A Quick Start Guide to Building an Enduring Company – In Conversation with Doug Leone

Doug Leone has led Sequoia Capital for over 25 years, overseeing the firm’s international expansion. Throughout his time at Sequoia, Doug formed partnerships with companies like Nubank, Medallia, ServiceNow and Wiz. He’s seen thousands of pitches and worked with hundreds of founders as they grow and scale their startups. On this episode of Moonshot, Doug chats with Sequoia India Managing Director Rajan Anandan about some of the insights he’s gained over the past two decades working with startups, common pitfalls founders should look out for, and what it takes to build a truly enduring company. The conversation took place during an AMA at Surge – our rapid scale-up program for early-stage startups.


Show Notes

  • Introduction [0:38]
  • Sequoia’s culture - Spiky people with a “We, not I” mindset [7:05]
  • Architect your company, not just your product [14:18]
  • Fail fast: Why flops are better than slogs [18:06]
  • The gross margin line doesn’t lie [24:53]
  • Servant leadership starts with you [30:34]
  • The number one reason companies fail [33:06]
  • Focus on solving a singular problem [37:58]



Dewi Fabbri: Hello and welcome to Moonshot – a show by Sequoia India and Southeast Asia that profiles innovative startups and inspiring founders who are dreaming big, making an impact, and driving change across the region.

I’m your host, Dewi Fabbri, and throughout this podcast, we’ll be introducing you to founders and thought leaders who are helping shape the region’s startup ecosystem. We hope this podcast will give you fresh ideas on how to start and scale an enduring company.

Dewi Fabbri: On this episode of Moonshot, we hear from Sequoia Capital’s Global Managing Partner, Douglas Leone. Doug has helmed Sequoia for over two decades, and has led the firm’s international expansion. This conversation with Sequoia India’s Rajan Anandan was recorded at Surge – our rapid scale-up program for early stage startups. Listen on to hear Doug’s frank takes on the different aspects of company building.

Rajan Anandan: Doug Leone is the Global Managing Partner at Sequoia Capital. Doug joined Sequoia over 33 years ago. And since 1996 has served as the global managing partner, where he’s overseen the firm’s expansion from a single $150 million early-stage fund focused on Northern California to now a global VC firm that all of you know, that spans China, India, and Europe.

Doug has led a large number of very successful investments, including Nubank. I’m sure all of you would have heard about Nubank last year as they went public. It’s a digital bank in Latin America, and many, many SaaS companies including Meraki, RingCentral,  ServiceNow, Trade Republic, and Wiz. So that’s just a few of the things that Doug has done. Doug has been gracious enough to be with us at several of our Surge cohorts, in person for the first two, where we used to travel to San Francisco and then since then on video. So, Doug, thank you very much for joining us.

Doug, so as I had mentioned, the focus for today is building enduring companies, Doug. And I wanted to start off with Sequoia, you’ve led the firm for 25 years. It’s very, very unusual to have a partnership like Sequoia be at the top of the game for 50 years. This is Sequoia’s 50th year. So Doug, maybe you could start off by talking a little bit about Sequoia and what is it that you and the partnership have done over many decades to get Sequoia to the point it is. So, we’ll start with that, and then we’ll get into all your learnings from working with so many companies.

Doug Leone: So we have understood we live in a rapidly changing world. And as a result, we’ve had to change very rapidly because for us, changing is the only option. There was a time where we used to mind only the Bay area, Silicon Valley. And then we saw entrepreneurial spirit go throughout the globe, and that started around when Netscape went public, we became interconnected, clearly accelerated by the iPhone, new business models and so on.

So we have always changed, knowing that our goal was to support founders in their journey. And support means, it’s very tough for us to help you with product-market fit. You’ve got to figure that out, because that’s black magic. But once you figure that out, we want to be the very best in the world in helping you scale businesses, knowing that we’ve done it now, maybe three thousand times. So we’ve always learned from you as a class of founders, we always continue to learn and we try to take those learnings; and so we have blends of people at Sequoia with all kinds of operating know-how. Rajan is an operator, I was an operator and then some people that are more on the investor side, but we want to make sure that when you have a go-to-market question, we can bring the best go-to-market person in the world and we have them on staff.

