Uncapped #36 | Pat Grady & Alfred Lin from Sequoia
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
Sequoia Capital's newly appointed co-stewards Pat Grady and Alfred Lin share insights into how one of venture capital's most respected firms actually operates. (01:01) This conversation unpacks Sequoia's partnership model, their systematic approach to finding outliers, and what stewardship means inside a storied firm known for backing companies like Airbnb, DoorDash, Snowflake, and OpenAI. (04:30) The partners emphasize they're in the "outlier business" - not seeking consistency but rather the 2-3 companies each year that will become tomorrow's most important organizations.
- Core focus: Building a platform that enables outlier partners to identify and partner with outlier founders, using frameworks around "see, pick, win, help, harvest" while maintaining a culture of courage and conviction over consensus.
Speakers
Pat Grady
Pat Grady is a partner at Sequoia Capital with nearly 19 years at the firm, where he has led their growth-stage investing since 2015. His portfolio includes major investments in category-defining companies like Snowflake, OpenAI, and Harvey, establishing him as one of venture capital's most experienced growth investors.
Alfred Lin
Alfred Lin joined Sequoia in 2010 and has led significant investments in companies like Airbnb, DoorDash, and Kalshi. Before venture capital, he was COO of Zappos and brings operational expertise to his investing approach, particularly around founder-market fit and long-term company building.
Key Takeaways
Conviction Trumps Consensus in Investment Decisions
Sequoia tracks voting patterns on every investment decision and has discovered that consensus versus non-consensus "does not matter at all." (35:35) What matters is the presence of strong conviction. Pat explains: "If everybody is a six, we vote zero to 10, no five, so six and above is positive, four and below is negative. If everybody's a six, probably shouldn't make the investment." They'd rather see three partners vote nine and three vote one than have everyone agree at a mediocre level. This insight challenges conventional wisdom about investment committee dynamics and highlights why courage is essential in venture capital.
Mid-Funnel Decisions Drive Success More Than Final Investment Decisions
The most critical decisions aren't made in partner meetings but in the "mid-funnel" - determining which companies deserve deeper evaluation. (51:46) As Pat notes: "Our biggest misses are the things that don't even make it till Monday." They've implemented mandatory debriefs after every meeting and systematic rating of all opportunities (0-10, no fives) to improve these crucial filtering decisions. This operational insight reveals how systematic processes can capture opportunities that might otherwise slip through the cracks.
Talent Mapping Creates Proprietary Sourcing Advantages
Sequoia maintains a proprietary "PageRank for people" system built over more than a decade. (22:42) They systematically ask accomplished VPs of engineering and other key talent to identify their smartest peers, creating a comprehensive talent map of Silicon Valley. This allows them to quickly assess the quality of engineering teams - a critical factor since Pat notes he "can't think of a lot of great companies that became billion dollar plus revenue businesses without having a great engineering team at some point." This approach demonstrates how relationship building and data collection can create sustainable competitive advantages.
Playing Your Unique Game Drives Better Picking
Rather than forcing partners into a single investment approach, Sequoia encourages "freedom within frameworks." (45:01) Alfred's lens focuses on founder-market fit, asking whether "this person was made for this company and the problems of this market." Different partners excel through different approaches - some are thematic and whiteboard-focused, others are high-volume and opportunistic. The key is developing authentic approaches that leverage individual strengths while adhering to core values of performance and teamwork.
Trust Building Defines the First Year of Partnership
When working with a new founder, the primary objective for year one is building trust, which has two components: competence and intention. (59:55) For competence, Pat goes through employee onboarding to understand the company like a new hire would. For intention, he clearly states his dual objectives: maximizing returns for limited partners while helping founders become "the absolute best possible version of yourself." The goal is earning the right to be the founder's first call when challenges arise, built through consistent demonstration of both understanding and genuine care for the founder's success.
Statistics & Facts
- Sequoia's best performing fund (Venture 12) had a 50% write-off rate while producing billion-dollar gains from Airbnb, Unity, and Dropbox, plus 10 companies with $100 million+ gains. (31:00) This statistic demonstrates that even exceptional venture performance requires significant risk-taking and tolerance for failure.
- The growth team covers approximately 70% of companies that competitor funds invest in, tracked through a systematic coverage metric. (15:40) Pat notes this is "probably about right" as 100% would get into CYA territory while 20% would miss too many opportunities.
- In a typical fund of 45-55 investments, they need six companies to achieve 10x+ returns, with three of those producing $100 million to billion-dollar gains to create a successful fund outcome. (30:43) This quantifies the outlier-dependent nature of venture capital returns.
