Sequoia partners share how they decide which startups get a yes

Partners at Sequoia Capital recently unveiled their distinctive approach to evaluating startup investments in a candid discussion on the 'Jack Altman' podcast. Alfred Lin and Pat Grady provided insights into the structured yet intuitive process their team follows to determine which startups receive funding. Grady revealed that for over a decade, the firm has meticulously recorded votes from all partners on potential investments. Interestingly, he noted that the overall consensus is less relevant than the conviction behind individual votes. "Our internal data shows that consensus versus non-consensus does not matter at all," he stated. Instead, it’s the presence of strong beliefs among partners that significantly influences decision-making. With a legacy of backing high-profile companies like Apple, Nvidia, Reddit, and SpaceX, Sequoia continues to make waves with newer ventures such as Kalshi, a prediction markets company, and Harvey, a legal tech startup. Grady, who has been with Sequoia for nearly two decades, explained the voting system: team members rate potential investments on a scale from one to ten. A score above six is deemed positive, while four or lower signals a negative outlook. "If everybody's a six, we probably shouldn't make the investment. It's consensus, but nobody has conviction," he noted. On the other hand, a split where some partners score high while others are low is seen as a positive indicator, emphasizing the strength of passionate support over uniform agreement. Lin, who joined the firm in 2010, emphasized the importance of cultivating a risk-taking mindset among junior investors, many of whom come from a background of academic excellence. "A lot of the people that join our team haven't had much failure, and we have to help them get comfortable with it because otherwise we're not going to get the outlier wins," Grady added. This focus on nurturing a tolerance for risk is crucial for the firm’s ongoing success in the unpredictable world of venture capital.