If you have an engineering question or product management question because what we want to do is help you solve this thing called the merchandising cycle, that goes from product management to revenue. Wherever that’s broken, it looks like no revenue, let’s fire the VP of Sales. It’s always ‘fire the VP of Sales’, because obviously you founders have always built a perfect product. Well, I’ve got news for you. Nine times out of ten, it’s not the VP of Sales. It is [that] something is wrong in that chain. Sometimes it’s the vision. And so, we help you solve those issues and we’ve done it for a very long time.

And along the way, we vertically integrated from seed, venture, growth – when you get product-market fit – pre-IPO and IPO and beyond, so we can stay with you for 20 years. And we’ve gone to all the geos that matter in the globe; US, Europe, India, China, Southeast Asia. Where we’re not, we tend to be investors in the most valuable company in that nation, that continent, that country – whether it’s Nubank in Latin America or Canva in Australia – and many others. So our goal is to serve you; founders are the head of the dog. No founders, no limited partners, no Sequoia.

The other thing we’ve done; it may matter to some of you, it may not to others… About 70% of our capital is from non-profits, that make the world a better place. Now you could say, “Why do I care about a children’s hospital on the East Coast?” Well, the reason you care [is], over half of the patients come from overseas. So these things, whether the Mayo Clinic or Cleveland Clinic or the great universities or retirees, but most of it comes from non-profits. And to us, that’s very important because as we get to see the future through your eyes and we steal some of your energy and we help you build these great businesses that some of you will build, we can also take care of the globe, which we’re really excited about, while at the same time taking care of our families and our careers.

I don’t know where else you can do that. I think that’s a privilege. And so we take that role very seriously and we are maniacal about it. I’ve gone as far as removing posters from Sequoia, because everything we’ve done is irrelevant. Everything we’ve done, by definition, had to do with yesterday. The only thing that matters is you and tomorrow. I want to know tomorrow – and you represent the opportunity for us and for the world, which is why, it’s that attitude we’ve managed to keep fresh for 50 years.

Sequoia’s culture - Spiky people with a “We, not I” mindset

Rajan Anandan: That’s great, Doug. Doug, let’s double-click a little bit on one aspect you just mentioned which is values and culture and what’s important. Maybe Doug, you could talk a little bit about what are the most important values from a Sequoia standpoint. Over the next couple of weeks, we are going to talk a lot about culture and values for each of our founders and their companies. And also, how do you sustain and evolve a culture over five decades? Because you know, usually in a five or ten year period, things start getting diluted. So, talk to us about culture and values at Sequoia. 

Doug Leone: First and foremost, you have to hire the right people for the culture you’re trying to achieve. If I am selling toothpastes, I know there’s no innovation. I’m looking for a different culture. It’s a market share, a penny of gross margin. But in a world of rapid change, of novelty, I need people, we need people that believe they can change the world. And we need people, I want to say this gently and politely; spiky, non-linear, sometimes injured people. Injured in life – I don’t mean physically – that are pissed off and have something to prove.

It could be, daddy told you or didn’t tell you [he] loved you one more time, or competition with an older brother. You know, it could be a lot of things, only you know. It could be a girl saying something to you when you were 12 and really hurting you in one comment, which may seem trivial to another person but boy, it changed your freaking life. It made you who you are. So it starts with spiky founders who have the courage and the vision to do something and we hire the same people at Sequoia. We do not want a well-rounded individual, we want a well-rounded partnership that’s made up of spiky individuals. So it starts with that.

And so what we have done at Sequoia [is] we have taken these individuals that tend to be loners, that tend to be ‘I’ people, that usually haven’t been on any teams, and put them in an environment of trust, whether it’s compensation, emotional or otherwise. And we make it very clear what we expect. First, I don’t even talk about it anymore because it’s so expected, and that’s integrity. So, I call that the ‘level zero’. But once you have that, you’ve got to perform and you’ve got to learn to use the ‘we’ pronoun. So if you as founders, if you give a presentation, you say, “I can ship you this”. I bet you a lot of you have said that. No, you can’t ship us s***. Your team can ship that. The people you hire, you bring along that you don’t want to remind them you are [the] founder. They will know already.

