Jeff Wang
speaker
190 appearances
1 recordings
1 series
first heard Oct 2024
last heard Oct 2024
Jeff Wang’s voice in public audio — every appearance, attributed to the second.
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Appearances
I think it's hard. I think it's hard to know. And this is part of the being emotional and attached or not. I think it's really important to be dispassionate and look at the data in a way that synthesizes it for what it is. So if it's good, we have to really call it good. If it's bad, we have to really call it bad.
And so one of the things that we've done is we've actually pulled in our data science team as an extension of the investment team. They join our weekly pipeline meetings. We have them very tightly integrated with our investment team to make sure that I think we have that data science angle in all of our processes.
What we have as investors is a thesis. On the private side, you can get a lot of data to go verify that thesis, right? You're under NDA or you're on the board and you have depth of information that you can then go verify a thesis. We don't have that in the public markets. The data that you have in the public markets is the same as every other investor. That's Reg FD, right?
So the smallest investor to the largest investor in a company, you don't have any different information. So to the extent that we can, from the outside in, verify a thesis, that is very helpful for validating how big do we want to make that position. Is that thesis actually still holding true? Has something changed? Has competition come in and knocked us off the top seat?
So I think that is very helpful for our investment process.
Shopify has been one of our biggest winners. It is also one of my bigger regrets in terms of post COVID. Coming out of COVID, we simply modeled a baseline that still had the post COVID trend continue to go up and to the right. And that was the case for a lot of e-commerce companies, right? So one thing that we got wrong is a lot of things return back to pre COVID.
humans don't really change that much or they change more slowly. And so e-commerce really returned back to the pre-COVID trend line. Shopify is still continuing to gain share against the total e-commerce and the total retail pie in a very nice solid way. But to model this, 800 basis points step up in a year and to say that that was going to continue from that trend, that was obviously incorrect.
We started to see that in the data and, you know, being detached to a company, really liking the management team there, having it be one of our biggest winners. I think it's, you have to be dispassionate when you see the data changing. And we held out hope for longer that, okay, this is just a blip in the data. It's going to get better again. It's It stepped down. It's still a great business.
It still continued to grow against a very positive trend in e-commerce taking, you know, share from overall retail spend. But that trend line was simply lower than we thought.
It just makes you focus on being dispassionate in a way that I think if I can get help from data science, if I can get help from my partners, I think that helps us be better. One of the things that we do is we have a quarterly review of the entire portfolio where we do a re-underwrite of every single position. Because unlike the venture world, we can buy and sell every day, every minute.
And so typically the re-underwrites driven by the team, the individual partner and the analyst who are supporting a particular investment. In the controversial investments, one thing that we will do is we will have a fresh underwrite from a different partner where you have a devil's advocate position. I think that's important for helping us be dispassionate.
So you've probably listened to the Sequoia Crucible Moments podcast where Ruloff dives into these difficult moments in a company's journey that require a lot of fortitude, but ultimately set the company in a better direction. That was 2016 for SEG. I'm not a founder, but I did help guide SEGE through what I call a refounding moment. So Sequoia had hired an original portfolio manager for SEGE.
You know, in 2009, he was a smart, hardworking guy, but didn't really unlock the synergies that we should have within our ecosystem. So really, he had the same playbook at his prior hedge fund. And so in a lot of ways, he was trying to recreate his prior hedge fund, even invest in non-tech areas, for example, as opposed to building something special and unique to Sequoia.
And so performance was good. It was not great. And so there's this crucible moment in 2016 where Sequoia decided to part ways with the original PM and actually consider shutting down the business entirely. So as the senior most partner remaining on the team, I was asked to come up with a business plan and convince the broader partnership why version two would be better.
And for us, it was an incredibly unifying moment because we were really fighting for our survival, right? The team actually, we actually all left the office. We rented some coworking space down at the Hana House in downtown Palo Alto, just to get some space and clarity for clarity of thinking. And ultimately the prescription, the strategy was pretty simple.
It was just simply focus on the areas where we have an advantage. That is investing in growth tech with a meaningful thematic overlap with broader Sequoia and co-investing alongside in late stage privates. So gone were the days of investing in lodging companies, port infrastructure. We even invested in an airline miles program. Yeah. And so we were just focused on the Sequoia sweet spot.
And when you look at the pro forma analysis of those returns, it was actually very strong if we just removed all the non-tech areas. And so what we did, we pulled together a 50-page PowerPoint strategy presentation, and I had to sit down in front of the partnership in the Menlo Park office in the main Ford conference room in the hot seat for founders and present to the partnership.
I was terrified. I was terrified. And I didn't really know if it would really work. I give Mike Moritz all the credit for this. The way he suggested framing it was, yes, this is a leap of faith to invest behind this team and this strategy now.
But it is way less of a leap of faith than back in 2009 when we didn't have a team, we didn't have any capital or LPs, no back office function, no clarity on whether we would have any ecosystem advantages in the public markets. And now we have all these things and we have a team that's bonded together that believes in it.
I think the public markets, especially when you're trading actively like we do, is actually a very different discipline from a continuation fund. So in a continuation fund, what you're typically doing is saying, this company that I've known for a long time, do I sell it or distribute the shares over time? And I think that most venture funds can be very good at that. What we do is different.
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