Power

Sequoia warns startups: Coronavirus is 2020's 'black swan'

In an interview, Sequoia partner Alfred Lin says it's time for founders and CEOs to worry not just about the health of employees, but of entire companies.

Black swans in water

A black swan event is defined as one that can't be predicted and causes maximum damage.

Photo: Costfoto/Barcroft Media via Getty Images

Sequoia, one of Silicon Valley's top venture firms, issued a stark warning about coronavirus to entrepreneurs on Thursday: "We suggest you question every assumption about your business." Founders are listening.

In sounding the alarm, the firm called the coronavirus the "black swan" of 2020, referring to the idea popularized by Nassim Nicholas Taleb of a surprise event that causes a massive impact and is only rationalized in hindsight as something that could have been expected.

Get what matters in tech, in your inbox every morning. Sign up for Source Code.

Sequoia, which has backed companies like Google, Square and Airbnb, said it has already seen companies face slowing business growth and supply chain problems and cautioned that coronavirus could create an extended global downturn. It backs companies around the globe, from China to India to Israel, but sent the warning to U.S. portfolio companies first on Thursday, before posting it publicly.

"Many of our portfolio companies' founders and CEOs are getting prepared to try help with the health and safety of their employees, and we want them to also know they should focus on the health and safety of their companies," Sequoia partner Alfred Lin told Protocol.

That includes re-evaluating how much cash the startup is burning through and sales forecasts, and being ready for venture fundraising to "soften significantly." Sequoia even urged founders to reconsider their headcount and "evaluate critically whether you can do more with less and raise productivity," stopping just short of calling for layoffs.

"I think we've been in a boom market, and most of the contingency plans have been to figure out what to do on the upside: If we raise more money, what would we do? If we exceed our revenue targets, what else should we invest in?" Lin said. "Here it's a reminder that you should have contingency plans for the upside and the downside and we wanted people to make sure they have the downside scenarios in place."

It's a stark warning, but one that Sequoia-backed founder Dylan Field wasn't surprised to receive. "If you're part of the startup ecosystem, you can see the spread of the virus, and understand exponential math, then you can see it's going to be significant," he said.

Related:


Coronavirus has been top of mind for Field and his business, Figma, which makes collaborative design software. So far, his business hasn't seen any dips in growth like Sequoia cautioned and it has millions in the bank after it raised $40 million from investors last year. "That honestly has been worrying us less. The health of the business hasn't been impacted yet," he said.

What has been worrying him is making sure his employees remain healthy. Figma has banned visitors to the office, told people to work from home if they need to and also switched all interviews to video. While Field hasn't down-scaled his hiring plans, he thinks it may be harder to reach their targets because of the video interviews and candidates not wanting to change roles in a period of instability.

It's not the first time Sequoia has forewarned startups. In 2008, the firm infamously created a presentation called "R.I.P. Good Times" that alerted entrepreneurs of a coming market downturn — the final slide telling startups to "get real or go home." This year's warning was notably absent of bad clip art and clocked in as one Medium post instead of a 50+ slide deck, but it did end up quoting Charles Darwin: "Those who survive 'are not the strongest or the most intelligent, but the most adaptable to change.'"

Sequoia's Lin said it's a different situation than the 2008 presentation, but it's still a message to founders to be prepared. "People should know it's about being prepared, not being alarmist," he said. "We wanted companies to think about these things proactively."

Get in touch with us: Share information securely with Protocol via encrypted Signal or WhatsApp message, at 415-214-4715 or through our anonymous SecureDrop.

To Modern Basket founder Hayley Leibson, who does not run a Sequoia-backed company, seeing the firm's memo was a good reminder that founders have to be able to navigate through uncertainty and do more with less if they need to. While much of Silicon Valley is focused on high-growth, money-burning companies, she said it may be time for the era of the cockroach company, or the ones who can survive anything, to return. "Founders right now should focus on being a cockroach and not a unicorn," she said.
Entertainment

'The Wilds' is a must-watch guilty pleasure and more weekend recs

Don’t know what to do this weekend? We’ve got you covered.

Our favorite things this week.