Take the word ‘founder’ out of your business card. They know you’re the founder. Don’t make yourself look any bigger because your true skill will be in the ability, not only to build a product – product-market fit – but you bring as many people along for the ride as possible, because you need both of those things to win. And so, how do we have a culture? We are maniacal about that; performance, teamwork, execution, fairness, do the right thing, think long-term, give of yourself… Do the right thing when no one’s looking. It’s very easy to do the right thing when it’s convenient, [when] you’re in the limelight and everybody’s looking, but do it when it really hurts you to do the right thing.

And that’s how you keep that culture and it starts with the top. If I do one little thing wrong, it gets magnified through the organization. Same thing with all of you. So you’re going to be judged by the way you look at people, by your ability to run an organization. You all think you want to run it, but you don’t know what being a CEO is. One day you may have to face that choice, whether you want to be the execution leader of your company.

Because the thing you don’t want to be, is you don’t want to be the bottleneck of your company. And so it’s that, if you will, hard-ass mindset, then the knowledge that the greater risk for us at Sequoia is the success we’ve had. If we take that too seriously and we hang our hats on it, we are toast. And so we’re always trying new things, trying to put ourselves out of business. Do you know how many times we’ve had an offsite, “How will we kill Sequoia?” That’s the topic. What would put us out of business and let’s go do it. That’s the mindset it takes for us after 50 years. That’s the mindset it takes for you, as you try to build your business.

Rajan Anandan: Great, thank you Doug. Hey, let’s double-click maybe just not two aspects that you mentioned; performance and this notion of “We, not I”. Obviously performance being the most important tenant. So for early-stage founders, and as our founders embark on building their companies, Doug, what are the sorts of things that they should do and they shouldn’t do, especially if they want to build a true meritocracy? And in the early days, obviously, you know, you hire lots of folks who are very loyal to you because nobody else would join you, etcetera. And then over time, obviously things have to change, right? So talk to us a little bit about how you think about performance. 

Doug Leone: Well, it’s not just performance. You know, we were talking about trust with someone, and I said, “Trust is the combination of intention and competence.” You have great intention but no competence, no one’s going to trust you. Not your integrity, but he’s not going to trust you because you’re not trustworthy from the business standpoint. Likewise, [if] you have great performance and lousy intentions, nobody is going to trust you either. So when you talk about performance, it starts with you. It starts with clarity. Clarity of where you want to head. You need that – and focus. Then you’ve got to hire terrific people and you want people that can break some glass, get things done.

You want people that are not bound by organizational norms. You want people that just have a need to do things. In engineering, no compromises. You want to start with A, A+ because if you already go with B+ when you’re young, you don’t have a lot. And then, you’ve gotta be ultra focused and super enthusiastic about what you’re building. You have to ooze excitement. You have to believe it in your heart because you’re going to sell something that doesn’t exist yet. And you better have that, because that’s how you convince people to bring along. And then you have to pay them fairly and you can’t be cornered as leaders, as managers. Somebody [says], “They don’t want to do this, so OK, I’m going to appease them”. No – [have] clarity, expect a lot. If they don’t perform, excuse them immediately and move on.

And you’ve got to search for this thing called product-market fit. That it’s going to be tested, not when you sell it, because you guys can sell anything –  you sold [it to] us. But when the mere mortal, when some person off the street can sell your product, that’s when you know you have product-market fit. And then you have to shift and become an execution machine to run as fast as you can. That’s the shift from leader to manager, executive. You know, from idea person to executive machine.

Architect your company, not just your product

Rajan Anandan: What mistakes do founders make, Doug, as they transition from the idea-driven founder to the execution machine? I mean, it’s a very hard transition to make.

Doug Leone: Look, if you put yourself in a poor founder’s shoes, they’re entering a new world, they’re doing the impossible, nervous as hell, you know, scared… They can’t show it in their face otherwise, but it is pretty nerve wracking. It’s healthy, I find that to be quite healthy. It’s normal, if you will. So what the mistakes are, first of all; bringing in co-founder – kumbaya, we all split things three ways, not recognizing that the talents are not three ways. Therefore, now you’ve got a problem with your co-founders too early, very early. Second, choosing investors because, “I’ve got a term sheet”. You know, who cares? When you went into a bar as a young person, did you marry the first person that came up to you and smiled at you? That’s what a term sheet is. They don’t architect their company, they architect their product but not their company. They make compromises in hiring. They don’t know who to trust and sometimes, they trust the wrong investors.

