Sequoia bets on silence | TechCrunch

[ad_1] There's a time-honored disaster administration technique, whereby one says nothing and waits for the outrage to go. For Sequoia Capital, the technique labored fairly effectively this week. Whereas companion Shaun Maguire initially weathered criticism over an inflammatory social media submit, that preliminary indignation cooled shortly. Now, some appear to assume that Maguire’s defiant stance could even be strengthening his place. Enterprise Insider truly known as it “good for deal stream” — controversy as aggressive benefit.

Sequoia’s calculated gamble carries actual danger, although. One other provocative submit from Maguire that hits the flawed nerve, a shift in political winds, or escalating penalties may shortly rework their unflappable companion from an asset right into a legal responsibility the agency can not afford to disregard.

A disaster communications skilled who has managed popularity disasters for dozens of main manufacturers tells this editor, “Corporations like Sequoia are bulletproof till they aren’t.”

What occurred

Sequoia’s hands-off strategy was put to the check earlier this week when the storied enterprise agency discovered itself within the eye of a storm over Maguire’s feedback about New York Metropolis mayoral candidate Zohran Mamdani. Maguire known as him an “Islamist” who “comes from a tradition that lies about the whole lot” in a July 4th tweet on X that has since been considered greater than 5 million instances. Multiple thousand signatures have poured in since on a petition demanding that Sequoia condemn the remarks, examine Maguire’s conduct, and apologize.

There’s been plenty of discuss why Sequoia hasn’t completed this, with many retailers noting that Maguire isn’t simply any companion. This standing owes partly to his friendship with Stripe co-founder Patrick Collison. In accordance with studies, at a 2015 Founders Fund occasion, Maguire—then a Founders Fund-backed entrepreneur—defended Collison throughout an argument with Anduril’s Palmer Luckey about quantum computing, incomes Collison’s friendship. The connection proved precious when Maguire joined Google Ventures in 2016; he helped safe a $20 million Stripe funding throughout his first week. When Maguire left Google Ventures in 2019, Collison personally really helpful him to Sequoia’s companions. (Stripe has been in Sequoia’s portfolio since 2010, with the agency investing greater than $500 million over 15 years.)

Maguire additionally led Sequoia’s funding in Bridge, a stablecoin platform that Stripe acquired for $1.1 billion, and is reportedly Sequoia’s hyperlink to Elon Musk, although that is in all probability considerably overstated. Musk and Sequoia’s world managing director, Roelof Botha, are each native South Africans and have identified one another for greater than 25 years, relationship again to their time collectively on the then-nascent PayPal, the place Botha was recruited personally by Musk.

Regardless of that lengthy relationship, the 2 haven’t at all times seen eye to eye. Botha was extremely important of Musk’s administration type when Musk was CEO of the merged X.com/PayPal firm, the place Botha was CFO. Botha as soon as informed veteran journalist Ebbe Dommisse, “I believe it will have killed the corporate if Elon had stayed on as CEO for six extra months. The errors Elon was making on the time have been amplifying the chance of the enterprise.” However Musk was at odds with just about that complete crew on the time, and people tensions have lengthy since been resolved.

The larger level right here: whenever you’re managing tens of billions of {dollars} in belongings and your agency’s popularity rests on backing winners like Google, Stripe, and Nvidia, you don’t simply forged apart a rainmaker.

In the meantime, Maguire’s habits suggests he’s not backing down. After issuing a 30-minute video on X final weekend through which he apologized for offending so many — saying he was making a degree a couple of political ideology and never one a couple of faith — he has doubled down with more and more aggressive posts this week. He claimed he has “reverse engineered” his critics’ “command construction” and threatened to “embarrass” anybody who escalates towards him. He added that that is him at “1% throttle” and warned individuals to not “fuck w youngsters of the web.”

The silent therapy

Sequoia has precedent for its strategy to this example. The agency has traditionally given its companions house to specific themselves publicly, with figures like Doug Leone and Michael Moritz (who left the agency in 2023) representing completely different political views.

However there’s an important distinction between political range and incendiary rhetoric and clearly to some, Maguire’s feedback lengthen past partisan politics into territory that alienates each political opponents and potential enterprise companions.

It’s additionally value remembering that even for Sequoia, there's a brilliant line. Michael Goguen, one other, earlier rainmaker with the agency, was promptly proven the door when Sequoia realized of a sexual abuse lawsuit filed towards him. The conditions are hardly comparable; Goguen’s points have been authorized and private, not ideological. On the identical time, Sequoia has proven it isn’t prepared to circle the wagons at any value, not if its popularity is at stake.

Presumably, a number of elements inform Sequoia’s do-nothing PR technique, together with how shortly individuals, confronted with a relentless flurry of reports, transfer on from a scandal. The agency can also be working in a distinct political panorama proper now within the U.S. Together with Donald Trump’s victory and the rollback of DEI initiatives has come new tolerance for controversial speech. What may need been career-ending at an earlier cut-off date is now weathered extra simply.

The agency can also be probably banking on the truth that whereas founders need companions who match the normal, extra genteel VC mildew, they need profitable ones much more. Startups being courted by a number of top-tier corporations won't like or agree with Maguire, however when Sequoia comes calling with its monitor file and virtually bottomless pockets, most founders are going to welcome the agency with open arms.

There’s additionally the very actual risk that Sequoia is engaged on a contingency plan. (Sequoia declined to touch upon Maguire’s posts when reached by TechCrunch earlier this week.)

Nonetheless, Sequoia’s silence carries dangers. Not all of the signers have been confirmed, however the petition towards Maguire contains the names of some distinguished Center Jap executives and founders who've attested to signing it, they usually symbolize the type of various, world expertise pool that drives innovation. By not addressing the controversy, Sequoia dangers being seen as tacitly endorsing Maguire’s views.

Put one other method, although the enterprise capital world has traditionally been remarkably forgiving of controversial figures with distinctive deal stream, the agency is playing with its popularity in an more and more related world market the place alienating complete areas and communities carries actual enterprise penalties.

Whether or not that guess pays off will rely upon how lengthy the controversy lingers, how a lot enterprise it truly prices Sequoia, and whether or not Maguire can resist the urge to push issues previous Sequoia’s personal tolerance threshold. (He has stated he doesn’t submit something that hasn’t been “excrutiatingly thought out.”)

Historical past means that established monetary corporations with sturdy monitor information are inclined to outlive their scandals, even critical ones. When Apollo International Administration’s Leon Black resigned in 2021 over his $158 million funds to Jeffrey Epstein, the agency’s inventory barely moved and shareholders appeared largely unfazed. Apollo simply continued its aggressive deal-making below new management.

Equally, Kleiner Perkins survived Ellen Pao’s high-profile gender discrimination lawsuit in 2015. Nevertheless it took years and primarily a wholly new group for the storied enterprise agency to regain its footing in Silicon Valley’s hierarchy. The lesson right here could also be that whereas controversial companions might be endured, the restoration timelines can range considerably relying on how corporations deal with the disaster.

For now, the disaster communications skilled, who requested to not be named, has some recommendation for Maguire and, by extension, Sequoia. Concerning the video Maguire revealed within the aftermath of his preliminary feedback, the knowledgeable stated, “I did assume that apology addressed the ambiguities in [Maguire’s] submit. Nevertheless it’s a 30-minute video — it's a must to be actually to observe this.”

If there’s a subsequent time, the skilled stated, Maguire ought to “do two movies — one for 3 minutes” and one other, longer video, for anybody who desires to maintain watching.