Illustration: Protocol

The East Coast is getting a little preview of summer this weekend. If you want to stay indoors and beat the heat, we have a few suggestions this week to keep you entertained, like a new season of Amazon Prime’s guilty-pleasure show, “The Wilds,” a new game from Horizon Worlds that’s fun for everyone and a sneak peek from Adam Mosseri into what Instagram is thinking about Web3.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Sponsored Content

Why the digital transformation of industries is creating a more sustainable future

Qualcomm’s chief sustainability officer Angela Baker on how companies can view going “digital” as a way not only toward growth, as laid out in a recent report, but also toward establishing and meeting environmental, social and governance goals.

Three letters dominate business practice at present: ESG, or environmental, social and governance goals. The number of mentions of the environment in financial earnings has doubled in the last five years, according to GlobalData: 600,000 companies mentioned the term in their annual or quarterly results last year.

But meeting those ESG goals can be a challenge — one that businesses can’t and shouldn’t take lightly. Ahead of an exclusive fireside chat at Davos, Angela Baker, chief sustainability officer at Qualcomm, sat down with Protocol to speak about how best to achieve those targets and how Qualcomm thinks about its own sustainability strategy, net zero commitment, other ESG targets and more.

Keep Reading Show less
Chris Stokel-Walker

Chris Stokel-Walker is a freelance technology and culture journalist and author of "YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars." His work has been published in The New York Times, The Guardian and Wired.

Workplace

Work expands to fill the time – but only if you let it

The former Todoist productivity expert drops time-blocking tips, lofi beats playlists for concentrating and other knowledge bombs.

“I do hope the productivity space as a whole is more intentional about pushing narratives that are about life versus just work.”

Photo: Courtesy of Fadeke Adegbuyi

Fadeke Adegbuyi knows how to dole out productivity advice. When she was a marketing manager at Doist, she taught users via blogs and newsletters about how to better organize their lives. Doist, the company behind to-do-list app Todoist and messaging app Twist, has pushed remote and asynchronous work for years. Adegbuyi’s job was to translate these ideas to the masses.

“We were thinking about asynchronous communication from a work point of view, of like: What is most effective for doing ambitious and awesome work, and also, what is most advantageous for living a life that feels balanced?” Adegbuyi said.

Keep Reading Show less
Lizzy Lawrence

Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She's a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school's independent newspaper. She's based in D.C., and can be reached at llawrence@protocol.com.

Workplace

It's OK to cry at work

Our comfort with crying at work has changed drastically over the past couple years. But experts said the hard part is helping workers get through the underlying mental health challenges.

Tech workers and workplace mental health experts said discussing emotions at work has become less taboo over the past couple years, but we’re still a ways away from completely normalizing the conversation — and adjusting policies accordingly.

Photo: Teerasak Ainkeaw / EyeEm via Getty Images

Everyone seems to be ugly crying on the internet these days. A new Snapchat filter makes people look like they’re breaking down on television, crying at celebratory occasions or crying when it sounds like they’re laughing. But one of the ways it's been used is weirdly cathartic: the workplace.

In one video, a creator posted a video of their co-worker merely sitting at a desk, presumably giggling or smiling, but the Snapchat tool gave them a pained look on their face. The video was captioned: “When you still have two hours left of your working day.” Another video showed someone asking their co-workers if they enjoy their job. Everyone said yes, but the filter indicated otherwise.

Keep Reading Show less
Sarah Roach

Sarah Roach is a news writer at Protocol (@sarahroach_) and contributes to Source Code. She is a recent graduate of George Washington University, where she studied journalism and mass communication and criminal justice. She previously worked for two years as editor in chief of her school's independent newspaper, The GW Hatchet.

Enterprise

Arm’s new CEO is planning the IPO it sought to avoid last year

Arm CEO Rene Haas told Protocol that Arm will be fine as a standalone company, as it focuses on efficient computing and giving customers a more finished product than a basic chip core design.

Rene Haas is taking Arm on a fresh trajectory.

Photo: Arm

The new path for Arm is beginning to come into focus.

Weeks after Nvidia’s $40 bid to acquire Arm from SoftBank collapsed, the appointment of Rene Haas to replace longtime chief executive Simon Segars has set the business on a fresh trajectory. Haas appears determined to shake up the company, with plans to lay off as much as 15% of the staff ahead of plans to take the company public once again by the end of March next year.

Keep Reading Show less
Max A. Cherney

Max A. Cherney is a senior reporter at Protocol covering the semiconductor industry. He has worked for Barron's magazine as a Technology Reporter, and its sister site MarketWatch. He is based in San Francisco.

Latest Stories
Bulletins