They think their product is never the problem, and I told you that it is often the problem. And so, you have to shape that product. You have to be willing to admit that you’re wrong and zig and zag until you get that product. Remember, it doesn’t matter if you sell it. Can I sell it? Can Doug Leone sell it? A mere mortal. Look, it’s a river. There are rocks in the river. Your job as a Chief Executive Officer is to remove as many rocks as possible so that water can flow. And a lot of people don’t know how to do that. And so, surrounding yourself with the right people, whether it’s a salesperson or a marketing person where you have blind spots and knowing to get the right person, those are the mistakes that we often see.

Rajan Anandan: Got it. Doug, you’ve mentioned, you’ve coined this phrase before, you’ve used this before, which is, ‘architecting the company like you would architect a product’. Say more about that.

Doug Leone: Well, it starts from the investor you choose. It starts from how much dilution you’re willing to incur. Let me give you both sides. There’s the person that takes so many SAFEs (simple agreement for future equity) without realizing by the time he does his $8 million Series A, he has lost half the company… Breaks my heart. There’s the person that says, “I don’t care who the investor is, I’m not going to dilute more than 10%”. They’re both silly points of view. Because you should figure out who that great investor is, map it out, figure out how much am I willing to sell for this caliber of investor and go. That’s one issue of architecting.

Making sure you’ve got the right deals with the co-founders. If you want to last with your co-founders, before incorporating, have a frank conversation: “I love you, Johnny. You are this, but I’m coding it, I’m thinking of it. You’re the business guy. It probably shouldn’t be a 50-50 split”. That’s how you’re going to last, [by] not going 50-50. That’s architecting your company, figuring out who your first employee is, figuring out what do you do now [that] you have a little bit of product. What do you hire? Do you hire a VP of Sales? Do you hire a regional guy? Do you hire a salesperson? Can the salesperson help you with the last ten steps of product management? He’s talking to customers. All those things are part of the architecture of your company early on.

Fail fast: Why flops are better than slogs

Rajan Anandan: Got it, very helpful, Doug. Doug, let’s maybe build on this bit. You’ve seen so many companies that have gone from seed to IPO and beyond, Nubank being the most recent one. And also you’ve seen many, I’m assuming, that haven’t made it, Doug. So as you think back on the truly enduring companies that you worked so closely with over several decades, what did they get right? Obviously, there are some obvious ones you know, some of the early decisions, like who do you get as an investor and how do you think about the cap table and so on. But tell us more Doug, especially the decisions in the early days. 

Doug Leone: So it lives and dies with product-market fit. If a hundred companies fail, 99.5 will be because of product-market fit. You throw a party, nobody shows up. Now, let me tell you, failing fast, no product-market fit is way better than decent, okay product-market fit. Because now, you’re iterating – you’re iterating, you’re spending money and you may never get there. So I actually like better flops than I do slogs. But the companies that get it right, one, have a crystal clear vision and they just build a beautiful product. Even in the early days, it doesn’t have to be the iPhone perfection like that, but the product just solves a singular need, not a ‘Swiss Army Knife’ need.

No one buys a product for five reasons, they all buy a product for one reason. For example, the last two companies I listened to, we made an investment a couple of days ago, cloud data security. It can help the CSO answer the questions, what data is stored in my cloud? How exposed are we? What can I do about it? That is a business problem. Oftentimes the best products, let me talk to B2B, are bottom-up utilities, simple point problems that turn out over time to become platforms that you just can’t get out of the enterprise, because everybody loves them. And so those are the best products. Give me a company with a thousand customers of $50,000 than five customers of $10 million. You want lots of customers, lots of virality, lots of people talking about it. Simple-minded product, scales over time into a platform. Those are the little tricks.

In B2C, you often are over your skis in unit economics and the unit economics are not there until they are. But you have to have conviction that they’re going to get there. And B2C is a different game, whether it be a lending business or an insurance business, and you have to understand all the numbers under the numbers. Are you going to get there really? Or are you going to ship more dollar bills with each new customer? But my favorites, I’ve spent my life in B2B, is B2B from the bottom up and then the companies that have made it, I’ve had super aggressive founders.

