Sequoia's Andrew Reed on Figma's community flywheel, the AI disruption thesis, and early investment lore

first config or have you been coming for a long time? This is my Yeah, I was gonna say very very bad investor if he's like, "Oh, I guess now that Pigma's a big deal, you know, I guess I'll guess I'll show up.

" I remember back when we got standing ovation for the font picker, you know, the first the first of two standing ovations for the font picker. So, yeah. Yeah, it's amazing.

No, I mean today today uh feels monumental just just given the scale of the event, but but also uh the launches uh uh the people that were stand you know you know doing a standing ovation for the font picker uh I'm sure they're here today seeing you know the four massive launches and uh yeah it's it's it's massive.

Yeah. I mean what what was the precursor to config? Were there like little user group meetups? you hear about that with like the the story of Instagram where like Kevin would like go running with the early group which was there were only 100 people on the service but he still was doing that customer development.

Um do you remember kind of the the arc of how we got here? Well for me so yes um well I remember predating our investment in Figma we were involved with GitHub which kind of universe which was like kind of the same sort of a vibe and actually very similar venues. Yeah. It was the open source developer ecosystem.

Um, and I remember sitting through some of those universes back in the mid2010s and thinking like I'm never going to be involved with a company that can do something like this. You know, just having like the true vibrant community like people actually want to show up.

I was like that was a cool thing to be involved with. And then like I go to the first config and it was in a room that's you know like the size of the maker studio thing now and you know it was just like buzzing and I remember whenever I come to config like I really feel like I'm cosplaying you know.

Yeah, like um I like making websites, but like you know some say I apply like a design like creativity to my Excel sheets like an artist. Let's say I'm I'm an artist in Excel. Um it's funny.

I'm so used to I go to these I I go to these events with um with my daughters like for school and stuff and they're um you know there's always like a long line of people for face painting and there's plenty of face painting supplies but there's only like two or three people who can actually do face painting.

I always walk around here like man like everybody here could be the most amazing face painter you know it's like you know I could just bring my my kids in in a face paint and have it all solved. Yeah. No, the talent the talent density is wild. Yeah.

Um, on on the topic of like these annual releases, uh, Brian Chesy recently said like part of founder mode is like even if you're a company that can do nonwaterfall, more agile development, more iterative releases, it helps to get on an annual cadence.

Um, not talking about Figma specifically, but is that something that you think is correct advice for big companies, small companies, is it going to become increasingly um, popular? Because the the uh, Airbnb, Brian, uh, the like the Chesky uh, memo kind of shook Silicon Valley.

I know uh, Ryan Peterson at Flexport was like, "We're doing that, too. " Yeah. At the same time, people have been looking at Apple and saying, "Hey, AI is moving too fast, Apple. You can't wait to launch your next thing for a full year.

You should be dropping software updates every single month and just telling us, okay, you improved it.

" Um, so there's a little bit of like a balancing act there, but what like what do you think of the overall trend of these an annual uh kind of agenda setting events uh versus something that's like you could kind of blend the two?

Yeah, I think um I think as software and technology has gotten easier to create, it has just gotten so much harder and as as there's more companies that gotten started and there more venture capital and like I remember back when you could, you know, you get a TechCrunch article written about your product launch and it would, you know, you drive all this signups and it was like this amazing thing and it's just so much harder to stand out now.

Like there are so many companies launching amazing stuff constantly. Yeah. And just as a you know like the red queen dynamic like just to stay in place you have to be doing you know usability improvements AI upgrades etc to your product every single week just to like like kind of maintain fall behind. Exactly. Yeah.

Then I think as it relates to like genuine product launches um you know I think and you know even for the stuff that's launched today there's an alpha there's a beta right. So there's um you kind of have to do the user testing in sync with this.

But yeah, it's pretty freaking cool to show everybody the things that you spent a year working on and rally your team around a deadline, you know, um like knowing the the the Figma team like this date has kind of been in the back of everyone's heads for a very long time.

