Sequoia wants to invest $1 million in your idea, then teach you how to really sell it

There are a lot of internal programs for the people it backs at the investment firm. The idea is to help its startup not just by dint of their affiliation with Sequoia, but also by helping them at the beginning with everything from story to recruiting strategies in order to give them an edge over their competitors.

Some of that know-how is being used for a seven-week program called Arc that is being used to bring even more promising founders into the fold. The idea is to invest $1 million in each company that fits the firm's criteria, after which Sequoia hosts the startup for one week, brings then programming together virtually for five more weeks, then pulls them together in person again for a final week in which they present what

Roughly the same number of startup will be accepted into the U.S. program in September as they are in Europe. In order to learn more, we talked with Jess Lee, who is leading the charge in the U.S. It has been edited lightly.

The Arc is an outgrowth of the internal programs of the company.

That is correct, that is the case. There is so much that goes into building an amazing company, and what we have tried to do over the course of many years, across multiple programs, is boil all of that down into basic company building concepts on topics like culture, hiring, product, and customer obsession.

The 17 companies that you settled on were the ones that you thought were the most promising. All those applications are read by someone.

The investors are reading them. We spoke with many people who applied and ended up in this class.

Each team gets a million dollars. In exchange for its capital, what amount of stake does Sequoia get? Is it less than 10? Is there more to come?

We have the ability to modify the terms. For some people, what you said would be typical. Some people who were already in the process of raising their seed round were put into a $1 million round by us. There is a small amount of a range. Pre-seed or seed companies are the majority.

The program uses the word "outlier" to describe what it's looking to fund, but it sounds like it doesn't mean "outlier."

We are looking for people who want to build companies that carve out new markets. The scale of ambition is more important than any one person.

What is an example of a European team carving up a new category?

Choice options is really interesting. Martin Gould is the founder of the company. He knows a thing or two about experience. He observed that the best way to fix the paradoxes of choice was to narrow it through understanding your tastes. He is trying to do that for a lot of different things.

What is the amount of time commitment for both sides?

The first week and last week are both in the Bay Area. We will go on a field trip in the fourth week. The location for the Americas' program is not yet known. It takes about one-and-a-half hours each day to teach a concept and a framework, or a founder or an operator from the field. When there is time for the founders to get back together, we call it a pure board, where they just get into their groups and talk about what they do.

The European cohort is almost done after seven weeks. Is there more funding offered to any of these startup?

Nobody is going to get a check at the end. There is not a demo day.

I was reminded recently that Sequoia was an investor in Y Combinator and owned a direct stake in the business. Is that still true?

I think we were many, many years ago, even though we are not anLP anymore.

Arc seems to be competing with YC. Is it possible that the relationship could be strained?

It can be complimentary. YC helps you raise money and gives you velocity. I think our program is geared towards long-term company building and I can imagine someone going through both.

The market has changed a little. There is a lot of structure being introduced into deals where it wasn't before. What are some of the terms that you wouldn't recommend to your startup?

It is better to avoid structure if you are wearing a founder hat. You can get wrapped up in structure and get your hands tied if you have a clean down round.

It's possible to look at all of this in a different way. The multiples, the stock market, and theStimulus were just anomalies. If you look at companies and remove the valuations from a map, you might be able to see where you are going in the next few years. Based on the analysis that I saw, I believe our returns are related to that.

In the meantime, founders, especially newer to the startup world, might be wondering why they are having to reduce their spending at the same time they are seeing firms raising billions of dollars in capital. They may be wondering if there is a problem.

The firms operate over a long period of time. The idea is to outlive the highs and lows of the market cycles.

The growth and venture funds are on time. They are raised every two to two and a half years. There was no real speed increase.

We changed our structure a tad. The Sequoia Capital Fund can hold public companies and allow us to break the 10-year cycle where you have to give your investors their distributions. If we had actually managed for our shares, and they hadn't cashed them out, we would have gotten a lot more back.