Sequoia’s Roelof Botha: Why Venture Capital is Broken & How Great Companies Are Built

Roelof Botha argues venture capital is structurally overfunded: $150–200 billion invested annually would require more than $1 trillion in yearly exit value to earn acceptable returns. He estimates only about 20 companies per decade achieve exits above $1 billion, making broad venture exposure, in his words, “return-free risk.”

Sequoia’s Scout program turned founders’ private networks into one of its most successful sourcing engines. Jason Calacanis helped lead Sequoia toward Uber, Sam Altman toward Stripe, and Botha says the original Scout fund has returned roughly 26 times its capital.

Sequoia has deliberately refused to follow rivals into ever-larger funds and fee-driven expansion. Its seed, venture and growth funds remain roughly their size of five to seven years ago, while the firm is structured as a private partnership intended to pass between generations without partners buying or selling ownership.

Sequoia changed its structure because selling winners after IPO was destroying long-term value. Its Capital Fund can retain selected public-company shares; Botha says simply holding them has produced another $6.7 billion of gains in three and a half years that LPs likely would otherwise have missed.

Sequoia requires consensus for investments, meaning one partner can theoretically veto an entire deal. Botha recently opposed a stablecoin-related company alone, then explicitly withdrew his objection because the rest of the partnership was strongly positive—a mechanism that preserves dissent without making one person’s uncertainty absolute.

Sequoia separated from its China operation because the original premise of an increasingly integrated U.S.–China economy had broken down. Botha cited Chinese company formation falling from about 51,000 in 2018 to 1,200 in 2023, arguing regulatory uncertainty can suppress entrepreneurship even when entrepreneurial talent remains.

Sequoia now has roughly as many developers as investors and builds proprietary software to sharpen investment decisions rather than simply enlarging its operating staff. Partners can instantly retrieve prior meetings, hiring trends and team assessments, while internal AI summarizes business plans, evaluates teams and maps competitive alternatives.

Botha nearly quit venture capital in 2009 despite already having backed YouTube, overwhelmed by missed opportunities and investments going bad. Doug Leone appeared at his home on a Saturday with homemade pesto simply to support him; Botha later described Michael Moritz’s contrasting gift as imagination—the ability to see what an unfinished company might become.