I heard Frank Slootman, I don’t know if you know who he is, the CEO of Snowflake and ServiceNow, saying this just this afternoon. He said, “I’ve never gone too fast.” I’ve served on Frank’s board. Frank takes no prisoners. There is no board plan, Wall Street plan, insight plan. He only has one plan – he has no cushion, all out. And to hear him saying, “I’ve never gone fast enough”, because if you got product-market fit, what is the reason for your plan for the next 12 months? Why can’t you do 2x that? And why don’t you try to do 2x that?

So, those are the kinds of questions… Great founders shift into that aggressive mode. Super aggressive founders who are execution machines, because if you do all that and you don’t execute, then you’re in real trouble, but that’s what the great companies have done.

Rajan Anandan: Got it. And when you say ‘super aggressive founders’, one is ambition. So tell us more Doug – just double-click because I think we’ve got forty founders on this call.

Doug Leone: I told you the sales issue, you know, the company grows from 15 to 60 [million in revenue] then you say, nice plan. Isn’t that a great plan? We all got to the board meeting, we approve the plan. I bet you, no venture investor has the courage to ask, “Why is that the plan? Why not a hundred? Well, in order to do a hundred we would have to do ABCD, why don’t we do that?” Or maybe a founder says, “We ought to do that.” Again, it’s not always like that.

As you’re learning, first you’ve got to get to product-market fit, but you want to know what the great companies have done. They’ve got product-market fit – usually bottom up, not top down – and they went for it. And they all are in a viral component and they all spent little in marketing or sales.

Rajan Anandan: So, to your point about thinking big, being bold, really going for it. If you’re $1 million or $2 million dollars of ARR, and let’s just say you have PMF… 

Doug Leone: So with $1 million dollars of ARR, I would ask the following question. I would first say, “Who’s running revenue?” I want to make sure there’s a guy there or a gal there that has run revenue up to $50 million because you’re not going to get the person, the VP of Sales yet. He may have the VP of Sales title that I usually call ‘National Sales Manager’ or something.

Rajan Anandan: You want somebody who has run a $50 million board?

Doug Leone: Yeah, you want that. It’s called the Regional Manager at another company, but now it’s his shot. You know, he’s managed 15 people, maybe two levels at most, maybe a couple of regional managers, but this is his shot and it’s a good company. Second, I pay a lot of attention to this thing called the merchandising cycle that says, why can’t revenue grow faster? “Oh, we don’t have enough leads.” Well, why can’t leads grow faster? “Oh, the messaging isn’t right.” Let me type your category on the website. You better come up [with] SEO or SEM.

The whole story from product marketing, on to the demand gen of revenue has to dance. Because if you have got that link broken, it doesn’t matter, like you can have a great vision and a great product, but you can’t run too fast. So you’ve got to debug with the CEO, we the board members, we help to debug that lineage back. And so getting that motion right – vision, product, marketing, the demand gen, revenue. Once you have a semblance of that, then you can stop pushing.

I hear a lot of sales productivity models, eight out of ten salesmen make quota. How wonderful is that? Three out of 10 salesmen didn’t make quota. How terrible is that? A part of me thinks about it the other way. If eight out of 10 salesmen make quota, you haven’t hired fast enough. Think about these things with an open mind and understand what the problem you’re solving really is. And then run!

The gross margin line doesn’t lie

Rajan Anandan: Got it. That’s very helpful. Doug we talked about growth and revenue and ambition. Let’s talk about margins.

Doug Leone: In some ways you can futz any line in a P and L, but you can’t futz the gross margin line. You want to grow revenue, you can spend a ton of money. In sales, as soon as I see a rapidly growing ARR, my head and my eyes go right to the sales and marketing line. What have you paid for that ARR growth? If you’ve had to pay an incredible amount, I’m not as impressed. Or you can show a lot of profitability by stalling growth and then you become profitable. But gross margin is the line that says how unique your product is and how much somebody wants. Now I’m not saying that percentage is always the game. If you’re an Amazon, you make it up on volume. It’s a scaled business. None of you guys are in a scaled business. You are all in the non-scaled business. And so to me, the gross margin line is the tell-all line.