Well, and it's such a it's such a you know, we we can kind of be understated, but but Dylan and the Figma team are making a huge statement coming in with, you know, sites, make buzz, like these are, you know, they can come out with a V1 now, but the the you know, my my expectation is they become, you know, very very significant pretty quickly.

Yeah.

Uh I mean obviously you're here to support Dylan but uh has Figma grown into a type of ecosystem where there are other potential power loss startups building in and around uh because you see that with a lot of companies I mean Zuck was just talking about it with like Facebook ultimately becoming a platform at a certain point.

It's been a lot of companies that have built on top. Exactly. Um I is there is there a story around like the broader design ecosystem that's taking hold um or is the venture capital community still just kind of like um like laser focused on fig Figma by itself?

I think Figma has supported and enabled a broad network of plug-in developers for a long time. And I think a lot of the power of Figma, you know, comes from what Figma enables, but also comes from the ecosystem around it that applies to things like templates, right? Like um and to these plugins.

So I think Figma from a architecture standpoint, Figma was a platform before it became the the platform, right? Um, and I do think it is the center of a community and a center of a community of products. Um, and I love the the mission of, you know, trying to eliminate the gap between imagination and reality. Yeah.

Um, you know, these are not just face painters, right? They're like the most creative people in the world who also love technology. Yeah. And I think for people with minds like that, allowing them to to do so much more, that's like one of the coolest things a company can do.

So, how do you think about design trends in the decks that you get pitched? Um, I mean, if Figma launched a deck designer, obviously, just design is becoming more accessible. It's becoming more affordable.

And also I feel like there's a little bit of just a meme in Silicon Valley that hey like if you're going out for a series A it's not unreasonable to spend 10k 50k on design for your deck. At the same time that can totally be like band-aid on a bullet wound if you're not actually building a great business.

Um, so I imagine as a as an investor there's a little bit of like don't fall for the pretty design, but we've seen trends where I mean for a while there were like a ton of direct to consumer companies that were just getting funded and it was like oh you you went to the exact same brand thing that the Warby Parker guys went to or whatever.

No, it's funny. I remember this is going to definitely date me. Um, you know, we used to print out all these decks, right? You would like, you know, get the deck and you just hit print and I remember it started being black.

No, then for the first so we uh black backgrounds for the first um I'm going to send this clip to Joe at Loom, Joe Venet from Bloom. For the first board meeting for Loom, they did like a 130 page deck in like dark mode squared, right?

It was like the the level of dark gray versus modestly less dark gray and these stack bar charts was impossible. And I know I came into the board meeting with this print out and it looked just like basically like a bunch of black pages.

Look, we've already lost like $400 on this investment because we have like burned through our entire printer ink and I can't figure out what the hell's going on in our business, you know? So anyway, we switched that one to light mode.

But I do think like um presentation, you know, it's like anything in business, you know, at its core, the Don Valentine thing is storytelling, right? And um visual storytelling is imperative to fundraising. It's imperative to sales. And I think having the right set of assets that tell your story, it really matters.

I actually do think like spending the money to create a presentation that really captures your idea, your ethos, what you're trying to build is like totally worth it.

Um, and you know, there's also the flip side like, you know, you can do it in the Times New Roman, you know, like, you know, the the spreader presentation, you know, or like um, so you you can go that path like look how little we tried or you can do the Yeah. Yeah, really good.

Every once in a while you see a deck from someone who's like coming out of an enterprise and has like deep deep uh institutional knowledge and they're probably going to build something really cool but they just don't understand design or even how to speak Silicon Valley's language at all and you're like okay I got to like you know actually read through the read between the lines.

No, the worst is when you get the ones that are um and as a you know I worked for Goldman Sachs, you know, as a foreign banker I I I love my investment banker friends.

um when you get the all of a sudden it's a series B company and they hire the you know head of finance and operations from Goldman and then you get the you know 98 years of combined industry experience like highly seasoned management teams say we're not doing whoa whoa John and I have you know 20 years of combined experience in technology media.

Exactly. Yeah. I've never met a management team that's not highly seasoned. Yeah. I mean Dylan was brand new. I'm I'm curious.

