- Startups should now be ready to take advantage of growth opportunities following the pandemic, Sequoia recommends.
- A year ago, Sequoia warned that COVID-19 was a “black swan” event that could hurt them.
- Yet Sequoia and its portfolio companies performed very well during the pandemic.
- See more stories on Insider’s business page.
According to the latest memo on the state of the startup world by Sequoia Capital, it’s time for startup to start growing in a post-pandemic world.
In the memo sent Thursday, Sequoia advised founders and CEOs of its portfolio companies to take advantage of trends that COVID-19 has brought to the fore. While they need to stay disciplined in their spending and prepare for long-term uncertainty, the venture capital firm team wrote, they also need to reconsider their long-term goals and set big ambitions.
“The present moment in our path to recovery is an opportunity,” Sequoia’s memo said. “If you feel confident about your business after vaccination, now’s the time to step on the gas carefully (or the accelerator pedal if you drive electrically).”
This is a clear tone shift from a year ago. In March 2020, the VC firm warned in another famous memorandum that the coronavirus was a ‘black swan’ – an extreme, unpredictable event – that could hamper startups’ ability to run their business, as well as raise extra funds. to gather. Some industry observers have compared the warning to a submission issued by the firm during the previous economic crisis, entitled ‘RIP Good Times’.
Brightfield CEO Jesse Levin told Insider that the “black swan” memorandum led to a “herd mentality” among startups that panicked over their cash reserves and chose to cut staff. In April 2020 alone, 269 starters laid off 26,651 employees, according to Layoffs.fyi, a site that monitors layoffs and jobs.
But unlike the 2008-’09 financial crisis, venture capital activity proved resilient during the pandemic. By the summer, VC businesses were writing checks again and, according to Pitchbook and the National Venture Capital Association, would invest a record $ 150 billion in U.S. businesses by 2020.
By the end of the year, the public markets were also eager to accept technical stock exchange again. Airbnb, which is backed by Sequoia, saw the light of day in December and its share rose 143% on the first day of trading. By all accounts, Sequoia performed well last year, Bloomberg reports, with two of the firm’s funds delivering 11 times more returns.
And 2021 is already starting just as hot. On Sunday, Stripe announced that it had raised $ 600 million in funding, raising its valuation to $ 95 billion – the highest among private U.S. technology companies.
Although the pandemic has not completely subsided, Sequoia says the time has come for optimism.
“We see a lot of green shoots when we enter a world after the vaccine,” reads his memo.
Sequoia declined to comment further.