Roelof Botha, managing partner at Sequoia, is beseeching founders to resist the siren song of skyrocketing markups, arguing that bloated rounds obliterate painstakingly bought progress and morale when the cycle unravels. At the same time, however, he suggests that Sequoia itself keeps its aperture wide: the investor is flooding in fresh capital while intentionally restraining fund sizes and doubling down on fewer, earlier bets. Botha’s message hits the wire as venture investing rapidly restarts in patchy areas—the appalling valuation hangover from a scarred 2021 can still be seen throughout the ecosystem. The verdict: the speed of investment is also vital, not only the cost.
Excessive markups shrink margins of error and resilience
Botha said that an extensive markup diminishes the margin of error, citing an example of a portfolio company that flickered from around a $150 million value to around $6 billion in 2021, only to circle back. That sort of increase hardens expectations internally and externally in a way that is difficult to reset, even if the company is highly profitable.
Data from the market supports the point: In 2023, exit counts dropped to lows last seen in 2005, as evidenced by PitchBook and the NVCA. Exit values also fell from apparent peaks in 2021. Data from Carta showed a rise in flat and down rounds since 2023–2024 and late-stage repricing, while high-profile repricing—e.g., a round at Klarna in the new year that dropped valuation by over 80%—shows how extreme swings can be.
Sequoia restrains fund size while leaning into seed stage
The psychological toll matters. Employees anchored to peak valuations watch option upside evaporate on paper, recruiting gets harder, and burn can drift higher just to “grow into” a price. In that spiral, governance and discipline often slip.
Even as Sequoia added approximately $950 million across new seed and venture vehicles, Botha stressed it was not chasing scale; the firm framed the capital, instead, as consistent with the scale of funds six to seven years ago. It remains anchored at the earliest stages. Over the past year, Sequoia backed 20 seed companies, including nine at incorporation—one more reinforcement of the firm’s bias for concentrated, hands-on partnerships.
That restraint is informed by hard math. Botha noted that roughly half of seed and venture investments historically fail to fully return capital—an underappreciated admission that underlines why fund pacing and entry price discipline matter. Botha also highlighted Sequoia’s agenda-less meeting culture and consensus-driven decision-making: each partner’s vote counts equally, and all discussions begin with anonymous polling, describing it as “voodoo in the room” to avoid pre-meeting coalition-building strategies.
Time-bound advice for founders based on runway length
Botha’s advice was blunt and time-bound. He explained that if you have as much as 12 months of runway, focus on building, not fundraising. With more product maturity and customer proof, you earn a better price later without contorting the plan to satisfy a lofty round today. If you have closer to six months of runway, raise sooner rather than later—conditions can flip fast. He compared the moment to a classic cautionary tale: flying too fast melts the wings.
In operating terms, that means saying no to unsustainable growth directives tied to headline valuations. He urged everyone to tighten on efficiency benchmarks such as:
- Burn multiple
- Disciplined payback periods
- Durable gross margins
- Net revenue retention that reflects real product-market fit—not just promotional spend
Why concentrated early bets may outperform in venture
Botha also took a contrarian view: venture capital is not a monolithic “asset class.” Strip out the top cohort of firms and long-run returns often trail passive equity indices. With more than 3,000 VC firms active in the U.S., he argued, flooding the market with additional dollars doesn’t create more breakout companies; it can dilute focus and push founders toward price over partnership.
Recent cycles bear this out. In 2021, mega-rounds and crossover funds helped propel record step-ups; by 2023, late-stage deal volume cratered and IPO windows froze, capping secondary liquidity. Concentrated, earlier-stage investing—paired with longer holding periods for public shares, which Sequoia introduced—can smooth those shocks and align firms with compounding over decades, not quarters.
Patience and unit economics over optics in the next cycle
The easy capital era paid for speed and optics; the following run will pay for patience and unit economics. Botha’s message is not anti-growth—it is anti-fragile. The founders who keep a short rein on valuations, choose investors for the partnership, not the price, and stick with closely tracking effectiveness metrics may have more when the cycle changes. That, not the largest flag in a hot round, is what keeps the teams together and the deposits.
