Sequoia's Investment Memo On YouTube 1

Sequoia’s Investment Memo On YouTube

It is very difficult to get genuine transparency on what VCs look for when making an investment. Some investors share their investment requirements, but how they have assessed opportunities against those requirements rarely. The only public domain investment memo I’ve found is by Roelof Botha recommending that Sequoia make a seed investment in Youtube1. Roelof has supported some of the most exceptional companies within the last 10 years including YouTube (I think one of is own first), Instagram, Tumblr, Evernote, Square, Others, and MongoDB. It really is a rare opportunity to see how such an accomplished investor thought about the opportunity behind closed doors and communicated his thoughts to the partnership.

In 3 succinct paragraphs Roelof articulates his principal theses that underpin why he feels YouTube is a compelling opportunity. One of the most fundamental of these is his hypothesis that YouTube may become the ‘primary wall socket of user-generated video content.’ This is supported by calling out several ‘strong blood vessels’ (macro tendencies) that YouTube taps into.

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Roelof enables his simple thesis and supporting macro-trends stand for themselves. He doesn’t wish to defend these foundational premises or articulate them further to the collaboration. This concise thesis, articulated in 9 lines, seems apparent in hindsight but at the time video was non-existent on the web basically. 30% of the business post Series A. It is interesting that Sequoia intended to launch the investment contingent on the company attaining 5 ‘specific milestones’ spanning business planning, product, customer acquisition, and hiring.

For the most part, the answer yes is, as you can plainly see even in the dining tables that I have provided in this post so far. Russian stocks and shares have the cheapest PE ratios, but that shows the organization governance country and concerns risk that investors have when investing in them. Chinese stocks in contrast have the best PE ratios, because with stepped down growth prospects for the country even, they have higher expected growth than most developed market companies.

Pricing Proposition 5: In pricing, it is not about what “should be” costed in, but “what’s” priced in! 11 billion for the company at the right time, but much closer to the actual prices, immediately after the IPO. I do have confidence in the intrinsic value and think of myself more as a buyer than a trader, but I am not just a valuation snob. When there is a point to this post, it is that a great deal of pricing, today as practiced, is sloppy, and ignores, or throws away, data you can use to make pricing better.

China may become more cautious in pursuing market liberalism. Market turmoil is tests China’s commitment to starting financial markets within its economic changeover. Turmoil might not affect China’s real economy. Market crash will have little real economy effect – collateral fund provides only 4% of investment capital. The biggest effect will be in terms of consumption and finance. China has tried to stop stock market slide – but the harder they make an effort to more it looks like these are losing control. China’s connection and foreign currency markets have been hit by concerns of contagion of slowing overall economy. China’s investors are anxious – and their leaders face a crisis of confidence.

Government has driven years of strong growth – and kept the economy strong during GFC. China has experienced rising debt levels and must reform the economy from government powered infrastructure investment. As the economy and property market slowed, the government focused on currency markets. The recent decline has worried traders who are used to seeing the government in control. The more regulators try to calm the market, the more the anxiety spreads.

Also, investors could be required to reduce spending. China’s stock market rout compounds global economic uncertainties. That market is unimportant alone – however the crash and China’s response are symptomatic of broader problems. The market has been in a speculative bubble for months clearly. Until last November stocks have been weak while real estate boomed – then property prices flagged and (to boost confidence) authorities cut interest rates and increased access to margin loan (ie loans secured against shares).

This seduced inexperienced investors – and their money swamped the market. Valuations were unrealistic. China’s authorities did nothing – perhaps hoping that heavily-indebted condition enterprises might be able to refinance themselves by issuing new collateral. However specialists also believed that acquired the means to easily cope with any problems. Modest changes had cooled property markets.

This assumption proved false – and regulators panicked. This was not to prevent a financial problem – but to avoid politics harm by imposing losses on 90m traders – for many of whom market speculation was their only way to build up wealth. The best problem with this is that federal government has signaled that it’ll transfer market loss to finance institutions. This will leave them with large losses.