Sequoia in Europe with Luciana Lixandru

You're listening to Station F, the podcast.

From the world's largest startup campus in Paris. This is Station F, the podcast and I'm your host, Roxanne Varza, first and foremost. Happy 2021, everyone. Wishing you all a great new year and hoping for a little bit less Covid in the upcoming year. Now, I am absolutely thrilled for this first episode we have the honor to speak with Sequoia Capital's first European partner, Luciana Lixandru. We're going to talk about all types of things that they're doing in Europe from their investment strategy, why they're coming to Europe, what they're looking for next, how they're grow, growing their team and more. And for this episode we have Gwen Salley from my team who is going to be moderating. Gwen is in charge of the investor community and more recently in charge of business development.

Luciana, thank you so much for, for taking your time once again. And I think I want to get started with something that is quite, quite on the news this day where like everyone in the Valley seems to be moving to, to Miami and you guys actually moved to Europe and set up shop in London. Can you tell us a little bit about that dynamic and why you decided to, to move to London?

Hi, thank you so much for having me. I'm thrilled to, to have a chance to chat to you guys today. And I will say that this is actually only my second podcast ever, so, so please bear with me. We're definitely talking during a strange time. I was, I just mentioned earlier, I'm looking outside my window in London and there is no one on the street. So yes, it's, it's a strange time and we're all hoping that 2021 will be kinder to us. You know, Sequoia has been thinking about Europe for quite some time and Sequoia has been investing in Europe for quite some time. So we are investors in companies like Unity and uipath and Klarna. It was just a natural evolution for the firm. It was natural because we kept on seeing talent from the distance in Europe and we kept on seeing opportunity. We were making investments, but we were making these investments slightly later on. And it's a natural evolution to want to find these founders earlier and candidly to be able to help these founders on the ground. I think that makes a, that makes a really big difference. So it's, you know, we were building out a team out of London. We, I joke that we're the only people who are signing a 10 year office lease. Everyone is giving up their office space. We're very committed, even from a real estate perspective. And yeah, that's why, candidly, it's just a very natural evolution. There's just more opportunity in Europe than ever before before.

Okay, and is there a reason why you decided to make this move in. In 2020, Covid aside, is there a dynamic that you identified in Europe where the team in the Valley was like, okay, it makes sense to make that move right now.

So Seque is very thoughtful about any, any move, and especially when it comes to entering a new geography. Of course, we, we've been active in China and in India for a long time, for over a decade, and for the past decade, we have not entered a new geography because we take these things so seriously. So we. There's just so much more opportunity in Europe than ever before. I would say the market really pulled us in, other than us finding our way here. Really interesting talent comes out of anywhere, and we want to be as close to close to that talent as possible, and we want to be able to help on the ground. The way we think about things is the following. We want to invest in global category leaders. When we invested in UiPath, we looked at the competition in robotic process automation in the US we looked at the competition in Europe, and we decided UiPath would be the global category leader. This company started in Eastern Europe, in Romania. It's an unusual location for. For a very successful technology company. But we want to have the opportunity to look across geographies and pick the company that we really want to put the entire weight of Sequoia behind.

Definitely. And also you mentioned a few deals that, like, you've been making in Europe before, having a presence on the ground like Klarna, Graphcore, UiPath. And so what is going to fundamentally change with having a team being present physically on the ground in Europe?

What will change is that we're hoping to find founders earlier. We invested in some of these companies very early on, by the way. Unity was a Series A investment and we invested, I believe, about 10 years ago in some of them. We did invest very early and some a bit later, like in UiPath, for example. But we want to find more of these exceptional founders and we want to find them earlier on. We want to intersect them already at the seed stage stage, at the Series A stage. And we really feel that the best way to do that is to be on the ground and to develop our networks here on the ground. So that's the first reason. The second reason is we want to be able to Help on the ground. Sequoia is a very, you know, we think of ourselves as company builders, not only investors. And a lot of the founders we work with will expand into the US and that's a big part of why we think we can be very helpful. At the same time, of course, these companies will always have strong European roots and being here on the ground, I think makes a big difference in order to be able to help them at home in Europe and in the US as they decide to expand over there.

