Reading · Embrace The Chaos

TLDR:
- The last 15 years were a blip in history, the future demands profitability.
- Go FOF yourself (see below).

Sequoia is one of the most successful venture capital firms in the world. The investment portfolio includes some of the most iconic technology companies in the world, Apple, EA, Cisco Systems, Google, Instagram, LinkedIn, Oracle, PayPal, WhatsApp and YouTube.

A VC is a type of investment vehicle that pools money from high net worth individuals and institutional investors to invest in early-stage, growth-oriented companies with high potential for return on investment. VC funds typically invest in companies in the tech, healthcare, and finance sectors, and provide funding for product development, marketing, and hiring talents. In exchange for the investment, VC funds often take an equity stake in the companies they invest in.

Last May, Sequoia presented a business building guide for the founders of their portfolio companies to plan effectively in uncertain times. It was part of a series and entitled Forecasting & Scenario Planning.

The title sounds like a boring accounting course. But it belies the gems in the deck. This is a generational blueprint for all entrepreneurs and frankly anyone in business regardless of type - VC funded, solopreneur, small business owner, corporate, etc.

Sequoia wrote this deck knowing people would need to reset their mindsets from a period of abundance to a future of relative scarcity. And mindset is hard to change.

Many of these principles are also applicable to any employee. Just consider yourself the product and your household as the business in all of the points below.

I collected the points from all of the slides and they touched upon these 3 mains themes: 1) Business Environment 2) Selling an Product-Value Proposition and 3) Assumptions

VC money and capital in general is drying up. Handouts are far and few going forward. Abundance was the past. Scarcity survival skills needed going forward.
Free Cashflow (FCF) is king. FCF is freedom from financial. FCF is freedom to survive and grow. FCF is freedom from the shackles of debt and dilution. For a business, household, or person, FCF is what you have flowing in every month/year after paying expenses, taxes, and investments.
Go FOF Yourself. FOF stands for Fund Our Future. We are all responsible to deal with reality as it is and figure out our financial solution. But first we must drop reality as we want to see it. You can't ignore gravity and you can't ignore reality. And if you then you intend to harm yourself.
Everyone solved problems with more money. Money they had, money they didn’t have, or money they anticipated. That money is gone. Critical thinking, belief, and adaption will solve problems today and tomorrow.

The days of people and companies betting big on stories are in the past. Financials plus a sound story are paramount now in a risk off environment.
As an individual don’t expect big, fat paychecks any longer. You will have to design your life for cashflow.
ALL CUSTOMERS MATTER! (Recite this in your sleep)
Sequoia stressed a product and customers first approach. Build strong products that help solve fundamental, real problems that people need to solve. Superior products built with a deep understanding of customer needs will generate additional sales. Customers flock to solutions and all the right metrics fall into place with this approach.
ALL PEOPLE MATTER! (Recite in your sleep)
As an employee this applies to you as well. You are the product. Invest in yourself so you can help people better than your competition. Know who you are helping whether it is your colleague, your manager, a partner, a customer, or your CEO. Know their concerns, motivations, and drivers. If you don’t know ask. People want people who can solve their problems.
In the beginning, overspending on sales and marketing to chase incremental dollars is a poor investment. As companies get larger, strong sales and marketing are indispensable.
As an employee, this means no one cares what you say you can do. Advertise and persuade by doing, by building, by creating, by solving, and by sharing.
Strive for profitability. Build durable products for strong unit economics, meaning make sure products are built for profit on an individual basis. A profitable division can scale from a profitable product and profitable divisions build profitable companies.
Trust is oxygen and a competitive asset as it is in short supply. Clients trust durable products and companies. Employers employee trustworthy employees. People partner with trustworthy people.
Everyone’s resources have slimmed down. Focus on the need-to-haves. Need-to-have wins. Nice-to-have loses. Another way to say this is to solve for the greatest pain. Meet customers and people at their most fundamental needs.

Stories are dead. Cash is king. We are in risk off mode.

THEIR SPEND IS YOUR REVENUE. Consumer and business consumption is down, review your revenue assumptions again and again for a competitive fight for every dollar.
For employees, companies are tightening costs and reviewing the ROI on everyone. This was made patently clear in Sequoia’s deck. Proving your value everyday is baseline reality.
Revenue is the unknown. Cost is your only true lever. Invest in what returns and reduce expenses in those things that add no value. Seems obvious but companies and people have carryover spending habits from the good old days. Cut mercilessly.
People, companies, and start-ups will need to drop the bad habit for searching for the next hot trend. The value must lay in the enterprise and the person, not in fleeting manias (If you were able to catch lightning in a bottle and make some profit in the past, hats off to you. But if not, this is no longer the economic environment for rainbows).
Customers and employers will pay for what they desire/need and for which they have funds. Make compelling solutions that address these desires/need and address the reality of the economics. Solutions are more than products and employees are more than resumes and LinkedIn profiles. The value for what makes the solution/prospective employee compelling has to be clearly illustrated to the buyer.
For example, buyers and consumers want guarantees, support, name brands, social proof, or flexible payment terms. Employers want to work with reliable, trustworthy, and friendly human beings who can bring attitude and determination to the role. What does the complete solution deliver?
For companies, stress-test desire and ability by looking at successful and unsuccessful business models during previous drawdowns. (Example: During 2008 & 2009 consumer staples leaders Walmart and Amazon did well.)
3 Years of runway is strongly suggested to grow a start-up growing forward.

Get used to not knowing. Plan for it, expect it, and grow despite it!

Good luck everyone!

Thriving in Scarcity, 101. For Business, You, Me

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