For example, your gross margin, your software company are in your fifties or sixties. It could mean that you’re very small and your hosting services haven’t come up to scale. I know how to break that apart. It could also mean that you have to wrap a lot of free consulting because your product is too complicated. That’s what it usually means, because software is cheap, software has no cost, zero cost of goods sold. It could mean that you have to wrap up industry consultants on it, because you’ve got to verticalize in the market because it’s too tough to sell horizontally. It could mean it’s too tough to support, because the cost of support is the cost of goods sold.

So to me, the gross margin line is that it doesn’t lie. It’s the reality of your business and, you know, great businesses, Amazon excluded obviously, there’s always an exception, have wonderful gross margin. There are lines, for those of you in SaaS, your favorite investment banker will show you market caps of companies in relation to gross margins and it’s a very clearly linear approach.

Rajan Anandan: Yesterday, the founders, we did a roundtable. Each founder sort of talked about what is the single biggest challenge that they have. I think 90% of them said hiring. As you know, it’s a very hot talent market everywhere around the world, especially in places like India and Southeast Asia. What are some of the hiring mistakes founders make? You’ve seen so many folks get hired in early-stages of companies, Doug. And what should founders watch out for?

Doug Leone: Hiring friends. Not hiring world-class people in engineering. Hiring suits. Hiring for experience versus for smarts. If you’re going to find someone that looks like Rajan – not like me, I’m too old – make sure he can break a problem from first principles. Make sure he doesn’t come to you with the answers before he understands the questions. If two people look identical and you have some doubt about the first principle, go with the brains, go with lesser experience. Give me less experience any day over someone that has a playbook hardwired. Those are the mistakes we often see.

Rajan Anandan: And do founders move fast enough when they don’t get it right, Doug?

Doug Leone: No, because oftentimes in some cases they’ve never really managed anybody. They are afraid to admit a mistake. Failing fast is great, ladies and gentlemen. Fail fast, and we’ll support you in failing fast. Don’t worry about how you look in front of the investors. This is where we can come in with you guys. When you have your little company and you have nothing at the start. As you know, you may have $2 million, $1 million, $3 million, but that’s not enough. But in the early days, as you try to have credibility, when there’s really nothing, Sequoia can really help you there. Can really help you hire to tell your story. You, for your part, you have to have high conviction. And a bit of sales skills, as you convince another human being to bet their career and join you. 

Rajan Anandan: Doug, earlier you mentioned flops are better than slogs – How should this inform a founder’s mindset when it comes to PMF in the early days of building a company?

Doug Leone: Well, exactly. Go for it. What Shailendra said is, “There are many roads to heaven.” I always remember that line from Shailendra. There is Slack who started as a gaming company and did a hard ride in May. But I have a really tough time – and there may be one or two – thinking of a company that was a slog for five, six years, and magically overnight became a great business. And I would ask you, do you want to preside over a six year old slog or would you rather do something else in year two or three? Now we will ride with you because in some ways, and I don’t mean to say, we know more than you. When one of you is in trouble, we fight like crazy and help you out and we’ll go there with you if you want to keep on fighting. But at some point you want to ask yourself the question, how long do you want to fight?

So, I’m a fail-fast person. Even though it’s painful to the ego, it’s painful to the soul, it’s not as painful as failing slowly, I’ll tell you that. Recoup the time and go do something else, which isn’t to say you ought to give up at the first bump, in a night. I’m not saying that, right. We’re all talking to one another, we all know what that means. But if after two or three years that the market is spoken, you’ve got three customers, four customers, it might be a little too painful.

Servant leadership starts with you

Rajan Anandan: Let’s talk a little bit about culture, Doug. As founders start scaling and hiring quickly, how should they think about protecting their culture?

Doug Leone: You have to pay a lot of attention to it, especially in the Zoom world. You have to  spend the calories, you have to write it down, and you have to act it and you have to remind one another. And you are the Chief Culture Officer as a CEO. Look at Sequoia US – I don’t know what India does – since COVID, we have daily check-ins for 30 minutes, every day. Not everybody attends everyday because sometimes, you’ve got a board meeting or [a meeting] for a company that has a short fuse, but we have daily check-ins because we’re not in the office. You have to figure out how decentralized you want to be.