Definitely. And you also talked about the team already and you guys started to build that team. If I understand correctly, there is a partner that joined you all the way from California and who actually moved to London to. To help you set up the office, is that right?

I'm trying to get the entire team to move to London, but it's going to take me a while. I'm joking. Yes, we have. We have a team on the ground. So George Robson joined us from Revolut. He started together with me back in September and he's wonderful. Zoe's joining us in Talent, actually, and I'll talk a little bit about how we think about our team on the investment side and then our team on the specialty side. We're hiring more investors on the ground. And importantly, as you mentioned, my partner Matt Miller is fingers crossed, moving over this summer as soon as Covid allows. And he'll spend some time on the ground here. He's already been spending time in Europe, so he's on the board of Tessian here and on the board of Graphcore, so he knows the ecosystem well and it's a pretty natural evolution. So. So we're really thrilled to have him here. And then with time, as I mentioned, maybe I'll convince more of my colleagues to come by. I will also say that other partners will be spending time on the ground again as soon as we can travel. And I'll say that my partner, Doug Leoni, already spends a lot of time on a regular basis and he's been incredibly helpful in helping us here in London and in Europe and so to.

Focus on the team a little bit more. So is everyone's going to be in London or are you also going to hire people that are going to be based elsewhere in Europe to maybe cover a little bit like a broader geographic area or how do you look at this from an HR perspective?

That's a great question and it's a very. It sounds like a simple question, but it's actually very difficult to make the right decision here because on the One hand, it is important to understand local hubs and understand local tech communities at the same time. On the other hand, I also think it's important for us as a team to be together as much as possible. There's nothing like walking into your colleague's office and brainstorming about an opportunity or brainstorming about a space. So it's really a fine balance. To answer your question, we're building out our team in London. But in order to also cover the second part of the equation, we'll spend a lot of time on the ground. And of course now is just a very strange time where we're talking about what will happen when the world goes to normal. But you should expect to see us in Paris on a very regular basis. You know, other communities should expect to see us on the ground in Stockholm and Berlin and Amsterdam in many of the key hubs. So that's a long answer to a simple question. We'll be based in London and we'll travel a lot.

Maybe just a last question on the team. I don't know if you want to call out for people to apply to Sequoia, but are you looking for a specific type of talent and what are the type of people you're looking at right now?

It's a great question and it brings me to something I alluded to before, which is how we think about building our team at Sequoia. If you look at our team in the US, it's, it's very interesting. It's, it's, I would say pretty much half people with an investment background and half people with an operating background. And I think that that balance is just incredibly helpful because we really work as a team. So our founders in Europe now are getting help from some of my partners on the engineering side, from some of my partners on the go to market side, whatever the topic might be. And we want to, as we extend the team into Europe, we want to follow a very similar approach. And again that's reflected in the fact that I joined, I have an invest, I joke that I have a boring invest investing background as opposed to the cool operational background. I'm joking. George of course joined us with a product background. And now for the next person we'd love to bring on board, someone with investing experience. Again with at least a few years of investing experience. Yes. So it's been really nice to see the reception from the ecosystem. A lot of people have been reaching out, so we feel very privileged to be able to talk to really wonderful candidates and really wonderful people and hopefully you'll hear from us on this front.

Well, yeah, and we can't wait to see who's going to join you and who's going to be leading Sequoia and see the entire team. Maybe another question is maybe more on the investment pace. So have you deployed capital already and what can we expect in terms of pace of investment for the upcoming year and maybe two years?

