Adapting to Endure – Sequoia Capital [pdf]

The economic limit is not on the availability of capital, it is on productive assets to put capital into. e.g. This isn't a water shortage, it's a bucket shortage. The maximalist view of returning the most to shareholders at the cost of becoming completely unmoored from reality is the direct consequence of a board installing a their rep at the helm to pump and dump the asset for them, and said rep writing a self justifying book moralizing their role in the experience afterwards. It's a critical and necessary role, but managers are not builders, they are extractors, and in a deluge, it's not the people with the promises who prevail, it's the ones building the rafts.

Anyone who has thought seriously about what this downturn is and what is causing it also knows that there are technology solutions that can and will turn it around. No company with product market fit will ever go down for lack of capital, it needs you more than you need it. The most volatile and powerful force on earth is human desire, and beautifully, right now it is suppressed by a small cadre of people who think they can subdue, contain, and manage it.

There has been no greater opportunity to disrupt and bring down mammoths since the the holocene era. The FAANGs growth period is behind them, which means they have peaked and they arguably now more defensive of their market share than they are innovative, which leaves a huge gap open. Nobody likes them anymore, to where blowing off their recruiters doesn't even merit a quip on personal slack channels. They're disco. Bets against the dominance and longevity of the platforms has become optimism for the human spirit, and that's a precarious place for them to be. Their whole strategy is to be short customer satisfaction, but without the regualtory monopoly holds that other predatory companies with terrible service have (credit agencies, HMOs, retail banks, cable and wireless operators, etc).

The reason the platforms want moderation and censorship is because in exchange it consolidates their market share via regulatory backing under the pretext of safety, so no new competitor can come to market unless they can meet the moderation requirements. That's how much they know their product sucks, that they are willing to get into bed with government to mandate that nobody can use anything else. That's the opportunity. To invent ice cream in a market full of shit sandwiches.

Pessimism is predicated on a zero sum model where you tell stories about a change in its balance, and given change is constant everywhere, all predictions of change in zero sum models are necessarily solipsisms. They aren't wrong it's just misleading and lame. (I do it myself a lot, optimism is a muscle that needs training.)

Anyway, this is to say my own plan is to listen to people, build tools for them, ship products, and iterate. Our greatest risks come from when we take our eyes off the road to worry about the fuel gauge. That slide deck provoked me anyway. Kind of them to share it, as it's really amazing to see their insights, but also to know for sure that mine really are way better.

Their portfolio companies can go bankrupt. It is a Darwinian (survival of the fittest) moment for all the companies at this time.

We’re experiencing a (likely) shrinking economy, with fewer customers who are spending more conservatively. VCs want their companies to succeed and preserve wealth.

I think it's fine (but not optimal) not to sell if you're playing the long game.

I'm all in cash and short positions right now. If my investing track record is anything to go by, that's a signal we've hit bottom. I'm betting otherwise, but what do I know.

They're telling their portfolio companies to shore up their balance sheets and extend their runways in case raising money at previous peak multiples continues to be difficult.