- Startups must prepare now to take advantage of growth opportunities after the pandemic, Sequoia advises.
- A year ago, Sequoia warned that COVID-19 was a “black swan” event that could harm them.
- However, Sequoia and its portfolio companies performed very well during the pandemic.
- See more stories on the Insider business page.
It’s time for startups to start accelerating growth in a post-pandemic world, according to the latest memorandum on the state of the world of Sequoia Capital’s startups.
In the memo sent on Thursday, Sequoia advised the founders and top executives of companies in its portfolio to take advantage of the trends that COVID-19 drove. While they must maintain discipline in their spending and prepare for persistent uncertainty, the venture capital team wrote, they must also review their long-term goals and set big ambitions.
“The current moment on our road to recovery represents an opportunity,” said Sequoia’s memo. “If you feel confident about your post-vaccine business, now is the time to start stepping carefully on the accelerator (or the accelerator pedal, if you are driving electric).”
This is a marked change in the tone of a year ago. In March 2020, the company VC warned in another famous memo that the coronavirus was a “black swan” – an extreme and unpredictable event – that could impair startups’ ability to manage their businesses, as well as raise additional funds. Some industry observers compared this warning to a presentation the company made during the previous economic crisis, entitled “RIP Good Times”.
Jesse Levin, CEO of the workforce analysis firm Brightfield, told Insider in April that the “black swan” memo led to a “herd mentality” among startups that panicked with their cash reserves and chose to cut staff. In April 2020 alone, 269 startups laid off 26,651 employees, according to Layoffs.fyi, a website that tracks layoffs and job openings.
But, unlike the 2008-09 financial crisis, venture capital activity proved to be resilient during the pandemic. In the summer, venture capital firms were writing checks again, investing a record $ 150 billion in startups in the United States in 2020, according to Pitchbook and the National Venture Capital Association.
At the end of the year, public markets were eager to embrace technology IPOs again. Sequoia-backed Airbnb went public in December, and its shares jumped 143% on its first trading day. Altogether, Sequoia performed well last year, Bloomberg reported, with two of the company’s funds showing 11 times higher returns.
And 2021 is already starting as hot as. On Sunday, Stripe announced it had raised $ 600 million in funding, putting its valuation at $ 95 billion – the highest among US private technology companies.
Although the pandemic has not subsided completely, Sequoia says the time has come for optimism.
“We see many green shoots as we enter a post-vaccine world,” said the memo.
Sequoia declined to comment further.