You know, we, we don't want to put a number on it because it's really about finding exceptional founders. We hope to, to find like minded founders as soon as possible and to partner with them as soon as possible. But I don't think it makes sense to go in with quote unquote quotas when it comes to investing. I think sometimes you might be really active in one year and then not so active in another year. It's really up to cycles and circumstances, etc. So we don't like to really put a number on it. But that said, yes, we will be active and the way we work is actually we don't want to be a high volume investor. We want to choose our investments very carefully. But when we choose an investment, we really put the entire weight of Sequoia behind that investment and that's everything. As I mentioned, it's leveraging our entire talent team. We have partners and talent who can help founders recruit and finance. We have partners who can help recruit in marketing, in sales and we have very, very, we have incredibly high quality teams that can be so helpful. We have a customer relationship team that can help our founders and so on and so forth. So we will, you know, we, we choose our partners very carefully and then when we do, we really do a lot of work and we really try to, to help with company building as.

Much as possible and probably a related question, but it's a question I've been asking to many VCs over the past few months, pretty much throughout Covid, but and it's definitely linked to the way you are setting up your team now. But do you, do you expect the European tech ecosystem to be different and do you think that the COVID impacted the way you're working over then, like not just like working remotely but the way you assess deals and the way you, you build your, your deal flow. Did Covid impacted you in big ways and do you think that some of those impacts are going to be long lasting?

So I think it's two parts to your question. I'll address the first one first, which was about the European ecosystem. I think the main difference, to be honest, when it comes to the European ecosystem is the fragmentation. It's a few different ecosystems with their own flavor. Each ecosystem is super authentic and developed in a slightly different way. You see more consumer businesses in some hubs and more enterprise businesses in some hubs, et cetera. And I think that's the main difference. On the one hand, it makes our job a little bit harder. As I mentioned, in normal times we travel a lot and try to be on the ground as much as possible. But at the same time, I think it's also exciting because every ecosystem has its own flavor, as I mentioned, and there is an authenticity to every ecosystem. That's quite nice. I think that's the biggest difference. If you look at sectors, I think sectors in Europe really reflect the evolution of sectors in the U.S. enterprise software in Europe, as it is in the U.S. is super interesting. I would say actually with a small nuance where fintech, I think Europe is actually an innovator in fintech. That's one area where it's been ahead for quite some time. And consumer probably slightly more difficult in Europe because you have to go from one market to the next and to the next and to the next. And with consumers, consumers can be fickle. So it's not just translating your app, it's really translating your proposition. So all this to say the ecosystem is more fragmented, sectors high level, I would say reflect what's happening in the U.S. the second question was around Covid. Right. And how we work in Covid versus before and how we assess businesses. I mean, I have to be honest with you, I really miss meeting founders in person. There's nothing like just understanding a founder's energy and hearing the story in person, sometimes over dinner, getting to know each other. Really, there's nothing quite like that. We try a lot of tricks to replicate as much of that as possible over zoom. So sometimes we'll send like a little dinner and we'll have the same meal together or whatever it might be. So we, we try to, to add these nice touches, but I don't think there is a secret formula. It's really spending as much time as possible in these circumstances over zoom. Yeah. And, and try to, to, you know, spice it up a little bit with, with some of the things I mentioned. The other thing we do is sometimes we'll just, we'll just change small things like just change our backgrounds to the company's background and just try to, to show small gestures and to be thoughtful. But I'll tell you honestly, I cannot wait to meet founders in person again. For me it's. Yeah, I miss it a lot.

Yeah. And thank you so much. That, that actually gives a perfect transition to my next question. That is definitely on the screening process. So over the years, like we know Sequoia backed tons of very successful company, dozens of DECA cores like Apple, Airbnb, Nvidia, LinkedIn, etc. Etc. With that question. I kind of want to go in the back office of Sequoia to understand the processes and how you screen founders. Can you tell us about, about that screening process and what is particular about it?

