Venture Capital: Sequoia’s ToDo list for entrepreneurs

Who’s Australia’s most interesting VC company? Anyway, thought some of you might find this informative. From Sequoia, who have a list of what they look for when funding startups:

Elements of
Sustainable Companies

Start-ups with these characteristics often foretells the success of a business and the likelihood of it becoming a sustainable, enduring company. We like to partner with companies that have:

Clarity of Purpose

Summarize the company’s business on the back of a business card.

Large Markets

Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.

Rich Customers

Target customers who will move fast and pay a premium for a unique offering.

Focus

Customers will only buy a simple product with a singular value proposition.

Pain Killers

Pick the one thing that is of burning importance to the customer then delight them with a compelling solution.

Think Differently

Constantly challenge conventional wisdom. Take the contrarian route. Create novel solutions. Outwit the competition.

Team DNA

A company’s DNA is set in the first 90 days. All team members are the smartest or most clever in their domain. “A” level founders attract an “A” level team.

Agility

Stealth and speed will usually help beat-out large companies.

Frugality

Focus spending on what’s critical. Spend only on the priorities and maximize profitability.

Inferno

Start with only a little money. It forces discipline and focus. A huge market with customers yearning for a product developed by great engineers requires very little firepower.

Business Plan
Formatting

We like business plans that present a lot of information in as few words as possible. The following format, within 15-20 slides, is all that’s needed:

Company Purpose

• Define the company/business in a single declarative sentence.

Problem

• Describe the pain of the customer (or the customer’s customer).
• Outline how the customer addresses the issue today.

Solution

• Demonstrate your company’s value proposition to make the customer’s life better.
• Show where your product physically sits.
• Provide use cases.

Why Now

• Set-up the historical evolution of your category.
• Define recent trends that make your solution possible.

Market Size

• Identify/profile the customer you cater to.
• Calculate the TAM (top down), SAM (bottoms up) and SOM.

Competition

• List competitors
• List competitive advantages

Product

• Product line-up (form factor, functionality, features, architecture, intellectual property).
• Development roadmap.

Business Model

• Revenue model
• Pricing
• Average account size and/or lifetime value
• Sales & distribution model
• Customer/pipeline list

Team

• Founders & Management
• Board of Directors/Board of Advisors

Financials

• P&L
• Balance sheet
• Cash flow
• Cap table
• The deal

From Sequoia Capital – who funded lots of interesting companies.

We like being the very first investors. In recent years companies such as YouTube, Plaxo, Cast Iron, and Mark Logic, have spent their formative months working in our office. Long ago Electronic Arts and PMC Sierra both developed their original business as our guests. We do not have an E.I.R. program. Ours is just for E.I.A.s – Entrepreneurs in Action.

And who said size doesn’t matter?

Sizing

We want to be contributors to companies that have the chance to become very significant. This requires us to cut cloth according to circumstances because companies require different amounts of capital at various stages. Bear in mind that the very best seed and early stage companies evolve into great growth companies. As a result, Sequoia Capital has had the good fortune to be an investor in a long list of growth stage companies. Here are some very general guidelines about the amounts we invest at different stages.

Seed Stage	$100K – $1M
Early Stage	$1M – $10M
Growth Stage	$10M – $50M

Other bits of info:

Creators

As the “Entrepreneurs Behind the Entrepreneurs”, Sequoia Capital has had the privilege of being the first investor and business partner in companies that make-up 10% of the NASDAQ’s value. Here are some of the people who have chosen us as partners:

Steve Jobs, Apple Computer

Larry Ellison, Oracle

Bob Swanson, Linear Technology

Sandy Lerner and Len Bozack, Cisco Systems

Jerry Yang and David Filo, Yahoo!

Jen-Hsun Huang, NVIDIA

Dan Warmenhoven, Network Appliance

Michael Marks, Flextronics

Larry Page and Sergey Brin, Google

Chad Hurley and Steve Chen, YouTube

Sic friatur crustum dulce (that’s the way the cookie crumbles). Have a good weekend.