John Hunpatin’s Post

really interesting to see this investment memo; probably true for all successful companies and also the full dataset.... what are the metrics (?) 1 out of 10 funded companies succeeds-- so it's very challenging to anticipate one way or another; from the beginning all look like they might succeed. For startup founders--there is a lot of literature on it being hard for founders to get future jobs other than founders; but don't despair--they often go on to start new ones, sometimes work in VC... some say more experience is better (that seems to be the MIT philosophy (Bill Aulet)). Is it true across all types of founders (unknown)? Prior success is likely to be advantageous. Every founder would prefer 100 percent success. Companies that take VC need to be able to scale very quickly. And every company will go through boom and bust times if it survives long enough.

Here's Sequoia's investment memo for YouTube back when it was in its infancy. See the venture capital investment logic and the metrics that back it. #innovation #venturecapital #startup https://lnkd.in/e4d5M8Pc

If you want to get a picture of how VCs think, this Sequoia investment memo (to invest in YouTube) is good to read.

Once in a lifetime opportunity.

My focus area is decisions under uncertainty and quality risk-taking. Many (not all!) PE and VC firms are good at this, but there's rarely a publicly available paper trail for others, such as corporates, to learn from. Sequoia's investment memo for YouTube is a great example. Some lessons: 1. Yes, risks (outcomes) are ideally quantified, but you gain nothing by forcing false precision. Sometimes the biggest, most important risks can only be ballparked with bookends and/or scenarios. You gain more by explaining dynamics than sweating numbers. Those risks, by the way, are also the opportunities. 2. Focus on the big uncertainties that matter. Don't waste brainspace on the others; that's for later. 3. Don't be afraid to make the decision even if you don't know everything. Instead, stagegate and build flexibility. "Our proposal is to invest $1m, followed by a $4m Series A when specific milestones [performance, risk reduction, exec team in place] are met. Sequoia would own ~30% post Series A...I'd like to give the company our decision on Monday. I recommend we proceeed with the financing as proposed." It paid off, 57X in ~2 years. 4. Effective summary. The first 2.5 pages really says it all; and that's what it took (a 1 page summary would have been insufficient). The remaining ~40 pages give more detail, and by the way no problem that they're duplicative.

I'd love to read that memo to gain insights into Sequoia's investment strategy and decision-making process. It's fascinating to see how they identified YouTube's potential and the returns they got from their investment. The fact that they were able to exit with a 57x return is a testament to their investment acumen. Do you think there are any key takeaways from this memo that can be applied to today's investment landscape? Rubén D. I think one key takeaway is the importance of identifying emerging trends and technologies early on and being willing to take calculated risks to capitalize on them. Sequoia's investment in YouTube was made in 2005 when online video was still a relatively new concept and it required a certain level of vision and conviction to see its potential. Today's investors can learn from this example by staying ahead of the curve and being open to new ideas and innovations. What are your thoughts on this

Absolutely fascinating to see how Roelof Botha and Sequoia Capital's early recognition of YouTube's potential translated into one of the most iconic investments of the digital age. This memo not only showcases the foresight involved in venture capitalism but also exemplifies the high stakes and intuition-driven decisions that are part of early-stage investments. Reading the leaked memo offers invaluable insights into the analytical processes behind successful investment strategies. It's a stark reminder of the transformative impact that venture capital can have on the tech landscape, forever altering the course of digital media. Rubén D.

The Investment that Generated 78,260% Return 🤯 A leaked document, courtesy Viacom vs. Google legal battle, offered a rare glimpse into Sequoia's thought process when they decided to back YouTube. Sequoia Capital's Roelof Botha in 2005 saw huge potential in online video sharing platforms and drafted a confidential memo suggesting to buy almost 30% stake in YouTube way before it was a thing. Results: It helped Sequoia turn their initial $12.5 million investment in Google to an estimated value of about $978 million, an extraordinary return on ROI of approximately 78,260% over 25 years. The Key takeaways from the memo: 1️⃣ How a clear and concise vision can drive significant impact. 2️⃣ Understanding the importance of structuring deals that align the interests of both investors and founders. 3️⃣ The value of a strong team and a defensible product: Want to learn more? Check out the full memo with my an in-depth analysis here: https://lnkd.in/gPVZEwVN

𝗧𝗵𝗲 𝗰𝗼𝗻𝗳𝗶𝗱𝗲𝗻𝘁𝗶𝗮𝗹 𝗬𝗼𝘂𝗧𝘂𝗯𝗲 𝗜𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗠𝗲𝗺𝗼 𝗯𝘆 𝗦𝗲𝗾𝘂𝗼𝗶𝗮 𝘄𝗲 𝘄𝗲𝗿𝗲 𝗻𝗲𝘃𝗲𝗿 𝗺𝗲𝗮𝗻𝘁 𝘁𝗼 𝘀𝗲𝗲 🤔 In 2005, Roelof Botha from Sequoia wrote an investment memo proposing to the investment committee that they invest in the seed round of a video company. That company was YouTube. The partners agreed to invest $1 million, which was followed by a $4 million Series A. A year later, Google acquired YouTube for $1.65 billion, netting Sequoia $500m: 57x its total investment. Not bad. It would be pretty interesting to read that memo, right? During a 2010 court case of Viacom vs. Youtube (Google) case, Roelof had to disclose his investment memorandum as part of his testimony. You can check it below 👇 Source: Alexander Jarvis's article on 50Folds Join 100,000+ founders and VCs who receive these insights in my weekly newsletter: https://lnkd.in/dtifw4mC

Sequoia's Leaked Investment Memo on YouTube 💫 In 2005, Roelof Botha, a partner at Sequoia, proposed a $1M seed investment in YouTube, followed by a $4M Series A. A year later, Google acquired YouTube for $1.65B, netting Sequoia $500M—a 57x return. During the 2010 Viacom vs. YouTube (Google) court case, Botha had to disclose his investment memorandum as part of his testimony. This memo provides a rare glimpse into how an accomplished investor evaluates opportunities and communicates with the partnership. Investment criteria can differ from fund to fund, and genuine transparency on how each investor assesses opportunities is rare, making this memo a very valuable resource! YouTube's pitch deck is also included in the last few slides. Check out Alexander Jarvis' in-depth analysis of the memo via the link in the comments!