It's a really good question and it's. To be candid, I will say there is no one size fits all. It's like when I'm asked what makes a good investment, I really wish I had a checklist that would make my life a lot easier and would make our lives a lot easier. But I'll try to give as concrete an answer as possible. With founders, I'll. For me personally, I, I always thought that intellectual curiosity and founders was one of the most important traits. So something I'll, I'll share a trick. I'm sharing it publicly, but it's okay. Something I like to do is, is the following. I try to make as many helpful introductions as possible to founders and given that Sequoia has such an incredible network, that's, that's a very smooth process. So let's say a founder has a great product and has product market fit, but he or she is looking to scale their marketing team, whatever it might be. In that case, what we'll do is we'll introduce this founder to really world class CMOs, like CMOs, of the best technology companies that are relevant to this particular sector. And that's just one example. In that case, it's helpful for the founder because they learn, but it's actually really helpful for us because these people come back to us and give us feedback on that particular conversation. In my experience, I remember with Both Daniel at UiPath and Andre at Miro with two founders where I made a lot of those introductions. I remember everyone came back and said, wow, they asked so many questions. It was such an engaging conversation. They're so eager to learn. I still remember that really stuck with me and I think that's one thing that I really tried to do. Again, which is helpful for founders and which is helpful for us because we get to know founders better through other people's eyes as well. Other than that, honestly, I think it's the typical. Spend as much time as possible together. Do you think about the world in a similar way? Does this founder want to build an enduring company? Do they think about the world in the next decade, couple of decades? That's how we think about the world. Do they think they have the ambition and the possibility to build a $50 billion company, $100 billion company, and of course many, most people don't get there. But do they think about the world in that way? And in those cases, when we find these like minded people, needless to say.

We'Re extremely excited and just to focus a little bit more on the actual process. Does that mean that as a founder reaching out to Sequoia, should I expect to meet X number of people, to have X number of meetings? Do you guys have some sort of template of memos that you. Investment memos that you actually pull out to the rest of the team? How does that work concretely in the background?

Okay, I understand. So you wanted the tactical part of the process. I was telling you about the philosophy.

Behind, and I love to have both.

Getting to know founders. Okay, I understand we are very team driven, so absolutely you should expect to meet, you know, one of us in an initial interaction and then you should expect to very quickly meet a larger group. We're incredibly team driven. We, we have very intellectually honest conversations. We challenge each other, we push each other. And yes, founders should expect to get to know the broader team quite early in the quote, unquote process, if we want to call it that. We do our homework thoroughly, of course. I wish again there was a checklist, but it really depends on the business model. It depends on the stage of the company. So I won't be able to come up with a checklist, but we do our homework thoroughly because, because we want to make the right decision, first of all. But second of all, because we want to be a really good board member and we want to be able to help our founders to, to build their company. And the only way to do that is by really understanding their business. And this, by the way, is a cautionary tale for founders when they receive term sheets in three days. There might be cases where people have done a lot of work on the space before. Yes. But really ask yourselves, am I going to work with someone who understands my business well, who took their time to be thoughtful about understanding my business? Because I think that makes a huge difference post investment. Once we work with these companies for 10 years, 15 years, and sit on their boards for a long time. And then the last part of the question, yes, of course we write memos. We want to a Crystallize our own thoughts and our own work. I personally find that very helpful. I think when I put down a thesis about a company that's. Yeah, it really helps me. It really helps me actually understand my own level of excitement and that first of all, second of all, we are very intellectually honest and transparent with, with all our partners. So it's important for us, for ourselves and for the partnership. It's important to, to write these memos.

Yeah.

And I guess answer your question on the process.

Yeah, no, definitely. And I guess on the investment memo, I guess it's kind of a similar process than an entrepreneur go through when building up the narrative for its startup. You actually do the same with the investment and when you pair those two things together, it builds a stronger narrative for the startup. So it does make sense. I love it. Actually you touched upon something very important. That leads to my next question, which is your portfolio companies that you have today and the incredible network of people that, that are in that portfolio. How does that network of founders, of mentors advisor investor work? Can you tell us a little bit about this community and how is it leveraged on a daily basis? Basically what I'm trying to ask is if I'm a portfolio company and a portfolio founder at Sequoia, how is it going to work to leverage your community?