The engineers tend to be able to work remotely. Salespeople like to be in groups, they’re more social. The farther apart you are, the less able your company is to handle a bump. If you’re far apart, make sure you get together a couple of times a year so you have that connection. But the answer is, there’s no easy trick, ladies and gentlemen, you have to work at it all the time, by your actions, your behavior, reminding people, leading by example, being generous and kind and being a servant. Servant leadership. It starts with you. Basically, you work for all of them. They don’t work for you. You work for all [of them]. It’s your job. I mean if you really want to win, you enable all of them. That’s how you win. That’s how you really win.

Rajan Anandan: Servant Leadership, Doug. Double click on that. What does that really mean?

Doug Leone: It means maturity on the part of the leader, that his job is to facilitate the job of everybody that works for him. So, they can go faster, they can execute. It means freeing people from working hierarchically, freeing them to go across geos, giving them the confidence across functional areas. Just give them the confidence that people have their heart in place and it’s not [that] people are swimming in their lanes. Coaching people, helping people, saying when you’re wrong, holding them to a standard, taking no prisoners but being there to help. That’s what servant leadership is. I’m here to help all you guys, that’s my job.

The number one reason companies fail

Rajan Anandan: Doug, when it comes to companies failing, the number one reason is PMF… You’ve said that to us many times. Let’s talk about that a little more.

Doug Leone: It’s rarely that the technology doesn’t work. Look, it’s either tech, it’s people, it’s money – which now there’s always – or it’s market. It’s usually market. [The] product always works sooner or later. We’re in a digital run, three months later, six months later, the product is going to be there. It’s usually product-market fit.

Look, and it’s really tough. When I was a young associate, I did an investment in an envelope printing company. I called 40 customers, “Would you buy an envelope printer?” If I asked you guys, I bet you all, you guys would say yes. You know why? Because you stick the envelope, it prints the thing, isn’t it beautiful, right? We built the darn company. I think we sold three envelope printers because the founders and I didn’t ask the right question. The right question is, “Would you spend $3,000 for an envelope printer?” Ah, holy s**t – that’s a different question. Who does the label of your envelope? Your assistant? What does your assistant make? $14,000 a year, back then. Well then, you wouldn’t spend $3000 for that.

You understand all the second order questions… So my favorite question to founders, the moment I meet them is, “How did you get your insight for the business?” And nine times out of 10, great founders have that personal relationship with the problem. Once in a while you get eBay. Five guys get in a room, they figured out eBay, but no personal experience of the problem. But most times, you’ve had firsthand knowledge. I want to hear about that, because that gives you insight and the solution.

Rajan Anandan: And what metrics exactly do you use to define PMF?

Doug Leone: Customers paying.

Rajan Anandan: How many customers?

Doug Leone: Customer using… Virality in the product, if they’re not paying, knowing that you can turn that on to B2C. Usage. Usage by customer. That’s PMF. I can’t describe it to you, but you know it when you see it.

Rajan Anandan: Especially in a B2B context. If it’s very difficult to sell and you’re really slogging, as you said, to sell it, that’s probably not a good sign.

Doug Leone: If you’re selling something for 12K and you’re stuck at that price point forever, you’re going to be in hell. If you have to sell it better, like you better get to a 100K fast in the first year. You know when the customer starts giving you, starts trusting you, starts trusting the fact they’re willing to buy an imperfect product from a new company. The only way to do that is if you’re unique in your product and you solve a real pain. If you don’t solve a real pain, why bother? If you’re not unique, why should I risk my life, my career, to look stupid in front of my boss? Whatever.

Rajan Anandan: When it comes to moving fast, how can founders create checkpoints that avoid biased thinking?

Doug Leone: Well, look, the greatest checkpoint is a customer. OK, now you’ve got a customer. That’s great. I’m sure that you sold the customer. Alright, go sell a second customer. Okay, now you can convince two. That’s another checkpoint. Okay, I ask, whenever I see the first 10 customers, I start asking the CEO whether there’s one of those 10 customers where he or the other co-founders were not involved. That’s a checkpoint. Ah, boy, remember I mentioned this regional sales manager, your regional sales manager, selling a product, a version with the pre-sales guides. That’s a hell of a checklist. If they can knock it in and do it again, boy, they can do it three times.

