Sequoia Capital's Moritz on how to be the next Google

Sequoia Capital's Moritz on how to be the next Google: "The accidental entrepreneur
Commentary: How do you get VC Mike Moritz to invest?

By Bambi Francisco, CBS.MarketWatch.com
Last Update: 12:01 AM ET Aug. 10, 2004
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SAN FRANCISCO (CBS.MW) - How do you become the next Google, Yahoo, Apple Computer or Cisco Systems?

If you asked Mike Moritz, a veteran venture capitalist at Sequoia Capital, who funded at least two of the world's best known Internet companies -Yahoo (YHOO: news, chart, profile) and Google - the answer is simple as it is wise.

"It's the idea that the founders are doing something that they think is useful for themselves," he said to me recently, in a rare TV interview that will air soon on our business magazine show, CBS MarketWatch Weekend. "And, then, eventually perhaps, coincidentally, perhaps accidentally, they discover that the product or service that they have built because they wanted to use something like this is that of great interest to lots of other people."



His thoughts are particularly apt as five-year-old Google (GOOG: news, chart, profile) tees up to go public at a $32 billion. They describe the process of how to establish a company whose goal is to serve the public with useful products, rather than sell the prospects of a company to a nation of gamblers.

Mortitz's approach was certainly true for the founders of Apple Computer (AAPL: news, chart, profile), who built a computer because they and their buddies were interested in playing around with computers, he said.

"I think they were as amazed as anyone else 10 or 15 years later, at how a hobby or doing something for themselves actually translated into a large personal computer business," he went on. "The same goes for, certainly, the founders at Yahoo and the founders at Google."

No one ever thinks that being a businessman is like being a public servant. Yet it's a perspective that we all need to keep in mind. It's a perspective I agree with, and one that Moritz zeros in on.

"We don't want people who are get-rich-quick artists," he added.

"I know it's bland; I know it sounds idealistic. But on a whole, if you have people developing services or products that do something useful for their customers, and, there are a lot of customers, things will work out OK."

Sitting down with the calm, methodically-spoken Moritz, I get the sense that he personally follows the same guidelines or rules-of-thumb filters he applies to those he chooses to invest in.

If he weren't a venture capitalist, he'd be an artist, he said.

Some artists, much like some venture capitalists, seek to create a world of possibilities. They paint or draw or write because it means something to them first. When it's commercialized, money is byproduct but the real reward and real lasting satisfaction is the meaning it gives to others.

Other character traits that Moritz looks for in potential entrepreneurs or executives are humility and a sense of frugality. Moritz, who sat down with me to talk at length at why he chose to invest in Plaxo, typically will turn away from anyone looking to "hog the limelight."

See related story: Will Plaxo follow Yahoo, Google story?

While I managed to get Moritz to speak at length about his views, his own written words back in 2000, at the height of the boom, are worth recalling.

"If arrogance was apparent at the dawn, it will inevitably permeate the company," he wrote back then. "If frugality, confidence, humility and a desire to develop a wonderful product or service were evident when an idea got started, then these will weave themselves into the corporate fabric. If modestly talented engineers were there at the beginning, the only people they will be able to hire will be the lame."

What else he looks for...

So, how does one get the toughest VC in Silicon Valley to sit down and listen to their pitch, I asked?

"E-mail me," he said, with a chuckle.

How do you discern a good investment?

"We make a lot of mistakes," he admitted. "We've made maybe 500 investments over the course last 16 to 17 years at Sequoia. Every time we think we've got it down, we know all the secrets, along comes something else. We've learned a fair amount of what makes a good investment or a bad investment.

"There are hallmarks of things that we try to look for. We try to anticipate a need that customers have - whether they're consumers or enterprise customers. We try to anticipate making an investment in a company that seems to be solving a problem that's brewing. Not a problem that's well recognized, but a problem that's brewing and that's only going to get bigger."

I had heard that Moritz was tough on entrepreneurs, so, I had to ask: How would others describe you and how would you describe yourself?

He took the fifth on the latter question, but on the former question he used diplomacy.

"I think people who invest in us would say the guys at Sequoia Capital are among the harder working people in the venture capital business," he said. "And, they're fairly steady. And, pretty devoted to their business and haven't gotten distracted by a whole lot of outside interests, and beyond their families and the venture business, they don't do too much else."

Finally, Moritz did touch on the future of social networks, the current buzz phrase in the valley.

"Social networking is one of those phrases like the phrases of recent years, whether it's B2C, or B2B, peer-to-peer - I'm not sure what it really means," he said. "There will be a bunch of services that will blossom and flourish. Five years from now, they'll be but little footnotes in the back of next set of history books written about Silicon Valley."

So would you buy Google shares at this price?

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