You think there's uh you know the the lore around Figma is that you know Dylan and it's Evan right Dylan and Evan you know spend years uh you know basically in obscurity building this like you know product you know today if if a founder was building a SAS tool and they were three years in and you know didn't have like a a product that they were letting people actively use uh I think most investors would would write it off.

I I almost feel like uh that it it almost ended up being an anti- lesson, you know, that sort of four-year period of obscurity because they were using they were pioneering the use of WebGL for, you know, a browser collaboration and uh h have you ever found yourself kind of like pushing back on founders that are like, well, Dylan and Evan spent, you know, four years getting their products?

Yeah, I know exact I know exactly what you mean. So I think it's a little bit like you know for for decks you can either do the we really didn't try at all or we made it look beautiful. Yeah.

I think with companies similarly you can do the we're going to iterate constantly in the market and find our way to product market fit or you can do the we have a concrete vision and we're going to build what we want to build and when we launch it it's going to work.

I think the in between area where you're just like slowly maneuvering off of your initial course like that's I think the really um the unhappy path. Yeah.

And I think we've done so many retrospectives on like analyses on what are the commonalities between the big outlier um big outlier companies and the reality is if you look at most of Silicon Valley history the length of time it took you to get from nothing to a million dollars of revenue is basically uncorrelated with yeah how fast your company grows.

But the how fast you go from one to 10 is highly correlated.

So basically it's like you know you're trying to coil a spring you know and um most of the companies that really make it uh go very fast out the gate but uh take a variety of times to get into I mean I think the most the most recent example probably open AI literally a nonprofit for a decade and then all of a sudden a billion in like a couple months.

Um, do you think that there's uh like Well, actually one more Figma lore story I've never seen. I just um so uh this is a Doug Beani story. So I think it's time to give Doug his shine.

Um so when we were doing our Figma investment, it was this was uh January 2019 and I was an associate so I was like doing my best to to position ourselves and I thought you know we have we're totally going to do this investment you know like Dylan Dylan loves us.

Um, and I was, but just in case I'm going to bring Doug in to like, you know, bring in the big dog. Um, and so Dylan and Evan are coming down to our office in Menllo Park. We had already given them a term sheet. Um, and we're just, you know, trying to show them how much we love them.

Is that the term sheet in that photo? Yeah, the one that got like, you know, someone did the CIA analysis to figure out all the all the Did they reverse? That was a hand. That was my bad to our comm's team.

Um uh and we're about to you know about to do the meeting and Dylan and Evan both into Brown and Brown's one of our LPs and we have all our all of our conference rooms at Sequoa named after our LPS and you know when we were going to do this meeting in the MIT conference room um and then you know I was just like yeah it's just it's a much nicer conference room than the Brown conference room.

um that Doug was like, "No, we're doing this in the Brown conference room.

" And like maybe 10 minutes before the meeting, he moves the meeting to Brown and then he goes into our system and shows he prints out a page with like all of the amount that Brown had invested in our various funds over the years and how much we had returned back to Brown. Wow.

And sits down, you know, we talk about Sequoia and all the stuff that we're doing. He puts this, you know, piece of paper out and, you know, Brown is where Dylan and Evan met. It's where a lot of the early work at Figma kind of began. Y and I was like, "This guy freaking rocks. that extra.

I was about to be just like hanging in the MIT conference room with no plan. So anyway, that's the alumni alumni playbook. That's crazy to actually go that extra step. You have fun at Brown. Well, we played a part. Yeah, exactly. Yeah.

Um, uh, switching gears a little bit, are you surprised at how Gen AI seemingly came for image creation before product design in some ways?

Like yes, you can use Gen AI to to generate, you know, screens of various products, but you would think that that would be uh a lot of the product designers I know are still, you know, doing the sort of handcrafted work to uh design, you know, flows and features and things like that.

And meanwhile, if you want to generate an image of the three of us sitting in a podcast studio, you can do that instantly. Yeah, I have been um I'd say I've been generally surprised at the order of things that have come out of this generative AI ecosystem in general, right?

