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Sequoia Capital Warns Founders On Arrival Of ‘Crucible Moment’

Sequoia Capital warned its portfolio startups that the good times are not only over, there’s no indication when they’ll return.

<div class="paragraphs"><p><strong><ins>U.S. dollars. (Source:&nbsp;<a href="https://www.freepik.com/jcomp">jcomp</a>/Freepik)</ins></strong></p></div>
U.S. dollars. (Source: jcomp/Freepik)

Calling the current environment a “crucible moment,” Sequoia Capital warned that the good times are not only over, there’s no indication when they’ll return. 

In a Zoom call earlier this month with the founders of its approximately 250 portfolio companies, the venture firm reviewed a 50-page presentation titled “Adapting to Endure,” according to documents obtained by Bloomberg News. 

Sequoia laid out the case for a long and drawn-out recession, and instructed founders to “do the cut exercise” immediately if they haven’t already done so by examining ways to conserve cash through eliminating or scaling back projects, R&D, marketing and other expenses.

“It doesn’t mean you have to pull the trigger, but that you are ready to do it in the next 30 days if needed,” Menlo Park, California-based Sequoia wrote in the presentation. The Information earlier reported the presentation.

An increasing number of late stage private tech companies  -- the same ones that were bankrolled by investors to grow at all costs –- are re-focusing on profit. Swedish buy-now-pay-later company Klarna Bank AB and Berlin-based grocery delivery startup Gorillas Technologies GmbH are among businesses that have laid off hundreds of people recently. 

Sequoia, which also weighed in on the 2020 dip with its Black Swan memo and the RIP Good Times in 2008, called out pre-IPO startups as being particular vulnerable if they weren’t focused on delivering profits.

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