How about this: “Why doesn’t Sequoia open an office in Toronto, or at least have a scout?”
I took the opportunity to pop my question to Matt Miller at his fireside chat with Toronto Startup Grind at Pivotal Labs.
The rationale I gave to Miller is this: Sequoia likes the odds of investing in startups that serve enterprise markets and if there’s one thing Golden Horseshoe startups do really well, it’s enterprise. There’s over 30 years of outstanding tech startups, from Alias and SideFX to Blackberry and Sandvine. Another clue to the potential here are the hundreds of thousands of expat Canadians working in the Valley – so why not stake a claim on the motherlode?
How did Miller respond? With outstanding grace and candor. And if it wasn’t the answer I wanted to hear it did make a whole lot of sense.
Sequoia's Strategy Beyond Silicon Valley
Miller said Sequoia’s strategy is to stay small. There are just 16 partners in the Menlo Park office. Each one looks at roughly 1,000 deals a year. Out of that deal flow each partner makes just 1 investment a year.
Sequoia segments the market into seed- and later-stage investments.
Seed-stage investee companies get a high intensity dose of Sequoia love. Sequoia believes that money is the least important part of what it contributes at this stage. It’s far more important to help make those crucial first hires, introduce founders to the right go-to-market partners, and guide them towards scalable success. They’ve found that for this magic to work, lots of face time with founders is key.
So, Miller and his partners want to be within biking distance of the offices of their seed-stage investees.
For later-stage companies Sequoia does invest in companies that are (much) further afield. He still doesn’t see Sequoia opening more North American offices any time soon. The culture gap between the Valley and a city like Toronto is not that gaping. The offices Sequoia opened in India, China and Israel are there because the culture gap is much wider, and having a local post serves as both a geographic and cultural anchor.
To spot opportunities in North America outside of the Valley, Sequoia does cultivate a network of scouts -people like Michael Cayley. But the interest in Toronto is strictly in later-stage companies.
Given Sequoia’s track record it's hard to argue they're in the wrong.
Our last conclusion: cash is a commodity. Some Toronto investors have recognized that and have ramped up what they contribute to the operating side of the companies they invest in. Other investors need to follow suit.