That's a really good question. And honestly this is something we really think about on a daily basis because we do have a lot of resources, we have a big network and making sure that our founders have an unmatched advantage because they work with Sequoia is really top of mind. It is something we focus on a lot. So I think that's a really insightful question. Thank you. Now to be a bit more specific, there are various ways and actually I don't know how much of it we talk about publicly to be candid. So I might keep it a little bit high level. We've been around for 48 years. We tried to take as much of the tribal knowledge that we built over this period of time and crystallize that in, in a few sessions or courses, if you want to call it that. And we built something, something called, well, let's just say it's a, it's program for our new companies, for our new new joiners in our portfolio. And this is a program over a few weeks, it's for each cohort, it's five to 10 entrepreneurs and, and we share a lot of these learnings, whether it's about storytelling and how to present your product or whether it's about, you know, just more tact. Not tactical, but more straightforward things like how to build your go to market. So whatever, you know, for the key areas, we, we built this program that's. That our founders really, really love. It's. And it's also a very nice opportunity for our founders to, to get to know each other. So. Because it's built in this cohort way. So that's one thing that I know we've been getting a lot of positive feedback on, and I know it's quite special and quite unique in the market, and then other than that, we're actually doing something, but candidly, I don't know how much we want to share about this right now, but we have built an internal community for founders because as you say, whatever question a founder is struggling with, I bet you there are five, at least five or even not more founders in our community that have, that had the same question or the same issue and would be able to help. And of course, one way to do it is to go through your board member. And as a board member, we're always very happy to help, but the other way is to facilitate a community of our founders for them to get to know each other directly. And we've done that and we focus on that quite a lot.

Yeah, what I was trying to get to is I want to understand if the founders of Airbnb and DoorDash actually got to talk to each other before IPO through you guys. That was kind of the purpose of my question. Now I want to talk about your scalp program, because I know it launched in 2009, if I'm not mistaken, when the Sequoia team in the Valley started to trust portfolio companies with a pool of money to invest in other startups. Can you tell us a little bit about this program? Is it working in a similar way today? And, and I know you've been announcing your Scouts for Europe. Can you tell us a little bit about them and then we'll ask a few questions to one of them?

Yes. And, you know, this is one of the things that fascinated me about Sequoia since before joining and after. Since joining is how much the team thinks about innovating. And this is a good example. So. Absolutely. The Scout program started in 2009. It's been, it's, it's a core part of, of how we run our business. And it's two sides to it. One, of course, is to find founders very early on, but the other one actually is about building a community and building a community of Scouts. For them to get to know each other, for them to learn how to invest through other Scouts and through us as Sequoia partners who are trying to help and trying to guide. And it's going to work very similarly in Europe. Our initial cohort is people that we knew before. We have worked with many of them before. We want to build a tight knit and intimate community, especially for the first cohort. And yeah, we're in. We're just getting started with a Scout program in Europe. And. And so far so good. We've actually. Yeah, so far so good.

And can you tell us as well more details on, like, there's a pool of money allocated? Is there like a check size, an amount of money that the Scouts get to invest like every year? How does that work? Very concretely.

Yeah. So more concrete leads, on average, $100,000 over a couple of years. Investments, I would say are anywhere from 10k to $100,000 roughly. I'm just giving you very roug. There are always exceptions and outliers. And our Scouts invest across countries in Europe and across sectors. And yes, as I mentioned, there are people that either we had worked with closely or we knew and admired and really wanted to bring them into our community. I should, by the way, mention that out of our Scouts in the US three of them became Sequoia Partners. So it's Mike Vernal, just Lee and Alfred Lin. They were all Scouts before. And overall, I believe it's 25 people who went into venture after. So I think it's a nice way for people to get a taste for investing and, yeah, get a bit of the flavor.

