successfully invested in alternative commerce, digital media, online/mobile marketplaces and Software-as-a-Service. Additionally, I’m exploring the changes in the food industry, new media/mobile sales/marketing channels and moving hardware infrastructure to software. I want to meet more founders in these spaces.
Q: WHAT’S THE BIGGEST MISTAKE ENTREPRENEURS MAKE?
A: Not hiring the best team possible. As an entrepreneur, you have the vision, mission, strategy and goals in your head at all times. The mistake some make is to try to do everything by themselves. It’s not possible; you need fantastic people who are great at what they do to help you scale as the business grows.
Q: WHAT’S THE NEXT BIG THING GOING TO BE?
A: If I knew, do you think I’d tell you?
All kidding aside, I do believe that the way we shop, eat, and spend time with our families will inevitably change due to new logistics, commerce and technology, as well as the desire to maximize in-person time with one another. Think about FaceTime by Apple: It allows us to travel and still share face-to-face conversations with the people we care about, in a very simple and intuitive way. Technology is going to continue to bring us closer to our daily activities to improve our way of life.
We’re beyond software for software’s sake – we’re utilizing the power of technology to touch everything, from farm-to-table to personal healthcare to how neighbors interact with one another to how businesses are built. In this, technology highlights human connections; with recommendations, community building and local commerce delivery, we’re finally start to get back to software that delivers value in our real lives.
Q: FOR MUCH OF ITS HISTORY, GENERAL CATALYST DIDN’T HAVE A REAL PRESENCE IN SILICON VALLEY. WHAT WERE THE UPSIDES AND DOWNSIDES — AND WHY’D YOU DECIDE TO CHANGE?
A: GC has consistently invested in Silicon Valley since inception, and we decided to set up our valley office almost four years ago. Why? First, value to our portfolio companies: An opportunity to be one of the few firms able to offer access to potential customers, partners, and talent on both coasts. Recruiting top talent is key for our companies; we have been developing programs with leading universities like Stanford, and it is no coincidence that our Cambridge office is located between Harvard and MIT.
Second, access to entrepreneurs and diverse tech markets: While certain spaces are very strong out east (media, SaaS, marketing services), the valley consistently produces amazing talent and outsized returns in important areas like consumer, marketplaces and infrastructure.
We’re proud of our work here so far — we’ve partnered with incredible founders like Patrick and John Collison at Stripe; Brian Chesky, Joe Gebbia, and Nathan Blecharczyk at Airbnb; Jessica Alba and Brian Lee at The Honest Company; Evan Spiegel and Bobby Murphy at Snapchat; John Thompson at Virtual Instruments; and Roman Stanek at GoodData to build some of the most amazing businesses on the West Coast. We’ve also welcomed a new partner to our team, Steve Herrod, who built one of the best and largest engineering teams in the Valley as CTO of VMware.
We often get asked how we make a bi-coastal partnership work. It’s not always easy, but it’s for sure a lot of fun. We work very hard to communicate as one team, collaborate on projects and never let distance impact decision-making. Our commitment is to have the entire firm available to our portfolio companies, no matter which coast they call home.
Q: HOW DID YOUR EXPERIENCES AT CMGI AND AOL-TIME WARNER INFORM YOUR APPROACH TO INVESTING TODAY?
A: Both experiences taught me a great deal about how to seek out amazing leaders, think through business models, build strong teams and focus. They also taught me what not to do: Get caught up in hype, hyperbole or pipe dreams, which tend to blow-up like pipe bombs.
The bubble was a unique market funded with expectations instead of fundamental economics. Today, we see private market companies with high valuations, but most also have strong underlying economic drivers. Consider Airbnb (effectively the largest lodger in the world) or Stripe (Paypal-like payments for mobile apps and marketplaces). These companies generate significant revenues and are disrupting major markets historically controlled by lumbering, incumbent behemoths that have not necessarily listened to their customers.
The new entrants will potentially struggle in an economic downturn, but they may also emerge as winners due to their unique business models. For instance, if a company needs to save on expenses during a tough economic time, it could encourage employees to try Airbnb vs. pay high rates at legacy hotels with massive cost structures. It’s a win for the company (cost savings) and for Airbnb’s business model (new income for their renters during a difficult time).
These are businesses with disruptive ideas and strong underlying business models. General Catalyst’s quest here in Silicon Valley is to work with entrepreneurs who want to change the world, helping them build business models and teams that can make it happen.
Tags: Airbnb, AOL, AOL-Time Warner, CMGI, dot-com bust, General Catayst, GoodData, Jessica Alba, John Thompson, Neil Sequeira, PayPal, Silicon Valley, Snapchat, Steve Herrod, Stripe, venture capital, Virtual Instruments