Then the next checkpoint is one salesman selling everything, maybe he has superpowers. Which happens by the way, you know… Can a second salesperson sell something? Another checkpoint. Alright, now it’s clear people can sell. How’s my pipeline looking? Is it big enough? Why isn’t it big enough? I’ve heard people say I don’t have enough leads, and they’re convinced we just need more leads. “Oh okay, bring in the lead gen person. Oh yeah, headcount – great.” You have your headcount. Ah, now the lead gen person is freaked out. Well, it’s not just a head count. You know, it’s a difficult conversation with a customer. It takes a while for the customer to get it, which is a synonym for the ‘positioning is wrong’ on the product.

And so you have to solve all this, simultaneously figuring out what the real problem is. Those are all checkpoints.

Focus on solving a singular problem

Rajan Anandan: Got it. Very helpful. In the early days, first year, how does one balance the strategy of staying focused on solving a singular problem very well, versus handling Swiss [Army] Knife product requests from marquee customers, enterprise customers? 

Doug Leone: A few words. First of all, let go of the word strategy and think about execution. Okay, forget about strategy. Strategy is a business school term. Throw it out the window. It’s raw execution. What is it you need to get done? What is in the best long-term interest of the business? So you have three marquee customers, Swiss [Army] Knife. Well is it in your best interest to do all three or is it in your best interest to do one? Because one is in a vertical market that you think the next five are going to come from.

Sometimes you have to say, “No”. And so these are the judgment calls you have to make. You have three customers. One financial services, one industrial, you ask yourself, “Where are likely the next five going to be?” And maybe you don’t do the industrial. And maybe you forgo that revenue. Remember, I was very clear – what is in the best long-term interest of your company? Not short-term. Now clearly you have to survive, right? Because you’ll never get to the long-term. I’m not an ideologue. But you’ll find that many of these customers with a Swiss [Army] Knife, they actually end up costing you money. What looks like revenue is really a cost center, so you have to be careful.

Doug Leone: So I’ll give you one last thing. It’s not so much [that] we want to push you. We want to help you. We want to help you identify the best person. I just got an email from a company. “Microsoft is stalling us”, blah, blah, blah. Three hours later, we have this most senior executive at Microsoft, the doors were wide open. Suddenly they can do their integration. So, things like this – help close in a candidate. We’ve seen that mistake. “Talk to that VP. You think your VP of sales is great? We’re not going to argue about it, but meet these three guys and see what you think after you meet those three folks”. That’s how we do things.

And then, there’s the whole founder-friendly, which is like, when someone calls you, “Buddy”. Have you ever come across people, they meet you in New York and suddenly they call you , “Buddy”, and your antenna goes way up. Founder-friendly should have the same thing. I had a founder yesterday – I was trying to win this deal for this company for one of our partners and this poor founder, scared shitless. He says, “I hear Sequoia is tough, and not as founder-friendly”. And I let them talk for a while and I said, I asked him if he had any children. “Yes, I have a son”. Great. I asked him if he thought that business is war, we’re fighting for a finite pile of goods. He said, “Yes”. And so, let me tell you what you just asked me, Mr. Founder. I’m going to put it in your eight-year-old son’s name. When your eight-year-old son is 18 and he goes to war and he’s looking for allies to survive, you just asked me as an ally, if I’m sweet. Is that really the first category you want? Me next to your son at war; do you really care whether I’m sweet?

Or is there a better question that you can ask? Such as, can you help here? Can you help there? Can you do this? Can you do that? Think about the frame of reference, whether I’m sweet, right on the eve of going to war. If I was going to war with any one of you tomorrow, if we were being shipped to Afghanistan, you would not give a darn whether I’m sweet or not. You’d care if I’m trustworthy, if I have your back, if I have any special skills to help you win. Now, that sounds pretty darn harsh. Right? Get used to it. That’s what your life is going to be about. Remember the numbers I gave you, get used to it. We can help you increase those odds by a whole bunch. And I want to leave it like that for you to make it very clear, the mountain you’re about to climb and how committed we are to you to help you climb that mountain.

Rajan Anandan: Doug, thank you so much for joining us. This is Doug Leone, just as Doug is.

Dewi Fabbri: Doug always likes to keep it real! I hope you’ve enjoyed listening to his insights. That was Doug Leone, Global Managing Partner at Sequoia Capital, in conversation with Sequoia India’s Rajan Anandan at a recent session of Surge.

For more interesting startup stories, visit our website ( or follow us on your favorite podcast channel. I’m Dewi Fabbri, and you’ve been listening to Moonshot.