On March 5, 2020 we warned Sequoia companies to prepare for the impending COVID crisis. Today we sent this note to our founders and CEOs with our advice for navigating the current climate and the coming recovery.
Dear Founders & CEOs,
While the pandemic is far from over, we see an important window of opportunity opening right now.
On March 5, 2020, we urged you to prepare for the impending storm. While we couldn’t foresee the scale of suffering or the extent to which the pandemic would expose societal inequities, we were able to see early on how it was impacting global business. We suggested you use the brief calm before the storm to pause, challenge assumptions, and reassess priorities. While the last year has been incredibly challenging, the indomitable spirit of resilience and adaptability we’ve seen across your companies (and across the world) has been inspiring. Today, we’re at another inflection point.
The U.S. is poised for stronger economic growth in the second half of 2021 than we’ve seen in decades. As vaccines bring an end to lockdowns closer, consumer debt has dropped, savings have risen and more stimulus is on the way.
COVID was an unexpected curve in our lives and for countless businesses. When you’re driving, you need to slow down before reaching a sharp curve, or you could skid off the road. That’s why we published the Black Swan memo. But if you want to maintain momentum, the time to start accelerating is when you’re at the apex of the turn. The current moment in our road to recovery represents an opportunity. If you feel confident about your business post-vaccine, now is the time to start carefully stepping on the gas (or accelerator pedal, if you’re driving electric).
In many ways, COVID pulled forward the future that technology companies have been building. Behaviors that would have taken decades to go mainstream were normalized in a matter of weeks. The question is: which behaviors will persist over the next decade, and which will be fleeting? Enduring companies are built around long-term trends and behaviors, so take advantage of this window while keeping your sights trained on what you could accomplish over the next decade.
Our Advice for Founders & CEOs
No one can say for certain what the future holds. Our advice for founders and CEOs in this uncertain environment: remain deliberate and measured, but don’t be afraid to dream and be optimistic about where the world is going. This will enable you to focus on your long-term aspirations while navigating the next few quarters, no matter what they bring.
Reassess/reaffirm your why: You and your team have been running hard. The last year might have brought fresh perspectives on what is important to you, what great causes you want to fight for, or what major problems in the world you want to solve. As you prepare to accelerate, reassess or reaffirm your long-term mission. Then, challenge yourself and your team: are you dreaming big enough? What is the scale of your ambition?
Remain measured: You’ve made really hard decisions during the pandemic, but you also realized how nimble and efficient your company became by zero-based budgeting and disciplined recruiting. You found more cost-effective ways to reach customers when you reset marketing spend and started from scratch. Don’t lose your hard-earned operating rhythm, even if you believe the future is bright.
Prepare for more volatility: During the pandemic, we saw operating results that departed from board-approved plans more than we’ve ever seen. The scenario plans you built reflected the high degree of uncertainty we all faced a year ago. There was wide variance in the ways countries and communities dealt with lockdowns, quarantines, testing and vaccinations. Different industries, economies, sectors and financial markets have shown similarly wide variability. As the storm of the pandemic begins to clear, uncertainty will continue to linger. Continue the best practice of scenario planning that helped you navigate the pandemic. While you prepare to take advantage of the opportunities ahead, remain nimble as you fine tune your tactics. Knowing when to upshift and downshift in changing conditions will be important moving forward.
Listen with ‘Dumbo ears’: You are optimistic and have a point of view of the hybrid world. You are planning your product strategy and business operations for new products and services based on that point of view, but no one really knows what the post-vaccine world will look like. There will be just as many surprises coming out of the pandemic as there were going in. Remember how diligent you were at the beginning of the pandemic to listen to customers, study their behavior, and find solutions for their pain. Continue to have “Dumbo ears,” anticipate customer pain points, be nimble to respond to your customers’ changing needs, and focus on the enduring. As Tony Xu would say, “choose optimism and have a plan.”
Focus on what matters: Focus on input metrics that reflect how your core business is performing. Continue to innovate on behalf of your customers. Systematically build advantages for your business operations. Don’t get distracted by vanity metrics. Stimulus spending and monetary policy have helped create buoyancy in public and private markets, and some of you may find you can fundraise at attractive valuations. If so, take advantage of your good fortune. Either way, remember markets can be erratic and irrational. Enduring companies focus on the things that matter and build value for their customers, communities, employees, and shareholders. Economist Benjamin Graham said, “in the short run, the market is a voting machine, but in the long run, it is a weighing machine.”
Most importantly, focus on the wellbeing of your people: Remote work has proven many benefits. However, for many the line between work and personal life has dissolved, and it’s taking a toll on mental health. Employees are burning out and feeling isolated after a year at home. Parents are frustrated that their children are missing in-person education. We’re seeing a difference between how business metrics are performing and how many people in those companies are feeling. Keep an open dialogue about the challenges your employees face. Strong leadership that puts people first will continue to be critical.
The last year has been trying in ways we couldn’t have imagined. It’s been exhausting. However, change also brings opportunity and constraint breeds creativity. We saw it in the last financial crisis, and we’ve seen it in the pandemic as companies have adapted business operations, launched new products and founded new businesses to meet evolving needs. Technology is flattening the world and bringing us together in new ways. Remote work has already begun expanding geographic hiring opportunities, combating bias and broadening entrepreneurship. We see many green shoots as we enter a post-vaccine world.
At Sequoia we believe anything is possible. Your resilience, creativity, and ability to rapidly pivot throughout the pandemic is proof. We look forward to seeing you rise to the new challenges that lie before us as we emerge from the pandemic.