Well, that gives me the perfect transition to Roxanne. Roxanne, are you envisioning a carrying venture capital?

Start with the hard questions, Gwen.

Thanks.

So actually, I think what's actually really funny is the Scout model, I think actually corresponds to me really well. I like kind of the freedom. I love the really super early stage aspect of it. So at this stage, I'm not envisioning a career in venture other than what I'm currently doing, but I do think that this is a great way to learn more and I'm definitely getting very, very curious about it.

Rox, can you tell us maybe for full disclosure. So I'm working with Rox. Obviously, I'm in her team. She's my boss. But I'm still going to ask tough questions. I think the first question is really on that Scout program and can you tell us a little bit about how you became a Scout and now that you Are a Scout, what do you plan to be a successful one?

I love these questions. So for the audience, Gwen is just kind of freestyling it with me. I have not seen these before.

So.

Actually, it's kind of a funny story because I've known Luciana for something like seven years before when she was at Excel, and so we were kind of in touch on and off. And when she joined Sequoia, we kind of got back in touch. And I actually had also been in touch with the Sequoia team to write an article about different Scout programs that we're developing in Europe. So this was kind of the way that the conversation started, but I think a lot of it really comes down to knowing Luciana and having this relationship with her for quite a. Quite a while now.

I was just going to say Roxanne falls in the category of people we really admired and really wanted to bring them in the community, although we hadn't had the chance to work before. And I'll also say I can already tell that she has a really good taste in companies.

Have you been submitting a few startups already?

Thank you. Yeah, obviously everything's still confidential because it's. It's the company that will decide when they communicate, but yes.

Okay, sounds good. And still a question on the scale program and how you became a Scout. Was there a screening process? Like, how did it work? Was just like informal conversation or you had to pass some tests or.

Yeah. Written exams. Difficult logic questions.

No.

I think I'll actually let Luciana explain a little bit more about how that works internally and what they're actually looking for in screening.

For sure. To be honest, the idea behind this is really for the Scouts to. Yeah. To get a flavor for investing because many, many of our Scouts had not invested. Some had invested before, but many of them had not. So it's a lot about brainstorming and. And asking each other. We're asking our Scouts, asking us, hey, what do you think about this sector? What do you think about this sector? This is why I like this. So there is an initial, hey, Luciana, or hey, Matt, or whoever the Scout might be working with, what do you think about this idea? And brainstorming together? And we might say, hey, sounds interesting. Have you thought about question A? Have you thought about question B? And from there, Scouts write a memo as well, actually, that gets shared with the Scout community. And that's pretty much it. We do try to keep the quote unquote process very simple. So we try to make the right decision. We try to help Guide the Scout and help the Scout become a great investor if, if they like it. And last but not least, our Scouts are also very busy people with very successful careers. So we also try to keep it very simple for them and for the founders that our Scouts work with.

Super clear. Thank you so much. Well, that's kind of. I might have one last question. We're obviously super happy to count to Count Sequoia be present in Europe and on the ground. Do you think that there is, there is actually a trend of having more fun from the Valley, more international fund from the Valley or even a very successful fund from Asia building a presence in Europe? Do you think that there is a momentum actually happening in Europe now and that we should expect to see more top tier funds setting up shop in Europe?

I think so. And by the way, I think that's a really good thing for the ecosystem system because it's just, it's a, it's a signaling of the maturity of Europe when it comes to technology. So I think we should absolutely expect that. I think, you know, we, we admire our competitors. We always try to be the best version of ourselves for our founders, and I think it's good to have really good competition for us, and I just think it's good for founders to have as many good options as possible.

Wonderful. Luciana, thank you so much again for participating today to this podcast and thank you for your time.

Thank you so much for taking the time and I really enjoyed all your questions.

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