Sequoia is a small investor in Fon. Sequoia is probably the most famous VC firm in the world. But Sequoia, as you can see from this presentation is confused and in a state of panic because first they made all these investments some very recently, and now they are telling their own companies to Get Real or Go Home. Plus they are coming very late in the “we warned you” advisory role. Allen and Co is another investor in Fon and Allen and Co advised us that markets were drying up for start up fund a year before Sequoia. At Fon we listened to Allen and Co closely and made the necessary adjustments. These painful cost reductions were done at Fon half a year before the other Sequoia companies who are only getting their warnings now, in the midst of the hurricane. So we are ahead of the game thanks to Allen and Co. We now find ourselves losing around 300K euros per month still significant but down from 1.2 million euros a year ago. With revenues and margins growing we are going towards profitability in 09. September was our best month in terms of revenues, margins and cash burn. Sequoia now only owns around 1% of Fon but if I had Sequoia as my lead investor I would wonder why is it that it took them so long to warn their companies. Maybe because Allen and Co is in NYC they seat at the center of the current financial hurricane and were able to warn us so much earlier but my advise to Sequoia would be to stop panicking and take advantage of the crisis to make more opportunistic investments.

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Nubeblog on October 16, 2008  · 

I was surprised with their announcement and I think they are now in ‘panic mode’. You are right about the markets drying up about a year ago: some VC started to delay decissions and others simply admited that the flow of cash to startups was collapsing.
Still, I think they are overreacting, just like markets are doing. But we have to question ourselves if the things are going so terribly wrong, and if they can get worse.

3.0 rating

Victor on October 16, 2008  · 

No better time to start a company….Need to be able to raise enough cash for 15 to 18 months and get to cash flow positive (software service model)

Allen & Co is legitimate. The future of Wall Street are more Allen & Co’s, in other words boutique firms.

I also like Sequoia but was quite shocked at the tone and the underlining message. I believe one of their General Partners said that this downward spiral will last 15 years. Let’s assume he’s right – Why did they then close two funds totaling $930M recently? It just doesn’t make sense. If Sequoia is willing to draw a line in the sand (making such silly calls as 15 years) then I would like to see them do the right thing and that is dissolve their Partnership. No way in hell should these guys be collecting management fees on the newly committed capital since the “world is coming to an end”.

3.0 rating

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