Like I remember I remember back when people were, you know, self-driving truck wave and it was all this concern about blueco collar jobs, you know, and everyone should learn how to code and you fast forward five years, it's like, well, that was a very seemingly poor take, you know, in hindsight.

Um same thing with radiologists. Yeah. Yeah. Exactly. They almost all have their jobs still. Yeah. And uh who was it? Was it Hinton or I forget it was someone uh big machine learning foundational researcher was saying like stop training them. Yeah. It's the the Yeah.

The you know how stuff and I think it ultimately it's kind of what I was saying about creativity earlier. I I genuinely think it's not because of a difficulty of the problem or some some underlying architectural thing.

I think it's just like um uh you know like look at the image editing models came out of amazing diffusion work right and that just happened at a point in time because of the creativity of a group of people yeah and it's amazing right and I think that same sort of thing you know bottoms up creativity creating massive technology innovation like that's has been the story for this whole wave I think that will continue to be the story and I think predictions from people you know who are the spreadsheet types are going consistently be proven wrong.

Yeah. Yeah. Do you think that there's a Dylan Field out there right now kind of grinding in silence for four years and then we'll come out with something disruptive or or does that does that pattern not even work in the age of the internet? Well, is probably already going to check in.

Well, the thing with Dylan, it's interesting is like haven't you guys known Dylan for a long time? Yeah. Um, you know, like Figma was grinding for a long time. Yeah. Um but it's not like they were grinding in true silence, right? Like Dylan and Evan were in seven. Evan, you know, absolute genius.

Um Dylan very engaged in the ecosystem. He's a teal fellow. Yep. Um yeah, we were wondering about those early rounds because it seems like going back to 2014, 2015, like doing a $20 million series, even a $4 million seed round, like that's not easy even if you're a hot company. Yeah. Um so yeah, I don't know.

Yeah, they were and they were, you know, they were engaging actually like interestingly so many of the people who I've run into already today were people who were like the early users of Figma when it was still a developing product. Sure.

And those people's, you know, they they didn't hear about it and want to try it and, you know, sign up. Like those are that's customer development, right? Like Dylan was like one of these true grassroots growth people in addition to the, you know, like um the the kind of product product visionary. Exactly.

And like building this community, you know, it's like everything that is magical in the what's that John Collison? you know, the John Carlson tweet around like it's a museum of passion projects, right? Like, you know, like this community doesn't just happen, right? Like it starts with a spark.

And I think that spark really is Dylan. Like um I remember there's a guy named Soleo Quervo who's the first product designer at Facebook. Yeah. Um he now does some investing. He's an amazing amazing guy. Yeah.

And I remember he told me about Dylan um you know back when Figma wasn't even around yet and he was just like this guy's gonna be amazing. And um it's funny he's interested me like four people and one was Dylan and then one was GMO from Brazil. Oh wow. So like it's an like no more optin. You know what I mean?

If you got somebody's send them my way yesterday. Uh on on the note of you said uh Dylan kind of creating this spark of community.

I think that when people when startup founders talk about community, it's almost it's almost like a meme because usually the first context that they're using it in is like, oh, we should have a dinner.

And it's like to me like a community is not like getting a room at a nice restaurant and just like getting people to show up and eat free food.

like this is a community of people that have traveled from, you know, basically every, you know, bunch of different continents all the way here, taking time out just to be immersed uh with this group. Um, and it just feels like community is uh ultimately created at the product level to some degree.

Like you can kind of like Well, that's I completely agree with this and to me like I was thinking about this this morning. I I wish everyone could have seen the keynote. Like it was so awesome. Yeah. It was like watching a rockstar. Like the room the the the the room was it's so big.

There's like so many people in that room. It's massive. Like I didn't stand. Yeah. It's unbelievable. But then you're like it's like 9,000 people, right? Yeah. It's like, you know, imagine seeing a a slide with, you know, 9,000 monthly active users, right? Like nothing, you know?

Um but 9,000 people, it's a lot of people, right? And to me it's the like your users aren't just numbers. Your users are people. Yeah. Right. And the nucleus of of this community are people who travel from Southeast Asia to be here. Travel from Europe to be here. Yeah. Um travel from Africa to be here. Yeah.

Um and that core 9,000 MAU has such a loud voice and the ability to like really propel a company forward. And if you put those 9,000 MA into a room, it looks like that, right? like it's it's enormous. Um, and finding the ability to like get that level of a nucleus I think is like it's it's a product thing, right?

You don't just buy them dinner. Yeah. Yeah. Yeah. I know you can't talk about public companies too much, but I'd love to know if you have any interpretation of what's going on with the Mag 7 right now on as far as like an opportunity for startups like uh today uh what was the news with Google? they traded down.

Basic Apple might Apple's VP of services basically came out and said that for the first time searches in Safari like shrank month over month and that's it just seems like there's just general chaos in big tech whether it's uh Google potentially splitting up or you know the the pressure on Facebook for Instagram.

It just feels like that could be fertile ground for startups. At the same time, a lot of people have been saying artificial intelligence, it just reads as a sustaining innovation, not necessarily a disruptive innovation.

Um, but but what are you uh like what is the level of optimism around the next generation of founders right now given what's going on with these like very well-run companies that are often in founder mode or have amazing management teams and fortress balance sheets.

I think um I forget whose law it is that you as a company ship your org chart, you know. Yeah, I know that one. I'll look it up afterwards. Whatever. Um Reed's law now. Yeah. Yeah, too. Um too, the I think the idea that AI will be a sustaining innovation.

Um I think it's probably it's probably like far enough along now to call that like mostly wrong so far. Um and I think it comes from that grassroots creativity combined you know small number of people especially with AI can do so much.

I think that's one of the things that um I was thinking about listening to the Figma keynote is like, you know, if the origin of Figma were was specific, you know, vertical inside of companies, designers, developers, marketers, content people, legal, you know, coming together and collaborating to move this like very complicated process from idea through to deployment.

Um now any one of those people can basically do all of those jobs. And I think that's like that's something that we are like definitely seeing and um so small enough people can do so much more and you aren't encumbered by shipping your ORC chart because you are the orc chart, right?

Like it's um and you can just put out amazing experiences and I think some of these big companies what you see is, you know, they'll have amazing models or products or ideas, but they just don't even let you find them. You know, it's like the um the notebook LM thing, right? Like, oh my gosh, that was sick, right?

And like now what? The fact that we're using past tense for a breakthrough Google product is so six months ago. It's funny because past tense. We should be like, "Yeah, it's still great. " There's probably all of a sudden you guys are in trouble. Yeah.

There's probably some app in the app store that's just notebook clown that's like doing 10 million of Yeah. Um I uh has we we were talking about this idea that like you know there's the rapper the chatpt rapper meme and then uh the the recent news of OpenAI acquiring Windinsurf.

Uh I was debating this with Jordy like is it kind of game on for uh rapper M&A.

Maybe that doesn't affect how you're underwriting investments at Sequoia, but do you think that there are uh other venture firms that see a multi-billion dollar outcome as something that changes how they underwrite like if the M&A markets at that level are open?

Does that change the riskon nature of early stage venture maybe in like the midmarket or or do you think it should just be business as usual? I um so I got a lot of questions that were similar to this after um we mutually called off the Figma deal with Adobe. Yeah.

And some of that, you know, how does this change your underwriting of an investment? Yeah. It's like I don't know what this administration is going to do, let alone the next one, right?

Like and the gestation period for these companies is sufficiently long that like what's going on today I don't think really will be able to change your investment criteria today. Yeah.

Now what you do with your companies might change right whether it's you know you're looking to buy smaller companies you have things that you're going to end up selling to bigger companies as relates to the actual like investment criteria at least for Sequoa you know we are looking for the big outlier companies one of ones you know the future aircraft carriers um but obviously you know you pay attention to the news and obviously you pay attention to what the administration's going to do yeah um I was thinking about it more just from this this idea that uh if like foundation model companies aren't necessarily going to steamroll application layer even regardless of the administration.

Just this idea that uh uh foundation model companies it feels like they need dance partners in a lot of different areas. We saw this with the X and XAI merger versus social who are we talking about like should anthropic by snap.

Um and I'm just wondering if there's more are you guys have you guys are having Sonia on I think on Friday. You should talk to Sonia about that in that present. She gave a presentation based on this exact topic and I could, you know, try to copy everything she said and do a poor job or Yeah. Yeah.

What were the other takeaways from I I assume you went to AIN. Oh, yeah. Uh, what were the big takeaways other than we found out that Jensen Wong's jacket is Farerraamo? Oh, we did find that out. I know. I know. It's leaked. It's leaked from us. It's sold out everywhere. It's sold out everywhere. Yeah.

Shout out to Alfred. That was a great trade. Oh, yeah. Yeah. He did the jersey swap. Jersey swap. That's legendary. Legendary jersey swap. Legendary, man. That's hang it in the hall. I would just leave at that point. I'm Yeah, the frame. I would like oify it somehow. Put it on a, you know, that's great. Um, yeah.

I think I think Alfred's jacket was Yeah. Yeah. What's the state of the Sequoia merch team? Have you guys explored anything as unique as a jacket? Well, I was thinking for this one, you know, we this is all of a sudden we we can we can somehow turn it into a statue and then just that's like an operating.

We can sell that for, you know. Totally. Um, you can see a lot of sequoa merge floating out there. You guys are pretty hold it close. Very subtle. Yeah. Subtle. Yeah. Okay. Versus the uh but anyway other takeaways from AINE. Uh who was interesting? What?

Vibe wise it was you know so much so much smaller than this room but I think vibewise it was really amazing. We we've held it for a few years now predating I think GBT3.

Y and it's been you know a lot of the same sort of people right like the people who started working on this early really passionately are still the ones who are kind of at the bleeding edge. Yeah.

Um is there more focus on like energy scale data center buildout or like new algorithms because a lot of people are scale build scale is all you need that are less enrich Sutton and then on the flip side there's some folks that are saying like hey maybe we're actually topping out that seems like a really foundational question yeah we had a little bit of both we had a little bit of both um and I think I think the practical reality is the answer is just yes like both just both yeah of course why not better algorithms at higher scale yeah and it's it's going to be both Yeah.

Yeah. Yeah. Something that I've been trying to dig into more is like when are we going to see other models scale up to the size of like the big transformer from the GT models like we it feels like we're getting there with diffusion.

certainly not there with robotics even though some of the robotics companies are now saying like hey we have the end toend models we have you know big uh big data sets and but they're not yet talking about hey we're building the massive data set we're doing the 100k H100s or anything uh that seems like a really critical uh like discussion point especially for yeah like where where where the next applications go because it does seem somewhat specific it doesn't feel like I I was talking to one the founder of etched and he was saying like uh he was saying like no I actually think like you will just be able to train a robot to walk by having it read every book on walking.

I was like I don't know about that. I read the book on walking.

I read every book and but but there is something there where it's like yeah if you're training a humanoid robot like why not just feed it all the data possible including all the images and all the videos and everything just the more it knows the better and that just builds like the stronger world model.

I'm trying this with you know with my kids right? It's like yeah just walk you know and it works it just works so there's a way to do it you know. Yeah. Anything else before we move on? Uh, no. This fantastic. This is fantastic. Thank you so much for Yeah. Great. Um, and I will tune in later today. Yeah, absolutely.

We'll see. Seated. Bye. Peace. Thanks for coming. Bye. Uh, always a fun time with Andrew Reed from the best, uh, legendary investor, one of the greatest to ever do it. Um, and we have our next guest. Still cooking. Still cooking. Excited for the next 40 years. Yeah. I'm bummed we couldn't make the AI send thing.

It would have been uh very good but we had a lot of uh a lot of travel going on. A lot of birthday lot of birthday. Anyway, there's a lot of event but fantastic. What's going on? Thanks for coming. Welcome to the stream. Uh would you mind kicking us off with an introduction for those who might not know you?

What's your name? What's your company? And your camera by the way is over there but you can you can just chat with us here. Yeah. Marty Ringline, CEO,